Exclusive: Saudi Arabia threatens to ditch dollar oil trades to stop 'NOPEC' - sources It should be noted that it is unlikely that NOPEC will pass and so the threat of this happening is very low. The issue is that this is yet another example of using- or threatening - various "Nuclear Options" in order to maintain global economic hegemony. We used the nuclear option with respect to sanctions on Europe - threatening to shut banks out of the international system of payments. Even if we don't go through with these threats - the fact that we are making these threats is disturbing. The world - including our allies - has been clamoring for a competitor to the US dollar as the World Reserve Currency (WRC) for years - especially after the 2008 crash. BRIC nations have already set up various alternatives in some sectors but, this can not be viewed as valid competitor at the moment. Europe has introduced SDR's which is an alternative system of payments - but this can only be used by Nations - not individuals or corporations .. again not a valid competitor. We were "allowed" to be the WCR. Maintaining this privilege requires that nations of the world do not use alternatives. These "Nuclear Option " threats only serve to hasten the adoption of a competitor to the US system of international payments. If a valid competitor arises - the history books will mark this day as the defacto end of the US economic Empire.
The Saudi nightmare is just beginning. If, as liberals demand of us, this is peak auto, and peak gas, they have many multitudes of problems greater than the use of the US Dollar as their payment device.. Folks shouldn't, ever, forget the lessons of history though. Whatever will their populations do as their economies crumble around them?
I agree that there are problems greater or equal to the loss of WRC status - but not too many. We are currently a debtor nation. We are living on credit. We spend more than we take in and our fiscal irresponsibility continues to increase. Contrary to popular belief - money does not grow on trees. At some point - the Piper comes and the Piper wants to get paid. So long as the USD is the WRC - the Piper can not get through the door. We hear the Pipes or yon mountain top but the Piper can not climb up the mountain to get to us. Obviously this is a very simplistic analogy but it is mostly accurate. The actual intrinsic value of the pieces of paper printed by the Fed - known as dollars is - ZERO .. ok the price of firewood. The paper is not backed by Gold, Oil or any other collateral. It is pure "Fiat" currency. The value that people attribute to the currency comes from one thing ... investor confidence. As confidence increases - the value of the dollar goes up.. as it decreases the value of the dollar goes down. WRC status gives huge confidence to the world in the USD. This is what allows us to borrow money and rock bottom interest rates. People are so confident in the USD that we can print dollars - float them onto the markets and this does not affect the amount of dollars needed to buy something of real intrinsic value that much. If we were just another nation - a nation whose currency was not the WRC - investors would be running for the hills because our debt is way to high on a relative basis. The risk premium would increase = we would have to pay much higher interest rates to lure investors to buy our debt. One thing to remember is that the Piper always gets paid ... one way or the other.
^^^... I don't recall you being a debt hawk... who knew... I would suggest one thing that mitigates the value equation is output. Specifically, our output. Both real goods and services as well as investment confidence in all of the above. We cannot ignore that either. There actually is intrinsic value in our production, and because of it, we have a valuable currency. As the value of oil declines, the effect of the reserve currency also unwinds as a lever on our valuation. Of course, if you were to calculate the centuries of oil reserve we enjoy in this country, perhaps you could simply tie the value of the dollar to the value of that oil. I suppose there's something like thousands of trillions of dollars worth of reserves there.... But why? you would instantly devalue every other non petro currency out there. And why would we ever want to do that?
I am a hard core fiscal conservative (old style Republican = prior to the religious right taking over) .. a believer in fair and free markets, the founding principles, and the principles of Republicanism. How you could not get this from my posts ? This is probably due to the fact that I am very much against Red Establishment who 1) hates the founding principles and the principles of Republicanism 2) Loves big Gov't, Big Gov't debt and wealth redistribution 3) Hates fair and free markets - loves corporatism (which even Tucker is talking about these days), price fixing, monopolism, anti competitive practices and bastardization of fair and free markets in general. US "Output" relative to what ? That is the question. Our spending is higher than our output justifies. If a persons output is a pound of flour .. but their spending amounts to the value of 2 pounds of flour - the excess spending made possible by accumulating debt... something is going to break at some point. At some point the bank stops lending you money and you have to go get a payday loan at an absurd interest rate. Then at some point even these folks wont lend you. What happens to the GDP of this person when sources of credit run dry ? It is reduced to output - and this assumes he has defaulted on his debts. If he continues to make payments on the debts - his GDP is reduced to below output. Intrinsic value of our production is not directly related. Yes this enables us to continue to make payments but this is no guarantee against default. Zimbabwe had production - this did not stop the currency from going to near zero. Russia had production back in the late 90's when it did a defacto default - reducing the value of its debt by half. (which I wish we would do sooner rather than later). The sooner we default - the better.
Got it. And good to know. I've wondered aloud about default before, and would it actually ever really hurt the US or our economy. And a while back, I might have suggested that it wouldn't. But, today, I think too much technology transfer has been allowed to erode our advantages (thanks Obama... schmuck).. and now we're far less ahead that we might have been today. So, perhaps defaulting might not be as advantageous as it once might have been. I look at debt now in a different way. It rebalances our transactional sheets. One thing that I never see is world debt vs US debt, and that ratio, which I believe is still very much in our favor. It continues to be this way because, again, perceptive value inoculates us just as much as solvency does. So, even though we have debt, I do believe that we should reduce it's burden, but not by artificially inflating the monetary supply, but by simply cutting back, and resolving debt. We could. Clearly, we have sufficient taxation to accomplish this, we simply don't have adequate motivation in the congress to do the difficult work to get it done. At some point, we have to take on this ever expanding nature of government, and tame it's voracious appetite for all of our money, lest we become the very bottom feeders liberals would have us become. So, in that, I think we can agree.
I agree with most of what you have said. The problem with default is that we would no longer be the "Shining Star" - the world Police. We would not have influence on other nations that we now have = economic hegemony. Our ability to project power would be weakened. The problem is that trying to maintain these things is killing us - as it did all the past military/economic empires. This is a long historical conversation- some of which you touch on - but in short: Technological innovation leads to military superiority which leads to economic hegemony. That is on the way up. The natural tendency is for technology to spread and this leads to the way down. For example. The Brits had the gatling gun .. with one gunship they could pretty much take over an entire African Nation - fighting back with sticks and stones. The return on investment was high. Decades later the African nation gets the gun (think storming a hill during ww2 which is defended by machine gun turrets). Now sending one gunship will not do. You have to send an entire armada. This is expensive and you will take heavy casualties. The cost of projecting power increases with time as technology spreads. Maintaining the ability to project power becomes increasingly negative to the point where the empire that tries to do this goes bankrupt. We hit the ROI wall a long time ago. Iraq was a joke. Most of what they had was destroyed in the Gulf war - there had been an arms embargo and sanctions ever since - such that 10 years later Saddam was fighting back with 1960's equipment - much of which was in poor repair and an army that did not want to fight. YET - this cost us Trillions of dollars .. and what did we get in return ? In 2000 - Total Military Spending was roughly 300 Billion/year. After 8 years of Bush it topped 900 Billion and went over 1 Trillion under Obama. Had we maintained 2000 spending levels (increasing with inflation).. we could have diverted 500 Billion/year x 16 years = 8 Trillion dollars .. to infrastructure, technology, ramping up our economy to compete in the third millennium. Instead we threw this money down the toilet .. for what ? To get rid of Saddam and chase the Taliban - a group that had nothing to do with 911 and even denounced Al Qaeda for its actions right after . All we did was pad the pockets of the international financiers that own and control the military industrial complex. Interest on our Debt over this time was roughly 400-450 Billion/year - x 16 and you can add another 7 Trillion to the total. Again padding the pockets if the same IF's who also own the banks. We spend nearly double that of every first world nation on healthcare -yet don't have universal healthcare. Things are so Obscene that even the KOCH Bros and others are calling for UC. Folks like "The American Conservative" - https://www.theamericanconservative.com/articles/the-conservative-case-for-universal-healthcare/ We spent 3.5 Trillion on healthcare in 2017. How much does this add to the total ? 1 Trillion/year would be conservative = 16 Trillion Again to pad the pockets of the IF's who own and control the Healthcare Oligopolies. And I have not even touched other Gov't waste. So who is going to pay this massive Corporate welfare program ? When the IF's have milked this cow dry - it will be you and me holding the bill.
oh dear... if they can't resolve this issue the drums of democracy will start beating for Saudi Arabia
Prince mad batshit is a crazy man He's like a mixture of Charles Manson and a world leader Jamal khashoggi's family has been granted the opportunity to get tens of billions of dollars. Billions
