Iraq, switching from the gold standard, questions..

[emeraldlonewoulf]

History and political science are not my strong points, but I got into a conversaton with someone for whom they are a few months ago, and he brought up some interesting points.


Supposedly, in the 1970's when the U.S. dollar went off the gold standard, it went on to something that could best be described as an oil standard. In other words, the gold the treasury kept track of was intended to back up the paper money being printed, and then they had to find something else. THey used oil, seeing as how this had become something valuable to the entire world. Thus, the standard for pricing barrels of oil was by the U.S. dollar, and the oil we could control as a nation was used to "back it up".

According to my aquaintance, trouble in Irag started because they wanted to switch their standard from the dollar to the Euro, and we didn't like that because it could cause our dollar to devalue drastically, causing problems for our delicately balanced finacial "system". Basically, changing this standard could cause us to lose our position as a super power.

So, it is about money, and it is about oil, but not in the way most people think.

Comments?

[CptSternn]

I already started a thread on this. What you are refering to is the petro dollar recycling system. You can find it on the web and in the wiki.

To sum it up for you again:

All OPEC nations must sell oil in US dollars. Well, I say 'does' sell oil - thanks to agreements made back in the 50-60's.

These primarily middle-eastern nations then spend the dollars in america - why? Because converting them to euros or other currecny will cost them more money, so it's cheap to buy american. They also use their funds to invest in the american stockj market, corporations, and real estate.

Of course, then the problem arises with the banks. With the billions they can't spend each year, they put in american banks, because once again its cheaper than converting it to other currency.

Then, other nations need oil. Britian, Europe, Asia, etc. all buy oil in us dollars. THEY have to pay to convert their monies to dollars. Buy pay a large sur-charge to america for this on top of the price of oil - which is another reason oil is so much higher to every other country in the world.

So america then runs a budget deficit of hugh proportions. Why does the IMF, WolrdBank, and other let them run this huge tab? Because every nation in the world needs oil, and since they have to convert their funds to us dollars at a high exchange rate, they know america always has a steady supplied of incoming cash.

IF OPEC switched the value of oil to be pegged with the euro, no more middle eastern money in us banks, a huigh drop off in forigen investments in america, and now america has to PAY to BUY oil like everyone else (well, everyone except the currency its pegged against).
and is not getting paid as the middle man by every nation that needs oil.

And the us economy collapses as they can no longer afford to borrow and spend because their golden-egg laying goose is now gone.

So yeah, the first thing bush did after invading Iraq is switch it's funds NOT from gold to oil, but from the euro to the dollar - because sadaam had switched the oil exports to the euro just a week before. Some say thats WHY bush invaded so quickly without an exit strategy, as he didn't want other nations following suit and was making an example.

Basically you are sorta right. The us dollar is pegged against oil, not gold. They often say 'the market' vs. gold, but the us market hinges on the petro-dollar cycle - so it's essentially oil. And the denair in Iraq is pegged against the us dollar (how conveinent) so transitively, it too is pegged against oil, but not it's own resources - the oil that america can profit it off through acting as a middle man.

What a good racket, eh?

[emeraldlonewoulf]

I didn't see the other thread, I haven't been on in a while. thks. I just thought it was a subject most people probably haven't really thought about.