The Dollar, The Euro & Oil: The Red-Lining Of America

lopaka

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I have absolutely no idea where to put this, but this is an excerpt I recieved last week from a listserve I'm on and thought I'd post in light of Brian Ellwood's question on the euro thread in UL's. This article's take would seem to be more that this wiil be the result, not cause of the War. (note: redlining is the practice of instituions like banks & insurance from serving a particluar geographic area, usually beacause of the race or income of the residents)

Mods, merge (or not) as you see fit. -lopaka
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'Bush plunges U.S. into rapid decline'
Date: Saturday, October 18 @ 09:43:23 EDT
Topic: Foreign Policy


The previously unthinkable is now on the table. Russia, the world's second
largest oil exporter, is giving serious consideration to trading its black
gold in euros, a switch that would surely set dominos in motion among other
oil producing nations and, ultimately, knock the dollar off its global
throne. Americans can thank George Bush and his Pirates for accelerating a
process that might have taken decades to evolve, but which now looms as a
"catastrophe" on the horizon. "There are already a number of countries
within OPEC that would prefer to trade in euros," said oil analyst and U.S.
Council on Foreign Relations member Youssef Ibrahim, in an interview with
the Moscow Times, October 10. "Putin's putting a big card on the table."

A switch to the euro "is really possible," according to Russian economist
and Putin advisor Yevgeny Gavrilenkov. "Why not? More than half of Russia's
oil trade is with Europe. But there will be great opposition to this from
the United States."

Gayrilenkov can be forgiven his understatement. Russian President Vladimir
Putin dropped his bombshell as if casually stating the time of day. Is
Russia considering a switch from dollar-pricing of petroleum? "We do not
rule out that it is possible. That would be interesting for our European
partners," Putin told reporters at a joint news conference with German
Chancellor Gerhard Schroeder in the Ural Mountains region of Russia.

Interesting, indeed. Even more important than the huge and immediate boost
that a Russian oil-euro arrangement would provide to the European Union,
the move would signal the definitive end of America's artificial
dollar-domination of the planet, a privileged status the U.S. has abused as
a weapon since the end of World War II.

As Dr. Sonja Ebron wrote in , February 20, "Given the highly leveraged and
fragile state of our economy, an OPEC switch from the dollar to the euro
would bring a quick and devastating dollar and Wall Street crash that would
make 1929 look like a $50 casino bet." (See "Why African Americans Should
Oppose the War.")

One month before the U.S. invasion, Dr. Ebron warned of the monstrous
blowback that would result:

"War is not the answer. It's a shortsighted desperation play that is
doomed to failure. Our military forces may take but cannot hold Iraq's oil,
as they have failed to tame Afghanistan's land. Far from staving off
disaster, our arrogance may instead compel OPEC to 'go euro' en masse,
taking many oil-consuming nations with them by force of economics. And a
trade war with Europe will lend the coup de grace to our economy."

The shrinking superpower

The Bush men launched their offensive largely to ensure that oil would
continue to be priced in dollars. American military dominance of the Middle
East and a series of "regime changes" would eliminate the euro-threat - or
so the theory went. An opposite chain of events has occurred, with the
impetus coming, not from OPEC, but from an increasingly confident and
assertive Russia, for whom Shock and Awe is mere fireworks.

Putin displayed his card to the world - a bargaining chip with the EU and
an implicit threat to the United States - because he could. The "sole
superpower" cannot stop him, but must instead come up with terms that
outweigh the benefits of euro-logic. The Bush Pirate's quest for a global
market subordinate to American fiat has failed. This shift in the global
relationship of forces should have been expected when Bush declared war
against world order. It is the logical result of, and answer to, the
president's 2002 ultimatum, "either you are with us, or against us." The
planet now prepares to turn on its own axis. Once set in motion, the
effects will be irreversible, no matter which party wins the White House in
2004. Henry C. K. Liu got it right in his far-sighted April 5 Asia Times
piece, "The War that may end the age of superpower."

"This war has succeeded in pushing Russia, France, Germany and China
closer, in contrast if not in opposition to US interests worldwide, a
significant development with long term implications that are difficult to
assess at present..

"This war will end from its own inevitable evolution, even without
anti-war demonstrations. It will not be a happy end. There is yet no
discernible exit strategy for the US. After this war, the world will have
no superpower, albeit the US will remain strong both economically and
militarily."

Saudi Arabia is the number one oil exporter. Having severed its military
alliance with the U.S., the Saudi royal family may be ready to drop the
other shoe. "The Saudi Crown Prince [Abdullah Bin Abdul Aziz Al-Saud]'s
visit to Russia was of great significance and the regime is talking about
closer cooperation with LUKoil and other Russian companies," says Council
on Foreign Relations oil analyst Youssef Ibrahim.

No nation is eager to upset the global currency regime. ("We do not want to
hurt prices on the market," President Putin was quick to add, at his Urals
press conference.) The Saudi princes, who value their dollar-denominated
wealth more highly than the teachings of Wahhabi Islam, are by inclination
among the least likely candidates to lead an OPEC euro-shift. Yet
relentless pressures from Ariel Sharon's Israel, its lobbyists and allies
on Capitol Hill, and from the Likkud group within the Bush administration,
have pushed the Saudis closer to the breakpoint. If Russia goes euro, they
will likely follow - sooner, if there is one more military outrage against
a sovereign Arab state. (In that sense, the fate of the dollar may be in
Sharon's hands.)

Iran, the world's fifth largest oil exporter, would go euro in an instant,
once it saw others headed for the door. Venezuela's President Hugo Chavez
relishes the idea. His nation exports about as much oil as Iran.

Muslim Indonesia, the oil giant of the Pacific with huge contracts to
supply the Chinese, actively debates the merits of the euro. In an April 17
report filed by Bloomberg's Tokyo bureau ("Indonesia May Dump Dollar; Rest
of Asia, Too?"), Indonesian Vice President Hamzah Haz was quoted: "One
thing is for sure, the adoption of the euro as an alternative means of
payments could be an effective solution to speculative dollar-oriented
dealings.'' [...]


A kind of international redlining will increasingly make itself felt,
but not seen. The Bush men believe they are willing into existence a New
American Century, while in reality they are creating an America-phobic
planet in which the U.S. has earned an invisible but powerfully
consequential non-favored nation status. Having invented the concept of
globalism, the United States will be consigned to pariah status - and
shrink, until it learns to live by human norms and scales.

Think of an oil-producer switch to the euro as the redlining of America.

http://www.blackcommentator.com
 

Mighty_Emperor

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lopaka: Thanks for starting this thread as it really needed another one spun off from that UL one:

http://www.forteantimes.com/forum/showthread.php?s=&threadid=11482

As it touches on a broad swathe of different subjects some of which have come up in different threads but also need a meta thread of its own.

As well as the business with the Euro a lot of recent conflicts all have aspects related to the control of oil from the obvious (Iraq and Afghanistan) to the less obvious (Serbia/Bosnia and Chechnya).

I have to take my dog to the vet (again) but I'll throw some other thoughts in later ;)

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brianellwood

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The Bush men launched their offensive largely to ensure that oil would be priced in dollars
" and remain so..."
This bears out what I understood, but was mis-informed in the sense that I thought Russia's oil was already traded in euros.
Did anyone see the film a week or so back (C4, I think) which covered the failed military coup in Venezuela. Interesting that the people who failed vanished into America, it seems.
 

Mighty_Emperor

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As I sai din the other thread a lot of recent events have been oil-related. It is largely as an aim to get control of the oil from OPEC.

The debacle over the Euro is still a minor one but will beocme icnreasingly important in the next decade or so and could prove to be a massive issue.

The UK is key in this as we use dollars to price our Brent Crude (numbers are the references - see main article for them):

The only serious threat to the dollar's international dominance at the moment is the euro. Next year, when the European Union acquires ten new members, its gross domestic product will be roughly the same as that of the US, and its population 60% bigger. If the euro is adopted by all the members of the union, which suffers from none of the major underlying crises afflicting the US economy, it will begin to look like a more stable and more attractive investment than the dollar. Only one further development would then be required to unseat the dollar as the pre-eminent global currency: nations would need to start trading oil in euros.

Until last week, this was already beginning to happen. In November 2000, Saddam Hussein insisted that Iraq's oil be bought in euros.3 When the value of the euro rose, the country's revenues increased accordingly. As the analyst William Clark has suggested, the economic threat this represented might have been one of the reasons why the US government was so anxious to evict Saddam.4 But it may be unable to resist the greater danger.

Last year, Javad Yarjani, a senior official at OPEC, the oil producers' cartel, put forward several compelling reasons why his members might one day start selling their produce in euros.5 Europe is the Middle East's biggest trading partner; it imports more oil and petrol products than the US; it has a bigger share of global trade; and its external accounts are better balanced. One key tipping point, he suggested, could be the adoption of the euro by Europe's two principal oil producers: Norway and the United Kingdom, whose Brent crude is one of the "markers" for international oil prices. "This might", Yarjani said, "create a momentum to shift the oil pricing system to euros."6

If this happens, then oil importing nations will no longer need dollar reserves in order to buy oil. The demand for the dollar will fall, and its value is likely to decline. As the dollar slips, central banks will start to move their reserves into safer currencies, such as the euro and possibly the yen and the yuan, precipitating further slippage. The US economy, followed rapidly by US power, could then be expected to falter or collapse.
http://www.monbiot.com/dsp_article.cfm?article_id=572

And this leads into what this that I quoted in the other thread about the rabid anti-Euro lies some of the press are spreading:

I think the first thing we must recognise is that the "patriotism" which informs the attacks on the European Union is fake. The newspapers responsible for most of the hysteria about straight bananas and regulated sausages are owned and run by a Canadian (Conrad Black) and an Australian with American citizenship (Rupert Murdoch). These men seem to care nothing for the "British values" their papers claim to defend. Their conglomerates are based in North America, and they have much less of a presence in continental Europe. They would appear, therefore, to possess a powerful incentive for dragging Britain away from the European Union, and handing it, alive and kicking, to the US.
http://www.monbiot.com/dsp_article.cfm?article_id=593

The current main play is over the Caspian oil field which if exploited would help destroy OPECs control over the oil (and the US). I'll get on to that in a mo..............

[edit: I thought it best to remove the subject - I was eluding to Clinton's "its about the economy stupid" but there is room for misunderstanding so I'll err on the side of caution ;) ]

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Mighty_Emperor

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Breaking the hold of OPEC

Soooo it is the Caspian Sea oil field that has got a lot of attention (as well as the war in Iraq of course which would get the US some levearge with OPEC):

The world's oil reserves, the depletion analysis centre claims, appear to be declining almost as swiftly as the North sea's. Conventional oil supplies will peak within five or 10 years, and decline by around 2 million barrels per day every year from then on. New kinds of fossil fuel have only a limited potential to ameliorate the coming crisis. In the Middle East, the only nation which could significantly increase its output is Iraq.

In 2001, a report sponsored by the US Council on Foreign Relations and the Baker Institute for Public Policy began to spell out some of the implications of this decline for America's national security. The problem, it noted, is that "the American people continue to demand plentiful and cheap energy without sacrifice or inconvenience". Transport, for example, is responsible for 66% of the petroleum the US burns. Simply switching from "light trucks" (the giant gas-guzzlers many Americans drive) to ordinary cars would save nearly a million barrels per day of crude oil. But, as the president's dad once said, "the American way of life is not up for negotiation."

"The world," the report continues, "is currently precariously close to utilising all of its available global oil production capacity." The impending crisis is increasing "US and global vulnerability to disruption". Over the previous year, for example, Iraq had "effectively become a swing producer, turning its taps on and off when it has felt such action was in its strategic interest". If the global demand for oil continues to rise, world shortages could reduce the status of the US to that of "a poor developing country".

This crisis, the report insists, demands "a reassessment of the role of energy in American foreign policy... Such a strategy will require difficult tradeoffs, in both domestic and foreign policy. But there is no alternative. And there is no time to waste". By assuming "a leadership role in the formation of new rules of the game", the United States will prevent any other power from exploiting its dependency and seizing the strategic initiative.

The US government has not been slow to act upon such intelligence. Over the past two years, it has been seizing all the Caspian oil it can lay hands on, cutting out both Russia and Iran by negotiating to pipe it out through Azerbaijan, Georgia and Afghanistan. Last week, though all the sages of the British and American right insisted during the Afghan war that it couldn't possibly happen, the presidents of Afghanistan, Turkmenistan and Pakistan met to discuss the first of the Afghan pipelines. American soldiers have now been stationed in Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Kazakhstan and Georgia, all of which are critical to the Caspian oil trade. According to the security firm Stratfor, "the US military presence will help ensure that a majority of oil and gas from the Caspian basin will go westward - bypassing the United States' geopolitical rivals, Russia and China". The reason why Vladimir Putin is so determined to keep Chechnya under Russian control, whatever the cost to both the Chechens and the Russians may be, is that Chechnya is one of the last available routes for Caspian oil.
http://www.guardian.co.uk/comment/story/0,3604,830012,00.html

And it is this network of pipelines that has been the cause of much of the recent strife.

Afghanistan is the obvious route:

http://www.guardian.co.uk/comment/story/0,3604,579071,00.html

but the previous Azeri/Aremenian problems started at the time Caspian oil was first being majorly exploited. To hedge its bets pipelines will also have to run across Turkey (and Azerbaijan) but it can't go the obvious route which is via SE Turkey to the Med as this is all Kurdish controlled areas and the US wouldn't stand for the possibility that the PKK could hold them to ransom) and so it has to go to the Black Sea (although BP may be going to run an underground pipeline through the region). This raises another problem as the Bosphorus is at its current capacity and so the oil needs to be offloaded and pumped over land and the obvious route is to take it across to the Adriatic but this means it would have to pass through Montenegro (and bits of Croatia, etc. depending on the exact route) but this region was highly unstable until we sorted it all out:

During the 1999 Balkans war, some of the critics of Nato's intervention alleged that the western powers were seeking to secure a passage for oil from the Caspian sea. This claim was widely mocked. The foreign secretary Robin Cook observed that "there is no oil in Kosovo". This was, of course, true but irrelevant. An eminent commentator for this paper clinched his argument by recording that the Caspian sea is "half a continent away, lodged between Iran and Turkmenistan".

For the past few weeks, a freelance researcher called Keith Fisher has been doggedly documenting a project which has, as far as I can discover, has been little-reported in any British, European or American newspaper. It is called the Trans-Balkan pipeline, and it's due for approval at the end of next month. Its purpose is to secure a passage for oil from the Caspian sea.

The line will run from the Black sea port of Burgas to the Adriatic at Vlore, passing through Bulgaria, Macedonia and Albania. It is likely to become the main route to the west for the oil and gas now being extracted in central Asia. It will carry 750,000 barrels a day: a throughput, at current prices, of some 0m a month.

The project is necessary, according to a paper published by the US Trade and Development Agency last May, because the oil coming from the Caspian sea "will quickly surpass the safe capacity of the Bosphorus as a shipping lane". The scheme, the agency notes, will "provide a consistent source of crude oil to American refineries", "provide American companies with a key role in developing the vital east-west corridor", "advance the privatisation aspirations of the US government in the region" and "facilitate rapid integration" of the Balkans "with western Europe".
http://www.guardian.co.uk/comment/story/0,3604,438134,00.html

This map shows the various proposed routes:

http://www.bsrec.bg/taskforce/SYNERGY/oilprojects2.html#viewmap

See also:

http://www.guardian.co.uk/international/story/0,3604,690153,00.html

http://www.guardian.co.uk/comment/story/0,3604,446490,00.html

http://www.guardian.co.uk/international/story/0,3604,182227,00.html

http://www.guardian.co.uk/oil/story/0,11319,853447,00.html

http://www.guardian.co.uk/oil/story/0,11319,821096,00.html

http://www.guardian.co.uk/business/story/0,3604,959516,00.html

http://observer.guardian.co.uk/business/ethics/story/0,12651,851000,00.html

http://books.guardian.co.uk/extracts/story/0,6761,631434,00.html

Also see the Garudian's Oil section:

http://www.guardian.co.uk/oil/

Sorry for just quoting Monbiot and the Grauniad but as I read the paper I know where the information is kept - I'll dig out some more firsthand details later.

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lopaka

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yes, but...

it may not be that simple. Quoting myself from a now-locked thread:


There was a fascinating article in the 7 October issue of The New Yorker magazine (sorry, no link) by Jon Lee Anderson entitiled "Our New Best Friend". It is about the vast oil reserves located off the West African nation of Sao Tome and Principe (estimated up to four billion barrels crude) and the US designs on it and non-middle eastern supplies in general. USA imports 50% of its oil currently, suppliers one through five are Canada, Saudi Arabia, Venezuela, Mexico and Nigeria. So even now, there is less dependency on Middle Eastern sources than is generally thought.

Two things that were cited as making African oil especially desirable by the bigwigs are that one, most of it that comes from places like Equatorial Guinea, Gabon, S.T. & P., etc is located far offshore in the deep ocean, so the natives don't notice it being taken as much. And two, these tend to be Christian-majority countries, so no having to mess with angry Wahhabi fundamentalists. The US is rumored to build a military base in Sao Tome, to protect *our* Gulf of Guinea security interests.

EDIT: I should have noted that this was posted long enough ago that it was the 7 OCT 2002 issue I referenced, not this year.
 

Mighty_Emperor

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lopaka:

it may not be that simple
No it isn't - things are obviously more complex than it just being about the oil and it probably operates at different levels (the most have a number of think tanks developing various strategies to on differnt timescales and in differnt areas so not all the eggs aare in one basket), however, these African fields will require a lot of infrastructure putting in place while a lot of the Caspian oil extraction infrastructure is in place - we have just had to do a bit of 'housekeeping' to make sure it can be pumped out.

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Mighty_Emperor

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Central Asia

The former Soviet republics in Central Asia are critical to this as they are outisde of OPEC and the US has gained some influence over them.

Khazakstan has vast mineral wealth and has kept its head down and ploughed ahead with plans for growth (they have unlimited potential - and the old USSR space launch areas?). They did do something interesting and move their capital mainly (I believe) due to the old one being too close to the border.

There is an interesting article today in the Garudian about uzbekistan which doesn't have the assets of Khazakstan and i smore reliant on US support but its human rights record stinks:

There are over 6,000 political and religious prisoners in Uzbekistan. Every year, some of them are tortured to death. Sometimes the policemen or intelligence agents simply break their fingers, their ribs and then their skulls with hammers, or stab them with screwdrivers, or rip off bits of skin and flesh with pliers, or drive needles under their fingernails, or leave them standing for a fortnight, up to their knees in freezing water. Sometimes they are a little more inventive. The body of one prisoner was delivered to his relatives last year, with a curious red tidemark around the middle of his torso. He had been boiled to death.
however, it is a very important area in the region:

But Uzbekistan is seen by the US government as a key western asset, as Saddam Hussein's Iraq once was. Since 1999, US special forces have been training Karimov's soldiers. In October 2001, he gave the United States permission to use Uzbekistan as an airbase for its war against the Taliban. The Taliban have now been overthrown, but the US has no intention of moving out. Uzbekistan is in the middle of central Asia's massive gas and oil fields. It is a nation for whose favours both Russia and China have been vying. Like Saddam Hussein's Iraq, it is a secular state fending off the forces of Islam.
http://www.guardian.co.uk/comment/story/0,3604,1072313,00.html

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Mighty_Emperor

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Hmmmmmmmmmmmmmmmmmm:

Over the four months before the coalition forces invaded Iraq, Saddam's government made a series of increasingly desperate offers to the United States. In December, the Iraqi intelligence services approached Vincent Cannistraro, the CIA's former head of counter-terrorism, with an offer to prove that Iraq was not linked to the September 11 attacks, and to permit several thousand US troops to enter the country to look for weapons of mass destruction. If the object was regime change, then Saddam, the agents claimed, was prepared to submit himself to internationally monitored elections within two years. According to Mr Cannistraro, these proposals reached the White House, but were "turned down by the president and vice-president".

By February, Saddam's negotiators were offering almost everything the US government could wish for: free access to the FBI to look for weapons of mass destruction wherever it wanted, support for the US position on Israel and Palestine, even rights over Iraq's oil. Among the people they contacted was Richard Perle, the security adviser who for years had been urging a war with Iraq. He passed their offers to the CIA. Last week he told the New York Times that the CIA had replied: "Tell them that we will see them in Baghdad".

Saddam Hussein, in other words, appears to have done everything possible to find a diplomatic alternative to the impending war, and the US government appears to have done everything necessary to prevent one.
and:

The same thing happened before the war with Afghanistan. On September 20 2001, the Taliban offered to hand Osama bin Laden to a neutral Islamic country for trial if the US presented them with evidence that he was responsible for the attacks on New York and Washington. The US rejected the offer. On October 1, six days before the bombing began, they repeated it, and their representative in Pakistan told reporters: "We are ready for negotiations. It is up to the other side to agree or not. Only negotiation will solve our problems." Bush was asked about this offer at a press conference the following day. He replied: "There's no negotiations. There's no calendar. We'll act on [sic] our time."

On the same day, Tony Blair, in his speech to the Labour party conference, ridiculed the idea that we could "look for a diplomatic solution". "There is no diplomacy with Bin Laden or the Taliban regime... I say to the Taliban: surrender the terrorists; or surrender power. It's your choice." Well, they had just tried to exercise that choice, but George Bush had rejected it.
http://www.guardian.co.uk/comment/story/0,3604,1082250,00.html
 

Jerry_B

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One thing about countries like Kazakhstan, etc. is that, if Russian goes Euro with it's oil, they're likely to follow suit. It would be in their interests to form an economic bloc with Russia - they still share too much infrastructure, and I doubt the US or the World Bank, etc. is willing to completely bankroll their changing over from old Soviet-era stuff. They will become more important players in teh whole deal, but the US may get nudged out of teh whole equation - not in any bad 'oh dear, this could create a war' way, but the US just may not be a factor any more.

The problem the US faces is that it may have shot itself in the foot. It needs oil - more than it can produce domestically. If it keeps trying to grab it from elsewhere militarily, it will soon run out of money. If it doesn't change it's foreign policies to being more benign, it will gradually face isolation and stagnation. It's already facing a trade war with Europe over steel prices, and is unlikely to win it. So it may gradually fade as a world power with a whimper and not a bang. Slowly but surely. The more it spends on extending it's own foreign policy, the more it indebts itself to those other nations who don't necessarily see eye-to-eye with it, and who may one day become economically stronger.

I don't think this will cause open warfare, so don't worry about that ;)
 

oll_lewis

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The reason dolars are used is that the Dolar, allthough now not much more than the paper it's printed on, is by large a stable curentcy of single large post industrial nation. the Euro is not stable it tends to bob up and down like a yo-yo as it is still a very new curency and aplys to several different countrys with difering economys.

Probably the Euro will be in a position to replace the dolar in international calculations in 20 years or so but people are stubbon if they have become acustomed to something, there are still people in britain for example that refuse to use metric measurements dispite their being more acurate and decimalised, so I wouldn't expect things to change anytime soon.
 

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unfortunately our sons will probably have to witness (from a good distance, i hope) the war between the us and the european union, due (among other things) to the dollar vs. euro thing.


riccardo "the not so optimistic prophet" ginoide
 
A

Anonymous

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Euro V Dollar

Gold nears $400

Fueled by weakening dollar, precious metal climbs to its highest level in 7-1/2 years.
November 12, 2003: 12:10 PM EST
Is it possible that O.P.E.C will start trading in Euro's instead of the Dollar?


NEW YORK (Reuters) - Gold prices Wednesday closed in on the psychologically important $400 mark, advancing to 7-1/2 year highs in New York, as the dollar's weakness against the euro made gold cheaper for European investors and commodity funds.

Gold price for December delivery broke above the 2003 high set in September after London trading wrapped up for the day, rising to $397.00 an ounce, its highest since March 1996. At 11:30 a.m. ET, the benchmark contract was up $7.20 at $395.60, off a low at $387.80.

Spot gold was quoted at $395.05, topping at $395.85. It closed at $387.85 in New York Tuesday.
 

rynner2

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Bump! Bill's post merged here.
 

Mighty_Emperor

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Richard Perle

Now here is an interesting one that came up in Private Eye. Conrad Black appointed ultra hawk Richard Perle to a senior position in Hollinger which is his company which owns various newspapers with an anti-Euro bias (including the spreading of Euromyths).

Now there may be no connection but.........

Resources:

Good wiki entry which links to various other relevant entries:

http://www.disinfopedia.org/wiki.phtml?title=Richard_N._Perle

Another good wiki entry:

http://www.911review.org/Sept11Wiki/Perle,Richard.shtml

Oooooo this is good - Perle tahnks the Telegraph (owner Hollinger) for finding the 'incriminating' material on anti-war in Iraq MP George Galloway (more links in the article):

http://www.casi.org.uk/discuss/2003/msg02188.html

More on the business aspects (it also appears Kissinger is on the board at Hollinger too):

http://vancouver.indymedia.org/news/2003/11/86507.php

A good biased overview on Perle and his many business and governmet interests (the SEC is investigating various connections):

http://www.americanpolitics.com/20030327Koop.html

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dot23

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Is it possible the recent events in Georgia are related to this pipeline deal? Although the US has officially sanctioned the 'velvet revolution' they could just be playig a waiting game to see what the new coalition will do - if they try to seize direct control over the pipeline, it could spell big problems for Georgia.

I've reread this thread after some time, and find it amazing that this isn't widely known. It would seem all the regions crises have come about because of these proposals, and yet only a few media outlets report these issues. Makes you wonder what the real agenda behind Blair delaying entrance to the Euro is really about.
 

Mighty_Emperor

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dot23:

Is it possible the recent events in Georgia are related to this pieline deal? Although the US has officially sanctioned the 'velvet revolution' they could just be playig a waiting game to see what the new coalition will do - if they try to seize direct control over the pieline, it could spell big problems for Georgia.
My understanding was that various events in former Soviet republics in and around the Caucasus (including Georgia, Cechnya, etc.) were part of the manvouvering to try and control and/or stabilise the region so that a pipeline could be taken to the Black Sea through that region.

I doubt the region is stable enough but with renewed terrorist attacks in Turkey areas then some kind of route through the more stable areas might still be an option (the Russians would stand to make a lot of money from it).

Emps
 

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Shevardnadze was a friend to the US and probably a signatory of any deal over a Georgia pipeline, so his removal must have caused some people in teh US MI complex to sweat a great deal, I would have thought.
 

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The oil is running out

As Monbiot points out the oil is running out:

http://www.monbiot.com/dsp_article.cfm?article_id=625

If there aren't think tanks devising meduim and long term strategies to maximise the US's access to oil then they aren''t doing their job (I suspect this kind of geopolitical maneuvering has been going on for decades and will just become more obvious as the situation becomes more desparate).

Emps
 

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According to a late night tv prog last week, the USA is busy building a large harbour in West equatorial Africa in order to ship out future oil from a tiny state controled by a "dodgy" president. They are financing his magnifent lifestyle( and his childrens' ) in order to facilitate all this( he says he owns all the land!!) whilst his subjects live in poverty without power, water or even a decent hospital. In his interview he makes the point that the developed west does " not understand the African way of life" and his population is perfectly happy. Meanwhile his son jets around the world and runs several cars ( of immense proportions) in Paris - obviously the African 'way of life':D
Also, I gather that an equatorial base would be the most efficient location for launching space projects, though I'm hardly an expert in that field...useful?
Just another case of looking after home interests, without a engaging moral issues?
 
A

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Hasn't Putin already voiced the fact the the Russian Federation have been thinking about trading their oil in Euros, with many of the former Soviet states expected to follow?

Apparently Mr Bush was none too pleased.

I beleive the question was asked of Putin by a journalist at a recent conference with the German premier.
 

Mighty_Emperor

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Well this has to be bad news for the dollar:

Dollar falls to 11-year pound low


The US dollar's slide against major world currencies continued on Tuesday.

The dollar dropped to an 11-year low against the UK pound, an all-time euro low, and also fell against Japan's yen.

The falls have been prompted by factors including widening US trade and current account deficits, low interest rates and the threat of terrorist attack.

The euro reached
Dollar falls to 11-year pound low


The US dollar's slide against major world currencies continued on Tuesday.

The dollar dropped to an 11-year low against the UK pound, an all-time euro low, and also fell against Japan's yen.

The falls have been prompted by factors including widening US trade and current account deficits, low interest rates and the threat of terrorist attack.

The euro reached $1.2812 before slipping back and was at $1.2767 in late trading in New York. The dollar also touched $1.8280 against the pound.

The pound later eased back to $1.8238 in late trading, but was still two cents up from late Monday in New York.

'Japanese intervention'

The euro is now homing in on the next pyschological level of $1.30.

On Sunday, Federal Reserve governor Ben Bernanke said that the risk of a dollar crisis was "quite low" against a basket of world currencies.

But against the yen the dollar dropped to 106.09, its lowest since September 2000.

The Japanese Government was reported to have intervened in the currency markets on Tuesday in an attempt to prevent the yen from continuing to strengthen.

A stronger yen makes life more difficult for Japanese exporters, whose products become more expensive for US importers.

Gold meanwhile pushed above $430 an ounce for the first time since 1988 on Tuesday but then closed lower on profit-taking as the battered dollar staged a late rally.

The metal, which is seen as a haven for investors, surged 20% in value last year.

The trigger for the recent dollar weakness was the hint from the US Federal Reserve that interest rates were unlikely to rise from current low levels any time soon.

US interest rates are at a 45-year-low as the central bank has held its key overnight rate at 1% since June 2003.

Export demand?

That means investors can find better returns elsewhere and are unlikely to buy US bonds, which are being sold to finance the country's ballooning budget deficit.

It also seems that the administration of President George W Bush is unconcerned about the slide in the currency because the cheaper US goods become, the more demand there will be for exports.

While that may spell good news for the US economy, it may have a significant effect on European hopes for a recovery.

According to economists at Societe Generale bank in London, "the impact of the latest euro rally is likely to be felt soon, and a further rise may jeopardise all hopes of an upturn in eurozone activity".
http://news.bbc.co.uk/1/hi/business/3371689.stm

but how will Bush deal with this and the trillion dollar debts he is running up?

How Will Bush Deal With the Deficits? Connecting the Dots to Iraq

Published on Monday, January 5, 2004 by CommonDreams.org

by Robert Freeman


Republican hearts are all aflutter over one quarter of strong GDP numbers. But the 8.2% third quarter growth was purchased on credit-the $374 billion budget deficit that was the largest in the country's history. All indications are that next year's deficit will be even larger, exceeding half a trillion dollars.

There is simply no magic to "growth" under these conditions. Any idiot with a hand full of credit cards charged to the next generation's children can gin up the short term illusion of prosperity. Until, that is, the bills come due.

George W. Bush inherited a $127 billion fiscal surplus but ran through all of that and more in his first year. He has turned a $5.6 trillion 10 year forecast surplus into a $3+ trillion forecast loss-an almost unimaginable reversal of $9 trillion in only three years. And this, in an economy that has grown for ten of the last twelve quarters.

The result of this almost psychotic profligacy, according to the Congressional Budget Office, will be a national debt of $14 trillion in 10 years. Interest payments alone will approach a trillion dollars a year and will exceed spending for all discretionary federal programs combined. Even more surreal, a study commissioned by former Treasury Secretary Paul O'Neil indicated that the 50 year forecast U.S. deficit would reach $44 trillion. The study was suppressed. O'Neil was fired.

How does a nation deal with debts that so greatly outrun its ability to pay? There are basically only five strategies. All are unappealing. Most are calamitous.

The most difficult strategy is, not surprisingly, the honest one: raise taxes and pay your bills. This is what King George III did following the Seven Years War with France in 1763. England had quadrupled its national debt in fighting the War and needed money to pay it off. It turned to the richest people in the realm, the Colonists, and began taxing paper, glass, paint, lead, and, of course, tea. The result, as we know, was the American Revolution.

It was the same strategy-raising taxes on the rich-that Louis XVI attempted in 1789. The French national debt had grown 10 fold under the pharoic opulence of Louis's grandfather, Louis XIV. Louis called the nobility and the clergy together and told them they would have to ante up. They, after all, had been exempted from taxes by Louis XIV in order to buy their complicity in his autocratic reign. Indignant, they refused to pay, precipitating the French Revolution, the most explosive upheaval to established government in the last thousand years.

A second strategy to deal with excessive debts is simply to print money. This is what Weimar Germany did to address the crushing debt imposed by the vengeful Treaty of Versailles. Before it was over the government had inflated the money supply by over a trillion times, leading some to comment that it was a waste of ink to put it onto paper worth so much less than the ink itself. The German middle class, whose assets were held at fixed amounts in government pensions, was destroyed. The collapse gave direct rise to Adolph Hitler.

A third strategy for dealing with onerous national debt is to sell off national assets. This is one of the first strategies the IMF imposes on third world countries that have gotten behind in their payments to western banks. Government-run industries, from telecommunications to water systems, are "privatized" and the country's natural resources are sold off to the highest foreign bidder. This is what Great Britain was forced to do in the aftermath of World War II.

Two world wars in only 30 years had ravaged the British economy and the pound sterling. Facing collapse at home (and revolution abroad), the government surrendered almost all of its colonies, from India and Pakistan to Nigeria, South Africa, Zambia and Zimbabwe. These had been among the greatest wealth-producing properties of modern times, the ones that had made the British Empire what it was. Their loss left Britain a second-rate power with only misty memories of its once imperial greatness.

A fourth strategy for dealing with excessive debt is to just repudiate it. This was used for centuries in the early days of the modern world and was revived two years ago by Argentina which brazenly refused to pay some $110 billion in debts it had accumulated over prior decades. More ominously, it was this strategy that was used by the Bolsheviks after they took power in the Russian Revolution.

The new communist government refused to be bound by the debts of the overthrown Romanovs. But the French had loaned heavily to the Russian government for decades before World War I and now were left in a lurch. A cascading series of defaults from one bank to another caused a liquidity crisis on the continent, ultimately setting off the Great Depression.

Finally, there is plunder. When a nation's debt load becomes so huge it cannot plausibly reassure creditors regarding repayment, it must seek some source of wealth, any source, to keep the borrowed money flowing. This, naked predation, is what kept the Roman Empire alive for the last two hundred years of its existence. It is the strategy adopted by the Spanish Empire-silver and gold from America-and which eventually destroyed the vitality of its own merchant and civil servant classes.

Government economists are not unawares of these imperatives. So, which of the five above strategies has the U.S. adopted to deal with its exploding debt problem?

Clearly, the Bush administration will not adopt the first strategy, raising taxes. In fact, as a result of Bush's mammoth tax giveaways, federal receipts as a percentage of GDP are at 16%, their lowest level since the 1950s. Raising taxes, or even simply reversing prior tax cuts, would betray the very purpose for which the rich installed Bush in the first place. And just as clearly, Bush cannot cut back on his prodigious spending-at least not yet-for that is the basis on which he has bought the short-term illusion of prosperity mentioned above.

Nor will the government resort to inflation, the second strategy. As we know from the German experience, inflation erodes the value of fixed income payments. The current U.S. debt, now in excess of $7 trillion, is held primarily by the very wealthiest of the world's citizens. They clip some $200 billion a year in coupons on this debt. If they were to see the U.S. government beginning to inflate, they would quickly sell off these instruments, precipitating a massive collapse. Alan Greenspan's quasi-religious stand against inflation can be understood first as his defense of the pecuniary prerogatives of this global investor class and second as the requisite fix to keep the funding flowing.

What about selling off assets, the third strategy? Now the story starts to get more interesting. As the dollar declines in value relative to foreign currencies, U.S. assets, denominated in dollars, become relatively cheaper. It costs foreigners less and less to buy more and more of the U.S. economy at fire sale prices. Some purchases will go into U.S. treasuries. Some will find their way into the stock market. Some will go into passive assets such as real estate. And some will go to buy active ownership and management of U.S. companies.

This is the dynamic that led the Japanese during the Supply Side-inspired dollar collapse of the 1980s to buy up Rockefeller Center, Firestone Tire, Pebble Beach, 7-Eleven, and countless other icons of America's commercial and cultural patrimony. It has the virtue (or vice, depending on your perspective) of appearing to be the result of "market forces". Government borrowing is settled by foreigners redeeming dollar-based IOUs in U.S. markets, denuding the private sphere of its productive assets and putting them into foreign hands. This is the reason Toyota is the biggest employer in Alabama and Honda is the second biggest employer in Indiana.

The fourth strategy, repudiation of debts, is more immediate than most American citizens realize. A significant portion of those $44 trillion future shortfalls come from under-funding of Medicare and Social Security. The recent Medicare bill is the first step toward official privatization. This will be accomplished by turning the program and its recipients over to the renowned stewardship of the insurance, health care and pharmaceutical industries and getting the liabilities off the government's books. Similarly, if Bush is elected in 2004, one of his first priorities will be a comparable privatization of Social Security. Not only will it prove an incalculable boon to the securities industry, it will substantially decrease the government's obligations to the Baby Boomers.

In terms of how a nation deals with excessive debt, the logic of these repudiation schemes is impeccable: it is far wiser for a country to repudiate the debts it holds to its own people-especially if they are not politically powerful-than it is to alienate its wealthy domestic and international underwriters. But asset sales and repudiation alone will not suffice to keep the funding flowing.

Already international investors are beginning to bail out of dollars. In 2003, the dollar was down 19% against the Euro with the fall accelerating since November. The dollar is now at its lowest level since the Euro was created in 1991. Even more telling is that international capital inflows to the U.S. dropped to $5 billion in August, down from $96 billion the year before. Nobody wants to hold dollars. But if the money flow stops, the U.S. economy collapses.

This is what happened in 1987. The massive Supply Side deficits of Ronald Reagan required the U.S. to borrow furiously from abroad. For a while the Japanese were our bankers, handily recycling their substantial trade surpluses into U.S. treasuries. But the Japanese soon realized they were being played for suckers. While they were making 5% returns on their treasuries, they were losing 15% on dollar depreciation. They stopped buying treasuries in October and the ensuing loss of liquidity caused the stock market to implode, the worst collapse since the Great Depression.

So what to do?

Finally, then, we come to the most sensitive and incendiary debt management strategy of all. Plunder. The purported rationale for the U.S. invasion of Iraq-that it possessed Weapons of Mass Destruction-is now known to have been a wholesale fiction. Not a single one of the administration's dozens of claims of WMD possession or imminent threat have borne the scrutiny of the most massive inspection regime in history. Of all the world's people, only the thuggishly propagandized American people ever believed (or still believe) this to have been the real purpose for the War. Not even Bush himself pretends otherwise anymore.

And the ex post facto rationale-that we are bringing Democracy to Iraq-is equally fictive given Paul Bremer's statement that the U.S. will not allow a Shi'ite government to take control there. Shi'ites, as Bremer well knows, make up 60% of Iraq's population. And no, it's not links to terror. And no, it's not connections to 9-11. What then? A simple thought experiment demonstrates the real truth about the U.S. invasion: would the U.S. have carried it out if, instead of sitting on the world's second largest supply of oil, Iraq was the world's second largest producer of, say, pomegranates? Or figs? Only the most pathologically Republican of cynics can even pretend to give this question a thought.

Control of oil gives the U.S. control of the industrial world and effective control of its own strategic competitors, Europe and China. This is the same strategy that made Alexander the Great so Great. As he entered new territories in pursuit of conquest, the first thing Alexander always did was capture and fortify the local water well. Within a day, two at the most, resistance collapsed. Oil is the water of today. It is the most widely traded commodity in the world. It is the one commodity without which modern civilization cannot function.

Control of oil allows the U.S. to extract all of the surplus wealth created by its rivals, ensuring that they remain forever subservient. This explains why Europe and China were so vociferous in their denunciation of the War. It also ensures that the U.S. has a universally desired, fungible, liquid commodity to collateralize its massive debts. Iraqi oil is a magical two-fer: it solves the U.S.'s primary strategic and economic challenges in a single fell swoop. But its capture can only be justified by deceit and accomplished through plunder.

The problem for most of Bush's Democratic challengers is that they know the above situation to be true. That is why-Howard Dean and Dennis Kucinich excepted-they went so sheepishly along with Bush's notoriously transparent casus belli in Iraq. They are left with petty quibbling about the adequacy of post-invasion planning. It is why they raised hardly a peep of protest over the ramming through of the Medicare package. It is why they bleat only procedural protests about the incivility of discourse as the three-quarters-of-a-century legacy of the New Deal is being peremptorily dismantled.

There was a time in the late 1990s when it looked as if the U.S. might be able to regain control of its fiscal destiny. Bill Clinton reversed the suicidal predations of Reagan's Supply Side Economics and produced the longest sustained economic expansion in U.S. history. One of the byproducts of that expansion was a series of budgetary surpluses that allowed the government to begin paying down the crippling debts run up under Reagan and Bush I.

But that halcyon era is already just a memory. Bush's massive debts are the nation's new fiscal master. And they have been run up solely to further enrich the already extremely wealthy the expense of the still desperately needy. The staggering costs of servicing these debts will drive interest rates into the stratosphere, destroying all possibilities of rebuilding a competitive economic infrastructure. The conservative British business magazine, The Economist, said it most presciently: "Long after Dubya is back on his ranch, Americans will be trying to recover from the mess he created."

It is breathtaking to imagine it could have happened so quickly but all federal policy, indeed, decisions concerning war and the very character of the nation itself, will now be defined by the stark new fact of our collective indenture.
.2812 before slipping back and was at
Dollar falls to 11-year pound low


The US dollar's slide against major world currencies continued on Tuesday.

The dollar dropped to an 11-year low against the UK pound, an all-time euro low, and also fell against Japan's yen.

The falls have been prompted by factors including widening US trade and current account deficits, low interest rates and the threat of terrorist attack.

The euro reached $1.2812 before slipping back and was at $1.2767 in late trading in New York. The dollar also touched $1.8280 against the pound.

The pound later eased back to $1.8238 in late trading, but was still two cents up from late Monday in New York.

'Japanese intervention'

The euro is now homing in on the next pyschological level of $1.30.

On Sunday, Federal Reserve governor Ben Bernanke said that the risk of a dollar crisis was "quite low" against a basket of world currencies.

But against the yen the dollar dropped to 106.09, its lowest since September 2000.

The Japanese Government was reported to have intervened in the currency markets on Tuesday in an attempt to prevent the yen from continuing to strengthen.

A stronger yen makes life more difficult for Japanese exporters, whose products become more expensive for US importers.

Gold meanwhile pushed above $430 an ounce for the first time since 1988 on Tuesday but then closed lower on profit-taking as the battered dollar staged a late rally.

The metal, which is seen as a haven for investors, surged 20% in value last year.

The trigger for the recent dollar weakness was the hint from the US Federal Reserve that interest rates were unlikely to rise from current low levels any time soon.

US interest rates are at a 45-year-low as the central bank has held its key overnight rate at 1% since June 2003.

Export demand?

That means investors can find better returns elsewhere and are unlikely to buy US bonds, which are being sold to finance the country's ballooning budget deficit.

It also seems that the administration of President George W Bush is unconcerned about the slide in the currency because the cheaper US goods become, the more demand there will be for exports.

While that may spell good news for the US economy, it may have a significant effect on European hopes for a recovery.

According to economists at Societe Generale bank in London, "the impact of the latest euro rally is likely to be felt soon, and a further rise may jeopardise all hopes of an upturn in eurozone activity".
http://news.bbc.co.uk/1/hi/business/3371689.stm

but how will Bush deal with this and the trillion dollar debts he is running up?

How Will Bush Deal With the Deficits? Connecting the Dots to Iraq

Published on Monday, January 5, 2004 by CommonDreams.org

by Robert Freeman


Republican hearts are all aflutter over one quarter of strong GDP numbers. But the 8.2% third quarter growth was purchased on credit-the $374 billion budget deficit that was the largest in the country's history. All indications are that next year's deficit will be even larger, exceeding half a trillion dollars.

There is simply no magic to "growth" under these conditions. Any idiot with a hand full of credit cards charged to the next generation's children can gin up the short term illusion of prosperity. Until, that is, the bills come due.

George W. Bush inherited a $127 billion fiscal surplus but ran through all of that and more in his first year. He has turned a $5.6 trillion 10 year forecast surplus into a $3+ trillion forecast loss-an almost unimaginable reversal of $9 trillion in only three years. And this, in an economy that has grown for ten of the last twelve quarters.

The result of this almost psychotic profligacy, according to the Congressional Budget Office, will be a national debt of $14 trillion in 10 years. Interest payments alone will approach a trillion dollars a year and will exceed spending for all discretionary federal programs combined. Even more surreal, a study commissioned by former Treasury Secretary Paul O'Neil indicated that the 50 year forecast U.S. deficit would reach $44 trillion. The study was suppressed. O'Neil was fired.

How does a nation deal with debts that so greatly outrun its ability to pay? There are basically only five strategies. All are unappealing. Most are calamitous.

The most difficult strategy is, not surprisingly, the honest one: raise taxes and pay your bills. This is what King George III did following the Seven Years War with France in 1763. England had quadrupled its national debt in fighting the War and needed money to pay it off. It turned to the richest people in the realm, the Colonists, and began taxing paper, glass, paint, lead, and, of course, tea. The result, as we know, was the American Revolution.

It was the same strategy-raising taxes on the rich-that Louis XVI attempted in 1789. The French national debt had grown 10 fold under the pharoic opulence of Louis's grandfather, Louis XIV. Louis called the nobility and the clergy together and told them they would have to ante up. They, after all, had been exempted from taxes by Louis XIV in order to buy their complicity in his autocratic reign. Indignant, they refused to pay, precipitating the French Revolution, the most explosive upheaval to established government in the last thousand years.

A second strategy to deal with excessive debts is simply to print money. This is what Weimar Germany did to address the crushing debt imposed by the vengeful Treaty of Versailles. Before it was over the government had inflated the money supply by over a trillion times, leading some to comment that it was a waste of ink to put it onto paper worth so much less than the ink itself. The German middle class, whose assets were held at fixed amounts in government pensions, was destroyed. The collapse gave direct rise to Adolph Hitler.

A third strategy for dealing with onerous national debt is to sell off national assets. This is one of the first strategies the IMF imposes on third world countries that have gotten behind in their payments to western banks. Government-run industries, from telecommunications to water systems, are "privatized" and the country's natural resources are sold off to the highest foreign bidder. This is what Great Britain was forced to do in the aftermath of World War II.

Two world wars in only 30 years had ravaged the British economy and the pound sterling. Facing collapse at home (and revolution abroad), the government surrendered almost all of its colonies, from India and Pakistan to Nigeria, South Africa, Zambia and Zimbabwe. These had been among the greatest wealth-producing properties of modern times, the ones that had made the British Empire what it was. Their loss left Britain a second-rate power with only misty memories of its once imperial greatness.

A fourth strategy for dealing with excessive debt is to just repudiate it. This was used for centuries in the early days of the modern world and was revived two years ago by Argentina which brazenly refused to pay some $110 billion in debts it had accumulated over prior decades. More ominously, it was this strategy that was used by the Bolsheviks after they took power in the Russian Revolution.

The new communist government refused to be bound by the debts of the overthrown Romanovs. But the French had loaned heavily to the Russian government for decades before World War I and now were left in a lurch. A cascading series of defaults from one bank to another caused a liquidity crisis on the continent, ultimately setting off the Great Depression.

Finally, there is plunder. When a nation's debt load becomes so huge it cannot plausibly reassure creditors regarding repayment, it must seek some source of wealth, any source, to keep the borrowed money flowing. This, naked predation, is what kept the Roman Empire alive for the last two hundred years of its existence. It is the strategy adopted by the Spanish Empire-silver and gold from America-and which eventually destroyed the vitality of its own merchant and civil servant classes.

Government economists are not unawares of these imperatives. So, which of the five above strategies has the U.S. adopted to deal with its exploding debt problem?

Clearly, the Bush administration will not adopt the first strategy, raising taxes. In fact, as a result of Bush's mammoth tax giveaways, federal receipts as a percentage of GDP are at 16%, their lowest level since the 1950s. Raising taxes, or even simply reversing prior tax cuts, would betray the very purpose for which the rich installed Bush in the first place. And just as clearly, Bush cannot cut back on his prodigious spending-at least not yet-for that is the basis on which he has bought the short-term illusion of prosperity mentioned above.

Nor will the government resort to inflation, the second strategy. As we know from the German experience, inflation erodes the value of fixed income payments. The current U.S. debt, now in excess of $7 trillion, is held primarily by the very wealthiest of the world's citizens. They clip some $200 billion a year in coupons on this debt. If they were to see the U.S. government beginning to inflate, they would quickly sell off these instruments, precipitating a massive collapse. Alan Greenspan's quasi-religious stand against inflation can be understood first as his defense of the pecuniary prerogatives of this global investor class and second as the requisite fix to keep the funding flowing.

What about selling off assets, the third strategy? Now the story starts to get more interesting. As the dollar declines in value relative to foreign currencies, U.S. assets, denominated in dollars, become relatively cheaper. It costs foreigners less and less to buy more and more of the U.S. economy at fire sale prices. Some purchases will go into U.S. treasuries. Some will find their way into the stock market. Some will go into passive assets such as real estate. And some will go to buy active ownership and management of U.S. companies.

This is the dynamic that led the Japanese during the Supply Side-inspired dollar collapse of the 1980s to buy up Rockefeller Center, Firestone Tire, Pebble Beach, 7-Eleven, and countless other icons of America's commercial and cultural patrimony. It has the virtue (or vice, depending on your perspective) of appearing to be the result of "market forces". Government borrowing is settled by foreigners redeeming dollar-based IOUs in U.S. markets, denuding the private sphere of its productive assets and putting them into foreign hands. This is the reason Toyota is the biggest employer in Alabama and Honda is the second biggest employer in Indiana.

The fourth strategy, repudiation of debts, is more immediate than most American citizens realize. A significant portion of those $44 trillion future shortfalls come from under-funding of Medicare and Social Security. The recent Medicare bill is the first step toward official privatization. This will be accomplished by turning the program and its recipients over to the renowned stewardship of the insurance, health care and pharmaceutical industries and getting the liabilities off the government's books. Similarly, if Bush is elected in 2004, one of his first priorities will be a comparable privatization of Social Security. Not only will it prove an incalculable boon to the securities industry, it will substantially decrease the government's obligations to the Baby Boomers.

In terms of how a nation deals with excessive debt, the logic of these repudiation schemes is impeccable: it is far wiser for a country to repudiate the debts it holds to its own people-especially if they are not politically powerful-than it is to alienate its wealthy domestic and international underwriters. But asset sales and repudiation alone will not suffice to keep the funding flowing.

Already international investors are beginning to bail out of dollars. In 2003, the dollar was down 19% against the Euro with the fall accelerating since November. The dollar is now at its lowest level since the Euro was created in 1991. Even more telling is that international capital inflows to the U.S. dropped to $5 billion in August, down from $96 billion the year before. Nobody wants to hold dollars. But if the money flow stops, the U.S. economy collapses.

This is what happened in 1987. The massive Supply Side deficits of Ronald Reagan required the U.S. to borrow furiously from abroad. For a while the Japanese were our bankers, handily recycling their substantial trade surpluses into U.S. treasuries. But the Japanese soon realized they were being played for suckers. While they were making 5% returns on their treasuries, they were losing 15% on dollar depreciation. They stopped buying treasuries in October and the ensuing loss of liquidity caused the stock market to implode, the worst collapse since the Great Depression.

So what to do?

Finally, then, we come to the most sensitive and incendiary debt management strategy of all. Plunder. The purported rationale for the U.S. invasion of Iraq-that it possessed Weapons of Mass Destruction-is now known to have been a wholesale fiction. Not a single one of the administration's dozens of claims of WMD possession or imminent threat have borne the scrutiny of the most massive inspection regime in history. Of all the world's people, only the thuggishly propagandized American people ever believed (or still believe) this to have been the real purpose for the War. Not even Bush himself pretends otherwise anymore.

And the ex post facto rationale-that we are bringing Democracy to Iraq-is equally fictive given Paul Bremer's statement that the U.S. will not allow a Shi'ite government to take control there. Shi'ites, as Bremer well knows, make up 60% of Iraq's population. And no, it's not links to terror. And no, it's not connections to 9-11. What then? A simple thought experiment demonstrates the real truth about the U.S. invasion: would the U.S. have carried it out if, instead of sitting on the world's second largest supply of oil, Iraq was the world's second largest producer of, say, pomegranates? Or figs? Only the most pathologically Republican of cynics can even pretend to give this question a thought.

Control of oil gives the U.S. control of the industrial world and effective control of its own strategic competitors, Europe and China. This is the same strategy that made Alexander the Great so Great. As he entered new territories in pursuit of conquest, the first thing Alexander always did was capture and fortify the local water well. Within a day, two at the most, resistance collapsed. Oil is the water of today. It is the most widely traded commodity in the world. It is the one commodity without which modern civilization cannot function.

Control of oil allows the U.S. to extract all of the surplus wealth created by its rivals, ensuring that they remain forever subservient. This explains why Europe and China were so vociferous in their denunciation of the War. It also ensures that the U.S. has a universally desired, fungible, liquid commodity to collateralize its massive debts. Iraqi oil is a magical two-fer: it solves the U.S.'s primary strategic and economic challenges in a single fell swoop. But its capture can only be justified by deceit and accomplished through plunder.

The problem for most of Bush's Democratic challengers is that they know the above situation to be true. That is why-Howard Dean and Dennis Kucinich excepted-they went so sheepishly along with Bush's notoriously transparent casus belli in Iraq. They are left with petty quibbling about the adequacy of post-invasion planning. It is why they raised hardly a peep of protest over the ramming through of the Medicare package. It is why they bleat only procedural protests about the incivility of discourse as the three-quarters-of-a-century legacy of the New Deal is being peremptorily dismantled.

There was a time in the late 1990s when it looked as if the U.S. might be able to regain control of its fiscal destiny. Bill Clinton reversed the suicidal predations of Reagan's Supply Side Economics and produced the longest sustained economic expansion in U.S. history. One of the byproducts of that expansion was a series of budgetary surpluses that allowed the government to begin paying down the crippling debts run up under Reagan and Bush I.

But that halcyon era is already just a memory. Bush's massive debts are the nation's new fiscal master. And they have been run up solely to further enrich the already extremely wealthy the expense of the still desperately needy. The staggering costs of servicing these debts will drive interest rates into the stratosphere, destroying all possibilities of rebuilding a competitive economic infrastructure. The conservative British business magazine, The Economist, said it most presciently: "Long after Dubya is back on his ranch, Americans will be trying to recover from the mess he created."

It is breathtaking to imagine it could have happened so quickly but all federal policy, indeed, decisions concerning war and the very character of the nation itself, will now be defined by the stark new fact of our collective indenture.
.2767 in late trading in New York. The dollar also touched
Dollar falls to 11-year pound low


The US dollar's slide against major world currencies continued on Tuesday.

The dollar dropped to an 11-year low against the UK pound, an all-time euro low, and also fell against Japan's yen.

The falls have been prompted by factors including widening US trade and current account deficits, low interest rates and the threat of terrorist attack.

The euro reached $1.2812 before slipping back and was at $1.2767 in late trading in New York. The dollar also touched $1.8280 against the pound.

The pound later eased back to $1.8238 in late trading, but was still two cents up from late Monday in New York.

'Japanese intervention'

The euro is now homing in on the next pyschological level of $1.30.

On Sunday, Federal Reserve governor Ben Bernanke said that the risk of a dollar crisis was "quite low" against a basket of world currencies.

But against the yen the dollar dropped to 106.09, its lowest since September 2000.

The Japanese Government was reported to have intervened in the currency markets on Tuesday in an attempt to prevent the yen from continuing to strengthen.

A stronger yen makes life more difficult for Japanese exporters, whose products become more expensive for US importers.

Gold meanwhile pushed above $430 an ounce for the first time since 1988 on Tuesday but then closed lower on profit-taking as the battered dollar staged a late rally.

The metal, which is seen as a haven for investors, surged 20% in value last year.

The trigger for the recent dollar weakness was the hint from the US Federal Reserve that interest rates were unlikely to rise from current low levels any time soon.

US interest rates are at a 45-year-low as the central bank has held its key overnight rate at 1% since June 2003.

Export demand?

That means investors can find better returns elsewhere and are unlikely to buy US bonds, which are being sold to finance the country's ballooning budget deficit.

It also seems that the administration of President George W Bush is unconcerned about the slide in the currency because the cheaper US goods become, the more demand there will be for exports.

While that may spell good news for the US economy, it may have a significant effect on European hopes for a recovery.

According to economists at Societe Generale bank in London, "the impact of the latest euro rally is likely to be felt soon, and a further rise may jeopardise all hopes of an upturn in eurozone activity".
http://news.bbc.co.uk/1/hi/business/3371689.stm

but how will Bush deal with this and the trillion dollar debts he is running up?

How Will Bush Deal With the Deficits? Connecting the Dots to Iraq

Published on Monday, January 5, 2004 by CommonDreams.org

by Robert Freeman


Republican hearts are all aflutter over one quarter of strong GDP numbers. But the 8.2% third quarter growth was purchased on credit-the $374 billion budget deficit that was the largest in the country's history. All indications are that next year's deficit will be even larger, exceeding half a trillion dollars.

There is simply no magic to "growth" under these conditions. Any idiot with a hand full of credit cards charged to the next generation's children can gin up the short term illusion of prosperity. Until, that is, the bills come due.

George W. Bush inherited a $127 billion fiscal surplus but ran through all of that and more in his first year. He has turned a $5.6 trillion 10 year forecast surplus into a $3+ trillion forecast loss-an almost unimaginable reversal of $9 trillion in only three years. And this, in an economy that has grown for ten of the last twelve quarters.

The result of this almost psychotic profligacy, according to the Congressional Budget Office, will be a national debt of $14 trillion in 10 years. Interest payments alone will approach a trillion dollars a year and will exceed spending for all discretionary federal programs combined. Even more surreal, a study commissioned by former Treasury Secretary Paul O'Neil indicated that the 50 year forecast U.S. deficit would reach $44 trillion. The study was suppressed. O'Neil was fired.

How does a nation deal with debts that so greatly outrun its ability to pay? There are basically only five strategies. All are unappealing. Most are calamitous.

The most difficult strategy is, not surprisingly, the honest one: raise taxes and pay your bills. This is what King George III did following the Seven Years War with France in 1763. England had quadrupled its national debt in fighting the War and needed money to pay it off. It turned to the richest people in the realm, the Colonists, and began taxing paper, glass, paint, lead, and, of course, tea. The result, as we know, was the American Revolution.

It was the same strategy-raising taxes on the rich-that Louis XVI attempted in 1789. The French national debt had grown 10 fold under the pharoic opulence of Louis's grandfather, Louis XIV. Louis called the nobility and the clergy together and told them they would have to ante up. They, after all, had been exempted from taxes by Louis XIV in order to buy their complicity in his autocratic reign. Indignant, they refused to pay, precipitating the French Revolution, the most explosive upheaval to established government in the last thousand years.

A second strategy to deal with excessive debts is simply to print money. This is what Weimar Germany did to address the crushing debt imposed by the vengeful Treaty of Versailles. Before it was over the government had inflated the money supply by over a trillion times, leading some to comment that it was a waste of ink to put it onto paper worth so much less than the ink itself. The German middle class, whose assets were held at fixed amounts in government pensions, was destroyed. The collapse gave direct rise to Adolph Hitler.

A third strategy for dealing with onerous national debt is to sell off national assets. This is one of the first strategies the IMF imposes on third world countries that have gotten behind in their payments to western banks. Government-run industries, from telecommunications to water systems, are "privatized" and the country's natural resources are sold off to the highest foreign bidder. This is what Great Britain was forced to do in the aftermath of World War II.

Two world wars in only 30 years had ravaged the British economy and the pound sterling. Facing collapse at home (and revolution abroad), the government surrendered almost all of its colonies, from India and Pakistan to Nigeria, South Africa, Zambia and Zimbabwe. These had been among the greatest wealth-producing properties of modern times, the ones that had made the British Empire what it was. Their loss left Britain a second-rate power with only misty memories of its once imperial greatness.

A fourth strategy for dealing with excessive debt is to just repudiate it. This was used for centuries in the early days of the modern world and was revived two years ago by Argentina which brazenly refused to pay some $110 billion in debts it had accumulated over prior decades. More ominously, it was this strategy that was used by the Bolsheviks after they took power in the Russian Revolution.

The new communist government refused to be bound by the debts of the overthrown Romanovs. But the French had loaned heavily to the Russian government for decades before World War I and now were left in a lurch. A cascading series of defaults from one bank to another caused a liquidity crisis on the continent, ultimately setting off the Great Depression.

Finally, there is plunder. When a nation's debt load becomes so huge it cannot plausibly reassure creditors regarding repayment, it must seek some source of wealth, any source, to keep the borrowed money flowing. This, naked predation, is what kept the Roman Empire alive for the last two hundred years of its existence. It is the strategy adopted by the Spanish Empire-silver and gold from America-and which eventually destroyed the vitality of its own merchant and civil servant classes.

Government economists are not unawares of these imperatives. So, which of the five above strategies has the U.S. adopted to deal with its exploding debt problem?

Clearly, the Bush administration will not adopt the first strategy, raising taxes. In fact, as a result of Bush's mammoth tax giveaways, federal receipts as a percentage of GDP are at 16%, their lowest level since the 1950s. Raising taxes, or even simply reversing prior tax cuts, would betray the very purpose for which the rich installed Bush in the first place. And just as clearly, Bush cannot cut back on his prodigious spending-at least not yet-for that is the basis on which he has bought the short-term illusion of prosperity mentioned above.

Nor will the government resort to inflation, the second strategy. As we know from the German experience, inflation erodes the value of fixed income payments. The current U.S. debt, now in excess of $7 trillion, is held primarily by the very wealthiest of the world's citizens. They clip some $200 billion a year in coupons on this debt. If they were to see the U.S. government beginning to inflate, they would quickly sell off these instruments, precipitating a massive collapse. Alan Greenspan's quasi-religious stand against inflation can be understood first as his defense of the pecuniary prerogatives of this global investor class and second as the requisite fix to keep the funding flowing.

What about selling off assets, the third strategy? Now the story starts to get more interesting. As the dollar declines in value relative to foreign currencies, U.S. assets, denominated in dollars, become relatively cheaper. It costs foreigners less and less to buy more and more of the U.S. economy at fire sale prices. Some purchases will go into U.S. treasuries. Some will find their way into the stock market. Some will go into passive assets such as real estate. And some will go to buy active ownership and management of U.S. companies.

This is the dynamic that led the Japanese during the Supply Side-inspired dollar collapse of the 1980s to buy up Rockefeller Center, Firestone Tire, Pebble Beach, 7-Eleven, and countless other icons of America's commercial and cultural patrimony. It has the virtue (or vice, depending on your perspective) of appearing to be the result of "market forces". Government borrowing is settled by foreigners redeeming dollar-based IOUs in U.S. markets, denuding the private sphere of its productive assets and putting them into foreign hands. This is the reason Toyota is the biggest employer in Alabama and Honda is the second biggest employer in Indiana.

The fourth strategy, repudiation of debts, is more immediate than most American citizens realize. A significant portion of those $44 trillion future shortfalls come from under-funding of Medicare and Social Security. The recent Medicare bill is the first step toward official privatization. This will be accomplished by turning the program and its recipients over to the renowned stewardship of the insurance, health care and pharmaceutical industries and getting the liabilities off the government's books. Similarly, if Bush is elected in 2004, one of his first priorities will be a comparable privatization of Social Security. Not only will it prove an incalculable boon to the securities industry, it will substantially decrease the government's obligations to the Baby Boomers.

In terms of how a nation deals with excessive debt, the logic of these repudiation schemes is impeccable: it is far wiser for a country to repudiate the debts it holds to its own people-especially if they are not politically powerful-than it is to alienate its wealthy domestic and international underwriters. But asset sales and repudiation alone will not suffice to keep the funding flowing.

Already international investors are beginning to bail out of dollars. In 2003, the dollar was down 19% against the Euro with the fall accelerating since November. The dollar is now at its lowest level since the Euro was created in 1991. Even more telling is that international capital inflows to the U.S. dropped to $5 billion in August, down from $96 billion the year before. Nobody wants to hold dollars. But if the money flow stops, the U.S. economy collapses.

This is what happened in 1987. The massive Supply Side deficits of Ronald Reagan required the U.S. to borrow furiously from abroad. For a while the Japanese were our bankers, handily recycling their substantial trade surpluses into U.S. treasuries. But the Japanese soon realized they were being played for suckers. While they were making 5% returns on their treasuries, they were losing 15% on dollar depreciation. They stopped buying treasuries in October and the ensuing loss of liquidity caused the stock market to implode, the worst collapse since the Great Depression.

So what to do?

Finally, then, we come to the most sensitive and incendiary debt management strategy of all. Plunder. The purported rationale for the U.S. invasion of Iraq-that it possessed Weapons of Mass Destruction-is now known to have been a wholesale fiction. Not a single one of the administration's dozens of claims of WMD possession or imminent threat have borne the scrutiny of the most massive inspection regime in history. Of all the world's people, only the thuggishly propagandized American people ever believed (or still believe) this to have been the real purpose for the War. Not even Bush himself pretends otherwise anymore.

And the ex post facto rationale-that we are bringing Democracy to Iraq-is equally fictive given Paul Bremer's statement that the U.S. will not allow a Shi'ite government to take control there. Shi'ites, as Bremer well knows, make up 60% of Iraq's population. And no, it's not links to terror. And no, it's not connections to 9-11. What then? A simple thought experiment demonstrates the real truth about the U.S. invasion: would the U.S. have carried it out if, instead of sitting on the world's second largest supply of oil, Iraq was the world's second largest producer of, say, pomegranates? Or figs? Only the most pathologically Republican of cynics can even pretend to give this question a thought.

Control of oil gives the U.S. control of the industrial world and effective control of its own strategic competitors, Europe and China. This is the same strategy that made Alexander the Great so Great. As he entered new territories in pursuit of conquest, the first thing Alexander always did was capture and fortify the local water well. Within a day, two at the most, resistance collapsed. Oil is the water of today. It is the most widely traded commodity in the world. It is the one commodity without which modern civilization cannot function.

Control of oil allows the U.S. to extract all of the surplus wealth created by its rivals, ensuring that they remain forever subservient. This explains why Europe and China were so vociferous in their denunciation of the War. It also ensures that the U.S. has a universally desired, fungible, liquid commodity to collateralize its massive debts. Iraqi oil is a magical two-fer: it solves the U.S.'s primary strategic and economic challenges in a single fell swoop. But its capture can only be justified by deceit and accomplished through plunder.

The problem for most of Bush's Democratic challengers is that they know the above situation to be true. That is why-Howard Dean and Dennis Kucinich excepted-they went so sheepishly along with Bush's notoriously transparent casus belli in Iraq. They are left with petty quibbling about the adequacy of post-invasion planning. It is why they raised hardly a peep of protest over the ramming through of the Medicare package. It is why they bleat only procedural protests about the incivility of discourse as the three-quarters-of-a-century legacy of the New Deal is being peremptorily dismantled.

There was a time in the late 1990s when it looked as if the U.S. might be able to regain control of its fiscal destiny. Bill Clinton reversed the suicidal predations of Reagan's Supply Side Economics and produced the longest sustained economic expansion in U.S. history. One of the byproducts of that expansion was a series of budgetary surpluses that allowed the government to begin paying down the crippling debts run up under Reagan and Bush I.

But that halcyon era is already just a memory. Bush's massive debts are the nation's new fiscal master. And they have been run up solely to further enrich the already extremely wealthy the expense of the still desperately needy. The staggering costs of servicing these debts will drive interest rates into the stratosphere, destroying all possibilities of rebuilding a competitive economic infrastructure. The conservative British business magazine, The Economist, said it most presciently: "Long after Dubya is back on his ranch, Americans will be trying to recover from the mess he created."

It is breathtaking to imagine it could have happened so quickly but all federal policy, indeed, decisions concerning war and the very character of the nation itself, will now be defined by the stark new fact of our collective indenture.
.8280 against the pound.

The pound later eased back to
Dollar falls to 11-year pound low


The US dollar's slide against major world currencies continued on Tuesday.

The dollar dropped to an 11-year low against the UK pound, an all-time euro low, and also fell against Japan's yen.

The falls have been prompted by factors including widening US trade and current account deficits, low interest rates and the threat of terrorist attack.

The euro reached $1.2812 before slipping back and was at $1.2767 in late trading in New York. The dollar also touched $1.8280 against the pound.

The pound later eased back to $1.8238 in late trading, but was still two cents up from late Monday in New York.

'Japanese intervention'

The euro is now homing in on the next pyschological level of $1.30.

On Sunday, Federal Reserve governor Ben Bernanke said that the risk of a dollar crisis was "quite low" against a basket of world currencies.

But against the yen the dollar dropped to 106.09, its lowest since September 2000.

The Japanese Government was reported to have intervened in the currency markets on Tuesday in an attempt to prevent the yen from continuing to strengthen.

A stronger yen makes life more difficult for Japanese exporters, whose products become more expensive for US importers.

Gold meanwhile pushed above $430 an ounce for the first time since 1988 on Tuesday but then closed lower on profit-taking as the battered dollar staged a late rally.

The metal, which is seen as a haven for investors, surged 20% in value last year.

The trigger for the recent dollar weakness was the hint from the US Federal Reserve that interest rates were unlikely to rise from current low levels any time soon.

US interest rates are at a 45-year-low as the central bank has held its key overnight rate at 1% since June 2003.

Export demand?

That means investors can find better returns elsewhere and are unlikely to buy US bonds, which are being sold to finance the country's ballooning budget deficit.

It also seems that the administration of President George W Bush is unconcerned about the slide in the currency because the cheaper US goods become, the more demand there will be for exports.

While that may spell good news for the US economy, it may have a significant effect on European hopes for a recovery.

According to economists at Societe Generale bank in London, "the impact of the latest euro rally is likely to be felt soon, and a further rise may jeopardise all hopes of an upturn in eurozone activity".
http://news.bbc.co.uk/1/hi/business/3371689.stm

but how will Bush deal with this and the trillion dollar debts he is running up?

How Will Bush Deal With the Deficits? Connecting the Dots to Iraq

Published on Monday, January 5, 2004 by CommonDreams.org

by Robert Freeman


Republican hearts are all aflutter over one quarter of strong GDP numbers. But the 8.2% third quarter growth was purchased on credit-the $374 billion budget deficit that was the largest in the country's history. All indications are that next year's deficit will be even larger, exceeding half a trillion dollars.

There is simply no magic to "growth" under these conditions. Any idiot with a hand full of credit cards charged to the next generation's children can gin up the short term illusion of prosperity. Until, that is, the bills come due.

George W. Bush inherited a $127 billion fiscal surplus but ran through all of that and more in his first year. He has turned a $5.6 trillion 10 year forecast surplus into a $3+ trillion forecast loss-an almost unimaginable reversal of $9 trillion in only three years. And this, in an economy that has grown for ten of the last twelve quarters.

The result of this almost psychotic profligacy, according to the Congressional Budget Office, will be a national debt of $14 trillion in 10 years. Interest payments alone will approach a trillion dollars a year and will exceed spending for all discretionary federal programs combined. Even more surreal, a study commissioned by former Treasury Secretary Paul O'Neil indicated that the 50 year forecast U.S. deficit would reach $44 trillion. The study was suppressed. O'Neil was fired.

How does a nation deal with debts that so greatly outrun its ability to pay? There are basically only five strategies. All are unappealing. Most are calamitous.

The most difficult strategy is, not surprisingly, the honest one: raise taxes and pay your bills. This is what King George III did following the Seven Years War with France in 1763. England had quadrupled its national debt in fighting the War and needed money to pay it off. It turned to the richest people in the realm, the Colonists, and began taxing paper, glass, paint, lead, and, of course, tea. The result, as we know, was the American Revolution.

It was the same strategy-raising taxes on the rich-that Louis XVI attempted in 1789. The French national debt had grown 10 fold under the pharoic opulence of Louis's grandfather, Louis XIV. Louis called the nobility and the clergy together and told them they would have to ante up. They, after all, had been exempted from taxes by Louis XIV in order to buy their complicity in his autocratic reign. Indignant, they refused to pay, precipitating the French Revolution, the most explosive upheaval to established government in the last thousand years.

A second strategy to deal with excessive debts is simply to print money. This is what Weimar Germany did to address the crushing debt imposed by the vengeful Treaty of Versailles. Before it was over the government had inflated the money supply by over a trillion times, leading some to comment that it was a waste of ink to put it onto paper worth so much less than the ink itself. The German middle class, whose assets were held at fixed amounts in government pensions, was destroyed. The collapse gave direct rise to Adolph Hitler.

A third strategy for dealing with onerous national debt is to sell off national assets. This is one of the first strategies the IMF imposes on third world countries that have gotten behind in their payments to western banks. Government-run industries, from telecommunications to water systems, are "privatized" and the country's natural resources are sold off to the highest foreign bidder. This is what Great Britain was forced to do in the aftermath of World War II.

Two world wars in only 30 years had ravaged the British economy and the pound sterling. Facing collapse at home (and revolution abroad), the government surrendered almost all of its colonies, from India and Pakistan to Nigeria, South Africa, Zambia and Zimbabwe. These had been among the greatest wealth-producing properties of modern times, the ones that had made the British Empire what it was. Their loss left Britain a second-rate power with only misty memories of its once imperial greatness.

A fourth strategy for dealing with excessive debt is to just repudiate it. This was used for centuries in the early days of the modern world and was revived two years ago by Argentina which brazenly refused to pay some $110 billion in debts it had accumulated over prior decades. More ominously, it was this strategy that was used by the Bolsheviks after they took power in the Russian Revolution.

The new communist government refused to be bound by the debts of the overthrown Romanovs. But the French had loaned heavily to the Russian government for decades before World War I and now were left in a lurch. A cascading series of defaults from one bank to another caused a liquidity crisis on the continent, ultimately setting off the Great Depression.

Finally, there is plunder. When a nation's debt load becomes so huge it cannot plausibly reassure creditors regarding repayment, it must seek some source of wealth, any source, to keep the borrowed money flowing. This, naked predation, is what kept the Roman Empire alive for the last two hundred years of its existence. It is the strategy adopted by the Spanish Empire-silver and gold from America-and which eventually destroyed the vitality of its own merchant and civil servant classes.

Government economists are not unawares of these imperatives. So, which of the five above strategies has the U.S. adopted to deal with its exploding debt problem?

Clearly, the Bush administration will not adopt the first strategy, raising taxes. In fact, as a result of Bush's mammoth tax giveaways, federal receipts as a percentage of GDP are at 16%, their lowest level since the 1950s. Raising taxes, or even simply reversing prior tax cuts, would betray the very purpose for which the rich installed Bush in the first place. And just as clearly, Bush cannot cut back on his prodigious spending-at least not yet-for that is the basis on which he has bought the short-term illusion of prosperity mentioned above.

Nor will the government resort to inflation, the second strategy. As we know from the German experience, inflation erodes the value of fixed income payments. The current U.S. debt, now in excess of $7 trillion, is held primarily by the very wealthiest of the world's citizens. They clip some $200 billion a year in coupons on this debt. If they were to see the U.S. government beginning to inflate, they would quickly sell off these instruments, precipitating a massive collapse. Alan Greenspan's quasi-religious stand against inflation can be understood first as his defense of the pecuniary prerogatives of this global investor class and second as the requisite fix to keep the funding flowing.

What about selling off assets, the third strategy? Now the story starts to get more interesting. As the dollar declines in value relative to foreign currencies, U.S. assets, denominated in dollars, become relatively cheaper. It costs foreigners less and less to buy more and more of the U.S. economy at fire sale prices. Some purchases will go into U.S. treasuries. Some will find their way into the stock market. Some will go into passive assets such as real estate. And some will go to buy active ownership and management of U.S. companies.

This is the dynamic that led the Japanese during the Supply Side-inspired dollar collapse of the 1980s to buy up Rockefeller Center, Firestone Tire, Pebble Beach, 7-Eleven, and countless other icons of America's commercial and cultural patrimony. It has the virtue (or vice, depending on your perspective) of appearing to be the result of "market forces". Government borrowing is settled by foreigners redeeming dollar-based IOUs in U.S. markets, denuding the private sphere of its productive assets and putting them into foreign hands. This is the reason Toyota is the biggest employer in Alabama and Honda is the second biggest employer in Indiana.

The fourth strategy, repudiation of debts, is more immediate than most American citizens realize. A significant portion of those $44 trillion future shortfalls come from under-funding of Medicare and Social Security. The recent Medicare bill is the first step toward official privatization. This will be accomplished by turning the program and its recipients over to the renowned stewardship of the insurance, health care and pharmaceutical industries and getting the liabilities off the government's books. Similarly, if Bush is elected in 2004, one of his first priorities will be a comparable privatization of Social Security. Not only will it prove an incalculable boon to the securities industry, it will substantially decrease the government's obligations to the Baby Boomers.

In terms of how a nation deals with excessive debt, the logic of these repudiation schemes is impeccable: it is far wiser for a country to repudiate the debts it holds to its own people-especially if they are not politically powerful-than it is to alienate its wealthy domestic and international underwriters. But asset sales and repudiation alone will not suffice to keep the funding flowing.

[b:357
 

Mighty_Emperor

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brian ellwood said:
According to a late night tv prog last week, the USA is busy building a large harbour in West equatorial Africa in order to ship out future oil from a tiny state controled by a "dodgy" president. They are financing his magnifent lifestyle( and his childrens' ) in order to facilitate all this( he says he owns all the land!!) whilst his subjects live in poverty without power, water or even a decent hospital. In his interview he makes the point that the developed west does " not understand the African way of life" and his population is perfectly happy. Meanwhile his son jets around the world and runs several cars ( of immense proportions) in Paris - obviously the African 'way of life':D
Also, I gather that an equatorial base would be the most efficient location for launching space projects, though I'm hardly an expert in that field...useful?
Just another case of looking after home interests, without a engaging moral issues?
Yes quite - here is a good review of what sounds like an interesting book which touches on a number of these issues (and how it could all be avoided by just making our oil consumption more efficient):

Time to cut down

We need to face up to the crisis in energy consumption. Michael Meacher finds some solutions in The End of Oil by Paul Roberts

Saturday July 3, 2004
The Guardian

The End of Oil
by Paul Roberts
352pp, Bloomsbury, £17.99


The current world order is essentially about the geopolitics of oil, and this book is a tour de force in charting, in a highly readable, balanced and objective manner, a fluid, constantly changing dynamic. It is to be hoped that it will be widely read in the United States (the home country of the author), since Americans are the least energy-conscious people in the world, are profoundly ignorant of what energy is and continue to live in a state of denial.

Paul Roberts describes the oil problem with exquisite clarity. Oil now provides 40% of the world energy market, although 26% still comes from coal and 24% from natural gas. By 2035 the world will use more than twice as much energy as it does today. Demand for oil will grow from today's 80m barrels a day to around 140m barrels. The use of natural gas, it is widely predicted, will expand even more, by some 120%, and coal by nearly 60%. These are staggering requirements: so where will all this extra hydrocarbon energy come from?

For the past decade the world has used 24bn barrels of oil a year, but has found on average less than 10bn barrels of new oil annually. In other words, demand for oil is soaring, especially from the industrialisation of China and India, while new capacity and reserves are shrinking. Moreover, the political instability of the world energy market is also growing apace. By the end of the current decade, Opec will be supplying 40% of the world's oil, well up from 28% today.

This background gives an interesting insight into the motives behind the Iraq war. Before the war, Iraq was producing 3.5m barrels a day, and many in the US administration believed this could be doubled by 2010. If Iraq could then be "persuaded" to ignore its Opec quota and produce at maximum capacity, the flood of new oil would end Opec's control over the oil price. Unlocking Opec oil, combined with being a decade ahead of the world in military technology, would guarantee American supremacy for a century or more. Control of oil would not only underpin American economic strength and power, but it would also be part of a much bigger geostrategic vision, offering leverage over countries more dependent on the Gulf for oil, especially China and Europe.

Even though the US neocon vision has gone badly awry, Washington's response to the approaching world energy crisis - to secure, by force if necessary, the remaining sources of oil supply - will have lethal consequences for the planet. Global warming emissions from the burning of fossil fuels, primarily oil and coal, are increasing at 3% a year, and at this rate will reach 12bn tons a year by 2030 and over 20bn tons by the end of the century. On that basis, greenhouse gases in the atmosphere will reach a concentration of 1,100 parts per million (three times the level of today), at which point even sceptical climate scientists concede that all hell will break loose.

So is there an exit from the disaster to which we are heading? As Roberts points out, solar energy and wind power have huge potential, but are not yet ready for prime time. Together they currently provide less than half of 1% of the world energy total. And there are still enormous hurdles to overcome. The best solar-power cells have efficiencies of only 10%; the costs of manufacturing these silicon-based cells remain incredibly high; and the power generated is intermittent, depending on climatic conditions.

The best alternative is one still too little talked about: conservation. The volume of energy we squander is prodigious. US power plants discard more energy in waste heat than Japan's entire energy requirement. Only 15% of the energy in a gallon of petrol ever reaches the wheels of a car, and less than a quarter of the energy used in a standard oven reaches the food. It has been calculated that a mere 2.7 miles-per-gallon improvement in the fuel economy of American cars and light vehicles would be enough to do without the need for oil imports from the Persian Gulf entirely - a rather better solution than launching a war on Iraq. Energy-efficiency gains could actually save more oil than could be found in the ground, and at lower cost than the average market price for oil. The implications of this are stunning. If we reduced energy intensity by just 3% a year, we could meet world demand in 2100 with only a quarter of the energy used today.

The trouble is that the "efficiency dividend" has so often been misspent. The fuel economy of cars has improved dramatically over the past decade, but consumers have responded by buying more cars or bigger cars, including the absurdly misnamed sports utility vehicles. Today's lighting systems are dramatically more efficient, but any potential energy savings are offset by dozens more recessed or track lights. Other energy savings are spent on more air conditioning systems, big-screen home-entertainment TV centres and additional refrigerators. The lesson of all this is the perversity of minimising cost, which is the goal of technology, rather than maximising conservation. But it does open up a real prospect of a different energy future - not one based on carbon-free energy sources alone, which are coming on stream too slowly, but one that joins these technologies with huge gains in efficiency that could then power cars, houses and industry, requiring only half or a quarter of the energy.

What are the chances of this becoming the driving force of a new global energy order? At the moment, next to nil. The wars in Afghanistan and Iraq were primarily about oil. The US is now building up a military presence in west Africa because it has known oil reserves of 66bn barrels - at least a 10th of those in the Middle East. Significantly, the US showed no interest in sending troops to oil-less Liberia. And US domestic investment in hydrocarbons continues to rise, with US coal consumption (and CO2 emissions) expected to increase by a further 25% by 2020, when nearly half of its power will come from the coal-fired sector - which, given the jobs and votes attached to that sector, goes a long way to explain US resistance to the Kyoto protocol.

So will the market ever move? Roberts quotes some very revealing research from the University of California which measured the hidden "well-to-wheels" costs of the pollution each gallon of petrol accounts for - from when the oil is produced and refined to when it is burned in the engine, including air pollution, climate change and military expenditures to protect oil supplies. If these factors are considered in the price of a car or the price of petrol, as they should be, the hydrogen fuel cell car becomes about 25% cheaper than today's petrol-driven cars.

Roberts's book ends with a vision of a "bridge economy", the transitional phase to a new energy order for the US. It will initially be fuelled by gas, much cleaner than oil or coal, so dramatically increasing the availability of gas should be a prime focus for the US. Second, a carbon penalty needs to be introduced, perhaps a cap and trade system, but including also developing coal gasification and carbon sequestration as the essence of clean coal. Third, a massive uplift in US car efficiency should be achieved by reintroducing the highly successful Corporate Average Fuel Economy standards, which Reagan abolished in 1987. Roberts adds here the interesting idea of a "feebate" - a stiff penalty (say ,000) if a car is bought that does 20 miles per gallon or fewer, and the same amount as a reward if a car is bought that does 40 miles per gallon or more.

This is an outstandingly clear, lucid and readable book about a highly complex issue that is central to our times. If I could recommend some books for George Bush and Tony Blair to read, this would be one of them.

----------------------
· Michael Meacher is Labour MP for Oldham West and Royton.
http://books.guardian.co.uk/review/story/0,12084,1252132,00.html

You can get it from here:

http://www.amazon.co.uk/exec/obidos/ASIN/0747570752/

There do appear to be a number of books on this kind of subject but this looks a good one.

Emps
 

jaseywasey

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Peak Oil

We all know oil is going to last forever, but it seems this could be sooner than we think....

http://www.lifeaftertheoilcrash.net/Introduction.html


Are you ready for $7 per gallon gas, $182

per barrel oil, 50 percent yearly inflation, total economic collapse, unending resource wars, and a large-scale reinstitution of the military draft?
Dear reader,



Civilization as we know it is coming to an end soon. This is not the wacky conclusion of a religious cult, but rather the result of diligent analysis sourced by hard data and the scientists who study global “Peak Oil” and related geopolitical events.



So who are these nay-sayers who claim the sky is falling? Conspiracy fanatics? Nostradamus fans? Apocalypse Bible prophecy readers? To the contrary, they are some of the most respected, highest paid geologists, physicists, petroleum engineers, and investment bankers in the world. These are logical, rational, and conservative people and they are absolutely terrified about the situation. This is why it's so scary.



The situation is so dire, even George W. Bush's Energy Adviser, Matthew Simmons, has acknowledged "The situation is desperate. This is the world's biggest serious question." In an August 2003 interview, Mr. Simmons was asked if it was time for Peak Oil to become part of the public policy debate. He responded:



"It is past time. As I have said, the experts and politicians have no Plan B to fall back on. If energy peaks, particularly while 5 of the world’s 6.5 billion people have little or no use of modern energy, it will be a tremendous jolt to our economic well-being and to our heath - greater than anyone could ever imagine."



When asked if there is a solution, Simmons responded:



"I don’t think there is one. The solution is to pray. Under the best of circumstances, if all prayers are answered, there will be no crisis for maybe two years. After that it’s a certainty."



Simmons' message has remained consistent. At a May 2004 conference on Peak Oil, he predicted oil will be priced at $182 per barrel in the near future - over five times its current price. Keep in mind, this is Simmons' prediction for oil prices in the near future. It's anybody's guess how high they will be in 10 or 15 years.



To put Simmons' predictions in perspective, consider the fact Osama Bin Laden feels $200 is a "fair price" for a barrel of oil.



If politics makes strange bed-fellows, Peak Oil is making downright bizarre ones.



The likely effects of such radically high oil prices are hard to over-dramatize.

When controlled for inflation, oil prices have never exceeded the $80 per barrel mark, which they broke during the 1979 oil crisis. The result was a worldwide recession second only to the Great Depression in severity.



If $80 oil can slam the economy into a severe recession, one can only imagine the damage $200+ oil is going to inflict.



Simmons isn't the only reputable source sounding the alarm. According to Secretary of Energy Spencer Abraham:



"America faces a major energy supply crisis over the next two decades. The failure to meet this challenge will threaten our nation's economic prosperity, compromise our national security, and literally alter the way we lead our lives."



The statements of Vice President Dick Cheney have been equally alarming. In late 1999, Cheney stated:



“By some estimates, there will be an average of two percent annual growth in global oil demand over the years ahead, along with, conservatively, a three-percent natural decline in production from existing reserves.”



Cheney ended on a disturbing note, “That means by 2010 we will need on the order of an additional 50 million barrels a day.”



This is equivalent to six times the amount of oil produced per day by Saudi Arabia, the world's leading oil producer.



A report commissioned by Cheney and released in 2001 was no less rosy:



“The most significant difference between now and a decade ago is the extraordinarily rapid erosion of spare capacities at critical segments of energy chains. Today, shortfalls appear to be endemic. Among the most extraordinary of these losses of spare capacity is in the oil arena.”






It's not just members of the Bush Administration who are extraordinarily concerned about Peak Oil. Avowed leftist and democratic demigod Michael Moore believes it to be a life and death issue for the entire industrialized world. In his most recent book, Dude, Where's My Country?, Moore dedicates an entire chapter, "Oil's Well That Ends Well" to the unprecedented suffering the industrialized world will soon endure if people don't wake up to the reality of Peak Oil.



On a similar note, in a recent issue of the Financial Times, former UK environmental minister Michael Meacher stated, “It's hard to envisage the effects of a radically reduced oil supply on a modern economy or society. The implications are mind-blowing.”



Even the Saudis have acknowledged the scope of the coming crisis. Publicly, they make dubious assertions the kingdom can meet the world's oil needs for decades to come. Privately, they sing a different tune. They have a saying that goes, "My father rode a camel. I drive a car. My son flies a jet-airplane. His son will ride a camel."



Anytime three members of the Bush administration and the Saudis are in complete agreement with Michael Moore and a high ranking environmentalist, it's safe to say the sh_t has hit the fan.

So is this going to be worse than the 1970's?

Yes, far worse. The oil shock of 1979, for instance, occurred when Iran cut its oil production by 1 million barrels per day, creating a shortfall in the world's oil supply of less than five percent. As explained above, this was enough to send the world economy into a severe recession.



Luckily, at the time, there were other swing producers such as Venezuela who stepped in to alleviate the crisis. Once world production peaks, however, there won't be any swing producers to turn to. The crisis will not be alleviated. It will just get worse with each passing year.



Furthermore, the coming shortfall in oil supply will eclipse the shortfalls seen during the politically-created oil shocks of the 1970's.



Once we pass the peak, oil production will decline (conservatively) by 1.5-3% per year. Oil demand, however, will continue to increase by 1.5-3% per year as the world's population continues to grow and industrialize.



This means that one year post-peak, we will experience a 3-6% shortfall in oil supply. This will plunge the economy into a 1979-style recession.



Unfortunately, the shortfall in oil supply will only grow, and the damage to the economy will only worsen. Ten years post peak, that shortfall will have increased to a staggering 30-60%. Fifteen years post-peak, that shortfall will have increased to a market shattering 45-90%.
Not really. The ability of renewable energy to replace oil is based more in myth and fantasy than science and reality.



Oil has had an Energy Profit Ratio as high as 100 to 1. This means it takes one unit of energy to produce 100 units. None of the alternatives have EPR's that even approach that of oil. Some of the alternatives, such as Hydrogen are energy losers, while others, such as biodiesel, barely break even.



The problem with these alternatives is not one of technical feasibility. They do work. The problem is they do not work anywhere near as well as oil. Even in the best of circumstances, they cannot produce anywhere near enough net energy to fuel even a fraction of our current oil-powered economy.



Furthermore, almost every advocate of alternative energy fails to realize two absolutely key points:



1. It takes a tremendous amount of oil to build alternatives to oil such as solar panels, windmills, and nuclear power plants. The construction of an average solar panel system, for instance, consumes about as much energy as the construction of a brand new SUV.



2. It would take even more oil to retrofit our multi-trillion dollar, fossil fuel based infrastructure to run on these alternative sources of energy.


This ramifications of Peak Oil have led many commentators to refer to it as "Economic Hiroshima." As a recent L.A. Times article entitled, "$7.00 Per Gallon Gas" explained:
We won't "run out of oil"; a vast amount will still be flowing - just not quickly enough to satisfy demand. And as any economists can tell you, when supply falls behind demand, bad things happen.



During the 1979 Iranian revolution, the last time oil production fell off significantly, world oil prices hit the modern equivalent of $80 a barrel. And that, keep in mind, was a temporary decline. If world oil production were to truly peak and begin a permanent decline, the effect would be staggering: Prices would not come back down. Any part of the global economy dependent on cheap energy - which is to say, pretty much everything these days - would be changed forever.



And that's the good news.



The term "peak" tends to suggest a nice, neat curve. But in the real world, the landing will not be soft. As we hit the peak, soaring prices -$70, $80, even $100 a barrel - will encourage oil companies and oil states to scour the planet for oil. For a time, they will succeed, finding enough crude to keep production flat, thus stretching out the peak into a kind of plateau and perhaps temporarily easing fears. But in reality, this manic, post-peak production will deplete remaining reserves all the more quickly, thus ensuring that the eventual decline is far steeper and more sudden. As one US government geologist put it to me recently, "the edge of a plateau looks like a cliff."



As production falls off this cliff, prices won't simply increase; they will fly. If our oil dependence hasn't lessened drastically by then, the global economy is likely to slip into a recession so severe that the Great Depression will look like a dress rehearsal. Oil will cease to be viable as a fuel. Political reaction will be desperate. Competition for remaining oil supplies would intensify, potentially leading to a new kind of political conflict: energy wars.
 

jaseywasey

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There are alternatives, right?


Not really. The ability of renewable energy to replace oil is based more in myth and fantasy than science and reality.



Oil has had an Energy Profit Ratio as high as 100 to 1. This means it takes one unit of energy to produce 100 units. None of the alternatives have EPR's that even approach that of oil. Some of the alternatives, such as Hydrogen are energy losers, while others, such as biodiesel, barely break even.



The problem with these alternatives is not one of technical feasibility. They do work. The problem is they do not work anywhere near as well as oil. Even in the best of circumstances, they cannot produce anywhere near enough net energy to fuel even a fraction of our current oil-powered economy.



Furthermore, almost every advocate of alternative energy fails to realize two absolutely key points:



1. It takes a tremendous amount of oil to build alternatives to oil such as solar panels, windmills, and nuclear power plants. The construction of an average solar panel system, for instance, consumes about as much energy as the construction of a brand new SUV.



2. It would take even more oil to retrofit our multi-trillion dollar, fossil fuel based infrastructure to run on these alternative sources of energy.

The harsh truth is there are no true alternatives to oil. The so called alternatives are, in fact, simply derivatives of oil. The power of the sun, the wind, and the atom cannot be harnessed without tremendous and continuous investments in fossil fuels.



What makes the situation even worse is the fact our market economy won't begin to aggressively pursue these (modest) alternatives until it is too late.

Reason: the amount of energy contained in a barrel of oil would cost about $200 to get from renewable sources. Thus, energy companies won't begin heavily investing in renewable energy until oil prices breach the $200 per barrel mark.



At that point, however, it will be too late - we will be in the midst of economic anarchy. Under such conditions, it will be impossible to implement large-scale renewable energy programs, as these programs all require significant amounts of cheap oil, which will no longer be available.



Without an abundant supply of cheap oil, we will have no way to power a transition to something other than oil.



Thus, once we pass the oil production peak, a return to a medieval style of existence will become inevitable.

Can't we Invent Our Way Out Of This?

Unfortunately, it is not that simple. We have a multi-trillion dollar infrastructure powered almost exclusively by fossil-fuels. Cars, trucks, roads, boats, docks, airplanes, airports, hospitals, schools, farms, manufacturing plants, food processing centers, water treatment plants - all run on fossil fuels. All plastics, pesticides, and fertilizers are derived from fossil fuels.



You can't just retrofit the entire economy, or even significant parts of it, to run on an entirely different source of fuel.



Furthermore, the emergence of a truly viable alternative to oil would be an absolute nightmare for the US economy.



The US dollar is the reserve currency for all oil transactions in the world - hence the term "petrodollar." This means that whenever oil is bought and sold - anywhere in the world, by anyone - the money exchanged circulates into the US economy. The strength of the US economy is directly tied to the strength of the petrodollar.



If a truly viable alternative to oil was to emerge, and the nations of the world began to use it, the petrodollar would collapse.



This would drive the US economy straight into a brick wall.
 

jaseywasey

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Can't we just comserve energy?

Not without instituting a complete financial meltdown. The reason is simple:we have an economy mired in debt: corporate debt, government debt, and consumer debt are all at record levels. In order to finance debt, you need economic growth. Economic growth requires a constantly increasing consumption of consumer goods - most of which are made from plastic, which comes from petroleum (oil) and are delivered by trucks, which consume diesel fuel (oil).



A truly successful conservation program would require us to drastically cut our consumption of consumer goods, which would halt economic growth dead in its tracks. This would cause indebted corporations, governments, and individuals to all slide towards bankruptcy. Banks would call in outstanding debts, businesses would close, government services would cease, and people would lose their jobs. The Great Depression would begin to look like the "good old days."


The Government has a plan to deal with this, right?


Yes. We can't invent or conserve our way out of this. As far as the US government is concerned, this leaves us with one option: fight and die for every last drop.



A report commissioned by Dick Cheney and released in April 2001 outlined the US plan to deal with the coming oil shortages.



The report explained that the "central dilemma" for the US administration is that "the American people continue to demand plentiful and cheap energy without sacrifice or inconvenience." It warned that the US is running out of oil, with a painful end to cheap fuel already in sight.



It argued that "the United States remains a prisoner of its energy dilemma," and that one of the "consequences" of this is a "need for military intervention" to secure its oil supply.



The level of military intervention necessary to secure the quantity of oil we need will require a large-scale reinstitution of the military draft.



To this end, the Pentagon has already posted a notice on its website asking for "men and women in the community who might be willing to serve as members of a local draft board." A process the military calls "Draft-Creep" is already underway. Several proposals to reinstate the draft are currently circulating in Congress. In addition, the Director of the Selective Service has proposed the draft be expanded to include all men and women ages18-34.



The fact that a large-scale military draft is planned for the Fall of 2005 has now been confirmed by the ultra-conservative website NewsMax.com.



Unfortunately, electing John Kerry won't stop the draft. He has all but promised to reinstate the draft if elected president.


What will things be like on the home front?

Without an abundant supply of cheap energy, transportation and food delivery systems will break down. Electrical grids will collapse. Unemployment levels will skyrocket. Consumer goods will only be available to the super-rich. Food and water will become desperately sought after commodities. Riots and urban uprisings will become common.



Ultimately, the government may have no choice but to implement some of the more draconian provisions of the Patriot Act and related legislation in hopes of maintaining order.


This is a worse case sceanario, right? There's a more optimistic outlook, isn't there?

Unfortunately, what you're reading is the optimistic outlook. As Matt Simmons has explained repeatedly to anyone who would listen: the situation is even worse than the most pessimistic of the pessimists thought it would be. In a recent interview, Simmons stated:



"The optimists turned out to be wrong. The jury has rendered the verdict. The optimists have lost. Much field data now proves their total thesis was wrong. The pessimists unfortunately, and ironically, might also be wrong. But most assume that this day of reckoning is still years away. They too might also be too optimistic. My analysis is leaning me more by the month, the worry that peaking is at hand; not years away."



As Simmons and numerous other experts with impeccable credentials are trying to tell you, Peak Oil is here and the ramifications are about to hit you, your family, and your future very hard.


http://www.lifeaftertheoilcrash.net/Introduction.html
 

lopaka

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FWIW, and I'm not really advocating a merge, the article jaseywasey posted was also the genesis of the thread Peak Oil and Its Consequences started by Breakfast.
 

Mighty_Emperor

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Hmmmmmmmm good point both threads touch on similar territory and I suspect it might be a good idea to merge them. Thoughts?

Emps
 
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