dollar two

DOLLAR TWO
See, not only do I write less, I can’t even keep track of what I wanted to say in the first place. Let’s continue from yesterday. The very good point I made which you were all busily scurrying out of the way so you could safely ignore was that the dollar is toast because of energy decline. With the US not consuming 25% of global oil production, the other countries can stretch out the remaining supplies for a longer period of time.
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The oil production is something like three quarters controlled by governments. Only a quarter is from private companies. This means, amongst other things, that oil can be used strategically. In the past, oil has been used to generate currency ( in US dollars as the de facto global currency ) which was used to buy whatever that country needed. In the case of the Saudis it was food ( the military protection was the price for preferential treatment ). One could argue that food production is set to decline along with oil due to weather disruption/overpopulation and decreasing petroleum inputs but I would argue that military supplies trump food ( witness the nitrates from manure going to gunpowder rather than food ). Oil is vital to a regimes survival. Food is secondary. Plus, all things being equal the oil should diminish quicker than food. Also, I think the US is one of the more vulnerable to oil scarcity and won’t to be able to use the food for weapon card.
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Why would any country wish to disrupt the current arrangement of US military protection of trade for the bulk of the oil? Because trade is in danger. A decline in energy means a decline in trade which means that a global trade policeman is no longer as important as before. The world will need us less and less, and haven’t we moved from protector to thief anyway? This is why it is important to think clearly, without jingoistic blinders on. It helps you see what is coming down the road. If the world views us as plunderers, they will be more inclined to decline our “protection”. And by declining, they benefit from more oil. Not that it is about more, as much as keeping the supply from running out as quickly.
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As I tried to point out before, it isn’t about wealth as much as it is about energy. Our rulers are blinded by the importance of money. It is the Be All and End All for them. They insist everyone else thinks just like they do. Yet I can assure you that plenty of other rulers in other countries are not as blind as that. They see their survival in energy, not in worthless paper. Look at gold, just as one example. The US national debt has a higher dollar amount than all the gold in the world. The US debt is higher than all the oil reserves in the world ( and that is all the “official” estimate numbers which are in reality much lower ). Clearly, currency is a sea in which commodities are a few small islands. But certainly you agree that oil, natural gas, grains and whatnot are all far more important for survival than hyperinflated paper currency?
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Most other countries place more importance on the future supply of oil than they do a future pile of paper currency. It might seem inconceivable to us that other economies would be willing to take trillions of dollars in losses. If you are talking about first world countries, you would be correct. However, most first world countries can’t survive outside the money economy. Other countries can. They can make what will be a relatively smaller sacrifice going from money to barter. It would totally decimate our economy, most others would have a lot less painful transition period. It is like jingle mail to other countries to lose our promise to pay. Short term pain, long term gain. As banker, we can’t see everyone else wanting to be free of our debt.
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