Another great, and insightful, article from Brandon Smith, at Alt-Market.com. This is the lynchpin, folks — The Petrodollar.
Even after seven years of writing macroeconomic analysis for the liberty movement and bearing witness to astonishing displays of financial and political stupidity by more “skeptics” than I can count, it never ceases to amaze me the amount of blind faith average Americans place in the strength of the U.S. dollar. One could explain in vast categorical detail the history of fiat currencies, the inevitable destruction caused by inflationary printing and the conundrum caused when any country decides to monetize its own debt just to stay afloat — often, to no avail.
Bank bailouts, mortgage company bailouts, Treasury bond bailouts, stock market bailouts, bailouts of foreign institutions: None of this seems to phase the gibbering bobbleheaded followers of the Federal Reserve cult. Logic and reason and wisdom bounce like whiffle balls off their thick skulls. They simply parrot one of two painfully predictable arguments:
- Argument No. 1: There is no way foreign countries will ever dump the U.S. dollar because they are so dependent on American consumers to buy their export goods.
- Argument No. 2: There is no way the dollar’s value will ever collapse because it is the dominant petro-currency, and the entire world needs dollars to purchase oil.
I have written literally hundreds of articles over the years dismantling the first argument, pointing out undeniable signals that include:
- China’s subtle dumping of the dollar — using bilateral trade agreements with other developing nations and, more recently, major economic powers like Germany and Japan
- The massive gold-buying spree undertaken by China and Russia — even in the face of extreme market manipulation by JPMorgan Chase and Co. and CME Group Inc.
- The dumping of long-term U.S. Treasuries by foreign creditors in exchange for short-term Treasuries that can be liquidated at a moment’s notice.
- The fact that bonds now are supported almost entirely by Fed stimulus. When the stimulus ends, America’s ability to honor foreign debts will end and faith in the dollar will crumble.
- Blatant statements by the International Monetary Fund calling for the end of the dollar’s world reserve status and the institution of special drawing rights (SDRs) as a replacement.
The second argument held weight for a short time, only because the political trends in the Mideast had not yet caught up to the financial reality already underway. Today, this is quickly changing. The petrodollar’s status is dependent on a great number of factors remaining in perfect alignment, socially, politically and economically. If a single element were to fall out of place, oil markets would explode with inflation in prices, influencing the rest of the world to abandon the greenback. Here are just a few of the primary catalysts and why they are an early warning of the inevitable death of the petrodollar.
Egyptian Civil War
She asked why I had waited until this year to make the prediction and why I had not called for such an event after the overthrow of Hosni Mubarak, as many mainstream pundits had. The question bears merit. Why didn’t Egypt ignite with violent widespread internal conflict after Mubarak was deposed? It seemed perfectly plausible, yet the mainstream got the timing (and the reasons) horribly wrong.
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