Currency risk hedges in favor of the dollar. Currency risk keeps gasoline at $5 a gallon around the world, 60% more than the US. Rising interest rates attract foreign investment increasing the value of dollar denominated securities. Currency exchanges for the Euro and Yen devalue. For example, since Greenspan has began raising interest rates; the dollar has increase 13% in value against the Euro and Yen. This currency risk forces foreign countries higher gas tax accommodating changes in the foreign exchange. The petrodollar system demands huge surplus trade deficit in order to create dollar surpluses too purchase imported oil. The central banks of Japan, China, and South Korea buy US treasuries with their dollars. If Iraq defied the dollar in favor of the Euro, OPEC momentum towards a PetroEuro would be profound and this sudden change could cause a panic selloff of the dollar by foreign central banks and OPEC oil producers. Currently, the US makes a $500-$600 billion interest payment per year with the rest of the world. 70% of the worlds trade is done in dollars. Every country needs a trade deficit to import oil because all international trade is in dollars[Learn More ...]

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