You Say You Want a Revolution?

My new favourite member of the US Congress is Michele Bachmann. This chick is actually insane, no wait, she's batshit crazy (don't look in her eyes, three classic examples of the way her mind works). As my blog approaches it's first birthday, I have to admit that I'm experiencing the worst writer's block that I've ever experienced due to this whole financial crisis. There's just so much to say, so many things happening, so many conspiracies that I just can't decide what to focus on. I've started more posts in the past week than in the past couple of months; not one of them finished. Finally, something simple to write about, a crazy Republican Congresswoman! Maybe I'll also talk about Glenn Beck too. He's just as nuts. First, why the block?

Yes, the US Federal Reserve system was created by the richest men in the world to control the money supply. Too much to say. Sure, the three main causes of the current mess, lightweight regulation, cheap money and the promotion of home ownership all benefited the financial sector of the economy. So, read about it here. Yes, those folks in charge of cleaning up the mess are the same ones who created it and have profited from it. Don't believe me? Here, read. Maybe it's easy to disregard the rantings of Hugo Chavez about a oil-backed currency, but there's something important to read here. Perhaps quantitative easing isn't really just printing money. You can read about that here. Is hyperinflation next, like here? Should we all buy gold? Here. Or will the government outlaw it's ownership? Could be here. The Khaleeji might wind up being a dud. Again, here. Putin could be bluffing. Here anyone? However, by the time the Chinese dragon began blowing smoke, questioning the US dollar as the international reserve currency I was convinced that everyone holding US dollars should start running for cover, fast. Read here. Then came the G20 meeting which taught me there is something better better than paper dollars - paper gold, or Special Drawing Rights (SDRs).

Now, what is an SDR? As described on the IMF site, it is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. SDRs are allocated to member countries in proportion to their IMF quotas. The SDR also serves as the unit of account of the IMF and some other international organizations. Its value is based on a basket of key international currencies. Essentially they are a substitution account at the International Monetary Fund through which unwanted dollars can be converted; a synthetic currency whose value is determined as a weighted average of the dollar, euro, yen and pound. The SDR was created in 1969, during the Bretton Woods fixed exchange-rate system, because of concerns that there was insufficient liquidity to support global economic activity. It was originally intended as a reserve currency, but is now mainly used in the accounts for the IMF’s transactions with member countries. SDRs are allocated to IMF members on the basis of their contribution to the fund. Sounds like a reasonable way to allow for a soft landing instead of a stampede as countries drop their dollar reserves. Ask where their value comes from and you get the same answer as the US buck - nowhere but faith.

The hope is that member nation's will take this credit and use it as needed. Another hope is that with fewer strings attached, the stigma of going hat in hand to the IMF will be reduced; seems to be working, Mexico already signed up. Here's where Bachmann finally comes in. Along with folks like Glenn Beck, the right wing loons are trying to stir the pot to the point of fermenting a revolution. Don't believe me? Just look at the spike in FBI background checks for gun registration in the past few months. Take a listen here (Just try to bear with her propagandist rhetoric, constitution, ceding sovereignty... at least to the point where she says "Kazakastan" a country presumably somewhere over there next to Whatsitcalledastan). Her belief seems to rest on the fact that other nations shouldn't have the choice as to what reserve currency to hold. And of course, by creating any kind of supranational reserve currency, the US buck will be sullied by the likes of Zimbabwe. Maybe this would explain why the US would then have to stop using the dollar. Or listen to her with another "great American" Sean Hannity calling for revolution. This follows her call for Americans to be "armed and dangerous" over Obama's plan to fight climate change.

And Glen Beck. This guy makes me want to use words worse than batshit. What do I expect, he's on "Faux" News, but really, I have to ask once again if people like this deserve freedom of speech. He stated as many times as possible that he wanted to debunk a made up story of FEMA concentration camps that Obama is trying to set up before talking about them. Of course the camps will be used soon for mass imprisonment of American citizens with right-leaning political views. Because he can't disprove they exist, that means they do, sounds familiar. Even profiling modern militias is a bad thing as right wing nut cases would never want to harm Americans. Never mind about those three police officers gunned down in Pittsburgh this weekend, fear mongering is a good thing.

Ok, ok, I know, Bachman and Beck aren't so bad, especially when people like Sean Hannity exist. I won't even get into the Cheney gong show. Fact is however, Beck et al can maybe be excused a bit by the fact they are just looking for ratings, but Bachmann, she was actually elected by the voters of Minnesota to represent them. Somehow, if you don't support everything that represents only America, you are labelled bad (socialist, terrorist sympathizer, etc...) by these right wing nutters. I've pointed out before that there's nothing more dangerous than a wounded animal in reference to the Republican party, but what happens when that half of the country are convinced that everything they believe in is about to be taken away by the red menace? The past week has been a particularly violent one in American, seems to be a new shooting everyday - I'm almost afraid to think that the Oklahoma City bombing and Waco anniversaries are coming up April 19th. According to the F.B.I., there have been 1.2 million more requests for background checks of potential gun buyers from November to February than there were in the same four months last year. That’s 5.5 million requests altogether over that period; more than the number of people living in Bachmann’s Minnesota. Annie, get your gun.

The Race to the Bottom

"There's a rumor going around that states cannot go bankrupt. This rumor is not true."
- Angela Merkel speaking at a private bank event last month in Frankfurt

We've got a strong field, one where I feel anybody could - but nobody wants to - win it. Iceland almost showed everybody how it's done a few month back, now the other competitors seem to be jockeying for position to see which country will be next to go. While many fingers are being pointed at the US for causing much of the current financial pain, one need only look at the strength of the dollar to see that most investors at least are betting it won't be the US winning the race to national bankruptcy. Based on currency values, again the Euro nations must be in a good position, right? Not so fast, Italy and Ireland are both looking like prime candidates to cause the collapse of the grand experiment. Looking further east however, at those EU members who aren't yet part of the monetary union, we see a few more likely victims. The falling value of the zloty, forint, leu and koruna seem to be trumpeting the possibility that it will be Poland, Hungary, Romania or the Czech Republic to be first to the finishing line in a race nobody wants to win. The Baltic states are making a stronger case that it may be one of them. Even wackier, how's this for a dark horse - Austria.

While the US continues to look for new ways to throw money into a dark pit by giving away money to banks and car companies, the value of their dollar seems to be living in an alternate universe as it climbs against most of the world. Arguments for this occurring centre around the fact that in times of crisis investors move their capital to traditional 'safe' bets; here the dollar reigns supreme. But what about that ballooning debt? Well, not to worry, the government is sinking trillions of dollars into the banking industries et al to ensure a growing economy, so the numbers will come down eventually, right? Wrong. Without discussing the complete waste of money that are the bailout and stimulus packages, (ie. throwing good money after bad, not investing in the future - school and green technology anyone?) even if there hadn't been an economic meltdown, the US economy was already well on the road to disaster. Simple math, income statement stuff - aging population with the baby-boomers on the verge of retirement (that's right 2009 means those born in 1946 turn 63!) equals lowered income from taxes plus higher medical and social security expenses spelling disaster. Even the days of dollar hegemony in world trade (read: oil), bond auctions and other nations foreign reserves seem numbered. From Kish in Iran to Beijing's planned experiment to make the yuan the new dollar in the east, their are ominous signs that the world has finally tired of financing the US debt. I've argued on more than one occasion that the dollar's days are numbered and there are others who do it better than I.

But I digress, if the US dollar is going up, there must be a lot worse currencies to be holding onto. Unfortunately, I find myself holding onto a lot of Polish zloty as I'm living here in Poland and I can attest to the fact that I'm a lot poorer today vis-a-vis the US and Western Europe than 6 months ago. The situation is similar in the other newer EU states. Faced with the double whammy of falling economic activity and even faster falling currencies, many of these nations are facing bankruptcy. Not only are the prices of imports going up, financing prices are skyrocketing for both individuals and governments. Consumers who were suckered by banks into taking low interest Swiss franc loans are now paying much higher payments and governments are being forced to pay higher rates to issue sovereign debt. Standard and Poor's seems to be dividing the Eastern European countries into 2 groups: the first includes The Czech Republic, Poland, and Slovakia who are likely to fare better in the current crisis because of their more resilient private demand and greater fiscal flexibility, while in the second group are the three Baltic countries, Bulgaria, Hungary and Romania, all of which are highly vulnerable. In fact, S&P downgraded Latvia's debt to junk status last week and threatened the same action for the other Baltic states following the fall of the the Latvian government.

While these countries don't have a printing press as powerful as the US Federal Reserve, they do have the EU to play white knight. However, even here there are big cracks appearing in the foundations. When word leaked that Germany was mulling some bailout options for their eastern neighbours this drew a sharp warning from the ECB as such a move would be against the EU treaty's “no bail-out” clause which prevents members of the eurozone from supporting other members that are facing rising public debt. Members of the euro currency club are feeling the pinch as well. Thanks to monetary union, you can no longer bet on individual nation's exchange rates. But thanks to credit default swaps, you can place convenient bets on the break-up of the eurozone. Last week, speculators bet on an Irish default, these bets make it more expensive for Ireland to refinance its debt, thus threatening to turn into a self-fulfilling prophecy. The cost of insuring Irish debt hit 350 basis points 2 weeks ago, meaning that for every £100 of debt it would cost £3.50 to insure against default; a year ago it would have cost 10p. Ireland isn't alone in the Union with messy finances, Italy, Greece, Spain and Portugal don't look much better as spreads on government bond issues are soaring as credit ratings are lowered. Italy's public debt is the third largest in the world, 104% of GDP, what the Economist calls the 'ogre in the attic'. Welfare minister Maurizio Sacconi said back in December, "There is something worse than recession, and that’s state bankruptcy: an improbable, but nevertheless possible, hypothesis." Meanwhile, the crisis in the east could reinforce the problems in the west as their banks hold $1.74 trillion in former Soviet-bloc nations' debt. Austrian banks are the most exposed, with eastern European loans totalling 75 per cent of gross domestic product. Over half of Austrian bank Raffeisen's debt portfolio is based in the east.

The world is facing an economic crisis of unknown proportions and thus far the financial gurus have been trying to put a band-aid on the flow of red ink by administering the same cure that got us into this problem, issuing more debt. I haven't even considered the problems facing nations outside the US and EU; the Ukraine looks even worse, Ecuador and the Seychelles have already defaulted. The question is who's going to suck up all the new debt? With the US looking to secure $2 trillion and other developed nations about a $1 trillion in new debt, the problem becomes who is there left to finance it? Hillary Clinton went to China to beg them to keep buying treasuries while others are looking to the IMF and World Bank. Eurozone countries are getting into a bad habit of failing to meet bond auction targets. The IMF has already extended over $50 billion in emergency credit to Hungary, Ukraine, Iceland, Pakistan and Hungary. With other nations lining up they are desperately trying to raise more funds, world leaders are calling for a doubling in IMF resources to $500 billion. According to ING Wholesale Banking, emerging-market governments and corporations need to repay some $6.8 trillion of debt this year. In an effort to stop the free fall of Eastern European currencies the central banks issued joint statements to the effect of 'hey, the market doesn't reflect economic fundamentals, besides, we'll join the Eurozone soon'! Sometimes you have to know when you can't help everyone, a tipping point can be reached where the attempt to save one more costs the lives of everyone. That's why lifeboats have a maximum capacity posted - though I'd imagine it would have to be one helluva tough bastard who'd be able to watch someone drown while the rest watched in silence. There can no longer be any doubt that the world is faced with the prospect of financial Armageddon and it's time to decide who to let on to the escape pods. I know, I know, it's human nature to save a drowning person, but trying to save everyone is financial suicide.

The wheels on the bus go...

'round and round, round and round. Just like the earth goes round the sun. This week the air felt clearer as if a weight had been lifted and the future once again bright. I was wondering what in the world many of us bloggers will write about now that our favourite target has retired to his ranch in Texas, when the light shone down and gave me a sign:

THERE'S PROBABLY NO GOD
NOW STOP WORRYING AND ENJOY YOUR LIFE


What started as a little British story more than half a year ago, then spread to the continent has made the jump across the pond. That's right, it's the atheist bus campaign. In a two pronged attack the British movement is taking hold alongside an American incarnation. The nation that has spent so much energy trying to spread her beliefs across the globe finally seems to be willing to take some lessons from the rest of the world.

Could it be that the land of free and the home of the brave is once again ready to put science before the bible? While the first signs out of the new Obama administration are positive, there's still many reasons to fear the fundamentalists (I mean the scary kind, the Christians). Watching the Obama inauguration, not only did we have to listen to Rick Warren's invocation, one had to hear the g word uttered far too many times for comfort. However, there was a tiny crack in the religious armor that appeared with Obama's words: "For we know that our patchwork heritage is a strength, not a weakness. We are a nation of Christians and Muslims, Jews and Hindus — and non-believers." That's right, even non-believers are citizens!

Two things flew in under the radar last week. One, the Texas Board of Education tentatively adopted new teaching standards that would make it more difficult to teach creationism in Lone Star state schools in an 8 to 7 vote. Even more importantly, President Obama lifted the ban on US funding for international organisations that offer advice or perform abortions, hoping to ease the suffering of millions of women worldwide. In a move that is sure to piss off a boatload of fundamentalists, he quietly rescinded what had become known as the "global gag order"- not the comedy kind of gag, the one where if you so much as think the word abortion, you lose your funding from the US government. Reagan created it, Clinton repealed it, Bush re-instated it and now Obama has continued the ping-pong rally between knowledge and faith. In fact, much like a mirror-image of Obama, Dubya re-instated the law in his first working day as president. After a campaign in which he said, "If we're an arrogant nation, they'll resent us...If we're a humble nation but strong, they'll welcome us. We've got to be humble and yet project strength in a way that promotes freedom." Then upon taking office, his first executive order imposed his way of thinking, the morality of the Christian Right, on the world. Of course, these were more innocent times, before the US was at war and there were more important things to worry about: (Get to about 1:20)

The Daily Show With Jon StewartM - Th 11p / 10c

I on News - First Family Privacy

Barack Obama Interview
John McCain Interview

Sarah Palin Video
Funny Election Video

Yes, before 9/11 my friends, check out the date, June 14, 2001, ahh, those we're the days. One of the new president's biggest challenges is going to be overturning the ignorance that the Bush administration propagated and return his nation to the path of science.

Unlike the signing of the order to close Gitmo, this repeal was low-key. This follows the inauguration ceremony which featured a religious tightrope act by Obama involving the above mentioned Warren and the liberal appeasing invitation to Gene Robinson, the openly homosexual Episcopalian bishop. Someone from outside of America wouldn't understand the controversy surrounding the words "so help me G(g)od". The same could be said of the controversies around the Reverends Jeremiah Wright, Rod Parsley and John Hagee stories, strange doings in a strange land. Of course keeping people stupid has its advantages, especially for the big corporations, particularly big oil. A little learning might make us question why a nation would want to continue feeding a habit that directly supports and created the people who wants to destroy them. The only reason to deny that climate change is possibly created by mankind's actions and thereby avoid doing anything about it is the religious answer. Only God has the power to change the world, little ol' us couldn't possibly do any harm. They miss the point. Whether or not climate change is a dire threat, the solutions to it is primarily an energy problem. Reducing pollution is an energy problem, concerns about the global oil supply is an energy problem, reducing dependence on foreign oil is an energy problem, reducing the trade deficit is an energy problem, improving national security is, you guessed it, an energy problem.

Maybe we should capitalize the word Science. The window of opportunity is closing for America to change its ways, to become energy independent through smart investment in Science. Even one of the American dollar oil fed creation of Abu Dhabi is creating a zero-carbon city, heck it won't even have any cars, as the emirate can foresee a time when alternative energy is king. Yet, mention CO2 reduction as a good idea to a fundamentalist and the same old myths to protect their right to continue supporting the enemy in the 'war on terror' through the continued reliance on black gold spew forth. Maybe we should ask a Bulgarian if they think it's a good idea to continue to rely on Russian gas anymore. At a time when more effort needs to be focused on investing in education, specifically real Science, we shouldn't be wasting our energy arguing about whether or not intelligent design should be taught alongside evolution or if women should have access to all possible health information. It didn't seem to matter when it was far more important to get into business school and someday work on Wall Street, become a Master of the Universe by inventing a new financial derivative. The true Masters of the next century need to be the Science nerds who invent things we can use and once put a man on the moon. This time the work needs to be done closer to home, from the $1.6 trillion in needed infrastructure to the power grid to the means of producing that power. Time will tell if America can be guided off its course toward ignorance and hate, but reaffirming the division between church and state is a good place to start.

The Daily Show With Jon StewartM - Th 11p / 10c

Tyrannosaurus Redux

Barack Obama Interview
John McCain Interview

Sarah Palin Video
Funny Election Video

Blame Canada

Hey Canada! What's up? It used to be that the only complaints people had from up north focused on Celine Dion. Lately, I can't seem to look at the news without seeing a negative, disturbing or simply ridiculous story coming out of my homeland. Could it have been the federal election in 2006 bringing Stephen Harper and his Conservatives into power? Is it the unknown addictive substance that Tim Horton's must put in their coffee? Whatever the reason you can't deny that the stream of news flowing out of Canada of late has ranged from the bizarre to the tragic. Regardless of the cause for the shift, the world's view of Canada is undergoing a transformation from an idyllic, if frozen, land of peacekeepers and natural beauty to one more in line with it's neighbour to the south.

The easiest line of attack is the environmental angle. While much of the world thinks of green spaces, majestic mountains and lush forests, the truth is Canadian government has possibly done more harm to the environmental effort than the Bush administration. While it could be expected that the US in their greed and lust for profits wouldn't ratify the Kyoto Protocol, Canada could have been a shining example to the world. They were one of the first countries to sign the Kyoto Protocol. Since that time however, led by the Conservative party, both federally and provincially, they have taken the low road. In typical wild west fashion, the governments have turned a blind eye to the developing disaster of the Albertan oil sands. The ecological damage is mind-boggling, while the environmental disaster has forced the government to change the definitions of pollution emissions. Congratulations Canada, while only making up 1/2% of the world's population, you´re the world's eighth largest producer of carbon dioxide.

We could talk about immigration if you'd prefer, Canada is a land of immigrants, where the term multiculturalism was born. A land where many have dreamt of starting a new life. Well, hopefully you´re not a confused Polish immigrant landing at the Vancouver International Airport with those dreams. Yes, the world watched in horror as some of those fine young men in powerful uniforms, RCMP officers, tasered Robert Dziekanski to death. If you're looking to come to Canada to avoid fighting in an illegal war, don't bother either. Last month Canada expelled the first US army deserter to have arrived since the Iraq invasion, and now Jeremy Hinzman is set to join Robin Long. Both face court martial and five years in prison for refusing to serve in Iraq. It is estimated that there are about 200 deserters in Canada.

If you're looking for the low point, you need look no further than the current governments support of the US "war on terror". After the previous government's refusal to join "the coalition of the willing" in an illegal invasion of a sovereign nation, the biggest worry that most Canadians had was that relations with their southern neighbour would be soured. Fear not, the new Conservative government led by Stephen Harper has saved the day. Just ask Maher Arar, a Syrian born Canadian university graduate who tried to return his home in Canada from vacation in Tunisia on September 26, 2002 and wound up in a Syrian prison, a victim of the US' secret rendition program. There he was repeatedly tortured. His family had no idea of his whereabouts for days and he didn't see them for 376 days. If you have time, here's the link to the official Arar Commission report, basically Judge O'Connor blasts the RCMP for providing U.S. authorities with inaccurate intelligence that resulted in Mr. Arar, and his wife Monia Mazigh, being put on a border watch list as dangerous al-Qaeda terrorist suspects. That same report confirmed their complete innocence. Oh yeah, there are a few more cases just like this.

It gets worse, friends. Maybe you somehow missed the video of Omar Khadr that was released in July. We'd all like to think that if our government and country knew that I was being held without charges and tortured they would do something about it. Well, according the the footage, Omar told the Canadian interviewers what was happening to him and yet nothing was done. Being only 15 when he was seized by US forces after a firefight in Afghanistan in July of 2002, he was thrown into prison on a Caribbean island with no rights and no charges. The cold indifference of his Canadian interrogators about seven months later is truly shocking, if you haven't seen it, you should, here:

Prime Minister Harper said in July that he would not interfere in Mr Khadr's military tribunal, due to begin at Guantanamo on 8 October. “Mr. Khadr is accused of very serious things. There is a legal process in the United States … Frankly, we do not have a real alternative to that process to get to the truth about those accusations.” Even Khadr’s American military lawyer, Lt.-Cmdr. William Kuebler, found that “preposterous.” Harper, he said, should “stand up as the Prime Minister of Canada and protect the rights of a Canadian citizen, and stop taking his orders from the Bush administration and stop being the last leader of a Western country to support a failed process in Guantanamo Bay.”

Of course I shouldn't lose my head over all this, not much has changed, has it? I guess that's another point, Canadians seem to be losing theirs, literally. Whether sitting on a dreary bus journey across the prairies or in prison in Saudi Arabia, heads seem to be rolling. In case you missed it, 40-year-old Vince Weiguang Li was charged with second degree murder for decapitating a 22-year-old fellow passenger Tim McLean on July 30th. After pulling out a hunting knife and stabbing McLean as many as 40 or 50 times, witnesses said, Li displayed the victim's severed head to horrified passengers who had already fled the bus. What the? It's not even hockey season yet, so I've no idea what could have pissed him off so much. Meanwhile one Canadian as already been sentenced to death and another still awaits trial in Saudi Arabia, and the punishment is beheading. The 18 and 23-year-old brothers both face death by sword for their role in the death of a 19-year-old Syrian in a schoolyard incident last year.

Heads are rolling while feet are washing up on shore. The west coast has seen at least five unidentified solo feet wash up on its shore over the course of the past year. It's a mystery that has the police, media and locals scratching their heads. The fifth foot, and first left foot, was found on June 16th near Ladner, B.C. No leads have been found, but there are enough missing people and serial killers around if the past is any indication; from Clifford Olson (killed 11 children) to Paul Bernardo and his wife Karla Homolka who killed three teenage girls, including Homolka’s sister to the biggest monster of all Robert Pickton. Pickton is alleged to have killed and dismembered the bodies of his victims, possibly as many as 49, on his pig farm in Port Coquitlam, British Columbia. Don't forget the Canadian pedophile, that swirly face picture guy, who was convicted yesterday in Thailand to 39-months in prison.

Of course none of this really matters to the Canadian psyche. What's really important is that we haven't won any medals at the Olympics yet. You'll find more outrage on the internet about the medal drought being experienced by the Canadian team than any of the above stories. The Canadian news story of the year for 2007 was the rise of the Canadian dollar versus the US buck. Woohoo! Way to go Canada, your dollar did what every other currency in the world did, appreciate versus the US dollar. Wake up Canada, there's more to life than Tim Horton's.

When First We Practice To Deceive - Lies Part 2

Everything has to be paid for though in the end. Or does it? If there were only something that could keep investors interested in buying dollars... Of course it's oil, having replaced gold and completed the transition of the dollar, a fiat currency, into a quasi-backed currency. Of course you need people to trust that this will continue and that dollars will always be needed. Thus the boom and bust cycle of the past century, with the battle for oil at it's centre and war as it's engine.

Who controls the food supply controls the people; who controls the energy can control continents; who controls money can control the world - Henry Kissinger

Gallipoli was an early British loss in WWI trying to secure access to the oil fields of Baku (1/5 of the world supply at the time). I know that most textbooks claim that war was ignited by the assassination of Archduke Ferdinand, but in reality it was due to British fear of a German Berlin to Baghdad railway giving them land access to the oil of the region. Things haven't changed much for the past 100 years of the reign of oil as the lies leading up to the Iraq invasion have been exposed, the objective clear. Things aren't looking so good for the plan as the price per barrel of crude rockets to weekly new highs with talk of 'peak oil' which could cause a greater disaster than war; people getting out of their car...

The British may have deviously beat the rest to most of the Arabian peninsula after WWI, but it was America that grabbed the then unknown gem of the region, Saudi Arabia. The Brits, and by default much of the world they controlled, also put themselves immensely into debt with Wall Street to pay for the war. JP Morgan and the rest got rich on the spoils, with onerous demands on not only the vanquished Germans, helping ensure WWII, but the Brits too. While the British managed to maintain control over much of the Middle East until the next war could be fought, such conglomerates as Royal Dutch Shell and the Anglo-Persian Oil Company that became the Anglo-Iranian Oil Company and is now British Petroleum(BP) rose to power. Of course WWII had many causes, but not the least of which was the oil embargo imposed by the US on Japan, at the time it was reliant on the Americans for 80% of their oil. The end of the war brought us the Bretton Woods accords which sealed American hegemony for the next 30 years by linking the U$ to gold, and creating the IMF, World Bank and "managed" free trade through GATT. At the time the US held most of the world's gold reserves, so all was good with big business on Wall Street. The Marshall Plan to rebuild western Europe also gave a huge boost to the oil companies as it ensured growing demand for crude.

The American relationship with Saudi Arabia has proven crucial ever since the government of Ibn Saud was recognized by the US in 1931. Standard Oil began searching for oil in the 30's and by 1938, the Arabian American Oil Company, later to become Aramco, first struck the black gold in commercial quantities. The relationship has had a long and winding path, but both countries have played each other for their own interests; the Saudi's needing protection, and the American's needing cheap oil. Thanks to Bretton Woods, the dollar was as good as gold, and people bought it for almost 30 years. Predictably however, America printed more dollars than there was gold to back it, which worked until the French and a few others began demanding the US pay back gold for dollars it brought to the US Treasury. Of course they couldn't pay and on August 15th, 1971 Nixon ended the repayment of gold, in essence declaring insolvency. Needing to do something, the US along with money managers struck a deal with OPEC, of which Saudi Arabia was a founding member, to exclusively price oil in US dollars in return for American guarantees to protect the kingdoms of the Persian Gulf against the threat of invasion or domestic coup. At the same time, the price of oil was allowed to increase from about $3.50 to $39.50 so the oil producing nations could buy American debt. source - The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets (Cornell Studies in Political Economy)

Like kids in a candy store the US government had been on a spending spree, particularly under LBJ. Claiming that America could afford both guns and butter, he escalated the war in South-East Asia and launched the Great Society movement. By 1979, gold had skyrocketed to over $800/ounce and interest rates reached 21% to fight inflation. The only way to safeguard dollar hegemony is military threat, and the 80's brought us rapid growth in military spending under Reagan. The petrodollar-recycling system allows the Federal Reserve to effortlessly expand global credit to enforce US financial control and continue massive debt-financing to pay for US military control. If petrodollar-recycling begins to break down, then financial and military control will also begin to decline. When Saddam Hussein began demanding payment for oil in euros in 2000, the US had him removed. To pay for it, the US simply has to print more money, which can continue as long as people are willing to buy dollars, which is why the fashionable lie of the past few weeks is that the US is committed to a strong dollar and will fight inflation. As long as people buy it, the cycle will be allowed to continue, and, if McBush is elected in the fall, US troops can take out the next threat, Tehran. But will it stop there, the axis of oil includes Iran, Venezuela and Russia. Could Caracas be next, or how about Moscow? When great powers begin to decline, they almost invevitably resort to war and beligerency, thereby accelerating their demise. Source - The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000

Of course oil politics has had it's obvious fallout. The radical Islamic movement was born out of resentment of American influence in the Middle and Near East, while at the same time returning immense financial benefits to big business. However, these benefits have also given rise to a thirst for ever greater returns, greed. We are witnessing what can only be called a commodity shock as oil and other resources, most importantly the food we eat, are seeing prices rise out of control and the main culprit is price speculation. As the G8 meeting wrapped up in Osaka yesterday, news of an Italian plan for regulation of this market leaked out. Of course the US and British opposed it as this would be seen as putting constraints on the free market system, the main pillar that globalization is built on. Sounds like part III of lies will have to wait until the next post.

On Dollars and Dinars

50-Cent shoots a video featuring the Euro, the Canadian dollar trades for more than a U$ while oil zooms over $135/barrel. Since the Bretton Woods agreement over 60 years ago tying the value of the U$ to gold and all other currencies to the U$, the USA has been the unquestioned economic superpower. While the gold standard was abandoned, many nations have maintained some kind of peg to the value of the dollar and most of the world's commodities are priced in U$. It's becoming increasing clear however that this policy is adding to other nation's economic problems more that helping. Dollar flight has been underway for much of the decade, but the worst is yet to come.

Most of the world is still priced in dollars, from oil to rice, but the rising cost to other nations is threatening to end this system. From Russia to Kuwait, countries are cutting their ties to the greenback one by one. Why? Quite simply they've lost faith in it's value. Meanwhile the price of importing from other countries has risen, fueling inflationary pressure beyond “acceptable” levels. Russia abandoned it's effort to tie the ruble's movement to the dollar in 2005. The second largest exporter of oil also wants to sell it to Europe priced in euros. The Eurozone is the largest source of imports for OPEC nations, so a nation like Saudi Arabia pays more for, say, French oil equipment which is of course priced in ever more expensive euros. In gulf nations, where the economies are booming due to rising oil prices, they are also forced to cut interest rates in line with US central bank due to the dollar peg, further adding to inflation. I'm sure these countries see the vicious cycle of higher oil prices leading to higher US deficits leading to a weaker dollar leading to higher oil prices, so why do they keep the peg?

On May 21st, 2007 Kuwait cut it's peg to the US buck. One could almost feel the shiver going up the spine of the American economy that is so dependent on oil imports from the region. Remember Bush visiting the Middle East a few months ago to supposedly ask for more oil and to be seen as supporting the Israeli-Palestinian peace process. Well, he was politely refused the oil and the Israelis stepped up their military operations in the occupied territories and tightened it's blockade of Gaza just three days after Bush left Jerusalem. But what he did accomplish was an agreement to maintain the pricing of oil in US dollars, for now. Even with prices spiralling out of control, causing migrant worker riots in Dubai as inflation is at it's highest level in 19 years in the UAE and at 16 year highs in Saudi and Oman they are toeing the line. The question is how long will these countries be happy watching the value of their trillion dollar investment in US Treasuries and securities erode?

It's not hard to see why it's so important for the US to maintain the pricing system in dollars. Let's imagine for a moment a world where prices were in other currencies and currencies such as the Chinese yuan weren't tied to the dollar, something many would like to see change to address the trade deficit. Every day the US needs to borrow to keep running, to fight two losing wars, to buy more oil from the Middle East and buy more Chinese products. Much of this debt is financed by the Chinese and other foreign countries. So while the US is busy printing money and pushing the dollar down, they are driving the growth of China and the Middle East, helping push their currencies higher. This of course in turn makes it more expensive to borrow tomorrow as the comparative values of the foreign currencies and the dollar move in opposite directions. Now, the economic argument would normally be that currency valuations will eventually cause buying behaviour patterns to change, but America is addicted to both oil and Walmart, spelling doom for the economy.

In 1971 the Gold Standard was abandoned, leaving an economic system based on fiat money, where there is no commodity backing up the value of currency, only the faith that people have in its value. Shortly thereafter a deal was struck with the Saudi's to conduct oil transactions only in dollars, thus was born the petrodollar era. If oil suddenly stopped being traded exclusively in US bucks, the dollar would no longer serve as the international currency which would force the US to reduce its trade deficits by becoming an export nation again, something I don't see happening. The route they've chosen is to maintain the system with an iron fist. In September 2000, Saddam Hussein may have sealed his fate by announcing that Iraq was no longer going to conduct oil transactions in dollars. The often delayed Iranian Oil Bourse finally opened in February of this year (despite some cable problems) with petroleum trading for non-dollar currencies, hmmm, I wonder what will happen next?