The lines of truth and fiction have successfully been blurred by the Bush administration.
However, what is increasingly clear are the facts and realities that we Americans are living with each and every day.
As Billmon detailed for us yesterday the housing index has zoomed from 6% in 2000 to 14% today. The price of gasoline has nearly tripled(300%) since 2000 to almost $2.80/gallon. The average hourly wage, after edging up slightly during the 90's has remained flat since 2001.
The price of a barrel of oil has more than doubled since 2000. And Jerome from Paris, methodically detailed far better than I ever could how the increase in the price of oil is used to recycle itself back into the US economy by propping up the American economy's enourmous debt.
Jerome concluded the post by alluding to a war in Iran to break or sustain this cycle.
I am connecting a dot from the US dollar's connection to the way oil is traded to the very necessity of this arrangement lest American assets rapidly lose value.
more in the extended
I first want to point to William Clark's essay from the Globabl research council predicting some of the real reason's to the war in Iraq.
http://www.globalresearch.ca/
http://www.ratical.org/...
The reality is that the "safe harbor" status of the U.S. dollar since 1945 rests on it being the international reserve currency. Thus it has assumed the role of sole currency for global oil transactions (ie. `petrodollar'). The U.S. prints hundreds of billions of fiat dollars, which U.S. consumers provide to other nations via the purchase of imported goods. These dollars become "petro-dollars" when are then used by those nation states to purchase oil/energy from OPEC producers (except Iraq, to some degree Venezuela, and perhaps Iran in the near future). Approximately $600 to $800 billion `petrodollars' are annually from OPEC and invested back into the U.S. via Treasury Bills or other dollar-denominated assets such as U.S. stocks, bonds, real estate, etc. This recycling bolsters the dollar's international liquidity value.
According to research by Dr. David Spiro, in 1974 the Nixon administration negotiated assurances from Saudi Arabia to price oil in dollars only, and invest their surplus oil proceeds in U.S. Treasury Bills. In return the U.S. would protect the Saudi regime. According to his book, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets [18], these purchases were done in relative secrecy. These agreements created the phenomenon known as "petrodollar recycling." In effect, global oil consumption via OPEC provides a healthy subsidy to the U.S. economy. Hence, the Europeans created the euro to compete with the dollar as an alternative international reserve currency. Obviously the E.U. would also like oil priced in euros as well, as this would reduce or eliminate their currency risk for oil purchases.
The `old rules' for valuation of the U.S. dollar currency and economic power were based on our flexible market, free flow of trade goods, high per worker productivity, manufacturing output/ trade surpluses, government oversight of accounting methodologies (ie. SEC), developed infrastructure, education system, and of course total cash flow and profitability. Our superior military power afforded some additional confidence in the dollar. While many of these factors remain present, over the last two decades we have diluted some of the `safe harbor' economic fundamentals. Despite vast imbalances and structural problems that are escalating within the U.S. economy, since 1974 the dollar as the monopoly oil currency created `new rules'. The following excerpts from an Asia Times article discusses the virtues of our petrodollar hegemony (or vices from the perspective of developing nations, whose debt is denominated in dollars).
Clark articulates quite fluidly the value of the dollar's direct link to it's use as 'the petro dollar' and the implications should the world choose to trade oil in a currency other than the US dollar.
Clark goes on to discuss this topic as it applies to Iran in this essay written more than one year ago.
http://www.globalresearch.ca/...
And the conclusion of Seymour Hersh's article lays out quite plainly what a post attack Iran may look like. It may not be total armeggedon but certainly a world of much higher oil prices, in the $100/barrel range. Higher gas prices of course and the substantial increase in worldwide violence.
Any American bombing attack, Richard Armitage told me, would have to consider the following questions: "What will happen in the other Islamic countries? What ability does Iran have to reach us and touch us globally--that is, terrorism? Will Syria and Lebanon up the pressure on Israel? What does the attack do to our already diminished international standing? And what does this mean for Russia, China, and the U.N. Security Council?"
Iran, which now produces nearly four million barrels of oil a day, would not have to cut off production to disrupt the world's oil markets. It could blockade or mine the Strait of Hormuz, the thirty-four-mile-wide passage through which Middle Eastern oil reaches the Indian Ocean. Nonetheless, the recently retired defense official dismissed the strategic consequences of such actions. He told me that the U.S. Navy could keep shipping open by conducting salvage missions and putting mine- sweepers to work. "It's impossible to block passage," he said. The government consultant with ties to the Pentagon also said he believed that the oil problem could be managed, pointing out that the U.S. has enough in its strategic reserves to keep America running for sixty days. However, those in the oil business I spoke to were less optimistic; one industry expert estimated that the price per barrel would immediately spike, to anywhere from ninety to a hundred dollars per barrel, and could go higher, depending on the duration and scope of the conflict.
Michel Samaha, a veteran Lebanese Christian politician and former cabinet minister in Beirut, told me that the Iranian retaliation might be focussed on exposed oil and gas fields in Saudi Arabia, Qatar, Kuwait, and the United Arab Emirates. "They would be at risk," he said, "and this could begin the real jihad of Iran versus the West. You will have a messy world."
Iran could also initiate a wave of terror attacks in Iraq and elsewhere, with the help of Hezbollah. On April 2nd, the Washington Post reported that the planning to counter such attacks "is consuming a lot of time" at U.S. intelligence agencies. "The best terror network in the world has remained neutral in the terror war for the past several years," the Pentagon adviser on the war on terror said of Hezbollah. "This will mobilize them and put us up against the group that drove Israel out of southern Lebanon. If we move against Iran, Hezbollah will not sit on the sidelines. Unless the Israelis take them out, they will mobilize against us." (When I asked the government consultant about that possibility, he said that, if Hezbollah fired rockets into northern Israel, "Israel and the new Lebanese government will finish them off.")
The adviser went on, "If we go, the southern half of Iraq will light up like a candle." The American, British, and other coalition forces in Iraq would be at greater risk of attack from Iranian troops or from Shiite militias operating on instructions from Iran. (Iran, which is predominantly Shiite, has close ties to the leading Shiite parties in Iraq.) A retired four-star general told me that, despite the eight thousand British troops in the region, "the Iranians could take Basra with ten mullahs and one sound truck."
"If you attack," the high-ranking diplomat told me in Vienna, "Ahmadinejad will be the new Saddam Hussein of the Arab world, but with more credibility and more power. You must bite the bullet and sit down with the Iranians."
The diplomat went on, "There are people in Washington who would be unhappy if we found a solution. They are still banking on isolation and regime change. This is wishful thinking." He added, "The window of opportunity is now."
On the surface, below the surface and inside the surface, this ALL seems to boil down to the US dollar's unseperable attachment to the trade of oil. The US government hasn't initiated an 'Apollo' energy program because the way the American economy, how the government and consumer debt and finally how the value of the very currency in our pocket is directly linked to the enourmous trade of oil in the world. Energy, oil and natural gas, specifically in this case makes the world go round.
What would happen to the value of the US dollar once peak oil fully engages the world?
What would happen to the US economy should the oil trade switch to alternate currency's before the American government was able to secure more of this strategic resource?
What would happen to the value of your house? what would become of inflation in the American economy in this environment?
It seems the Bush administration is betting that the middle east switching away from the US dollar when trading oil is a far more serious threat to the American economy. As opposed to the civil strife and military headaches that would ensue after a strike against Iran.
I can only conclude that the Bush administration feels it has only a military option to 'save' the American economy. I also conclude that the Bush administration is seriously miscalculating.
The adminstration can choose to be far more engaging and global towards the serious issues energy supplies, Iran's nuclear ambition's and the stability of the American economy during times of high debt and global instability. The Bush admintration made very clear cut political choices of lowering taxes to secure the popularity of it's governing majority. However, these choices have trapped the American economy into a serious and lethal dependance on the use of the US dollar to trade oil. This trade gets recycled back into the US economy through debt that can be used to purchase goods from China and the cycle continues anew.
I've done my best to be as articulate as Jerome from Paris and Billmon, they are my inspiration and mentors. I hope they catch this diary and take it's ideas farther than I ever can. But the connection seems to be vey clear and lethal. Bush and Cheney are both oil men and likely see oil as the world's only 'practicle' form of cheap energy and in keeping with their belief in Pax Americana, as the US dollar as the only currency to be used to control the economy and it's ability to maintain America's hegemony.
The Bush's are seriously miscalculating and we, as well as our children and grandchildren will painfully be living through the consequences of these mistaken, myopic choices and conclusions.