Rumsfeld on the Ropes

[RougeUnderoos]

[quote=Azure] Surely Saddam didn't use it to build weapons, right?

/quote]

Laugh. Apparently not. What aren't you getting here?

[Lurch]

Okay, how about this theory for the reason to invade Iraq, and now have an eye on Iran... to save the empire. The American dollar is the defacto standard for trade because of the direct relationship between oil and the greenback. This artificially keeps the American currency strong, even in times of discord, when currencies traditionally take a beating. What if Bush and Co. were just protecting the empire by insuring the dollar remained the standard for oil purchases and the standard for international trade? Should the standard change currencies, the American dollar would likely be dumped on the open market causing the dollar to plummet and the deficit to rise to even greater levels than it is. Maybe the invasion of Iraq and sabre rattling with Iran is to prevent this change from being initiated by oil producers in the middle east?

Too much of a conspiracy theory for you?

Terrible theory - makes no economic nor logical sense. Doesn't mean that Bush didn't believe it I guess, but here are my thoughts.

The $US is the standard for trade b/c it has been historically the biggest economy that engages in the most international trade with the most stable economy. Add to that that the US consumes something like 25% or 30% of total oil in the world, and what other sensible currency for exchange of oil is left. This is now failing, partially as a result of the war and accumulating debt. When the $US is no longer the standard of trade, we are probably in for The Greater Depression b/c the massive dumping of US dollars will collapse the global economy. Personally, I think this will be GW's legacy, rather than whether he lied to get into Iraq, etc.

Further on the "theory", how in the world does an invasion insure the $US remains the standard of oil trade. What possible relationship exists that would influence buyers and sellers to price things in $US based on the US being in Iraq. In fact, if you care to look at the broader world, I think you'd see the opposite has occurred, and quite predictably. The world has fled from holding $US, oil prices are much higher (especially in $US, but much less so for every other country in the world). For reference, look at the rush to gold as the "safe haven" currency rather than US paper. This has probably accelerated an inveitable decline of the US's economic influence in the world.

As for some of the more assertive statements, what exactly is the "direct relationship" between the $US and oil? It's no different than the relationship between the $US and Twinkies. Oil prices go up or down in accordance with the trade weighted movements in currencies, with the $US simply the means of expression.

As for keeping the $US "artificially strong", I'd love to hear how this works. IMO, what has historically kept the $US strong is that other nations and individuals have held a lot of wealth in US paper b/c of the perceived stability and the fact they are by far the biggest economy. That is gone or at least fading, thanks to the tag team efforts of Osama and GW combined with the creation of the Euro, China's emergence, etc.

[Lanny_MacDonald]

Originally Posted by Lurch

Terrible theory ...

Thanks for playing Lurch. Here's more information on the subject, which just happens to align with the potential Iranian Oil Bourse on the horizon.

Part 1:

Krassimir Petrov, Ph. D.
January 17, 2006
Abstract: the proposed Iranian Oil Bourse will accelerate the fall of the American Empire.
I. Economics of Empires

A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.

Historically, taxing the subject state has been in various forms - usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, imperial taxation has always been direct: the subject state handed over the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods - the difference capturing the U.S. imperial tax. Here is how this happened.

Early in the 20th century, the U.S. economy began to dominate the world economy. The U.S. dollar was tied to gold, so that the value of the dollar neither increased, nor decreased, but remained the same amount of gold. The Great Depression, with its preceding inflation from 1921 to 1929 and its subsequent ballooning government deficits, had substantially increased the amount of currency in circulation, and thus rendered the backing of U.S. dollars by gold impossible. This led Roosevelt to decouple the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not an empire. The fixed value of the dollar did not allow the Americans to extract economic benefits from other countries by supplying them with dollars convertible to gold.

Economically, the American Empire was born with Bretton Woods in 1945. The U.S. dollar was not fully convertible to gold, but was made convertible to gold only to foreign governments. This established the dollar as the reserve currency of the world. It was possible, because during WWII, the United States had supplied its allies with provisions, demanding gold as payment, thus accumulating significant portion of the world's gold. An Empire would not have been possible if, following the Bretton Woods arrangement, the dollar supply was kept limited and within the availability of gold, so as to fully exchange back dollars for gold. However, the guns-and-butter policy of the 1960's was an imperial one: the dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. Most of those dollars were handed over to foreigners in exchange for economic goods, without the prospect of buying them back at the same value. The increase in dollar ho ldings of foreigners via persistent U.S. trade deficits was tantamount to a tax - the classical inflation tax that a country imposes on its own citizens, this time around an inflation tax that U.S. imposed on rest of the world.

When in 1970-1971 foreigners demanded payment for their dollars in gold, The U.S. Government defaulted on its payment on August 15, 1971. While the popular spin told the story of "severing the link between the dollar and gold", in reality the denial to pay back in gold was an act of bankruptcy by the U.S. Government. Essentially, the U.S. declared itself an Empire. It had extracted an enormous amount of economic goods from the rest of the world, with no intention or ability to return those goods, and the world was powerless to respond - the world was taxed and it could not do anything about it.

From that point on, to sustain the American Empire and to continue to tax the rest of the world, the United States had to force the world to continue to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. It had to give the world an economic reason to hold them, and that reason was oil.

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars. Because the world had to buy oil from the Arab oil countries, it had the reason to hold dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for dollars could only increase. Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil.

The economic essence of this arrangement was that the dollar was now backed by oil. As long as that was the case, the world had to accumulate increasing amounts of dollars, because they needed those dollars to buy oil. As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured, and the American Empire could continue to tax the rest of the world. If, for any reason, the dollar lost its oil backing, the American Empire would cease to exist. Thus, Imperial survival dictated that oil be sold only for dollars. It also dictated that oil reserves were spread around various sovereign states that weren't strong enough, politically or militarily, to demand payment for oil in something else. If someone demanded a different payment, he had to be convinced, either by political pressure or military means, to change his mind.

The man that actually did demand Euro for his oil was Saddam Hussein in 2000. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business, political pressure was exerted to change his mind. When other countries, like Iran, wanted payment in other currencies, most notably Euro and Yen, the danger to the dollar was clear and present, and a punitive action was in order. Bush's Shock-and-Awe in Iraq was not about Saddam's nuclear capabilities, about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the dollar, ergo the American Empire. It was about setting an example that anyone who demanded payment in currencies other than U.S. Dollars would be likewise punished.

Many have criticized Bush for staging the war in Iraq in order to seize Iraqi oil fields. However, those critics can't explain why Bush would want to seize those fields - he could simply print dollars for nothing and use them to get all the oil in the world that he needs. He must have had some other reason to invade Iraq.

[Lanny_MacDonald]

Part 2:

History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse. Economically speaking, in order for an empire to initiate and conduct a war, its benefits must outweigh its military and social costs. Benefits from Iraqi oil fields are hardly worth the long-term, multi-year military cost. Instead, Bush must have went into Iraq to defend his Empire. Indeed, this is the case: two months after the United States invaded Iraq, the Oil for Food Program was terminated, the Iraqi Euro accounts were switched back to dollars, and oil was sold once again only for U.S. dollars. No longer could the world buy oil from Iraq with Euro. Global dollar supremacy was once again restored. Bush descended victoriously from a fighter jet an d declared the mission accomplished - he had successfully defended the U.S. dollar, and thus the American Empire.

II. Iranian Oil Bourse
The Iranian government has finally developed the ultimate "nuclear" weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006. It will be based on a euro-oil-trading mechanism that naturally implies payment for oil in Euro. In economic terms, this represents a much greater threat to the hegemony of the dollar than Saddam's, because it will allow anyone willing either to buy or to sell oil for Euro to transact on the exchange, thus circumventing the U.S. dollar altogether. If so, then it is likely that almost everyone will eagerly adopt this euro oil system:

• The Europeans will not have to buy and hold dollars in order to secure their payment for oil, but would instead pay with their own currencies. The adoption of the euro for oil transactions will provide the European currency with a reserve status that will benefit the European at the expense of the Americans.
  .
• The Chinese and the Japanese will be especially eager to adopt the new exchange, because it will allow them to drastically lower their enormous dollar reserves and diversify with Euros, thus protecting themselves against the depreciation of the dollar. One portion of their dollars they will still want to hold onto; a second portion of their dollar holdings they may decide to dump outright; a third portion of their dollars they will decide to use up for future payments without replenishing those dollar holdings, but building up instead their euro reserves.
  .
• The Russians have inherent economic interest in adopting the Euro - the bulk of their trade is with European countries, with oil-exporting countries, with China, and with Japan. Adoption of the Euro will immediately take care of the first two blocs, and will over time facilitate trade with China and Japan. Also, the Russians seemingly detest holding depreciating dollars, for they have recently found a new religion with gold. Russians have also revived their nationalism, and if embracing the Euro will stab the Americans, they will gladly do it and smugly watch the Americans bleed.
  .
• The Arab oil-exporting countries will eagerly adopt the Euro as a means of diversifying against rising mountains of depreciating dollars. Just like the Russians, their trade is mostly with European countries, and therefore will prefer the European currency both for its stability and for avoiding currency risk, not to mention their jihad against the Infidel Enemy.

Only the British will find themselves between a rock and a hard place. They have had a strategic partnership with the U.S. forever, but have also had their natural pull from Europe. So far, they have had many reasons to stick with the winner. However, when they see their century-old partner falling, will they firmly stand behind him or will they deliver the coup de grace? Still, we should not forget that currently the two leading oil exchanges are the New York's NYMEX and the London's International Petroleum Exchange (IPE), even though both of them are effectively owned by the Americans. It seems more likely that the British will have to go down with the sinking ship, for otherwise they will be shooting themselves in the foot by hurting their own London IPE interests. It is here noteworthy that for all the rhetoric about the reasons for the surviving British Pound, the British most likely did not adopt the Euro namely because the Americans must have pr essured them not to: otherwise the London IPE would have had to switch to Euros, thus mortally wounding the dollar and their strategic partner.

At any rate, no matter what the British decide, should the Iranian Oil Bourse accelerate, the interests that matter-those of Europeans, Chinese, Japanese, Russians, and Arabs-will eagerly adopt the Euro, thus sealing the fate of the dollar. Americans cannot allow this to happen, and if necessary, will use a vast array of strategies to halt or hobble the operation's exchange:

• Sabotaging the Exchange - this could be a computer virus, network, communications, or server attack, various server security breaches, or a 9-11-type attack on main and backup facilities.
  .
• Coup d'état - this is by far the best long-term strategy available to the Americans.
  .
• Negotiating Acceptable Terms & Limitations - this is another excellent solution to the Americans. Of course, a government coup is clearly the preferred strategy, for it will ensure that the exchange does not operate at all and does not threaten American interests. However, if an attempted sabotage or coup d'etat fails, then negotiation is clearly the second-best available option.
  .
• Joint U.N. War Resolution - this will be, no doubt, hard to secure given the interests of all other member-states of the Security Council. Feverish rhetoric about Iranians developing nuclear weapons undoubtedly serves to prepare this course of action.
  .
• Unilateral Nuclear Strike - this is a terrible strategic choice for all the reasons associated with the next strategy, the Unilateral Total War. The Americans will likely use Israel to do their dirty nuclear job.
  .
• Unilateral Total War - this is obviously the worst strategic choice. First, the U.S. military resources have been already depleted with two wars. Secondly, the Americans will further alienate other powerful nations. Third, major dollar-holding countries may decide to quietly retaliate by dumping their own mountains of dollars, thus preventing the U.S. from further financing its militant ambitions. Finally, Iran has strategic alliances with other powerful nations that may trigger their involvement in war; Iran reputedly has such alliance with China, India, and Russia, known as the Shanghai Cooperative Group, a.k.a. Shanghai Coop and a separate pact with Syria.

[Lanny_MacDonald]

Part 3:

Whatever the strategic choice, from a purely economic point of view, should the Iranian Oil Bourse gain momentum, it will be eagerly embraced by major economic powers and will precipitate the demise of the dollar. The collapsing dollar will dramatically accelerate U.S. inflation and will pressure upward U.S. long-term interest rates. At this point, the Fed will find itself between Scylla and Charybdis - between deflation and hyperinflation - it will be forced fast either to take its "classical medicine" by deflating, whereby it raises interest rates, thus inducing a major economic depression, a collapse in real estate, and an implosion in bond, stock, and derivative markets, with a total financial collapse, or alternatively, to take the Weimar way out by inflating, whereby it pegs the long-bond yield, raises the Helicopters and drowns the financial system in liquidity, bailing out numerous LTCMs and hyperinflating the economy.

The Austrian theory of money, credit, and business cycles teaches us that there is no in-between Scylla and Charybdis. Sooner or later, the monetary system must swing one way or the other, forcing the Fed to make its choice. No doubt, Commander-in-Chief Ben Bernanke, a renowned scholar of the Great Depression and an adept Black Hawk pilot, will choose inflation. Helicopter Ben, oblivious to Rothbard's America's Great Depression, has nonetheless mastered the lessons of the Great Depression and the annihilating power of deflations. The Maestro has taught him the panacea of every single financial problem-to inflate, come hell or high water. He has even taught the Japanese his own ingenious unconventional ways to battle the deflationary liquidity trap. Like his mentor, he has dreamed of battling a Kondratieff Winter. To avoid deflation, he will resort to the printing presses; he will recall all helicopters from the 800 overseas U.S. military bases; and, if necessary, he will monetize everything in sight. His ultimate accomplishment will be the hyperinflationary destruction of the American currency and from its ashes will rise the next reserve currency of the world-that barbarous relic called gold.

Recommended Reading
William Clark The Real Reasons for the Upcoming War in Iraq
William Clark The Real Reasons Why Iran is the Next Target
Krassimir Petrov
email: Krassimir_Petrov@hotmail.com
Petrov Archives
About the Author
Krassimir Petrov has received his Ph. D. in economics from the Ohio State University and currently teaches Macroeconomics, International Finance, and Econometrics at the American University in Bulgaria.

[Lurch]

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars.

I would LOVE to see a primary source on this. I know OPEC has openly talked about setting its pricing targets in Euros since at least 2004, which increases price risk for the US. I have certainly never heard of an "iron clad" agreement that oil be priced in $US. I'd love to see a credible source for many of the items in this article, though I guess at the heart of every conspiracy theory is information not widely known and impossible to verify.

[Lanny_MacDonald]

Originally Posted by Lurch

I would LOVE to see a primary source on this. I know OPEC has openly talked about setting its pricing targets in Euros since at least 2004, which increases price risk for the US. I have certainly never heard of an "iron clad" agreement that oil be priced in $US. I'd love to see a credible source for many of the items in this article, though I guess at the heart of every conspiracy theory is information not widely known and impossible to verify.

Ah, gotcha. So because YOU don't know that this is fact it becomes a "conspiracy theory". Well maybe this will change your view a bit. From the horse's mouth, so to speak.

Especially interesting is a speech given by Mr Javad Yarjani, the Head of OPEC's Petroleum Market Analysis Department, in a visit to Spain (April 2002). His speech dealt entirely on the subject of OPEC oil transaction currency standard with respect to both the dollar and the euro. The following exerts from this OPEC executive provide insights into the conditions that would create momentum for an OPEC currency switch to the euro. Indeed, his candid analysis warrants careful consideration given that two of the requisite variables he outlines for the switch have taken place since this speech in early 2002.

"The question that comes to mind is whether the euro will establish itself in world financial markets, thus challenging the supremacy of the US dollar, and consequently trigger a change in the dollar's dominance in oil markets. As we all know, the mighty dollar has reigned supreme since 1945, and in the last few years has even gained more ground with the economic dominance of the United States, a situation that may not change in the near future.

The world's dependency on US dollars to pay for trade has seen countries bound to dollar reserves, which are disproportionably higher than America's share in global output. The share of the dollar in the denomination of world trade is also much higher than the share of the US in world trade.

Having said that, it is worthwhile to note that in the long run the euro is not at such a disadvantage versus the dollar when one compares the relative sizes of the economies involved, especially given the EU enlargement plans. Moreover, the Euro-zone has a bigger share of global trade than the US and while the US has a huge current account deficit, the euro area has a more, or balanced, external accounts position.

One of the more compelling arguments for keeping oil pricing and payments in dollars has been that the US remains a large importer of oil, despite being a substantial crude producer itself. However, looking at the statistics of crude oil exports, one notes that the Euro-zone is an even larger importer of oil and petroleum products than the US."

"From the EU's point of view, it is clear that Europe would prefer to see payments for oil shift from the dollar to the euro, which effectively removed the currency risk. It would also increase demand for the euro and thus help raise its value.

Moreover, since oil is such an important commodity in global trade, in term of value, if pricing were to shift to the euro, it could provide a boost to the global acceptability of the single currency.

There is also very strong trade links between OPEC Member Countries (MCs) and the Euro-zone, with more than 45 percent of total merchandise imports of OPEC MCs coming from the countries of the Euro-zone, while OPEC MCs are main suppliers of oil and crude oil products to Europe."

"Of major importance to the ultimate success of the euro, in terms of the oil pricing, will be if Europe's two major oil producers the United Kingdom and Norway join the single currency. Naturally, the future integration of these two countries into the Euro-zone and Europe will be important considering they are the region's two major oil producers in the North Sea, which is home to the international crude oil benchmark, Brent. This might create a momentum to shift the oil pricing system to euros."

"In the short-term, OPEC MCs, with possibly a few exceptions, are expected to continue to accept payment in dollars. Nevertheless, I believe that OPEC will not discount entirely the possibility of adopting euro pricing and payments in the future. The Organization, like many other financial houses at present, is also assessing how the euro will settle into its life as a new currency. The critical question for market players is the overall value and stability of the euro, and whether other countries within the Union will adopt the single currency."

Should the euro challenge the dollar in strength, which essentially could include it in the denomination of the oil bill, it could be that a system may emerge which benefits more countries in the long-term. Perhaps with increased European integration and a strong European economy, this may become a reality. Time may be on your side. I wish the euro every success."

Based on this important speech, momentum for OPEC to consider switching to the euro will grow once the E.U. expands in May 2004 to 450 million people with the inclusion of 10 additional member states. The aggregate GDP will increase from $7 trillion to $9.6 trillion. This enlarged E.U. will be an oil consuming purchasing population 33% larger than the U.S., and over half of OPEC crude oil will be sold to the EU as of mid-2004. This does not include other potential entrants such as the U.K., Norway, Denmark and Sweden.

[Lurch]

Ah, gotcha. So because YOU don't know that this is fact it becomes a "conspiracy theory". Well maybe this will change your view a bit. From the horse's mouth, so to speak.

Well, aside from the "gotcha" style of argument which is quite weak, I don't see a single thing in this story that addresses the key point. You, or at least the article, states there is an "ironclad agreement" to trade oil in $US that the US is willing to go to war to enforce.

In 1971, as it became clearer and clearer that the U.S Government would not be able to buy back its dollars in gold, it made in 1972-73 an iron-clad arrangement with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. dollars for its oil. The rest of OPEC was to follow suit and also accept only dollars.

(Emphasis mine)

Your subsequent post does not mention this alleged agreement, nor hint at it. In fact, it merely supports the fact that trading oil in $US is merely a function of the long-standing US dominance in the world economy that is now threatened by the Euro-zone, basically reinforcing the farce that the US could possibly hope to influence trading patterns by force. In fact, I noted in my previous post that OPEC was openly talking about trading in Euros b/c they saw this as a way to hedge their currency risk and they did a lot of trade with European nations. Gotcha is right, but I think you've lost the plot of your own argument.

[Azure]

WTF are you talking about? Clinton dealt with Iraq the best way that he could. Clinton did not invade Iraq because he knew there was no way to manage the situation effectively. He knew going in that it was a quagmire waiting to happen. And how did he know that? He LISTENED to the military and they told him it was a no win situation. The best thing they could have done was to contain and use diplomacy. That is what the military wanted to do and that was exactly what they did.

Shooting a couple missiles at Iraq is a good form of diplomacy, ain't it? Maybe Clinton should have come out and said it was a no-win situation or at least not tell the whole world that Saddam had WMD and then do nothing about it.

If you want to blame someone for not getting the job done in Iraq place the blame where it really belongs, at the feet of Bush41. Bush had an international coalition in 1991 and could have easily removed Hussein from power, but he chose not to. If the most pressing issue was to get Hussein out of the way, it could have been done then and there, with international approval. Unfortunately there was the thing of maintaining Iraq and the stability of the region, even then. Bush41 knew that Iraq was better with a crippled Hussein in power than having the mayhem in the region that his removal would cause. Bush41 made the decision, and in retrospect, it was the right one. A secular Iraq was the best thing possible in region. Now that is nothing more than a pipe dream.

An Iraq where Saddam murders his own people is a better Iraq then it is now? WTF?

Do you expect democracy to be established overnight?

That's right, we do. What the public sees is about 1/10th of 1% of the information available on a given subject. The story that is released to the media looks nothing at all what the facts of the matter is. There was a boatload of information that showed that Iraq HAD WMDs, but there was also a load that said it had been destroyed. The intelligence was picked over and the stuff that supported the plan to invade was presented. The stuff that echoed the sentiments of the UN and the inspectors was buried. Congress voted on what the Bush admin presented, and what they presented was a well shaped package that was designed to make you believe one thing, which was counter to the facts. I'm not sure what you're mother taught you, but mine taught me that is lying.

And if it had been destroyed, why did Saddam chase away the weapons inspectors? Again, and again, and again. Before they could destroy the weapons

I guess I have to ask you, if the American evidence was so damning, why did it not convince anyone else in the security council and in the general assembly when Powell presented it? I'll save you the time. Because it conflicted with the intelligence that other nations had, that's why.

What intelligence? The intelligence that Russia, France and Germany were in bed with Saddam?

Oil for food? You know it wasn't only the American companies.

That's your perogative, and its great to hear someone living in small town Alberta say as much. Too bad its not your tax money that is paying for all that is going on in Iraq. Too bad you don't live in a city of 5.5 million people with infrastructure for 2 million. Too bad you aren't subject to the grid lock that politics has caused in this country. You might have a completely different view on the subject.

And based on where I live, thats the opinion I will hold. Does the US concern me with their domestic matters? No. But their foreign policy is something will eventually effect Canada.

What's to mention? It's done. Sanctions have meen handed out. The real funny thing is that American companies got the majority of the goodies in that whole mess, but none of that has hardly been mentioned. Why is that?

So where'd the money go, if its done?

[HOZ]

Originally Posted by CaptainCrunch

And we changed 1-0-1 which is an accepted translation of S-O-S, to 9/11 so our super shadowy secret organization would know when all of our secret plotting and conspiring would erupt in chaos.

I have always suspected! Finally my suspicions are confirmed!

Now explain why I pick up radio signals with my molar fillings and have an unstoppable desire to by "Catcher in the Rye"!

[Cowperson]

Originally Posted by Lurch

Terrible theory - makes no economic nor logical sense. Doesn't mean that Bush didn't believe it I guess, but here are my thoughts.

The $US is the standard for trade b/c it has been historically the biggest economy that engages in the most international trade with the most stable economy. Add to that that the US consumes something like 25% or 30% of total oil in the world, and what other sensible currency for exchange of oil is left. This is now failing, partially as a result of the war and accumulating debt. When the $US is no longer the standard of trade, we are probably in for The Greater Depression b/c the massive dumping of US dollars will collapse the global economy. Personally, I think this will be GW's legacy, rather than whether he lied to get into Iraq, etc.

Further on the "theory", how in the world does an invasion insure the $US remains the standard of oil trade. What possible relationship exists that would influence buyers and sellers to price things in $US based on the US being in Iraq. In fact, if you care to look at the broader world, I think you'd see the opposite has occurred, and quite predictably. The world has fled from holding $US, oil prices are much higher (especially in $US, but much less so for every other country in the world). For reference, look at the rush to gold as the "safe haven" currency rather than US paper. This has probably accelerated an inveitable decline of the US's economic influence in the world.

As for some of the more assertive statements, what exactly is the "direct relationship" between the $US and oil? It's no different than the relationship between the $US and Twinkies. Oil prices go up or down in accordance with the trade weighted movements in currencies, with the $US simply the means of expression.

As for keeping the $US "artificially strong", I'd love to hear how this works. IMO, what has historically kept the $US strong is that other nations and individuals have held a lot of wealth in US paper b/c of the perceived stability and the fact they are by far the biggest economy. That is gone or at least fading, thanks to the tag team efforts of Osama and GW combined with the creation of the Euro, China's emergence, etc.

Good post . . . . . I'd agree with the gist of it, especially the "twinkie" part.

Stuff like that is obvious even if it might not be among those easily led around by the nose by conspiracy theories.

In Canada, we're used to a fairly stable relationship with the USA dollar which might cloud our view of how currency relationships more often work.

It is very easy to demonstrate the USA dollar has had frequent and dramatic moves - both positive and negative -within relatively short time frames against other major and minor currencies through the last 25 years.

As an example, the high/low difference in the USA dollar/Japanese Yen relationship between 1990 and 1996 was 98%.

The USA dollar/Swiss Franc relationship varied 20%-25% six times - up and down - between 1990 and 1996.

The British Pound/USA dollar relationship varied 30% between October 1992 and February 1993.

Some might even speculate the abrupt decline of the USA dollar a few years ago might have been a deliberate pulling of the plug to get China to float its currency versus the policy of pegging it at an artificially low value to the dollar (a conspiracy theory!!!). Certainly, European exporters trying to access the number one consuming market in the world, America, can't be too happy about a 7%-8% rise in the Euro against the dollar so far this year. But American exporters might be quite happy about it.

Regarding oil, we sometimes forget America is the number 2 or 3 oil PRODUCING nation on the planet. Combined with the power of its economy and its status a large importer, its not suprising pricing might be in that currency . . . . . although, as Lurch stated, that's fairly irrelevant. Price it in any currency you want, a liquid one preferably, and smart guys with computers engaging in arbitrage would even it out.

On deficits, there remains an argument as to whether government deficits actually matter as illustrated in this article from 2004:

http://money.cnn.com/2004/02/02/news...dget/index.htm

In the broad sense, debt does matter to America as they are surrendering some of their sovereignty when they shift a disproportionate portion of their debt burden to overseas lenders . . . . . in the early 1990's, Canada also had a disproportionate share of its debt in the hands of foreigners but we now are essentially capable of funding our own debt internally (thank the Liberals for that).

On the other hand, the American economy is an extremely dynamic thing and, unlike Germany and France as examples, can easily overcome the troubles a government might get into in terms of debt.

In the late 1980's, early 1990's, I remember pondering about The Decline Of The American Empire . . . . . and obviously, that was just before the USA economy took off for much of the rest of that decade, powering the global economy.

Its amazing what that particular economy can weather . . . . . New York City bankruptcy in 1975 and the same near thing in the late 1980's, the flattening of a major city last year, banking system failures in the past requiring massive bailouts, etc, etc. . . . .

My passing thoughts.

Cowperson

[HOZ]

Originally Posted by Cowperson

Good post . . . . . I'd agree with the gist of it, especially the "twinkie" part.

Stuff like that is obvious even if it might not be among those easily led around by the nose by conspiracy theories.

In Canada, we're used to a fairly stable relationship with the USA dollar which might cloud our view of how currency relationships more often work.

It is very easy to demonstrate the USA dollar has had frequent and dramatic moves - both positive and negative -within relatively short time frames against other major and minor currencies through the last 25 years.

As an example, the high/low difference in the USA dollar/Japanese Yen relationship between 1990 and 1996 was 98%.

The USA dollar/Swiss Franc relationship varied 20%-25% six times - up and down - between 1990 and 1996.

The British Pound/USA dollar relationship varied 30% between October 1992 and February 1993.

Some might even speculate the abrupt decline of the USA dollar a few years ago might have been a deliberate pulling of the plug to get China to float its currency versus the policy of pegging it at an artificially low value to the dollar (a conspiracy theory!!!). Certainly, European exporters trying to access the number one consuming market in the world, America, can't be too happy about a 7%-8% rise in the Euro against the dollar so far this year. But American exporters might be quite happy about it.

Regarding oil, we sometimes forget America is the number 2 or 3 oil PRODUCING nation on the planet. Combined with the power of its economy and its status a large importer, its not suprising pricing might be in that currency . . . . . although, as Lurch stated, that's fairly irrelevant. Price it in any currency you want, a liquid one preferably, and smart guys with computers engaging in arbitrage would even it out.

On deficits, there remains an argument as to whether government deficits actually matter as illustrated in this article from 2004:

http://money.cnn.com/2004/02/02/news...dget/index.htm

In the broad sense, debt does matter to America as they are surrendering some of their sovereignty when they shift a disproportionate portion of their debt burden to overseas lenders . . . . . in the early 1990's, Canada also had a disproportionate share of its debt in the hands of foreigners but we now are essentially capable of funding our own debt internally (thank the Liberals for that).

On the other hand, the American economy is an extremely dynamic thing and, unlike Germany and France as examples, can easily overcome the troubles a government might get into in terms of debt.

In the late 1980's, early 1990's, I remember pondering about The Decline Of The American Empire . . . . . and obviously, that was just before the USA economy took off for much of the rest of that decade, powering the global economy.

Its amazing what that particular economy can weather . . . . . New York City bankruptcy in 1975 and the same near thing in the late 1980's, the flattening of a major city last year, banking system failures in the past requiring massive bailouts, etc, etc. . . . .

My passing thoughts.

Cowperson

Lets not forget thatthe 2nd biggest economy sunk like a rock and flat lined fpr a decadew and is now recovering.


Stuill 10 times bigger than China.

[Azure]

Originally Posted by HOZ

Lets not forget thatthe 2nd biggest economy sunk like a rock and flat lined fpr a decadew and is now recovering.


Stuill 10 times bigger than China.

Let me guess, too much to drink?