Keep the Saudi dollar peg to fight terror

December 31, 2007

I don’t know what to make of this ridiculous article from the Guardian. Are we really supposed to believe the Saudi government will make a decision of such magnitude just to stick-it to Bin Laden? Are they making their policy decisions simply by opposing the recordings of an invisible man from a mythical cave far far away?

If Saudi Arabia decides to maintain the dollar peg it will be for many reasons, Bin Laden not included. They have an interest in seeing America survive this turmoil. America provides defense against threatening neighbors. America is also the home to many hundreds of billions of dollars worth of investments owned by various members of the Saudi royal family and their associates… this time Bin Laden is included.

Saudia Arabia does not want to see the US dollar collapse and will likely accept some inflation to preserve its value. The real question is to what degree the Saudis will be willing to bend. It’s not unlikely they have a threshold beneath which all bets are off.

Not to mention this.