By Andy Sambidge
Dubai chamber director general says good time for gov't to reassess dollar link.
The UAE should consider a fresh monetary policy, reducing its link with the US dollar, a senior Dubai business leader has said.
"It may be a good time now for the government to reassess the dollar volatility," Hamad Bu Amim, director general of the Dubai Chamber, said in comments published by UAE daily Gulf News on Sunday.
"We always link our monetary and fiscal policies with the United States." It's time to revisit that link, he told the paper.
As a result of the greenback recent decline, the UAE and other Gulf currencies that are pegged to the dollar are losing value.
The UAE, the Arab world's second biggest economy, was part of a planned monetary union but it walked away in May, freeing up its monetary policy from certain obligations, the paper reported.
"The Central Bank is applying different monetary tools and is not blindly following US policies. Having said that, the dollar peg has served us well for the last three decades," he added.
In an interview with CNN broadcast over the weekend, UAE central bank governor Sultan Bin Nasser Al Suwaidi said he saw no alternative to pegging the dirham to the US dollar.
"We have noticed there is tremendous correlation between our economy in general and the US economy and when there is growth in the US in our region and specifically the UAE," he added in the programme.
But in no circumstance, use this opportunity to ask what money is. Money is a GOOD readily acceptable in exchange by everyone in a given geographical area, and is sought for the purpose of being re-exchanged. Money is not digits, nor a freely floating abstraction which exists in the mind only. Money does not come into existence by attempting to capture the â€œrealityâ€ of economic relationships into a MODEL. Money is not a wager that completely disregards the important relationship between itself, money, and prices. Money needs an anchor, an anchor in reality, not in the mind. Money cannot be itself the anchor if it has no reality. Money cannot be itself the anchor if it exists only in the (digital) mind. The central element in the economic problem of money is the objective exchange value of money, popularly called its purchasing power. Hence, Saudi Aramco announced on Wednesday that it will begin using the Argus Sour Crude Index (ASCI) published by Argus Media as the benchmark price for all grades of crude oil sold to US customers. Aramco thereby decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange. Will Aramco price oil in the GCC single currency and will Saudi Arabia therefore look to it that the currency has an anchor in reality?