Re: Dollar Got Bush Wacked :D
There has been an effort to establish dollar hegemony since WW2. Why is the currency hegemony so lucerative? Because it allows a government to print a lot more money, export its inflation, demoninate its foreign debt in its own currency and pay interest thereon by printing even more money, and keep cost of living low by printing money to import real goods and services.
Vietnam war drained the US and depleted its gold reserves as foreign central banks kept trading in dollars for gold -- dollar was then tied to gold -- causing Nixon to break off dollars tie to gold, which would have caused dollar to nearly collapse -- I say nearly because the US still had its manufacturing base then -- except for a scheme that would peg dollar to oil in 1972-3. Energy is so vital that as long as energy is traded in dollars, so would all else.
Thence came a concept of floating currencies that floated around the de facto currency of almighty dollar. Since dollar, not gold, became the standard, the countries began stockpiling dollars to back up their own currencies and foreign trade, allowing the US to print money, which went primarily towrds foreign affair adventures like defeating socialism.
Now, the worlds largest net energy exporters, Russia, Iran and Venezuela are out to change the dollars tie to oil. China will wait until it has sucked the US dry before dumping its foreign exchange reserve dollars. US trade sanctions are really to slow down this enormous accumulation of foreign exchange reserve dollars by any one country, because if this one country decides to dump dollars, other nations will have to follow suit. After all, no one wants to be left with worthless paper.
By the end of 2006, 67.7 percent of all foreign exchange reserves were in dollars and 25.2 percent in euros. The scary thing is that competition from euro has just now begun. Then what accounts for 36 percent drop in the value of dollar since 2002? Its due to the fact that the US government has printed so many dollars that even dollar hegemony scheme has become too saturated to support its excesses.
Since 1981, the focus of Reagan and his cold warriors -- now they are called neo-cons or zio-cons, has been to see the USSR fail, probably beacuse it supported Arabs against Israel. If they could defeat the Soviets, entire world would become their playground. So they put all their eggs in one basket and went after the Soviets. To completely focus on this, they said, lets give the American people what they want so they dont interfere with our adventures: Low federal income taxes and easy credit. This has led to the federal debt of 9.114 trillion dollars and total government, business and private debtat an estimated 48 trillion dollars -- compare it to the national wealth of the US -- market value of everything in the US -- which is estimated at 33 trillion dollars. The country is literally bankrupt.
Now, the Russia is back. China and Iran have become considerably stronger. Brazil is growing closer to China. Without oil, all the US has left is 160 billion in gold and 63 billion in foreign exchange reserve dollars to back up its currency. I am not sure how many dollars are in circulation within the US, but global foreign exchange reserve dollars add to about 6.5 trillion dollars. All those dollars backed by 160 billion in gold and 63 billion in foreign exchange reserves. Laughs? Now, they dont know what to do, except blame it all on the American democracy, rather than their priorities and misadventures.
Peak oil alone does not explain oil prices as high as 100 dollars a barrel over such a short period of time. I think that high oil prices are to keep the dollar afloat. More the price of oil, more the dollars needed to buy this oil. Here is just another temporary scheme that, although enriching oil companies, is draining the US economy and strengthening the largest oil exporters, most of whom are against them.