oil economy lies 4

OIL ECONOMY LIES 4

Lie #3: The US dollar is the currency other flee to.

It is something that is written so often it brings to mind Nazi propaganda ( if you repeat a lie often enough… ).  The dollar is a safe haven.  The dollar is fundamentally sound.  The dollar is always preferred over other currencies.  The dollar rebounded today after foreign stock market crashes.  Back before Peak Oil, or the housing bubble bust or Lehman Brothers, back when you could actually realistically pretend the economy was still on life support rather than a corpse being injected with more formaldehyde to stave off decomposition, I read a small piece stating that all the worlds gold and all the worlds reported oil reserves ( which, remember, are usually inflated numbers ) combined together at current prices were worth less than the current US national debt.  If one can agree that you can’t really recognize a store of wealth as desirable as those two, gold being real money since the start of national governments and the Agricultural Age, and oil being the energy source that is responsible for all economic growth but more importantly all our products helping us survive such as fertilizers for crops and heat for our homes in winter, than can’t we agree that those two stores of wealth are the only indicators there are?  And that if that is the case then our debt is larger than all the wealth left on the globe.  And then it follows that any economy with more debt than can ever be repaid is sick and will not last. 

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But that isn’t the worse past.  Our debt has been paid ( the interest on our debt, NEVER the principle ) and increased not by any economic activity as we don’t manufacture or create as much as skim and steal from others, but by that magic Petro-Dollar.  I’m sure you are all pretty tired of hearing about that by now, but it is imperative to your survival to understand that while the Derivatives Bubble Of A Quadrillion Dollars is a very scary near future problem ( perhaps even starting as I write this and only viewed in hindsight, it only takes a few re-insurers failing to make good on paying off loses measured in the less than one percentile that will give us 2008 Redux ), scary enough that it will cause a global Depression immediately and impair trade and stability, from the point of view of the man on the street nothing is going to be more devastating than the world waking up one morning and deciding that the US can pack sand and they don’t want our worthless Greenbacks anymore ( just remember, a Greenback was a Lincoln wartime currency unbacked by gold and the term originally derisive ).  We’ve been subsidizing our debt and inflation by exporting it for 45 years now, while at the same time we’ve increased the oil we need to import to survive.  We only pump five million barrels a day ( not including the soon to be shut down fracking oil ) and use up to twenty and that math does not add up.  The death of the Petro-Dollar is the death of imports, including all that oil. 

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In short, the Dollar is only a company chit for future oil production, which was the only thing making it attractive to foreigners ( and here, by Dollar, I mean Treasury Bills.  They are the trading currency for oil, not the actual dollar paper currency ).  Once those chits become counterfeit, once the buyers or producers of oil decide they want another way to trade oil, the dollar is instantly worthless and not fit for TP ( remember that unplayable debt? ).  And as we speak, more and more countries are safely bypassing the dollar for oil trading.  Iran just announced as such, one in a long line.  Russia just opened an Oil Exchange using their own currency.  China and Russia have bypassed the dollar for future trade agreements.  Less than two decades ago, Iraq tried to decouple from the dollar and we invaded them.  Libya tried to talk up a gold currency and we did the same ( although I believe that was secondary and there was more than meets the eye there ).  Now, we can’t say “boo” when others announce goodbye to the dollar ( one wonders if the Iranians either have nukes or if there are Russians in country to guarantee their safety, to assure this, or if we simple are that powerless now ).  It is already happening, the barn door is opened and the horses are stampeding.  Forget the global stock market meltdown, this is far more serious.  There is absolutely no guarantee that we have years of this before the world as a whole rejects the petrodollar.  It could happen any time.  Gird your loins, yo!

Series continues next week.

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