Turn Out the Lights. The Party’s (Almost) Over
Many of you may have heard the rumor that the OPEC nations want to switch to a basket of currencies to value their oil, as the dollar is seen as increasingly worthless.
The reason that they fear the worthlessness of the dollar is because, of course, the dollar is worthless. Thanks to the Chimpy policies of (1.) allowing American corporations to defer paying taxes on foreign earnings as long as they are kept outside of the United States, and (2.) allowing American corporations to write off the cost of relocating their facilities overseas, America has become a vast wasteland of abandoned factories and empty office buildings. Since we don’t back our currency with anything “hard” like gold, our goods and services are the underpinning of the dollar. Unsurprisingly, policies that deliberately gutted our commons have led to well-founded doubts about the value of a dollar. When you add to that the staggering budget deficits we’re running now (with NO corresponding changes to the polciies that gutted our commons to begin with,) is it any wonder the oil producers are said to be in favor of fleeing the dollar-demoninated valuation?
Yes, so far no one in OPEC has confirmed their intentions, so that one is still a rumor, albeit very likely a true rumor. So let’s put the OPEC story aside for a minute, and have a look at another story, one that is no rumor. South America is moving towards a unified currency in direct response to what is happening to the dollar, and they’re doing it rapidly.
Leaders from Latin America and the Caribbean have agreed during a summit in Bolivia on creation of a regional currency aimed at reducing the use of the US dollar.
The decision came shortly after members of the Bolivarian Alternative for the Americas (Alba) gathered in the central city of Cochabamba for the start of the two-day summit, the AFP news agency reported.
Top on the agenda for the left-leaning regional trade group, which includes Venezuela, Ecuador and Nicaragua, were talks to implement the new currency, known as the sucre, for use among Alba nations.
“The document is approved,” Evo Morales, Bolivia’s president and summit host, said on Friday.
Earlier, Hugo Chavez, the Venezuelan president, described the new currency as a “revolution of paradigms”.
“The sucre is born in the Alba,” Chavez said ahead of the meeting.
“The sucre – an autonomous and sovereign monetary system that will be agreed upon today so that it can be implemented in 2010.”
The Sucre will be backed up by a lot of value in the natural resources and the goods and services of South America, and it will most certainly emerge as an attractive alternative to the currency of the “Sick Man of North America.”
All that is left now is for the Chinese to either (1.) let the value of the renmibi find its natural spot well above that of the dollar, or (2.) cut off the funding spigot. Either action will be the end of the dollar, the present low interest rates, and what is left of our economy. That day has to be coming pretty soon.
Tags: bush, dollar, economy, failure, rushpublicans, south america, sucre
October 19th, 2009 at 12:43 pm
Hi JR,
I have mixed feelings.For purely selfish reasons,being a father to two daughters I want the gravy train to continue and as it winds down,to wind down slowly with the US gradually becoming one among many,one civilized nation among the rest of the industrial world.
Objectively it’s good to see the Empre kicked in the nuts and how Chavez helped shove the IMF off the cliff in Latin America with his cheap loans to other countries.The IMF’s chicago-style conditionalities brought them to the cliff,but Chavez kicked them off. I’m sure that’s a big part of the vilification of the guy in our media.
I believe Iran already sells oil to Japan in yen.It sure makes sense to use a basket of currencies,that way the US can’t control OPEC’s pricing thru $ manipulation.I’m not saying that’s why the $ rises and falls,I’m just saying it’s a factor.
But we are a fiat currency and all our debt is in USD so if the dollar drops in value it would not have the effect that a devaluation has in countries whose debt is in foreign currency.
I believe these issues are significant,more evidence we are in decline.But I don’t believe they’re gamestoppers.
On the other hand I wear a Raider hat,cry every time at the end of Armageddon and can’t figure out how to turn my youngest daughters car stereo system off,all of which are symptoms of idiocy.
October 19th, 2009 at 2:34 pm
Oso, the similarities to the winding down of the USSR are too numerous to believe that we get to escape their fate. I really don’t think we do.
I actually believe that we’ll see both our disintegration and a reformation of a rump USSR within the next 10 years.
October 19th, 2009 at 2:36 pm
Shortly after the end of WWI, circa 1918, Germany’s currency became basically worthless. As a matter of fact people used to carry their money in wicker baskets because it took so much to buy even a loaf of bread. They would often leave the baskets outside the bakery as they made their purchases. When they came out, the basket, worth more than the money, had been stolen. If we aren’t careful we will go the way of the Germans. This was a scary read JR.
October 19th, 2009 at 4:09 pm
Jolly Roger,
you know that USSR comparison is apt,gonna have to think on that . I suppose we could substitute Oligarchs for the Too Big to Fails,substitute the big time bureacrats (nomenklatura?) for the CEO’s. Failing war in Afghanistan with (gasp)a failing war in Afghanistan. Gonna have to read up on Russia,any good articles would be great to know of.
Great.just when I had myself talked into believing everything was gonna be hunky-dory you come along and throw a bucket of water in my face
Just kidding man,I enjoy your site and ordinarily I’m pretty cynical too. Comes with being a Raider fan these past several years.
October 19th, 2009 at 9:27 pm
When it all settles down it will still be about the control of oil, no matter what the cost.Courtesy Chimpy and his oil buddies.
October 19th, 2009 at 9:52 pm
I can see the end of the American empire from my porch.
Maybe this will finally put a stop to U.S. military adventurism? I sure hope so because nothing else has wised us up.
October 20th, 2009 at 3:55 pm
I almost covered this subject a few days ago. I’m glad you did, JR. I think the sucre is bad for the US, but good for the world.