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Thread: weekend commentary - maintaining 'dollar hegemony' by 'cornering' the Oil market ?

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    Default weekend commentary - maintaining 'dollar hegemony' by 'cornering' the Oil market ?

    an 'outside the box' and very politically incorrect theory on possible behind the scenes US economic strategy from a foreign source ...

    (snip)"Currently, the U.S. economy is held together by the slimmest of threads; literally duct-taped together by massaging all of the crucial economic numbers, pumping as much cheap fiat-currency into the system, and by increasingly-suspicious" maneuverings in the futures markets. After the elections, they’ll be no reason to conceal the rot at the heart of the system. After all, we are not facing an unforeseen catastrophe, but a planned demolition intended to increase the disparity between rich and poor to such an extent, that democracy, as we know it, will no longer be possible.

    Nothing is more repugnant to America’s ruling elite than the notion that every man, however broke and insignificant, can participate in our system of government.

    The Federal Reserve's bloody fingerprints are all over our present dilemma. The privately-owned Fed has never operated in the public interest. By doubling the money supply in the last 7 years and keeping interest rates artificially low, the Fed has generated a $10 trillion housing bubble while, at the same time, ignoring a $800 billion trade deficit which is sucking up American assets and crushing American industry at an unprecedented rate.

    This massive expansion of debt has increased the likelihood that an unexpected event, like a bank failure or a teetering hedge fund, will cause a major disruption in the markets sending tremors through the global system. Even if nothing explosive happens, the faltering real estate market will continue to swoon, consumer spending will dry up, and the fragile economy will crash to earth. In fact, this is taking place right now; retail sales are anemic, residential housing dropped a whopping 17% in the last 3 months, and economic growth shrunk to a measly 1.6% in the third quarter. The only thing keeping the economy from collapsing entirely is the sudden drop in oil prices which "conveniently" coincided with the midterm balloting.

    This won’t last. According to industry analyst Matthew Simmons the world production of oil may have already peaked setting the stage for a leveling-off period before the inevitable decline. Simmons has data to show that "world supply of oil has declined to 83.98 million barrels per day in the second quarter after hitting 84.35 million bpd in the forth quarter of 2005." Oil production is going backwards not forwards.

    No one believes the price of oil is going down any time soon. As energy prices rise and the housing market falls; consumer spending, which added $825 billion from home equity into last year’s economy, will continue shrivel. Thus, the Fed will have to make the tough-choice of whether to loosen the purse strings and lower interest rates to keep the economy sputtering along or ratchet up rates to attract more foreign investment. (Keep in mind that the real estate market is already in retreat, even though, the full force of the Fed’s interest rate increases won’t be felt for up to 6 to 12 months after they have been raised. The worst is yet to come)

    Most economists believe that Fed Chairman Bernancke will be forced to lower rates sometime in 2007 to try to stimulate the economy and to affect a "soft landing" in the housing market, but don’t count on it.

    I believe the Fed is more likely to either keep rates the same or raise them to outpace the anticipated increases in Europe and Asia. The reason for this is simple; it presently takes nearly $2.5 billion per day [ in additional investment from foreign sources into US assets / equities - sic ]to maintain our current account deficit. To continue to attract foreign capital, US Treasuries must offer a higher rate of return than their foreign competitors. Now that the economies in Europe and Asia are growing; naturally their interest rates are going up accordingly.(to slow inflation) That means that the only way that America can continue to expand its debt, through the exchange of fiat currency for resources and manufactured goods, is by raising the return on Treasuries. And, that is probably what Bernanke will do, even though it will skewer the struggling American worker and the US economy at the same time.

    The secret of running the global economic system is to control the issuance of currency and thereby be in a position to expand one’s own debt as one sees fit. The Federal Reserve must preserve its "dollar hegemony" if it wants to maintain the greenback as the world’s "reserve currency". To accomplish that, the dollar must stay one step ahead of its competitors (higher rates) and prove that it is on solid financial footing. This is impossible now that the US economy is contracting, so Washington has decided to do the next best thing; corner the oil market. By controlling Middle East oil US policy-makers believe that they can force foreign nations to accept the debt-plagued greenback regardless of the faltering US economy. It is no different than any other extortion racket.

    If the plan succeeds the dollar will remain the de-facto international currency. But it is difficult task and the escalating violence in Iraq suggests that the results are far from certain."(snip)

    from

    hmmm, perhaps this explains the recurring back page news clips about huge US Navy and Marine buildups off the Iranian coast ...



    well, I suppose, based on last week's election results, if anything is going to get started in terms of escalating US middle east military actions, it has to happen before the new congress convenes in early January 2007 ! If so, get ready for gasoline and oil prices to jump right back up to their summer 2006 highs (or higher), and the share price of oil / gas / energy company stocks to take another upward jump as well .

  2. #2
    Sitri
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    Default Re: weekend commentary - maintaining 'dollar hegemony' by 'cornering' the Oil market ?

    Well, their comes a time when you have to pay the Pied Piper. We are where we are and nothing we can do will stop the pain that will be coming.

    Did you read in the news today (New York Times) that we spend about 2.5 billion on reconstruction of power, sewer, etc. for Iraq and it has all basically been a waste. And now the contract to do that reconstruction is ended. So we pull out.


    We are spending money like drunken congressmen. How can we expect to live like we deserve dollar hegemony when we treat it like monopoly money?

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    Default Re: weekend commentary - maintaining 'dollar hegemony' by 'cornering' the Oil market

    well keep in mind the remarks of the immortal Sen. Everett McKinley Dirksen, made some 20+ years ago when the US dollar was worth 2-3 times as much as it is today ..... "A Billion here, a Billion there, and pretty soon you're spending Real Money" ! 2.5 Billion dollars wouldn't even pay for Social Welfare programs / Medicaid benefits for one month in the state of New York alone !

    I didn't see the Times article, but it indeed does cost a lot of money to keep replacing stuff that the islamic jihadists keep blowing up !

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