An earlier essay The Dollar Rally and Deflationary Imbalances in the US Dollar Holdings of Overseas Banks demonstrates that a significant dollar demand has been created overseas by the deterioration of dodgy, if not fraudulent, US debt assets and dollar deposits.
There is something ironic if not pathetic in the EU coming hat in hand to the Federal Reserve to beg for additional supplies of dollars at higher prices after taking heavy losses from US debt instruments that were founded on deception and false premises.
One obvious solution is for Europe to "go off the dollar standard" as Roosevelt went off the gold standard in 1933 within the US.
For example, for those covenants that are payable in dollars only, the EU can declare that the obligations may be settled in euros at prevailing exchange rates.
As it says on the US dollar, "This note is legal tender for all debts, public and private."
Dollars ought not to be required to settle primarily domestic accounts, as gold was no longer required to settle debts within the US after 1933. Dollar transactions should be treated as forex transactions.
The gold standard was superior to the dollar standard as gold could not be created or destroyed at will by private US banking manipulation.
The US will object strenuously, as will US private companies. After all, there should be little doubt that the bankers are using the current dollar hegemony to their advantage. If Europe is content to subsidize American extravagance then they should continue to do nothing about it. But they need to be prepared for a descent into a kind of debt peonage.
It should be almost embarrassingly obvious to everyone that the Dollar no longer deserves to be treated as the singular reserve currency and as a universal monetary standard, especially not for primarily domestic transactions.
