Recent moves by Fed and OPEC point to American decline

Much has been made of the Peak Oil crisis and the potential shift of world oil currency from USD to EURO or, potentially, another currency. But Randall Bornemann raises other intriguing issues such as China’s massive holdings of US debt and the Fed’s move to increase liquidity of the national money supply… [
By Randall Bornemann
Republished from Center for Research on Globalization
Recent moves by Fed and OPEC point to American decline
[Editorial Note: Randall Bornemann, while presenting a short summary of some very complex economic and geopolitical processes, provides the reader with a set of footnotes, which support his summary statements. He also provides useful bibliographical references.]

“In the long run, we are all dead.”
John Maynard Keynes, architect of the Bretton Woods economic system

The world economy is on the brink of complete disintegration on a scale not seen since prewar Germany, and World War Three could be the result. (1)

The dollar continues to be devalued, as the Federal Reserve Bank keeps rates low, inflating the money supply to never-before-dreamed-of levels. This, in turn, drives prices up, even as wages are falling due to the exportation of jobs overseas and the importation of cheap (often illegal) immigrant labor.

OIL

This summer, we have seen the price of gas rise to all time highs.

The mainstream press blames this on factors such as the “War” in Iraq, the terrorism in Saudi Arabia, and supposed oil shortages. But is this really the case?

Actually, the price of oil is cheap in terms of the dollar of the 1980’s and 1990’s. In fact, in the same time period during which the price of oil has gone up in terms of the dollar, it has remained stable in terms of the EURO. (2) This has prompted speculation that OPEC will change from denominating all sales of oil in the dollar to other, more attractive currencies, like the EURO, which would be disastrous for the US economy and the dollar as world reserve currency. (3)

The US is currently attempting to get OPEC and other oil producing nations to maintain a stable price for oil, even as the value of the dollar plummets.(4) This amounts to asking other countries to accept our losses FOR us, as we continue to print more and more billions of dollars out of NOTHING to give them in exchange for their oil.

Venezuela, from whom we get about 15% of our oil (and whose government we have been attempting to topple for years) is against this (5), but OPEC has agreed to ‘increase output’ in an effort to drive down the price. (6)

WAR

The US already has a shortage of troops to deploy to Iraq, (7) but war in other areas of the world looms as well, especially as the economic situation deteriorates. Terrorist attacks in Saudi Arabia make that key oil producing region less stable.(8) Calls for an ouster of Hugo Chavez (which are covertly supported by the US ) (9) in Venezuela increase uncertainty there.(10) Chavez has threatened to cut oil exports to the US, sending precious supplies to China instead. (11) The US already has troops deployed in the region, assigned to President Bush’s PLAN COLOMBIA, which purportedly aim to fight narco- trafficking. (12) Then there is China.

China holds an unimaginably large portion of US debt.(13) Without China’s continued support for the dollar, the US currency would have devalued to the point of worthlessness long ago. However, China has recently stated publicly that they are planning to diversify their holdings out of exclusively dollar- denominated assets. (14) The dollar is just not a good investment anymore. (15)

These are the three major areas where the US could be forced to deploy militarily. We are already committed to Iraq due in large part to Saddam’s profitable decision to sell oil in EUROs instead of dollars. (16)

Where will we end up next? And where will we get the troops?

The only difference between the current geopolitical position of the US and the geopolitical position of Britain 100 years ago is that the US currently has unquestioned military dominance.

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REFERENCES:

1: Safehaven
Let me just say from the outset that the Federal Reserve has confirmed our Stock Market Crash forecast by raising the Money Supply (M-3) by crisis proportions, up another 46.8 billion this past week. What awful calamity do they see? Something is up. This is unprecedented, unheard- of pre-catastrophe M-3 expansion. M-3 is up an amount that we’ve never seen before without a crisis – $155 billion over the past 4 weeks, a $2.0 trillion annualized pace, a 22.2 percent annualized rate of growth!!! There must be a crisis of historic proportions coming, and the Federal Reserve Bank of the United States is making sure that there is enough liquidity in place to protect our nation’s fragile financial system. The amazing thing is, the Fed’s actions mean they know what is about to happen. They are aware of a terrible, horrific imminent event. What could it be? One can draw no other conclusion except that the Fed is acting irresponsibly in its managing the money supply, in fulfilling its duty to “maintain a stable currency.” I reject the notion that the Fed is acting irresponsibly. No, something is up, bigger than we have ever seen in the history of the United States.

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