Ditching the Greenback

For some observers, a much awaited trend is beginning to take shape in the Middle East: that of Arab countries ditching their pegs to the American greenback in favor of adopting pegs to the euro — the currency of 13 of the European Union’s 27 current members — or a basket of mixed currencies. A move that would be much hailed by the local citizenry in the region as overdue; but not so warmly welcomed by regulators in the US entrusted with maintaining the US dollar hegemony. Managing exchange rate regimes and mitigating risks of global repercussions from currency volatilities may well be the economist’s version of Michelangelo’s challenge to paint a perfect picture on the ceiling to the Sistine Chapel. That’s why central bankers reside in the top levels of the worldwide financial decision making mechanism. Between the various options of using a gold standard, applying limited currency management,