To comprehend why there will probably not be a non-violent solution to the crisis of Venezuela one must know what is at play in the global geopolitical plan. What is at stake are the largest existing oil reserves in the world in Venezuela. For the global dominance of the United States it is crucial to maintain control of the largest oil reserves in the world. Whatever country, however democratic it may be, has this strategic resource and does not make it accessible to the multinational oil companies, a majority of which are North American, will become the focus of an imperial intervention.
The threat to national security of which the presidents of United States speak of is not solely in access to petroleum but above all in the fact that the global exchange of oil is denominated in U.S. dollars, the true nucleus of power of the United States since no other country has the privilege of printing the bills they wish without this significantly affecting their monetary value.
This is the reason why Iraq was invaded and the Middle East and Libya razed (in the last case with the active complicity of France’s Sarkozy). For this same motive there was interference, now documented, in the Brazilian crisis because the exploitation of the pre-salt oil fields was in the hands of the Brazilian people. For this same reason Iran returned to being in danger.
Is there no economic delusion some lefty isn’t prey to? that oil is priced in dollars just doesn’t matter.
This whole ‘oil is sold in dollars’ has been a popular meme for ages, the obvious fact it’s totally meaningless seems to just make people repeat it more often.
Isn’t oil in fact priced against a basket of currencies but denominated in US$ because the US$ is the only world currency liquid enough to sustain the trade? As Von Mises observed, “if socialists understood economics, they wouldn’t be socialists”, hence the repeated misconception by the Left.
Wonderful thing this intertubes thingy. I hadn’t given much thought and my first Google search told me this:
“In short:
Since the agreements of 1971 and 1973, all the members of OPEC (Organization of Petroleum Exporting Countries) quote oil prices only in US Dollars. However, in recent times some countries which have had trouble with USA (Iran and Venezuela) have been pushing for the use of Euro as the currency for oil prices (Since 2003, Iran has started accepting Euro as well)”
Assuming it’s correct, and no other link contradicts it, nothing to do with the USA.
The second link then told me:
“If the Gulf countries stopped pricing oil in dollars, they would also presumably stop pegging their currencies to the dollar, a more significant development. And of course Chinese officials have been making noise for several years about the need to move away from a dollar-dominated world. The problem that both China and the oil exporters have is that they’re holding gigantic stashes of dollars that would suddenly be worth a lot less if they started trying to sell them off. ”
To be fair that’s from a Time article in 2009 but I can’t see that much has changed.
Curiosity may well kill a cat, but a lack of it could kill an economy, as Chesterton might have said.
I just love the ‘National Constituent Assembly”, aimed at overcoming the opposition of the National Assembly. Parlients are democratic until the nom-socialists win, then we declare the parliament to be an enemy of democracy and create a new parliament to side-step it.
You need dollars to buy oil – it’s international trade using someone’s domestic currency.
So not all dollars created end up circulating inside the American economy, which means inflation is being exported, right?
There will probably not be a non-violent solution to the crisis of Venezuela because the people in charge are socialist wankers, and they have all the answers and anyone who disagrees and claims they’re starving etc is a capitalist running dog who needs to be shot.
Let’s use Brazil Nuts to pay for oil. Or cowrie shells. Or those bloody huge stones that some of the people in Micronesia used to use. Or the relics of saints. Or tiny bits of the fabric of the Shroud of Turin. Fragments of the Berlin Wall. Fifty year old whisky.
Or, if you insist, electronic representations of green bits of paper printed in the USA.
If you were explaining it to a Martian he might find none of these ideas dafter than the others.
Mind you, our Martian might think that gold might make a better currency than any of those. Reactionary git!
@dearieme
If we decided to use brazil nuts, and all the people who needed oil needed brazil nuts in order to buy oil, what would this do to the price of brazil nuts?
Why? You need anything the seller will take. Just because Sainsbury’s price their stuff in £ Sterling, doesn’t mean they can’t accept €. Most of them won’t, of course, because it just complicates things.
Equally, most oil markets price in $ and some marketplaces may even insist on trades being in greenbacks (well, greenback shaded electrons, anyway.) Nothing to stop you ringing up the Iranian Oil Minister or the Sales Director of Statoil and offering them any value in trade – currency or otherwise.
Rather depends on the supply of Brazil nuts – whether it is sufficient to meet this new demand.
Anyway, people would soon be trading in Brazil nut derivatives.
You can’t wipe out your basic error by digging hypothetical pooh traps and whistling loudly whilst praying we fall in.
We should let them, nay encourage them, in their mis-belief. In the same way that tattoos are the marker of a woman to avoid, the dollar/oil meme is a useful marker of a truly awful economist.
@Surruptitious
That’s the point though isn’t it? The Saudis have agreed to only accept payment in dollars (in exchange for being able to use the U.S military on occasion)
So the only thing “the seller will take” is dollars.
So if you want oil, you’ll need dollars.
My pooh trap remains viable.
And if brazil nuts only grew in Devon………….
So don’t buy oil off the Saudis. Simples.
Barring odd situations such as Venezuala, it’s a fungible commodity.
“Nothing to stop you ringing up the Iranian Oil Minister or the Sales Director of Statoil and offering them any value in trade – currency or otherwise.”
Agreed.
It’s presumably happening all the time then?
Care to provide some examples of the enormous worldwide trade in oil using other currencies?
No, doesn’t work. Annual global oil market is under $2 trillion. Depends on the year of course. The FX markets trade some $2 trillion of US dollars every working day.
why would the U.S. do this when they will be self sufficient from fracking in a few years anyway?
https://www.forbes.com/sites/timworstall/2014/12/05/commodities-are-usually-priced-in-dollars-yes-but-this-does-not-mean-what-you-think-it-means/#7ce7e02624a4
They say there is nothing new in the world except the history you don’t know.
http://www.financialsense.com/contributors/jerry-robinson/the-rise-of-the-petrodollar-system-dollars-for-oil
“President Richard M. Nixon and his globalist sidekick, Secretary of State, Henry Kissinger, knew that their destruction of the international gold standard under the Bretton Woods arrangement would cause a decline in the artificial global demand of the U.S. dollar. Maintaining this “artificial dollar demand” was vital if the United States were to continue expanding its “welfare and warfare” spending.
In a series of meetings, the United States — represented by then U.S. Secretary of State Henry Kissinger — and the Saudi royal family made a powerful agreement. (Several authors have worked to compile data on the origins of the petrodollar system, some exhaustively, including: Richard Duncan, William R. Clark, David E. Spiro, Charles Goyette and F. William Engdahl).
According to the agreement, the United States would offer military protection for Saudi Arabia’s oil fields. The U.S. also agreed to provide the Saudis with weapons, and perhaps most importantly, guaranteed protection from Israel.
The Saudi royal family knew a good deal when they saw one. They were more than happy to accept American weapons and a U.S. guarantee to restrain attacks from neighboring Israel.
Naturally, the Saudis wondered how much was all of this U.S. military muscle was going to cost…
What exactly did the United States want in exchange for their weapons and military protection?
The Americans laid out their terms. They were simple, and two-fold.
The Saudis must agree to price all of their oil sales in U.S. dollars only. (In other words, the Saudis were to refuse all other currencies, except the U.S. dollar, as payment for their oil exports.)
The Saudis would be open to investing their surplus oil proceeds in U.S. debt securities.”
of which the presidents of United States speak of
Pillock cruelly exposed by genitive relative clause.
Fracking is possibly an example of progress made only under extreme conditions. The last few years of extreme monetary policy has not just allowed for the survival of zombie companies, but the emergence of zombie industries.
After all, making money cheap doesn’t just allow bankrupts to limp on, but also future bankrupts to get up and running.
Look at the unicorns.
To be fair, it doesn’t matter whether pricing oil in USD is important economically. It matters whether the people in charge of US foreign policy believe it’s important.
‘The social achievements of the last two decades are indisputable.’
Wut? No food, no toilet paper. Oh, ‘social’ achievements. NO ONE has food, NO ONE has toilet paper. Great achievement!
‘There is a distortion that runs through all media that demonizes a legitimately elected government to stir up the social and political fire and legitimize a foreign intervention that’d have incalculable consequences.’
de Souza Santos’ argument? The people voted for this shit, so it’s okay.
@MattyJ
Or even whether it suits the people in charge of US foreign policy to pretend that they believe it’s important.
“Defending the petrodollar” has enabled a LOT of foreign misadventure.
“‘There is a distortion that runs through all media that demonizes a legitimately elected government to stir up the social and political fire and legitimize a foreign intervention that’d have incalculable consequences.’”
Sorry, is this an article about George Soros funding Trump protests?
@Tim
I’m not agreeing with the author on Venezuela – from what I can see it’s just the standard endgame for socialism once again, but the commentary on dollars is pretty orthodox, no?
If the Saudis had never agreed to sell their oil exclusively in dollars, what difference might it have made to American monetary and foreign policy since that time?
Whatever country, however democratic it may be, has this strategic resource and does not make it accessible to the multinational oil companies, a majority of which are North American
Two out of five supermajors are American. The entire Middle East doesn’t give any of them much access.
To quote a t-shirt I wear whenever I am a voting member of a governing body, “Sometimes a majority simply means that all the idiots are on the same side.”
Just because it’s orthodox, even popular, doesn’t mean that it isn’t utter bollocks. Just look at the “they are paying a tiny fraction of their enormous turnover in corporation tax” meme.
So, your presumption is that the markets aren’t working because the Americans are exercising their evil control over the dollar, in which oil is (usually) priced?
And you agree that there are valid alternatives to the markets.
But nobody is (or, de minimis, there is no easily providable evidence that anybody is. You demanded, I can’t be bothered looking) using those alternatives.
So, two conclusions.
Either your presumption is wrong. The Americans are not evilly biasing the markets.
Or, if they are, the impact on the participants in those markets is less trouble than the (relatively minor) effort of employing one of those alternatives.
But you have your conspiracy theory. Tuck it up warm and give it a kiss.
I thought that was Hayek, rather than von Mises?
Just look at the “they are paying a tiny fraction of their enormous turnover in corporation tax” meme.
“The NHS is the envy of the world”
“Diversity is our strength”
“Islam is a religion of peace”
These days orthodoxy is almost a proxy for detecting idiocy and deceit.
@Surreptitious
I’m not suggesting that the majority know or understand the role of the petrodollar. I’m suggesting that the petrodollar theory I’ve proposed here is quite well-known and established.
Essentially, commentators here that pretend petrodollar mechanics is tinfoil hat conspiracy theory rather than well-established geopolitics 101 are quite puzzling to me.
Energy geopolitics is a complex subject – Seymour Hersh has written extensively on this subject if you care to look into it.
“…if they are, the impact on the participants in those markets is less trouble than the (relatively minor) effort of employing one of those alternatives.”
Let’s check:
Saddam – short drop, sudden stop
Putin – global pariah
Gaddhafi – bayonet in jacksey
The trouble of using the alternatives seem non-trivial.
@Rob
I agree that much orthodoxy is wrong, but the argument being presented here is that petrodollar theory is akin to tinfoil conspiracy?
I’m more than happy to see some argument about the petrodollar, but just shouting “tinfoil hat!” and running away seems similar to Leftists shouting “racist” to shut down arguments they cannot contend?
If there was $1 trillion circulating in an economy and $1 trillion circulating outside that economy, would local prices be based upon the total amount in circulation, or just the amounts circulating locally?
And if the $1 trillion external suddenly became internal, would that affect local prices?
What about wages?
What di what now?
Pricing oil in $ enables American world dominance?
How exactly?
No, the petrodollar isn’t tinfoil hat time.
“You need dollars to buy oil” – where you started, I remind you, is.
And how does it do that, exactly?
If the owners dumped it, then you’d get some inflation. But it’s less than the value of US banknotes in circulation so not that much. If they bought something of value with it?
And, anyway, it’s half a day’s worth of the forex market in dollars. Not quite chickenfeed but certainly Chicken Little.
“If socialism suddenly became a viable route to global prosperity, wouldn’t all* of the commentators on here look stupid?”
Well, that’s
A) more likely than the Iranians and the Chinese going along with something that embeds US economic power, &
B) would have a more significant effect than $1T dumped in the US economy.
* apart from DBC** and Paul.
** does socialist economics love LVT or will he be the first of the fellow travellers up against the wall?
M2 money stock in the US is 14tn.
They don’t publish a wider M3 or M4 definition as far as I can tell, but that would be a multiple.
A trillion dollars sounds like a lot, but it’s not. There are a lot of dollars or there.
The dollar is a (the?) global reserve currency and that does make it a bit different to other curriencies. But the transactional use of the dollar in oil markets is not that big a deal.
Ivor
“You need dollars to buy oil – it’s international trade using someone’s domestic currency.”
Back in the day, the Soviets owed NZ hundreds of millions for butter exported to the Soviet Union. The final bill was settled with Lada’s.
Butter is priced in USD’s on international markets, yet no USD”s were required for this trade.
David Moore,
Ladas for butter? NZ got shafted on that deal.
A fleeting glimpse above of the Nixon Shock 1971 by which he unilaterally polished off the Bretton Woods agreement’s gold convertibility and set currencies floating (hence the need for Saudi oil involvement in dollar stability) .That mature democracy, Great Britain, reacted by blaming the financial disarray on the British trade unions( much to Enoch Powell’s derision) and electing an arrogant housewife with a chemistry degree to promote class conflict.
It is a fact that, despite being a really significant event, nobody has even heard of the Nixon shock in the UK .
https://www.theguardian.com/world/2013/oct/15/russia-offered-newzealand-military-hardware
At one stage NZ was offered two MiGs and a nuclear sub in return for that Russian butter debt.