One of the talk shows I like to listen to, Troubleshooter Tom Martino, had a interesting show yesterday about oil, currency, and war. Really makes you think. Here it is with a link to it on the bottom: -------------------------------------------------------------------------- OIL & THE US DOLLAR Wednesday, May 3, 2006 by - Tom Martino NOTE: THESE ARE NOT MY ORIGINAL THOUGHTS. I HAVE SIMPLY COMPILED THIS INFORMATION (AVAILABLE TO ANYONE) FROM A NUMBER OF SOURCES. ONE OF THE PRIMARY SOURCES IS AUTHOR KRASSIMIR PETROV (see footnote below). THE INFORMATION HAS BEEN VERIFIED TO THE EXTENT THAT MULTIPLE SOURCES AGREE ON THE FACTS. SOME OF THE CONTENT IS BASED ON OPINION EXPRESSED BY VARIOUS SOURCES. SOME SOURCES OBVIOUSLY HAVE A POLITICAL BIAS AGAINST THE US GOVERNMENT. WHILE THAT IN ITSELF DOES NOT DISQUALIFY THE INFORMATION, IT SHOULD BE NOTED. THE MOST OBVIOUS STATEMENTS OF OPINIONS HAVE BEEN PUT IN QUOTATION MARKS AND BOLDLY ITALICIZED. THIS ARTICLE IS NOT MEANT TO BE AN EXPRESSION OF MY PERSONAL POLITICAL BELIEFS. I AM SIMPLY PRESENTING INFORMATION FOR CONSIDERATION. THE AMERICAN EMPIRE A nation-state taxes its own citizens vs. an empire taxes other nation-states. →Empires improve living standards of the empire →Also strengthen the military dominance necessary to continue the collection of those taxes. →Historically, taxing has been direct and in various forms: Gold Silver Slaves Soldiers Crops Cattle “The American Empire was different: It taxed the world indirectly through inflation.” →It distributed US currency (U.S. Dollar) to other nations in exchange for goods. →Those dollars were then inflated, thereby denying other nations of cashing those dollars in for equal value. →“In other words the US denied those countries of getting the same economic benefit of goods from the US.” →“The difference was, in essence, a U.S. imperial tax.” BACKGROUND Early in the 20th century, the U.S. economy began dominating the world economy. →The U.S. dollar was tied to gold. →The value of the dollar neither increased, nor decreased because it was always based on an exact amount of gold. →However, after The Great Depression (1921 to 1929) the US government had to increase the currency in circulation to overcome massive deficits. →Backing by gold became impossible. →President Roosevelt then decoupled the dollar from gold in 1932. →Up to this point, the U.S. 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. After Roosevelt uncoupled the dollar from gold, The Bretton Woods Agreements (SEE NOTE BELOW) in 1945 established an international monetary exchange system. A major factor made the U.S. dollar convertible to gold only to foreign governments. →This established the dollar as the reserve currency of the world. By that time the US had accumulated a significant portion of the world’s gold because during WWII, the United States had supplied its allies with provisions, demanding gold as payment. The Bretton Woods Plan would have been good for the world economy if the dollar supply was kept limited and within the availability of gold. The Creation of an Empire: Inflation →In the 1960's the US dollar supply was relentlessly increased to finance Vietnam and LBJ's Great Society. →US dollars handed over to foreigners in exchange for economic goods could not be redeemed for equal value. “In essence, those nations were being taxed.” In 1970-1971 foreigners demanded payment for their dollars in gold. →The U.S. Government defaulted on its payment on August 15, 1971 →It had extracted an enormous amount of economic goods from the rest of the world and now could not return the value. →“The US continued to force the world to accept ever-depreciating dollars in exchange for economic goods and to have the world hold more and more of those depreciating dollars. But it had to give the world an economic reason to hold dollars. That reason was oil”. In 1972-73 the US made an iron-clad arrangement with Saudi Arabia. →The US would support the power of the House of Saud →The House of Saud would accept only U.S. dollars for its oil. →The rest of OPEC followed suit and decided to only accept dollars. →Even though dollars could no longer be exchanged for gold, they were now exchangeable for oil. →“As long as the dollar was the only acceptable payment for oil, its dominance in the world was assured.” But what would happen if someone demanded a different form of payment? A REASON ARAB COUNTRIES HATE AMERICA A barrel of oil contains the same energy as it has from the beginning. However the US Dollars used to buy that oil have been inflated over the years. In essence the US has been buying the same oil with "cheaper" dollars. When a commodity is purchased with currency that is worth less and less, the price goes up and up. Eventually, the sellers of the commodity get angry and refuse to take the devalued currency. “Terrorism is funded to wreak havoc on America, to distract Americans … to divert their attention from the economic threat about to befall them … the destruction of the US dollar.” THE REASON FOR THE WAR IN IRAQ In 2000, the first person to demand the Euro as payment for his oil was Saddam Hussein. →“His demand was met with ridicule but as it became clearer that he meant business, political pressure was exerted to change his mind.” →“The US attack on Hussein’s was not about his nuclear capabilities or about defending human rights, about spreading democracy, or even about seizing oil fields; it was about defending the US Dollar” →Two months after the United States invaded Iraq, the Iraqi Euro accounts were switched back to US Dollars, and oil was sold once again only for U.S. dollars. →“Global dollar supremacy was once again restored.” A NEW THREAT ”The Iranian government has finally developed the ultimate weapon of mass destruction that can swiftly destroy the American financial system: THE IRANIAN OIL BOURSE.” →Note: A “bourse” is a stock exchange. An “Oil Bouse” is an exchange to buy and sell oil. →The Iranian Oil Bourse was scheduled to open March 2006. The Iranian Oil Bourse will accept only the Euro for payment of oil. In economic terms, this represents a much greater threat to the US Dollar than Hussein did. →If other OPEC nations follow, the new standard for oil will be the Euro, thus circumventing the U.S. dollar altogether. →“Many enemies of the US will jump on the chance to move away from the US Dollar.” “Is it a coincidence that the US is now considering action against Iran?” SUMMARY The world struggle is not over oil but rather the currency that will be used to buy and sell oil. That currency will rule the world and the country that issues that currency will the dominant world power. FOOTNOTES: THE BRETTON WOODS SYSTEM This international monetary management system established the rules for commercial and financial relations among the world's major industrial states. The Bretton Woods system was the first example of a fully-negotiated monetary order intended to govern monetary relations among independent nation-states. Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference. The delegates deliberated upon and signed the Bretton Woods Agreements during the first three weeks of July 1944. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value – plus or minus one percent. In the face of increasing strain, the system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold. PRIMARY SOURCE: Krassimir Petrov Petrov 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. -------------------------------------------------------------------------- Link to the website: http://www.troubleshooter.com/data/current/OILTHEUSDOLLAR.html Tom Martino is a local Colorado guy. He used to be on the local network news and then he got into consumer advocacy through his work as a reporter. Now he has a nationally syndicated radio program. Basically people call him up when they have problems with businesses. I think he still works with one of the local channels, too.