Billy the Kid

The million dollar question: What do Billy the Kid and the USD have in common? The answer: They are both outlaws. As of March 21, in Iran and North Korea, it will be illegal to hold USDs. The day after the announcement, Malaysia followed suit. The penalty is jail, and I would imagine in such countries as N. Korea and Iran, the penalties could be much worse.

This means that the approximate 4 million barrels of oil per day that Iran exports will no longer be able to be sold in USD. This puts the monopoly that the U.S. holds on oil sales being denominated in USD at strong risk (approximately 70% of all the oil in the world is held in USD).

And what does that mean? Well, one of the main reason the companies like China, Russia, and the other OPEC countries buy our debt and hold USD is to buy oil. It will be harder and harder for the USDs that are floating around the world to find a home. This, my friends, is bearish for the USD. I expect some other countries to eventually follow suit, although this is most unnecessary. There will be little reason to outlaw the holding of USDs when nobody wants them anymore.