Greetings Regular Joes,
Please accept my apology for the lack of writing recently. I wish I could include a daily entry here, but my efforts as Another Joe are purely for the edification of our readers. While there are ads here and we have an affiliate relationship with a couple of companies, income from this site is just a hair over zero. And this past couple of months I’ve been able to land a couple of writing contracts, so had to concentrate on them. And, as many of you know, often looking for work takes longer than actually doing the job. As it stands, I’ll have to keep working toward these efforts in the foreseeable future. But I do want to continue our discussion here, so please bear with me.
The recent movements in precious metals, the dollar, the DJIA and other areas has been quite interesting. As I’ve studied these movements a lot of buried details surfaced. Perhaps one of the most amazing articles I’ve had the pleasure of reading lately was the one provided by Marin Katusa of Casey Research entitled, ‘Will Iran Kill the Petrodollar?’
While I knew that the dollar was intertwined with oil, I had no idea of what had happened 40 years ago. In a statement, America agreed to protect Saudi Arabia in return for their agreement to trade oil in dollars. By doing this, the world began holding more dollars as a means to acquire oil.
There’s more to the story, and no reason for me to reinvent the wheel. If you have the time, read Marin’s article. In a nutshell, countries started buying more dollars. Bonds were increasing. The dollar was increasing in value.
This was a masterful stroke on the heels of departing from gold backed dollars. In the late 60s countries were beginning to turn in their dollars for gold. But, though it shouldn’t be any surprise to Regular Joes, the US realized that it could not keep up with the gold depletion. Simply put, fiscal policies had managed to print more dollars than there was gold to make good on them. So Nixon severed the dollar’s tie to gold, ending the dollar’s stability, but also removing America’s responsibility to trade gold for dollars.
In a sense, US dollars went from being tied to the value of gold to being tied to the value of oil in a matter of a few years. And, perhaps even more insidiously, this maneuvering served to make the world dependent upon US dollars. However, since the dollar was no longer restrained by gold reserves, the Federal Reserve became free to issue more dollars based on policy, rather than true worth. The web was spun, and most of the modern world was caught.
It’s an intriguing history, fraught with lies, corruption, manipulation, coercion and a whole list of other modifiers that would make our heads swim. But, as we all know, for every action there is an equal reaction. In this case, these actions have been building and building, placing pressure in areas that many aren’t looking. Because the dollar is so closely tied to oil, as well as its status as the world’s reserve currency, natural destruction of its value has not been allowed to occur. Simply put, nobody wants to see the dollar fall. Every modern country has too many of them.
Sooner or later something has to give. That may be what we’re witnessing today. Tensions in the Middle-east seem to be turning customers away from dollar denominated oil. And, as Marin, points out, this is likely the reason the US is so reluctant to mind its own business. They’ve hooked the country in the manipulations of the oil industry there, and simply can’t afford to let things be.
If oil is allowed to be traded in other currencies then other nations will see less value in holding on to dollars. If that happens, then America’s ability to move and shake the world economies will diminish greatly. And as this confidence in the dollar descends, so will its value. If this happens, then all the immense pressure that’s been piled on top of the greenback can only result in one thing – the collapse of the dollar = massive inflation.
We aren’t prophets. How the future will unfold is uncertain, as is the timing. But we can learn from history. How many fiat currencies have survived over the past century? Remember, the dollar, though it was in some ways fiat before separated from gold, wasn’t completely fiat until 1971. It was revalued relative to gold in 1934. The Federal Reserve came into being 99 years ago. In other words, the dollar has changed three times in the past century. What will the next change portend?
It’s a lot to think about. But remember, “Uh-oh” is not in God’s vocabulary. Consider and prepare accordingly, but place your greatest confidence in He who is never shaken or moved. He is the same yesterday, today and forevermore.