Greasing the skids

Russia, Iran and the fall of the petrodollar

© Bryan Zepp Jamieson
5/23/06
http://www.zeppscommentaries.com/Politics/petrodollar.htm

“If one day the world's largest oil producers demanded euros for their barrels, it would be the financial equivalent of a nuclear strike” – Bill O' Grady, A.G. Edwards

Ever wonder why Putsch attacked, invaded and occupied Iraq? You know it wasn’t WMDs, or to fight terrorism, or any of that bullshit. Putsch himself knew it was bullshit and that he was lying the American people into war.

So why DID he do it?

The answer is actually self-evident and fairly well-known in political circles. Saddam, a man whose judgement is questionable, decided to set up an oil bourse. Now, a bourse is a bourse, of course, of course, which means that it’s a stock market. Saddam wanted to have a commodities and futures market for Iraqi oil that would trade oil in Euros.

As the Bill O’Grady quote that prefaces this essay indicates, this was considered a serious threat to the American economy. The dollar is the central currency in world trade, indicating the power and might of the American economy. And the biggest single commodity in world trade is oil. It is America’s favored position in the world oil markets that her currency is the one used. Not only does it add to the strength of the dollar (or, in latter times, prop it up), but it extends America’s credit to incredible lengths, allowing it to be the biggest debtor nation in the history of the world.

Losing that status could bury the American economy. The US would no longer enjoy unlimited credit, and the value of the dollar would collapse. Foreign markets (and nearly one in three debt dollars are in Asia, mostly China) would be able to unload them fast enough. The dollar could lose 60% of its value in the space of a few weeks (and virtually unnoticed by the general public, the dollar has lost nearly a quarter of its value in the past year), and the US would suddenly discover that a consumer economy that depends on cheap imports to consume no longer has an economy when the price of those imports soars.

It’s even possible where the stock market in the US could lose 40% of its value in the space of a year, but with the dollar worth only 40 2006 cents, the Dow would actually have a higher number then it did before the crash began, since its value is assessed in dollars. That should cheer Karl Rove up. But it isn’t good news for any of the rest of us.

Either Clinton or Putsch could have avoided this by dropping the Sanctions and playing ball with Saddam. Yes, he’s a disgusting, murderous dirtbag, but then, most of America’s oil buddies are anyway. You really think the House of Saud is any improvement over Saddam’s sons?

America’s capitalist system did a wonderful job of selling itself the rope with which Saddam proposed to hang it. When you get right down to it, our captains of industry are about as intelligent and as sensible as any flock of chickens.

So Putsch reacted to Saddam’s threat by stomping him flat, killing a hundred thousand people and wasting trillions of dollars. Sensing that the “solution” was a temporary patch, he kept his focus on his main job, which was to gut the American national treasury while there was still anything worth stealing in it. Didn’t you ever wonder why, in the midst of war, he kept cutting taxes for the rich?

That left the problem of Iran. Far bigger than Iraq, with a popular government that was moving toward friendlier relations with the west, Putsch and his oil buddies could have played ball with them, offering them a chunk of the Iraq carcass and giving them management over some of Iraq’s war. It would have made America an ally and a crucial link to Russia.

But the flock of chickens mentality that guides American capitalists took over, and it was decided that the best thing to do with Iran was threaten them, both directly, and indirectly through the occupation of neighboring Iraq.

Not surprisingly, the Iranians promptly elected a hardline regime that promised to stand up to America and uphold the will of Allah while it was at it. If this sounds familiar, it’s only because Ahmadinejad’s regime is a mirror image of the one in Washington – crafty and vicious, but essentially weak and brittle, using religion and patriotism to prop itself up. It’s no wonder they don’t like one another very much, or why the things each says about the other sound almost identical.

But Ahmadinejad is smarter than Putsch, and more flexible. He has developed relationships with both China and Russia, both of whom moved to block Washington’s efforts to get UN permission to bomb Iran. And Putin made it clear that Russia would react to any kind of a strike on Iran, going so far as to say that a launch of missiles at Iran, even if not nuclear, could result in a nuclear volley being fired back from Russia. Most unfortunate, oh the embarrassment. Don’t make us make a silly mistake like that, Putsch. Cheney went over there, presumably to threaten Putin, and clearly came back empty handed. In fact, he may have just hung the United States out to dry.

The propaganda that led to support in Congress for the attack on Iraq isn’t working this time. Democrats wouldn’t support it anyway, and Republicans, appalled at the mounting hatred of their party that is showing up in the American public, are backing away from Putsch. And the smarter ones realize that an attack on Iran would inflict far deeper damage to America than the Iraq invasion – already the greatest military embarrassment in American history – has.

In the wake of the Cheney visit, Russia announced it is setting up an oil bourse of its own. June 8th. In a way it might help the US, since Putin wants oil traded in rubles, which might weaken the general move to trade oil in Euros. You might find a twenty dollar gold coin on the sidewalk tomorrow, too. It’s far more likely that Russia, with more oil than anyone else in the world except maybe Canada, will STILL find the world preferring Euros. They could battle it out while America lies unconscious in the middle of the ring, the referee in a WWF match.

South American oil companies are also moving toward oil trade in Euros, lead by Venezuela’s Hugo Chavez, another leader America would have been better off leaving alone.

At this point, the oil war has almost certainly been lost. Which means that America is about to suffer the greatest economic setback in its history.

Iran is opening their oil bourse next month, and there isn’t anything America can do about it.

The dollar is going to take huge hits in value, dropping as much as 60%. Imports are going to go much higher in price, and inflation will set in, particularly in gasoline.

It won’t just be a recession. It will be a full-blown depression, perhaps as bad as the one in 1929-1934.

And it begins next month.