It's an interesting threat, and one that we're going to have to keep out eye on. But I have reservations about how effective multinational cooperation on inter

It's an interesting threat, and one that we're going to have to keep out eye on. But I have reservations about how effective multinational cooperation on international monetary policy can be. One of the reasons that the dollar is the global reserve currency is because there is so much of it in circulation. No other currency is as liquid. Moving oil purchases of a bloc of countries to a non-dollar basket of currencies ought to be a significant hit to global demand for the dollar. But those same countries will have to correspondingly increase the amount of their own currency in global circulation, if the basket is to be used for international trade contracts. Despite being a strong currency and having a strong central bank, the EU has not pursued a policy of making the Euro a globally viable reserve currency, precisely because they do not want to have to deal with the problems that stem from creating the massive amounts of currency in circulation necessary for global use. However, something similar was done in the past in Europe. During the transition to the Euro, the currency was brought into existence for use in financial transactions three years before it was brought into physical circulation (http://en.wikipedia.org/wiki/Introduction_of_the_euro#Preparation_for_transition_to_the_euro http://en.wikipedia.org/wiki/Introduction_of_the_euro#Prepar...). So the euro existed really as a reified basket of national currencies fixed against each other in certain proportions. This was possible because of the end goal of bringing into being a fully unified monetary system and because of the close political integration of all the major players, who were subject to the financial constraints necessary to keep their currency locked into a fixed ratio with the others. It's not clear to me that the Arab nations, Iran, Russia, and China can sustain the level of economic cooperation necessary to make their basket of currencies stick. Further, it's not clear that they can maintain stable financial policies at home, while allowing enough of their currency to be used abroad. Secondary foreign markets for a nation's currency can have difficult-to-predict effects (e.g. the Eurodollar market: http://en.wikipedia.org/wiki/Eurodollar http://en.wikipedia.org/wiki/Eurodollar). For a nation like China, who keeps very close control over their currency, won't allow it to float, and doesn't allow full convertibility (http://www.chinadaily.com.cn/hkedition/2009-09/18/content_8706002.htm http://www.chinadaily.com.cn/hkedition/2009-09/18/content_87...), it will be quite difficult for it to seriously play a role in supplanting the dollar. Having one actor (the Fed) is far less prone to problems than having half a dozen or more actors facing coordination and cooperation problems when faced with currency speculators operating in secondary currency markets. Just look at how Soros was able to tear the Pound Sterling out of the ERM by massively shorting it (http://en.wikipedia.org/wiki/European_Exchange_Rate_Mechanism#Pound_sterling.27s_forced_withdrawal_from_the_ERM http://en.wikipedia.org/wiki/European_Exchange_Rate_Mechanis...).