The dollar is dead: long live the ?

Sorry to repeat myself but

Oil & Energy Watch
by cactus flower on Sat Mar 29, 2008 12:31 am

I read that in the 1920s over 70% of the world's oil was extracted in
the US. How things have changed -

Greatest Oil Reserves by Country, 2006
Rank Country Proved reserves
(billion barrels)
1. Saudi Arabia 264.3
2. Canada 178.8
3. Iran 132.5
4. Iraq 115.0
5. Kuwait 101.5
6. United Arab Emirates 97.8
7. Venezuela 79.7
8. Russia 60.0
9. Libya 39.1
10. Nigeria 35.9
11. United States 21.4
12. China 18.3
13. Qatar 15.2
14. Mexico 12.9
15. Algeria 11.4
16. Brazil 11.2
17. Kazakhstan 9.0
18. Norway 7.7
19. Azerbaijan 7.0
20. India 5.8

Top 20 countries 1224.5 (95%)
Rest of world 68.1 (5%)
World total 1,292.6


NOTES: Proved reserves are estimated with reasonable certainty to be recoverable with present technology and prices.
Source: Oil & Gas Journal, Vol. 103, No. 47 (Dec. 19, 2005). From: U.S. Energy Information Administration

Libertas sound hawkish all right in relation to maintaining the dollar as reserve currency for oil trading. If this is an example of the type of policy intervention they want to make to the EU debate, at risk of repeating myself again it is very evidently pro-US. As my long thread at the top of this page says, there is a belief on the right (Paul) and the left (Pilger) that this issue was what the US invaded Iraq over.
George Soros was saying in 2006 that is was unthinkable that the Euro might replace the dollar - now it is commonplace talk. It might be interesting sometime soon to look at Libertas' "Energy Policy" in a separate thread.

Ask youngdan about the cost of petrol in the states - it's half what it costs here. You'd swear they were awash with oil. They have some form of international hegemony on the price at which they buy it and I don't fully understand why - is it something to do with American economic stability or military dominance? Anyway it doesn't make sense that Iran would have to sell Japan oil as long as the Japanese had dollars but it seems to have been true up to now that any oil transaction in the world between any two non-American countries still made the American dollar printing presses rattle.

There was a discussion on boards about oil and the dollar
http://www.boards.ie/vbulletin/showthread.php?t=2055257173

and it contained this post

P_ONeil wrote:

The people above are correct. Originally, oil was traded in dollars because of the amount of oil America was buying. To this day they still are the main buyer of oil.

In fact, check this poster - look at the pie chart on the bottom right showing the 2004 stats on the distribution of oil worldwide. America uses more oil in a year than every other country on the planet added together.

http://www.oilposter.org/posterlarge.html

That being said, the big issue is as also mentioned above, is what is known as the petro-dollar recycling system.

Ever wonder how the America government can run a few hundred billion dollar deficit like they are now?

It works like this...

http://en.wikipedia.org/wiki/Petrodollar_recycling

OPEC sells oil in dollars. This means EVERY country has to buy dollars to buy oil. Just like when you go on holiday outside of the EU, you have to purchase that currency. All countries have to pay a fee to America to buy dollars to purchase oil for their own country. This means EVERY country in the world has to pay a charge to America everytime they buy oil. America 'borrows' from other nations, and never has to pay it back. Why? They simply deduct the money they owe from the nations money transfer fees when they buy oil. It doesn't cost America anything to convert their currency, but every other country has to pay America to transfer funds.

Also, OPEC nations then have all their profits in dollars. If they convert them to invest outside America they too then pay a conversion fee, which is why you see Iran and Venezuela still having large accounts in American banks even with the current rhetoric - it would cost them billions to move their money. This keeps American banks fat and happy, and allows them to borrow, run up huge deficits, and not have to pay it back. They know whoever they borrow from will have to buy oil sometime, and they use that as an economical weapon of sorts.

This is why America is the richest nation. However, times are changing - countries are looking to trade oil in Euros, and that scares the **** out of America because they then lose their edge, and a few trillion a year in made-up fees they currently are getting. It's like a scam, only legal. Sort of like paying the mafia for the building rights in New York, everyone has to pay for using dollars to buy oil.

Saddam switched his oil to be backed by Euros the day before America invaded. The FIRST act of the American 'improvised government' was to switch this back after the Americans captured the oil ministry - the FIRST building secured by the American forces. Thats why they skipped the fighting and sent the troops right into Baghdad.

Either way, if other nations follow suit, then the American economy will collapse. They know this, which is why they keep israel in place and columbia - they act as surrogates which they use to apply pressure to anyone who starts talking of messing with the scheme of things in the petro-dollar recycling system.

Any government even mentioning this or trying to change things finds itself paying even more for dollar conversions, or finds themselves completely cut out of the loop, leaving their country thirsting for oil. Lack of oil can keep a nation from developing.

I could go on for hours, but just check the wiki and Google the term - there is lots of material out there on this.

Next time you go to the pump, know that 1/4 of the price you pay isn't going to the middle east - its going into American coffers and that your paying for the right to buy oil through the American petro surtax.

I'm not sure that P. O'Neill is right in every detail but there may well be an essential truth. The fact that the oil ministry was seized first whilst the globe's most important historic artefacts were looted and trashed for day after day on our TV screens cannot be forgotten. It is correct the switch back to the dollar was done when the first fighting was still going on.

This thread in Politics.ie is mainly very good chat about the overall economic crisis, but someone gives the view that for the Euro to become the petroeuro would be a poisoned chalice as it would create inflationary pressures and unsustainable spending in the eurozone the same way as the petrodollar has in the US.

Politics.ie Link

cactus flower wrote:

Thanks for the tip WbS. Any recommendations?

Jeekers, that's up to what you like. For myself, it's Analog (SF), MacWorld, Scientific American, and Prospect (current affairs) from the UK. The exchange rates and taking out a 2 year sub makes them very very cheap compared to the news stand (or compared to a night out in Dublin). Take MacWorld, something like 80 USD, which is...via xe.com, 50 euro. Pretty good for 2 years.


I'm always tempted by National Geographic, but then I think, what on earth do I do with them if I do subscribe? Like, they look great, but what's their function? Otherwise I'd love to get Asimov's, maybe something like Popular Mechanics (to annoy truthers) and perhaps Wired which I like although every issue I read of it is like every other issue. But, that's a lot of reading ...

Everyone buys oil at the same price. 116 dollars a barrell. Set every day in NY and Rotherdam. The difference is tax. Remove the tax and you would be paying less than here because transportation cost to Europe is less.

youngdan and others have been discussing the bizarre rise of the dollar.

Cael posted this today on the IRBB website.

Propping the Dollar and the War in Georgia

Wag the Dog: How to Conceal Massive Economic Collapse

by Ellen Brown

Global Research, August 14, 2008
webofdebt.com

"I’m in show business, why come to me?"

"War is show business, that’s why we’re here."
– "Wag the Dog" (1997 film)

Last week, Fannie Mae and Freddie Mac had just announced record losses, and so had most reporting corporations. Unemployment was mounting, the foreclosure crisis was deepening, state budgets were in shambles, and massive bailouts were everywhere. Investors had every reason to expect the dollar and the stock market to plummet, and gold and oil to shoot up. Strangely, the Dow Jones Industrial Average gained 300 points, the dollar strengthened, and gold and oil were crushed. What happened?

It hardly took psychic powers to see that the Plunge Protection Team had come to the rescue. Formally known as the President’s Working Group on Financial Markets, the PPT was once concealed and its very existence denied as if it were a matter of strict national security. But the PPT has now come out of the closet. What was once a legally questionable "manipulator" of markets has become a sanctioned stabilizer and protector of markets. The new tone was set in January 2008, when global markets took their worst tumble since September 11, 2001. Senator Hillary Clinton said in a statement reported by the State News Service:

"I think it’s imperative that the following step be taken. The President should have already and should do so very quickly, convene the President’s Working Group on Financial Markets. That’s something that he can ask the Secretary of the Treasury to do. . . . This has to be coordinated across markets with the regulators here and obviously with regulators and central banks around the world."1

The mystery over what was going on with the dollar the first week in August was solved by James Turk, founder of GoldMoney, who wrote on August 7:

"[T]he banking problems in the United States continue to mount, while the federal government’s deficit continues to soar out of control. . . . So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here’s the proof.

"When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to buy US government debt instruments so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.

"On July 16, 2008 . . . , the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. . . . So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others."2

Just as central banks manipulate currencies in concert, so gold can be manipulated by massive selling of central bank reserves. Oil and any other market can be manipulated as well. But markets can be manipulated by only so much and for only so long without fixing the underlying problem. There is more bad news coming down the pike, news of such magnitude that no amount of ordinary manipulation is liable to conceal it.

For one thing, roughly $400 billion in ARMs (adjustable rate mortgages) have or will reset between March and October of this year. Assuming 3 to 6 months for strapped debtors to actually hit the wall with their payments, a huge wave of defaults is about to strike, continuing through March 2009 – just in time for the next huge wave of resets, in option ARMs.3 Option ARMs are loans with the option to pay even less than just the interest on the loan monthly, increasing the loan balance until the loan reaches a certain amount (typically 110% to 125% of the original loan balance), when it resets. The $800 billion credit line recently opened to Fannie Mae and Freddie Mac may be not only tapped but tapped out, at taxpayer expense. The underlying problem is little discussed but impossible to repair – a one quadrillion dollar derivatives scheme that is now imploding. Banks everywhere are facing massive writeoffs, putting the whole banking system on the brink of collapse. Only public bailouts will save it, but they could bankrupt the nation.

What to do? War and threats of war have been used historically to distract the population and deflect public scrutiny from economic calamity. As the scheme was summed up in the trailer to the 1997 movie "Wag the Dog" --

"There’s a crisis in the White House, and to save the election, they’d have to fake a war."

Perhaps that explains the sudden breakout of war in the Eurasian country of Georgia on August 8, just 3 months before the November elections. August 8 was the day the Olympic Games began in Beijing, a distraction that may have been timed to keep China from intervening on Russia’s behalf. The mainstream media version of events is that Russia, the bully on the block, invaded its tiny neighbor Georgia; but not all commentators agree. Mikhail Gorbachev, writing in The Washington Post on August 12, observed:

"What happened on the night of Aug. 7 is beyond comprehension. The Georgian military attacked the South Ossetian capital of Tskhinvali with multiple rocket launchers designed to devastate large areas. Russia had to respond. To accuse it of aggression against "small, defenseless Georgia" is not just hypocritical but shows a lack of humanity. . . . The Georgian leadership could do this only with the perceived support and encouragement of a much more powerful force."4

Bruce Gagnon, coordinator of the Global Network against Weapons and Nuclear Power, commented in OpEdNews on August 11:

"The U.S. has long been involved in supporting ‘freedom movements’ throughout this region that have been attempting to replace Russian influence with U.S. corporate control. The CIA, National Endowment for Democracy . . . , and Freedom House (includes Zbigniew Brzezinski, former CIA director James Woolsey, and Obama foreign policy adviser Anthony Lake) have been key funders and supporters of placing politicians in power throughout Central Asia that would play ball with ‘our side’. . . . None of this is about the good guys versus the bad guys. It is power bloc politics . . . . Big money is at stake . . . . [B]oth parties (Republican and Democrat) share a bi-partisan history and agenda of advancing corporate interests in this part of the world. Obama’s advisers, just like McCain’s (one of his top advisers was recently a lobbyist for the current government in Georgia) are thick in this stew."5


Brzezinski, who is now Obama’s adviser, was Jimmy Carter’s foreign policy adviser in the 1970s. He also served in the 1970s as director of the Trilateral Commission, which he co-founded with David Rockefeller Sr., considered by some to be the "master spider" of the Wall Street banking network.6 Brzezinski later boasted of drawing Russia into war with Afghanistan in 1979, "giving to the Soviet Union its Vietnam War."7 Is the Georgia affair an attempted repeat of that coup? Mike Whitney, a popular Internet commentator, observed on August 11:

"Washington’s bloody fingerprints are all over the invasion of South Ossetia. Georgia President Mikhail Saakashvili would never dream of launching a massive military attack unless he got explicit orders from his bosses at 1600 Pennsylvania Ave. After all, Saakashvili owes his entire political career to American power-brokers and US intelligence agencies. If he disobeyed them, he’d be gone in a fortnight. Besides an operation like this takes months of planning and logistical support; especially if it’s perfectly timed to coincide with the beginning of the Olympic games. (another petty neocon touch) That means Pentagon planners must have been working hand in hand with Georgian generals for months in advance. Nothing was left to chance."8

Part of that careful planning may have been the unprecedented propping up of the dollar and bombing of gold and oil the week before the curtain opened on the scene. Gold and oil had to be pushed down hard to give them room to rise before anyone shouted "hyperinflation!" As we watch the curtain rise on war in Eurasia, it is well to remember that things are not always as they seem. Markets are manipulated and wars are staged by Grand Chessmen behind the scenes.

NOTES

[1] Remarks from Hillary Clinton on the Global Economic Crisis,” CNN (January 22, 2008) (video preserved on allamericanpatriots.com).

[2] James Turk, “Mystery Solved,” GoldMoney.com (August 7, 2008).

[3] Bill Murphy, “Wipeout Nightmare,” LeMetropoleCafe.com (August 11, 2008); Ruth Simon, “FirstFed Grapples With Payment-Option Mortgages,” Wall Street Journal (August 6, 2008); Ruth Simon, “Mortgages Made in 2007 Go Bad at Rapid Clip,” ibid. (August 7, 2008).

[4] Mikhail Gorbachev, “A Path to Peace in the Caucasus,” Washington Post (August 12, 2008).

[5] Bruce Gagnon, “What Do We Know About Georgia-Russia Conflict?”, OpEdNews (August 11, 2008).

[6] Hans Schicht, “Financial Spider Webbing,” Gold-eagle.com (February 27, 2004).

[7] “Soviet War in Afghanistan,” Wikipedia

[8] Mike Whitney, “Bush’s War in Georgia,” Global Research (August 11, 2008).

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine.

A very nice find CF, thanks for sharing. I've always liked Cael and think it's a pity he didn't get more involved here after joining.

As much as I'm impressed with what he's said, I think it's very far from being the complete picture. It's left out the most important and biggest player in the whole scheme; the Russians.

Before the cold war ended, it was widely acknowledged that the Russians had the finest intelligence service on the planet and that they played the intelligence game in a way that put all the other players to shame, including the British and the US. How many intelligence operatives, working for the USSR, were rounded up after the cold war? Not enough to warrant being described as the greatest intelligence service that the world has ever seen.

The US is financially a dead dog and the British have major problems (and not just financial either). Look that the political climate in England, New Labour are ready for the back of the shovel, the Tories are a joke and groups like the BNP are becoming very popular at a local level.

On the other hand, the Russians have had lots of time to recover from 'the death of communism.' The Chinese are their allies and are in with them for the long haul, whether they like it or not, they are also rapidly becoming the world's most powerful financial entity (if they're not there presently), they could collapse the world's economy with the stroke of a pen and survive the fallout. I don't think the olympics hindered any moves that China could have made or wanted to make. They're playing exactly the tune that they want to play. Any movement they make from here on in will be seen as China coming to the rescue.

Israel is the problem child here. Israel wants to have at Iran and thus the US wants to have at Iran also. Yet the US has allowed Georgia if not encouraged them, to start pissing around right on the Russian border. Why is that?

For decades, the US has been surrounding China with missiles and puppet regimes. They've been trying the same with Russia too with limited success.

When you split an enemy's force, it's not a defensive move, it doesn't limit an enemy's attack. When you split an enemy force, the sole point is that it weakens an enemy's abilty to respond to an attack, should you take the battle to them.

The big problem with the scenario is that you never initiate such an attack from a weakened position. The West might indeed have superior technology (though that could be debated), but with a collapsing economy, a dispirited army (there are citizens walking around the US carrying placards with such friendly slogans as: 'Fuck the troops.'), and even though they have the support of the majority of world leaders, they have never been so despised by the world's population.

Pissing on Russia's doorstep doesn't only seem like the tail wagging the dog, it looks like an act of desperation. The West is moving to check Russia's king. All Russia has to do is castle and the West is fucked and everyone knows it. The Russians cannot castle if doing so would move their king into a checked position. By castling, in this anology, I mean appearing to calm the whole Georgian issue down and it looks as if the Russians are succeeding. Israel and/or the US is going to have to go into Iran. There's a problem there though - Pakistan - regime change etc. They might need to have the Indians have a go at Pakistan before any such move could happen in Iran.

I shouldn't forget Iraq and Afghanistan in this picture. Particularly Iraq (let's not forget Turkey having a go at the Kurds either or their incursions over the border of Iraq to do so). The 'Surge' was an exercise in buying off dissidents, formerly known as Al Qaeda and allowing ethnic cleansing and the civil war to escalate. The US and its allies couldn't subdue a small country smashed back to the stone age by more than a decade of genocidal sanctions. Looks to me like Iraq is going to be like a black hole sucking in life when it gets swarmed by all the above mentioned parties. Armageddon and biblical prophecies anyone? Thank god I'm an atheist.

This brings me back to my initial point about intelligence. Who's swinging the dead dog by the tail?

Jeez, I'm beginning to sound like a conspiracy theorist. Trust me, it's no theory, I can't even figure out who the conspirator is.

Snap out of it Hermes. There is not one word said by Cael in that piece. It is just what Ellen Brown said. I used to read that website myself. Have I not been talking about Brezinsky for months. He ORDERS Obama not advises him

The US certainly gains an advantage by having oil traded in dollars. However, the P oneill's assertion that 1/4 of every oil-dollar transaction ends up in the US treasury is nonsense. There is no "hidden" transaction fee.

What I've noticed about conspiracy theorists is that they look for a hidden agenda while ignoring that which is front of their faces.

The billions/trillions that the oil rich Middle Eastern countries collect in revenue are obviously denominated in dollars. If they wish to invest in Japan they have to convert dollars into yen. Now a transaction cost occurs. The bankers make a spread here. Whatever currency that oil producers use will have to be converted. Of course, the oil producers could sell their oil for a basket of currencies adjusted by ratio to each currencies value flucuations. If I was an oil producer I'd rather have dollars, yen, swiss fances and euros rather than just the yen.

Anyway, many of the dollars are funneled into safe investment called US Treasury debt. This allows the US to borrow way beyond its economic means. It also gives the US a leg up on inward investment. It's much easier for a sheik to invest in the US as he/she doesn't have to convert currency. This is another huge advantage to the US.

The other part of the conspiracy theorists arsenal is focused on geo-political concerns. It has more top do with scarcity of supply than dollar hegemony. Commodity supply = political clout. The Russians have already made their intentions known.

However, it pays to watch the Chinese these days. They just paid Chevron oil company $2 billion for a proven oil find in Angloa. Nice. Sell the Chinese good to the US while lending the US money by purchasing Fed bonds and pay a US corporation out of their dollar reserves. And the Chinese don't give a fig about local politics and wars because everyone knows they'll protect their vital interests.

[I read a comment on another site about how a Dublin pundit could read Mickey Harte's football strategy like a book. He had Harte figured out and could tell by how many points Dublin would win. The US's strategy is wearing thin in the new resource scarce environment we live in today. However, there is nothing to say that their strategy won't change.

Many seem to think that a client based solution whereby the EU ties oil producers to the euro currency is the best solution. It's nice to play the global super power. So far Iran has jumped on board. France's use of the Ayatollahs seems to be paying off. However, they've also produced the environment where Iran is about to become a nuclear player with the second highest proven oil stocks in the world. I wonder if Iran might have a bigger agenda than the EU would wish them to have. Will the ability to borrow beyond our current means by having oil denomiated in the euros offset the potential factors of a possible Middle Eastern super power on our doorstep?]

Why do you think that the Arabs would worry about transaction fees of a couple of percent. Meaningless. The Arabs do what they are told and if they don't the Iranian mullahs will cut off their fat heads. Saddam learned the hard way. The dollar will be kept as the reserve currency as long as possible. As long as the debt is denominated in dollars the US does not give a bollix. They could buy back every outstanding bond in the morning.

youngdan wrote:

Why do you think that the Arabs would worry about transaction fees of a couple of percent. Meaningless. The Arabs do what they are told and if they don't the Iranian mullahs will cut off their fat heads. Saddam learned the hard way. The dollar will be kept as the reserve currency as long as possible. As long as the debt is denominated in dollars the US does not give a bollix. They could buy back every outstanding bond in the morning.

How's about yee yd? The US would be doing itself a long term favour by letting the euro take over as the world currency. In the cold light of day, they need to get back to basics in the US. Do what they do best and build companies. Be that as it may.

Any insight into gold and the dollar rise? I'd love to know where all these dollars are going to be invested . But then again, wouldn't we all. gl

Interesting stuff from Cael/Cactus and Hermes but I'd hope that what we are seeing is a coincidence of events rather than a global chess strategy although that line of argument is very compelling. The 'Castling' of Georgia by the Russians is a palpable image and would suggest peace for a while. For me it is clear that Russia was not the aggressor and that Georgia will not enter Nato while there is a an internal border dispute i.e. the Georgians are the ones who will have to respect democracy. Why the Americans are taking such a belligerently disapproving stance is unsettling and is pure hypocrisy and they would be better off approaching the whole thing a lot more diplomatically... But that's an argument for another thread.

What effect this has had on the dollar and the oilprice isn't clear yet as it may have coincided with something that would come sooner or later anyway and that's a regulation of the American currency. The dollar was simply not allowed to fall any further and was possibly propped up by a system which must be similar to how the ERM operated in Europe in the 1990s... otherwise it's a climate that's ultimately very destructive for business and commerce and no one wants that (as long as it's within sustainable bounds of course )

So that's my theory - the dollar fell because of intervention and the oil price because of lack of demand. The upshot, I imagine, is that America and Europe will have to technically switch from oil to alternatives over the next decade and a half - this is the price that will be paid for this adjustment.

Fixing the North American currency is not new - it happened in 1985:

Quote :

Methods of regulating the foreign exchange market - such as fixing currency values to a commodity such as gold, or setting maximum exchange rate fluctuations had proven to too rigid. After the regulatory mechanisms- such as the gold standard, the Bretton Woods Accord and the Smithsonian Agreement - were no longer in place, the currency market was left with only the forces of supply and demand to guide it. Economic events such as OPEC oil crises, stagflation during the 1970's and severe changes in the US Federal Reserve's fiscal policy gave rise to a need for regulation.

These conditions led to the Plaza Accord, where on September 22nd 1985, finance ministers and central bank governors from the then G-5 nations- the United States, Japan, West Germany, France and the UK- gathered at the Plaza hotel in New York.

http://www.traderslog.com/plaza-accord.htm

Here is a guy live on youtube showing the oil fall and dollar rise as traders see it. He's using trader software and he says that demand for oil isn't so strong so the price is falling - a bubble. He mentions Georgia on the way

I should have an insight into the gold drop as it cost a lot of money on paper. I am in under 300 so I have seen numerous pullbacks. Naked short selling is allowed in th futures markets so anything can happen. This will continue until the coin shops have no metal on the shelf. Then gold will not be to be bought at any price.

This American guy seems to agree with you youngdan:

Its a good commentary on why the apparently irrational movements in the dollar and gold price are taking place -

http://onlinejournal.com/artman/publish/article_3646.shtml

Quote :

Gold is “real money” all right, but it’s also a commodity. And when commodities are smashed by a deflationary tidal wave -- as they have been the last few weeks -- gold will follow them into the basement. In truth, gold has taken an even worse pasting than the euro, free-falling from $980 per ounce in mid-July to $786 at Friday’s market close -- $194 in a month. Goldbugs are so fanatically committed to their views about “real currency” and “fiat money,” that any correction in the market is seen as proof of government manipulation (even though they are right many times).

There’s plenty of evidence of meddling in the currency markets, just as one would expect. After all, the Western banking system, led by the Fed, operates as a cartel. The head honchos are about as committed to free markets as Bush is to democracy, which isn’t saying much. It’s all a public relations ruse that’s used to defend a de facto monopoly; the paper money scam. So, we shouldn’t be surprised when foreign central banks inexplicably purchase $28 billion of US government securities at the 11th hour (as they did last month) to conceal our massive trade imbalance and prop up the waning dollar. Don’t forget, it’s their chestnuts they’re keeping out of the fire, too.

But, that doesn’t mean the Fed has superhuman powers or that every time gold goes into a tailspin it’s because the black helicopters fired lasers into the currency markets. When the economy is in the grips of deflation; all asset-classes get dragged down, gold included. Many of the hedge funds and other big market players are selling their gold positions, recognizing that the commodities boom is over and it’s time to move on. That doesn’t mean that gold won’t rebound sharply when Bernanke slashes rates or if Bush blows up some new part of the globe. It simply means that in the short-term “cash is king.” Pension funds and hedge funds will continue to deleverage to reduce their credit exposure to put themselves in a better position to rollover their debt. That means that gold’s slide could last awhile. This doesn’t look like a conspiracy to me, but I have my tinfoil hat in hand just in case.

No one knows where the bottom is for gold, but one thing is certain it’s future looks a lot brighter than the dollar’s. The Bush administration has yet to demonstrate that it can enforce Dollar Hegemony via military intervention. That is a very big deal indeed. If the dollar isn’t backed by Middle East oil, then the $6 trillion stockpile of dollars and dollar-denominated assets that are languishing in foreign central banks and sovereign wealth funds, will continue to dwindle until the dollar’s position as “reserve currency” comes to an end.

That’s one doomsday scenario, but there is another one, too. If Bernanke and Paulson continue to pile all of the nation’s credit problems (bad paper) on top of the greenback, foreign capital will head for the exits and the dollar will crash. Either way, the dollar’s troubles are mounting and something’s got to give.

anyone got a figure for how much of the price of dollars is due to oil?

america gets an unfair advantage re petro-dollars due to anti-inflationary nature of pricing oil in dollars. aslo kick on effect of seignorage.

i wrote extensively on this in p.ie but have forgotten most of my posts.

zakalwe wrote:

anyone got a figure for how much of the price of dollars is due to oil?

america gets an unfair advantage re petro-dollars due to anti-inflationary nature of pricing oil in dollars. aslo kick on effect of seignorage.

i wrote extensively on this in p.ie but have forgotten most of my posts.

There's a post on this by rockyracoon just up above in this thread - I think some more further back.
From what I remember the dollar has benefited a good bit from this arrangement but if the euro was to replace it as the main petro-currency it could be a bit of a weight around the neck.

Auditor posted this in the Graphs Thread - its easy to forget just how much oil the US are consuming.

Obama says he is going to cut oil dependency in the US by a half. They have big potential for solar as well as wind and wave. This would surely bring down the price of oil, but also the cost of renewables?

cactus flower wrote:

Obama says he is going to cut oil dependency in the US by a half. They have big potential for solar as well as wind and wave. This would surely bring down the price of oil, but also the cost of renewables?

Simply adopting European-style taxation on fuel should see an exodus from gas-guzzlers and a sharp increase in fuel efficiency of American cars while going some way towards bridging the $400 billion deficit in the budget. What amazes me about the Democratic National Convention(for which I have being staying up) is that none of the speeches have made any real mention of how to tackle the tower of US debt. I thought Obama might mention it in his hour-long acceptance but no.

Ard-Taoiseach wrote:

cactus flower wrote:

Obama says he is going to cut oil dependency in the US by a half. They have big potential for solar as well as wind and wave. This would surely bring down the price of oil, but also the cost of renewables?

Simply adopting European-style taxation on fuel should see an exodus from gas-guzzlers and a sharp increase in fuel efficiency of American cars while going some way towards bridging the $400 billion deficit in the budget. What amazes me about the Democratic National Convention(for which I have being staying up) is that none of the speeches have made any real mention of how to tackle the tower of US debt. I thought Obama might mention it in his hour-long acceptance but no.

Devaluing the dollar would help them, in fact it has. Its surely the easiest way of reducing the debt ? They may feel that the "victim chained to poisoner" relationship with China is unlikely to be disrupted for fear of economic collapse in China ? They may bank on going to war again and grabbling a whole lot of stuff ? After that I'm out of ideas for this evening.

cactus flower wrote:

Devaluing the dollar would help them, in fact it has. Its surely the easiest way of reducing the debt ? They may feel that the "victim chained to poisoner" relationship with China is unlikely to be disrupted for fear of economic collapse in China ? They may bank on going to war again and grabbling a whole lot of stuff ? After that I'm out of ideas for this evening.

Bill Clinton managed to do what perhaps no president since Roosevelt did, he balanced the budget, revived the economy and brought back surpluses. If Obama can repeat what Clinton did, the US can progressively and sustainably sort out its economic problems. Indeed it seems to be doing this already. As the housing market continues to implode, consumption shrivels and the banking sector endures a long cold shower, US exporters are diligently trading their way out of difficulty and helping to seal the gap in the trade deficit. Indeed US exports are now growing faster than China's. If this is continued for another few years, the US economy will be in far better shape than before.

Ard-Taoiseach wrote:

cactus flower wrote:

Devaluing the dollar would help them, in fact it has. Its surely the easiest way of reducing the debt ? They may feel that the "victim chained to poisoner" relationship with China is unlikely to be disrupted for fear of economic collapse in China ? They may bank on going to war again and grabbling a whole lot of stuff ? After that I'm out of ideas for this evening.

Bill Clinton managed to do what perhaps no president since Roosevelt did, he balanced the budget, revived the economy and brought back surpluses. If Obama can repeat what Clinton did, the US can progressively and sustainably sort out its economic problems. Indeed it seems to be doing this already. As the housing market continues to implode, consumption shrivels and the banking sector endures a long cold shower, US exporters are diligently trading their way out of difficulty and helping to seal the gap in the trade deficit. Indeed US exports are now growing faster than China's. If this is continued for another few years, the US economy will be in far better shape than before.

At risk of seeming under appreciative, did he not do it in part by changing the US into a low wage services based economy and letting manufacture go to the dogs? And by starting the shift from public debt to private indebtedness of ordinary people? Or was that all Bush ?

cactus flower wrote:

At risk of seeming under appreciative, did he not do it in part by changing the US into a low wage services based economy and letting manufacture go to the dogs? And by starting the shift from public debt to private indebtedness of ordinary people? Or was that all Bush ?

Hardly, living standards improved, wages rose, unemployment was subdued, the national debt clock was turned off, productivity improved and terrorists were a minor problem thanks to the care and attention paid by the Clinton Administration. Bill is the best President since Roosevelt.

Ard-Taoiseach wrote:

cactus flower wrote:

Devaluing the dollar would help them, in fact it has. Its surely the easiest way of reducing the debt ? They may feel that the "victim chained to poisoner" relationship with China is unlikely to be disrupted for fear of economic collapse in China ? They may bank on going to war again and grabbling a whole lot of stuff ? After that I'm out of ideas for this evening.

Bill Clinton managed to do what perhaps no president since Roosevelt did, he balanced the budget, revived the economy and brought back surpluses. If Obama can repeat what Clinton did, the US can progressively and sustainably sort out its economic problems. Indeed it seems to be doing this already. As the housing market continues to implode, consumption shrivels and the banking sector endures a long cold shower, US exporters are diligently trading their way out of difficulty and helping to seal the gap in the trade deficit. Indeed US exports are now growing faster than China's. If this is continued for another few years, the US economy will be in far better shape than before.

That sounds good - a logical consequence of the falling dollar... as long as there is a lot of manufacturing done at home to export. Is your export growth a reference to the recent 3.3% reported growth?

Auditor #9 wrote:

That sounds good - a logical consequence of the falling dollar... as long as there is a lot of manufacturing done at home to export. Is your export growth a reference to the recent 3.3% reported growth?

It is and the figures will eventually begin to show it. The durable orders for July were rather good so that augurs well for the US economy next year. It seems that having provoked this global slowdown, the US is to be one of the least affected with Europe and Japan the ones flirting with recession. I do refer to the 3.3% growth figure published which is quite amazing. If that's continued, we could see a very quick recovery in the US. It's still very touch and go and it would be reckless to call an end to this downturn, but it's looking likely that the US will deliver a big surprise to the upside.

Look at this graph for example, they have been progressively easing the current account problem over the last two years by growing exports at a faster pace and with export growth picking up should solve the problem by the next presidential elections...