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Thursday, September 20, 2007

Tol ya

I've written before about the dollar, euro and oil. Nixon in the early 70's took America off the gold standard as Europe was draining out gold reserves (The Bretton Woods Agreement allowed nations to redeem their dollars for gold. It also established the World Bank and the IMF-International Monetary Fund) . He promised Saudi Arabia that if they allowed oil purchases were acceptable only in dollars, that the U.S. would defend the Kingdom of Saud. Hence, the creation of the "petro-dollar" and all oil was purchasable in dollars only. In other words, we switched backing the dollar with gold to oil.BTW,this is/was one of the sticking points with Osama bin Laden, that a hard commodity, oil, is exchanged for printed paper. Saddam Hussein and Iran have offered to sell their oil for euros. The problem with the dollar is, was, has always been the profligate spending of the U.S. Congress. And how the Congress affords all this spending it is to print more money via the Faustian bargain with the Federal Reserve. The problem is that as the Feds printing press runs, the dollars that reside in Saudi Arabia, China, et al, become worth less and less. So, then the dollar holders will begin to look for something that will hold its value. The alternatives seem to have been chosen: gold and euros.
This is a six+ year graph of the cost of gold delineated in dollars per ounce (compliments of Kitco):
















This graph shows that the dollar has, since January 2000, lost well over half its value (a dollar in 2000 is now worth $.43). A quick gold vs. dollar seminar: in 1907 a $20 gold piece and a $20 bill (silver or gold note) both bought a man's suit. In 2007 a $20 gold piece will still buy a man's suit. A $20 Federal Reserve note may buy the tie.
In other words, people don't trust the dollar.
And the proof? These headlines:
"Canadian Dollar Trades Even with U.S. Dollar for First Time Since 1976"
" Saudi Arabia Fears U.S. Dollar Collapse" (This headline and story is critically relevant).
"Euro Trades at $1.40 US-Highest Ever"
"Gold Hits Highest Level Since 1980"
"Oil at All Time High"- This is a parallel to gold's price, both being a commodity that holds value.
And it's all about Congressional spending and exporting our debt. And it's not Congress' fault. All those Representatives and Senators did all that spending because we sent them to do it. They did at our behest.
Well, at your behest.
I've always been an extreme fiscal conservative, a strict Constitutionalist (spending only according to Article I, Section 8 along with the 10th Amendment in the Bill of Rights [aka Amendment X]). Unfortunately, I'm on the same ship where you've elected reckless captains and crew for decades.
This a chickens home to roost story.
We'll see if we can dodge the bullet one more time.
But, I doubt that we'll learn the lesson, though it's been taught many times for many years.
My friend Thomas Brewton has an excellent post about the Federal Reserve, the dollar and the current true economic situation here in America. (Also be sure to read "The Unwritten Constitution")



Wednesday, September 19, 2007

Jim Ramstad to Retire - I say, good riddance.

While others are talking that we should show some respect for Jim Ramstad, I say good riddance.

Before redistricting I was unfortunate enough to be in his district.
He never was a Republican, did not share our core beliefs and whenever a vote was close you could depend on him to sell out the party and more importantly our ideals.

Some say he was better than a DFL candidate in that position.
B.S.

He was never there when it mattered.
And he blocked the way for a true Republican (can't challenge and incumbent) so when the conservative wave crossed the nation, Jim was there to help sink it.

And now it looks like some in CD3 want more of the same.

Either you think what you believe is good and right or you are just a politician and want to win.

But what is the point of "winning" if the result for you and the country are the same.


So long Jimmy boy, and don't let the flap on the big tent hit you on the way out.

Monday, September 17, 2007

Greenspan

When I read Drudge yesterday and saw the red screamer headline that Greenspan said the battle in Iraq was about oil, it definitely caught my attention. My thoughts were that in a sense the importance of oil may have been in the mix in some way. I mean, admit it, if it weren't for oil, if oil had never been found in the Mid East, would the Royal House of Saud ever been visited by any world leader? Would the sheikdom of Dubai be able to buy a new Bentley every minute instead of saving up goat skins for a decade to buy a used Chevy? The only reason Iran, Iraq, Saudi Arabia, Qatar, UAE, Dubai are even blips is because of oil. And that gave the Arabs and Aryans (Iranians are not Arabs) money and power. So, because of a radical like Hussein and the delicate balance of Mid East politics, Greenspan has a point.
Nixon in the early 70's took America off the gold standard because Europe was demanding gold for dollars as promised in the Bretton Woods agreement. Nixon then promised the Royal House of Saud that if they accepted only dollars for oil, the U.S. would protect the sheikdom. So we created petrodollars and substituted oil for gold to back the dollar. As the world bought oil from the Mid East, and the Saudis determined what happened in all the oil economy and what price would be paid, the dollar again was the world's reserve currency. Saddam Hussein was threatening to accept euros for oil and thereby upset the petrodollar balance. Iran was threatening to do the same at the March oil bourse. Add that to a tyrant that was also willing to invade Kuwait and mix in radical mullahs and there is a recipe for worldwide financial collapse. All because of oil.
So, Greenspan's comments are accurate, but taken out of context. Captain Ed has more on this this morning.
As I searched the internet to find articles, I came across a few that reminded me that the Royal House of Saud is doing a very, very dangerous balancing act. It is seen as corrupt and decadent and is the target of Islamic radicals. And in my next post, I'll tie decadence in the House of Saud and Norm Coleman's stance on bio-diesel.