Sunday, April 29, 2007

What to believe?

I like media critiques, the journal that specialized in it is no longer online, which is why Matt Taibbi's articles are like a breath of fresh air.. Here's his obit on Boris Yeltsin , his critique of New York Times, and one more here of a special post 9/11 supplement. Plenty of bite. And this is one of the funniest articles I've read from him, where he launches a full fledged attack on Thomas Nolle.

My mind is all over the place right now, because I've been trying to understand the dollar, and why it's been sinking of late. The problem with being on the internet for too long is that you can't make your mind up about which version of the truth you should believe in. Take the concept of petrodollars, for instance. On one hand it is said that America benefits from every barrel of petrol sold by OPEC, which leads to a quote like this:

In 1968, Richard Nixon inherited the hair-raising collapse of the US Treasury's gold pool and the un-winnable occupation of Vietnam that had caused it. Within the next four years, Nixon would abandon fixed currency exchange rates and the gold standard, then allow a 20% devaluation of the dollar that wiped out billions of dollars in US debts to Western Europe and Japan. Since oil payments were denominated in dollars, the consequent jump in the price of oil was a harsh blow for Europe, Japan, Africa, and Latin America.

The US, on the other hand, owned the dollar printing press, and it was able to recycle the crisis, via petrodollars, through these regions. US puppet governments in Iran and Saudi Arabia helped underwrite this system with their ability to swing oil production.

This game of economic chicken by Nixon set the stage for a new method to assure US supremacy, since the post World War II industrial boom had run aground on the rocks of the Marshall Plan nations' export capacity and on Vietnam.

And then there's someone who thinks this concept is retarded. (Crtl F for tyrone)
It's very hard to say who's on the right. And this isn't some conspiracy theory anymore, it's a school of thought. I mean, here's a wikipedia entry on it which considers it a 'hypothesis

In 2000, Iraq converted all its oil transactions under the Oil for Food program to euros. When U.S. invaded Iraq in 2003, it returned oil sales from the euro to the U.S. dollar.

It took a flag, a warcry, complicit media, and a system perpetually geared for war to get there. But it was always about the oil, and America needs it to support the American way of life. The End of Suburbia painted gloom and doom for America and the world as we know it, and A Crude Awakening compounds it. The docu starts off by saying that oil reserves are actually much lower than what the OPEC economies report, because they keep revising their estimates so that they can mine more fuel now. This conspiracy theorist with poorly formatted ebooks gives investment strategies for the crash. Interesting stuff.

Oil is remarkable stuff, one barrel of oil equals 25000 hours of human labor. This is magical, non renewable stuff. It's really outrageous that we allow it to be wasted on such abominations. To compound things, the US government gives American citizens tax cuts if they consume it wastefully on automobiles that weight more than 6,000 pounds.

In 2003, the Bush administration proposed increasing the tax deduction to $75,000. Lawmakers responded by expanding it to a whopping $100,000 as part of the $350 million tax cut package. Yet Congress did not change the weight-based classification of the vehicles, creating a huge benefit for the largest, least efficient vehicles.

The last time OPEC took the world hostage in 1979, the American car industry improved fuel efficiency by 62% from 1975-1984. And it's sad that the automobile industry has actually regressed after that. From the book: Winning the Oil Endgame.

The average new U.S. light vehicle in 2003 had 24% more weight, 93% more horsepower, and 29% faster 0–60-mph time than in 1981, but only 1% more miles per gallon.

A Saudi oil minister once said "The stone age didn't end because of a lack of stones."

Fortunately, human creativity is a renewable, boundless resource. I'll place my bets on the Fischer-Tropsch process. Ze Germans used it in WWII. And we've got plenty of coal reserves in the world.

1 comment:

Veena said...

The implications of the Petrodollar have been exaggerated.
The fundamental flaw in Krassimir Petrov's reasoning, as rightly pointed out, is the assumption that the dollar is backed by oil. The gold standard for dollar issuance meant that dollars were exchangeable for the same value and later, proportionate value in gold, hence the terms 'gold parity' and 'gold pegging'. Dollars, on the other hand, cannot be exchanged for oil but conversely, oil can be exchanged for dollars. Simply put, the value of the dollar and its purchasing power depended on the availability of and demand for gold, and consequently, the price of gold - the value of the dollar does not depend wholly on the price of oil. The influence is undeniably signficant but not infinite, not encompassing, not the principal 'push'. A cause and effect relationship in economics is not as simple as related by Petrov (I would like to see your credentials!).
The real worry is the interest rate cut in the U.S. And what of OPEC?
["The world needs more oil than OPEC seems willing to supply, making it difficult to avoid another surge in oil prices over the coming summer," the Centre for Global Energy Studies said in its monthly report.]