Happy Thanksgiving from The Lady!

I just wanted to take a moment to wish any and all of my readers, especially those back home, a very Happy Thanksgiving.  As I’m currently abroad, holidays can feel a bit lonesome, even with my husband and friends around.  Tomorrow is just another day for us.  However, I would like to take a minute and think about the things that really matter this Thanksgiving, as we all have a lot for which to be thankful.

I miss my family a lot when I’m overseas.  My family had a big Thanksgiving reunion last weekend, and it’s hard to be away when everyone is posting pictures and guilting you about not being there, though it certainly wasn’t because we didn’t want to be.  Fortunately, most everyone I know here has a good “friend family,” and we’re all able to get together in some way and celebrate together, even though we can’t be back home with our folks.  Friends can oftentimes be just as good as family.

I’m very thankful that I have a good job that has allowed my family to save money towards purchasing a house.  I’m thankful that we’re all healthy and have a nice, warm apartment to call home on this blustery night.  I know that there are a lot of people who aren’t even half as fortunate as we are, and it’s to those people who have lost their homes in the crisis, have found themselves without work, and who are making do with less this holiday season that I would like to extend sincerest wishes for a holiday that is nonetheless filled with love and hope.

Times are hard for a lot of people right now, and the future is uncertain for many.  We have the tools to make our lives better in the coming year, if only we use them to their best advantage.  So for all of you, wherever you find yourselves this Thanksgiving and on into the holidays, may your travels be safe, may the food be plentiful, may your friends and family be well, may Black Friday not result in any major injuries, and may you find many reasons to be thankful this holiday season.  Happy Thanksgiving, everyone!

Run, Ron, Run!

Ron Paul’s campaign website has a new blog article up featuring several mainstream media articles on his strengthening position in the early states, such as Iowa.  The Paul campaign as thrown a lot of money into Iowa.  According to The Washington Post, which was quoting a Forbes poll, fully 67% of Iowa voters polled had been contacted by the Paul campaign.  Paul has been advertising since July, as well, so he’s had an early advantage.

I don’t know the Paul campaign’s real reason for starting so early, but I suspect it’s because they know one thing, if they know nothing else: Paul must win early to prove that he has even a snowball’s shot at the nomination.  The media, historically, has taken every opportunity to ignore him, and they’ve even created a few of their own.  It would be tough to downplay a victory in Iowa.  Or at least, I think that’s what they’re banking on.  At any rate, the Paul campaign is going to have to capitalize on the statistical tie for first and do his damnedest to come out ahead.  The first races are vital to the long-term survival of the campaign.

My final thought is that it’s good to see him getting some more press coverage!  It’s about bloody time!

“Conspiracy Theorists” Not Welcome on OWS Site

The OWS site has changed its moderation policies so that folks who listen to Alex Jones, David Icke, Lyndon Larouche, and others, as well as political campaign supporters – particularly Ron Paul 2012 supporters.  Anyone who posts anything about anything these guys say is subject to a global network ban now.  Seriously?

I will admit that I watch Alex Jones – not religiously, but I do enjoy him.  Not everything he says is correct, but he does put out good information, and he talks about things that the MSM won’t touch, and I appreciate that.  David Icke is kind of a nutter, frankly, but people have the right to listen to him, if they so desire.  I don’t know all that much about Larouche, although I’ve seen a few videos of his.  Honestly, I don’t really remember what he’s about.  But I do know that some of the so-called “conspiracies,” such as the Federal Reserve destroying the currency, aren’t really conspiracies, but they are true, from a financial standpoint.  Whether or not it’s a conspiracy, well, that’s another story.  The “conspiracy” that there is no real law mandating a personal income tax?  Not a conspiracy – it’s true.

Where am I going with this?  It seems silly to place a ban on information coming from certain sources.  I understand that the organization – and apparently there is some form of organization at the top, even if the street protestors seem helter-skelter – has the right to do whatever it wants with its own website, but in my opinion, they aren’t doing their supporters any favors by excluding certain topics from discussion.  There should be a discussion of the Fed and the role that government plays in the creation of this debt problem.  Injection of different ideas can be a healthy thing.

Also to be considered is that actions like this aren’t going to garner the movement any brownie points with “the other side” – the disaffected conservative element.  And there is a disaffected “conservative” element which includes Republicans, libertarians, and constitutionalists.  It seems foolhardy to actively attempt to splinter away from these people.  It seems foolish to ban certain ideas just because they’re “conservative.”  Not all conservative ideas are inherently “bad,” just as not all liberal ideas are inherently good.  Both sides have good points about some things.

Whatever the case, I think OWS is going to end up alienating people who would potentially like to take part.  They have the right to shut the door on these people, but it isn’t going to help the cause, nationally.  Also, if I’m being honest – or perhaps sounding like a conspiracy theorist – it seems like they’re trying to separate themselves from any conservative element, which is a quick way, frankly, to ensure that the movement never makes it past a certain stage of development.  If a large portion of the country views them as dirty, socialist hippies with no tolerance for any difference of opinion, they’ve already slit their own throats.  Either the movement has already been co-opted, or they’re just foolish.

If you want to take a look at OWS moderating policies, click here.

Paul Surging in Polls

It’s getting late, and I seem to be developing the nasty cold/sinus infection that is circulating at my school, but I wanted to post this.  Ron Paul’s candidacy site posted this article saying that he is currently surging in the polls.  It looks like he’s set to come in first or second in the Iowa and New Hampshire primaries, as of right now.  This is excellent news for those of us who have been supporting him for years.  I’ve been waiting a long time for this.

The pundit is claiming that Paul would make a legitimate run as a third-party candidate.  I have no idea why they have to inject that into the debate.  Paul has said over and over again that he won’t run as a third-party candidate.  Frankly, Paul running as a third-party candidate could potentially deal a fatal blow to any Republican candidate.  Paul fans – myself included – are notoriously devoted to their man, and most of them would leave the Republican establishment in a  heartbeat to vote for him.  He would also take away a large base of Democrat crossover voters, as well as independents.  While I seriously doubt that, should Paul lose the nomination, he will endorse the Republican candidate of choice, I don’t think we can expect to see him run third-party.  He has said over and over that he wouldn’t do it, and I believe him.

Still, I rather hate to see pundits even implying that he might, because it plants the seed in the readers’ minds that he won’t win, and I’ve had enough of that.  The other candidates have had their horns tooted.  When does Ron Paul get his turn?  Honestly, I believe that he will have to win Iowa or New Hampshire to garner mainstream media attention, and even then, I think they will try to downplay any victory of his to the American public.

Nevertheless, I am heartened by this good news.  It feels good when you see your cause making progress after spending years and years out in the political wilderness.  I guess every idea has its time.  Perhaps liberty is due to make a comeback!

I Wish OWS Stood for “Occupy Washington, Stupid!”

Occupy Wall Street still seems to be bringing the turmoil to cities across the country.  I would like to start off by saying that I think it’s great that folks are exercising their freedom of speech – when they aren’t being maced by John Law – and their right to make a peaceful stink in public.  That said, I still think OWS has missed the boat on the fundamental reasons why this whole financial catastrophe has come about in the first place.  I know that I might as well wish for the moon, but I really wish some “End the Fed” protestors would make the rounds at these things and get some more people educated.  That might bring a bit more direction and sense to OWS, which unfortunately seems to lack a clear focus about what it wants.  The movement, as a whole, knows it’s pissed off, but doesn’t really know what to do to go about getting anything done.  There is no clear platform here.  And yes, this is another post about monetary policy.

There is a great illustration that was created by a guy named James Sinclair, and it looks like this:

In a lot of respects, they’re upset about the same things.  The main differences are that OWS protestors tend to be young adults or students with a socialist tendency while Tea Party members tend to be middle-aged and kinda like Sarah Palin.  Well, I don’t like socialism or “Sexy Sarah,” but I do think it would be nice if some of the “End the Fed” elements popped up more often.

The truth is that the current financial crisis was not created by Wall Street, as such; it was created by the Federal Reserve.  Both current Fed chair Ben Bernanke and his predecessor, Alan Greenspan, are both known for targeting inflation.  That is, they take a look at one measure of the economy – the consumer price index (CPI), for example – and then move to keep that index on a target rate of inflation.  They become fixated on that index and that number.  Without Fed intervention, the market would extend credit based on savings, and investors would take risks based on the rate of returns on capital investment.  The central bank’s manipulation of the money supply, however, throws these things off.

The Austrian business cycle essentially states that the whole thing begins when a central bank buys up assets, which directly leads to the banks expanding credit.  The result here is that prices and inflation concurrently go up.  Businesses will tend to borrow more and, when this money comes onto the market, it will artificially lower interest rates.  The problem here is that when interest rates are artificially low, investments that might have otherwise looked like a losing proposition to business owners will suddenly look far more palatable, and these businesses will start buying up capital goods.  To quote Murray Rothbard: “In short, businessmen react as they would have if savings had genuinely increased: they move to invest those supposed savings.”  I bet you can see where all this is going.

Rothbard continues to explain that, because of an excess of work in the capital goods industries, worker wages are bid higher and higher.  The workers will, in turn, begin to spend this money.  Unfortunately, the lower interest rates reflect saving that is not really happening, and saving is necessary for capital investment to occur successfully.  In effect, businesspeople have a false perception of the real amount of capital available to them.  They have been tricked into believing that people are saving more than they really are.

So what happens when consumers start to get back into their old savings/consumption routine?  Bad news bears, that’s what happens.  Businesses realize that they have invested too much in production goods and not enough in consumer goods.  At this point, an economic depression occurs.  It should be noted, however, that depressions are a necessary evil in the business cycle, for that is the time when bad investments are liquidated and the market rights itself.  As unsavory as it may be, liquidation in the market is vital.

The question now might be this: how is it that booms are allowed to go on for years and years without any retribution, so-to-speak?  This is where you might want to start penning a “thank you” note to the Fed.  By continually increasing the money supply over and over again, the system never has a chance to right itself.  Consumer spending habits never find their norm, and the cost of the capital goods industry never catches the rise in prices.  Only when the banks finally start to become unstable must the money supply be contracted.

Still with me?  Hang in there.  We’re almost at Ground Zero of the current financial crisis.

The problem now is that the Fed is keeping interest rates artificially low.  In effect, they are continuing to expand credit at a time when it oughtn’t to be extended at all.  The Fed continues to print money every day by holding interest rates so low.  They accomplish this, in part, by buying up long-term Treasury bonds (quantitative easing).  They used to only purchase short-term bonds – ones that matured within days to months – but because the interest rates on them are so low, the Fed has turned to buying longer-term bonds.  This has the result of ticking off our foreign debt holders (like China), weakening the dollar, and it’s also going to directly lead to undervaluing risk and misplacing scarce capital – things we can hardly afford at this stage of the game.

I know that I’ve said this time and time again, but I’m going to repeat myself.  (Those of you who know me will be used to that!)  I say again that there will come a time to pay the piper.  We cannot continue to monetize an ever-growing debt.  There must be a correction, and we are only prolonging the time until that eventual day arrives.  And when it does arrive, it is going to speak with authority.

At this point, I’ll bring us back to my original comparison of OWS and the Tea drinkers.  They’re mad about a lot of the same things, quite rightly.  There aren’t enough parties, however, in either camp who truly understand why the US is in its current situation.  It is vital that both camps understand what is really driving this crisis, and then maybe we will begin to see some real results, instead of the usual left-right paradigm repeating itself ad nauseum.

Note: I used the following articles and books to help me write this post.  Hop on over to Cato and Mises.  They will give you a thorough and academic run-down on Austrian economics and the business cycle that is far superior to anything I could ever hope to print.  Have a look!

 Malfeasant Central Bankers, Again
Business Cycle Primer
Tea Party, Meet Occupy Wall Street
For a New Liberty – Murray Rothbard

Bugger That

As of late, Germany has been sounding the call for further EU integration, which would result in the creation of a European Monetary Fund, as well as an alteration of the EU treaty to avoid triggering a referendum.  In a nutshell, it would allow for further integration of Europe without a protest vote.  And, if this article from Express UK is to be believed, Britain is not reacting well to Berlin’s aggressive integration stance.  (In my experience, the Brits generally don’t react well if they perceive any sort of threat from any outsiders.)

The UK has long abstained from further economic involvement with the EU.  In fact, when initially put to referendum, Britons handily voted down the idea of abandoning the long-standing British Pound Sterling. David Cameron, the Tory (conservative) Prime Minister, suffered a bit of an embarrassment back in late October when several conservative lawmakers balked at his orders to vote against bringing British membership in the EU to public referendum.  Although Cameron spoke as though it wasn’t a serious setback, it seems as though he has lost one battle in what may blow up into a full-blown war to bring Britain out of the EU cooperative.

EU Business reported that Great Britain was divided about equally regarding EU membership, with a slight majority favoring an exit.  Express UK is now reporting that rift to either be larger or growing (it didn’t specify), with now 51% of Britons figured to be in favor of leaving the EU, while only about 32% would vote to stay, if the subject were brought to referendum today.

Ultimately, the same worries that seem to be buzzing around Britain are not limited to the shores of those islands.  EU citizens on the continent have long held similar worries about a unified government and currency – with good reason, perhaps, given that the EU is in dire straits now.  It seems that the political answer to these worries has not be to question the current path but to instead impose integration, a tactic that still seems to be favored by the bureaucrats in Brussels.  In fact, according to this Cato report on economic policy, Chancellor Merkel and the other Volk in Berlin seem to be ignoring a rather obvious reality at home, as well: most Germans are opposed to bailouts of other countries and now favor a return to the good old Deutschmark (God rest it).  Once again, it seems as though the wishes of the people are being ignored, ostensibly for “their own good.”

Though the article was written before the Greek default was admitted – and Greece was defaulting two years ago – it now seems painfully obvious that what the EU is ultimately asking is that Greece, Italy, and others be allowed to take advantage of Germany’s financial power and the benevolence of the government, which represents a population that is currently unwilling.  It’s no wonder certain elements in Britain want out of this mess post haste!

EU leaders are fretting over the idea that if Greece and other weaker states are kicked out, it would signal the failure of the “European project.”  Frankly, it’s already a failure.  In just a few short years after economic integration, Europe’s nut-bag currency and financial policies have led it down the road to ruin.  It would be monumentally difficult to argue, at this juncture, that Europe is doing anything but failing.  Further integrating a mess is not going to make it less of a mess – it’s just going to prolong the descent into the inevitable.  As long as the EU, Britain, and the US pursue easy money policies via monetization of the debt through central banks printing fiat currency, the ultimate economic demise of the countries in question is inevitable.

That said, Britain has less to lose by exiting the Eurozone than one might imagine.  For one thing, they do more business with the US than with mainland Europe, in terms of services and investment, and the same could be said of the US in regards to Britain.  Ultimately, Europe has long disliked Britain’s strong financial and diplomatic ties to Washington.  If Britain were to cave and join the Euro, it would lose a measure of support with Washington, although it would gain favor in Brussels.  Of course, it would also lose most of its coveted financial freedom, something to which the Brits have fiercely clung for a long time.

But as I’ve said, I think the final word for the British Isles will be decided by what the world is perceiving in the economic meltdown of Southern Europe.  Why in the world would anyone want to integrate more closely to that?  It’s like throwing oneself into bankruptcy just because your friend is doing it.  Besides that, I don’t believe that the Brits like to be dictated to, and that’s what closer integration with Europe promises: having Brussels red tape, fiscal, and social policy crammed down one’s throat.

Forbes commentator Tim Worstall had a rather amusing take on what he calls the “political delusion” of the German finance minister and conveys the average British voter opinion, which will hopefully be where the buck (or the pound) finally stops: “The euro?  Wha’ wiv all ’em riots ‘n stuff?  Nah, rubbish, innit?”

Uplifting News

I just read an article in the Des Moines Register placing Ron Paul in second place for the Iowa caucuses, which are now just a few short weeks away.  Although the article once again fails to make mention of Dr. Paul, the proof is in the pudding: Paul is a viable candidate with a good shot at winning.  If you truly love liberty and hunger for change, get behind the only candidate who is pushing for it: Ron Paul!  No more wars!  No more endless debt!  No more unlimited presidential power!  Less government!

Predictable: European Leaders Calling for Further Integration

I am generally unsurprised by the European meltdown.  I mean, the way that their banking system is set up doesn’t exactly induce member states to live by their means.  In the wake of this meltdown, European leaders are calling for closer integration which, in my mind, is just about the last thing these folks need.  I’ve found two articles today where in Angela Merkel, the chancellor of Germany, and Jose Barroso, EU Commission President, claimed that Europe needs to be more closely bound in order for the Euro to survive.  I have no idea what logic they’ve used to arrive at this faulty conclusion, but they’re wrong.

We need to look at why Europe is in this trouble in the first place.  The European Central Bank operates in much the same way that the Fed does, except that it is a “produce money and lend” (PML) approach, while the Federal Reserve used the “produce money and purchase” (PMP) approach.  Although the process is similar, says Philipp Bagus via the Mises Institute, the results are the same: the money supply is expanded, which allows governments to keep living beyond their means.

I will admit that the article, while excellent, can be a bit, well, scholarly (i.e. boring for most people and hard to read in parts).  Nonetheless, it has diagrams that go along with it to show the reader exactly how the money supply is being inflated.  Let’s start with the Fed.  In a nutshell, the government issues bonds or, as they are commonly referred to, T-Bills.  The government must pay interest on these T-bills.  The Fed buys them in an open-market scenario which, according to Bagus, “monetizes the debt in a way that does not hurt politicians.”  Basically, politicians make a promise to pay at a later date for money they spend today.  The government pays interest to the bond’s new owner, the Fed.  At the end of the year, the Fed pays a bulk of its interest profit back to the government.  When the bonds mature and the principal must be paid in full, the government simply issues new bonds to pay the principal on the old ones and continues the cycle of monetizing the debt.

At the same time as the Fed is buying government bonds, it will also allow credit extensions to private banks, which operate on the fractional reserve system.  Fractional reserve banks loan out money at a rate of about 6:1, meaning that, at any point, they are unable to pay back all of their depositors’ cash.  Essentially, the Fed uses the interest money to expand the supply of credit to the banks.

In the case of the ECB, it receives the government bonds from banks, rather than directly from the government itself.  The banks use those government bonds as collateral against ECB money, which it then loans out at interest.  At this point, you can see how fractional reserve banks are inherently bankrupt, for they are always increasing the money supply at a greater rate than they would be able to pay back, were those loans ever recalled and the money supply contracted.

In any case, since the bonds are merely collateral held by the ECB, the bonds still belong to the private banks, and the governments pay interest to the banks, rather than to the ECB directly.  The banks then pay interest on their loans from the ECB, and the ECB provides a portion of its profits to the governments.  In one sense, the Fed is actually more up-front about its dealings, because we can see the bonds on its balance sheets, whereas the ECB doesn’t directly declare this, since the bonds are still property of the banks.  The effect is essentially the same, with the major difference that the profits are often distributed unequally between participating governments, and this is where we run into problems with the likes of Greece, Italy, Spain, Ireland, and anyone else who needs a bailout this week.

Basically, what has happened is that banks have been buying up Greek bonds when they should have been rejecting them outright.  The whole fiat/fractional reserve system avoids meltdown by being held in check by the behavior of other banks.  In truth, there is very little to prop up the system, once it begins to spiral out of control, which is exactly what we’re seeing now.

The problem with Europe is what is commonly referred to in economics as a “tragedy of the commons.”  Because of the misdeeds and irresponsibility of a few, everyone is going to suffer.  In this case, Greek bonds were being purchased for rates similar to German bonds, but the Greek government was spending at a furious rate.  Now that banks aren’t buying Greek bonds, the interest rates have gone up, and the Greeks have been left out in the cold, unable to monetize the debt.  That’s why the news media keeps bleating on about Greece raising taxes on everything – heretofore, they were able to avoid raising taxes by monetizing the debt via the ECB.  Now everyone is going to end up paying for the misdeeds of individual as well as the EU government.

I hardly see how closer integration is going to solve anything, as the EU government has been a vehicle in creating this catastrophe.  It seems more likely that countries like Germany and France will force out the economically impoverished ones such as Greece, although none of Europe is in a glowing situation right now.  The only reason I can figure for Merkel and others calling for closer integration is so that there will be more regulation on the banking sector.  Still, I don’t know how that’s going to solve the essential problem that is inherent to all banking systems such as these.  It seems a far better idea to let go of this half-baked idea about the Euro and go back to currencies that are printed by the governments themselves.  It might not be such a bad idea back home, either!

Note: I owe Philipp Bagus a debt, as I used some of his ideas and source material to help me write this article.  While I have some different ideas about intellectual property, I wouldn’t want to begrudge a true scholar the recognition he deserves.  Please head over to the Mises Institute and check out his articles.  He makes the mess in Europe seem crystal clear.

“The Bailout of Greece and the End of the Euro”
“The Fed and the ECB: Two Paths, One Goal”
“The Commons and the Tragedy of Banking”

This is Ridiculous

I just checked my email, and I received an email yesterday from the Ron Paul Campaign.  In the CBS debate Saturday night, Ron Paul was given a whopping 89 seconds of speaking time out of 90 minutes of debate time.  89 seconds.  Michele Bachmann didn’t fare any better.  I am really sick of this blatant blacklisting of Ron Paul by the mass media.  I’m not a big Bachmann fan, but you know, everyone deserves to have an equal say in a debate.

For those of you who don’t know who Ron Paul is – if you found your way here, you probably know who Ron Paul is – I strongly urge you to find out immediately.  Ron Paul is the only candidate who isn’t calling for an attack on Iran.  Ron Paul is the only candidate in favor of bringing our troops home and stopping these endless wars, which are contributing to our bankruptcy.  Ron Paul is the only candidate who is serious about shrinking the federal government to a manageable size.  And most importantly, he is the only candidate who is serious about ending the Federal Reserve.

Please, educate yourselves on Austrian economics.  I, too, thought economics was a dull subject intended only for math wizards and people with too much time on their hands, but Austrian economics is a genuinely rewarding, uplifting field of economic study.  Read Frederic Bastiat.  Read Murray Rothbard.  Read Ayn Rand.  Read Garett Garrett.  Do it now.  You will be so glad that you did.

Most importantly, if you’re a Ron Paul supporter, please donate to his campaign immediately.  I know that times are hard.  I know that most people don’t have a lot of extra money right now.  But if you can spare even five or ten bucks this month, please, invest it in liberty.  We have got to give this man a fighting chance.  We have to make a statement that we want real change, not more of the same, tired old rhetoric of war, endless spending, and lies.  It’s time America learned the truth and got back on track to prosperity and freedom.  But we have to stand up and fight for it.

I don’t mean to get up on a soapbox, but we’ve got to be vigilant.  This may be the most important election in the last century.  Are we really ready for four more years of Obama or – God forbid – Rick Perry or Mitt Romney?

The Usual Suspects

They say all that glitters is not gold… But apparently, gold can make a big difference now in the survival of a nation’s regime.  I stumbled across an article in The New American (via Infowars, I admit it), and it’s giving a lot of credence to a somewhat off-hand remark I made to my husband one night several months ago when this whole Libya business started up.  I mentioned to him, although I didn’t know exactly why the whole thing was going down, that I bet it had something to do with Libya’s vast gold and oil reserves.  Looks like this wildcat blogger might have struck a gusher, after all!

According to the article, titled “Gadhafi’s Gold-money Plan Would  Have Devastated Dollar,” NATO went into Libya for reasons other than human rights violations.  I’ve heard a lot of my own friends tooting the horn for the death of Gadhafi, many of whom were anti-war doves to the extreme when Bush was invading Iraq.  I find it amazing that so many of them were willing to lambast Bush for what, although undesirable, was a legal war, and praise Obama to the skies for what is unequivocally an illegal war.  But I’m getting sidetracked.  The article states that NATO more likely invaded Libya because of a plan Gadhafi had that would have given substantial bargaining power back to Africa and potentially other oil-exporting countries in the Middle East: only sell oil for gold dinars.  This idea hasn’t gotten a lot of mainstream coverage in the US, but I have managed to dig up some articles about it.

Gadhafi’s regime had its own state bank that was wholly owned and operated by the government of Libya.  That government was also sitting on about 144 tons of gold, which isn’t chump change.  Gadhafi had been lobbying for Africa to come together under a gold-backed currency, the dinar, and begin purchasing oil and other commodities – thereby excluding the dollar.  This is according to economist Anthony Wile of The Daily Bell.  Had this event come to pass, it would have meant big problems for the elites in control of the Western financial system.  In effect, it may have caused yet another financial collapse.

If you lay aside the fact that this plan may have cost Gadhafi his life, this is actually a decent proposition for Africa.  Given the fact that oil is a finite resource with a time limit that is, in relative terms, ticking down rather quickly, it makes financial sense to do this.  Whether or not one believes in pumping to capacity, the fact remains that the USA, along with countries that are heavily involved in production, use an awful lot of oil.  Demanding gold in exchange for oil is a brilliant move because, let’s face it, most Middle Eastern countries don’t have other exportable sources that will ever command the prices that oil and natural gas do.  It would ensure the influence of the oil-rich nations in a post-petroleum world, which isn’t that far off, if we’re being honest and realistic.  The issue of oil and a post-industrial world is something I’d like to and will tackle in another article, however.

The fact remains that Gadhafi was attempting to undermine the Western powers in a very real way.  NATO saying that they wanted to save the Libyan people from a brutal murderer is a lot of hogwash.  NATO has no real designs to get rid of any dictator, regardless of how brutal, so long as that dictator is supportive of Western policy aims.  I sincerely doubt it is the policy aim of the West to lose control of the world financial system.

Take a look at the US.  If you include Medicare and Social Security, we’re in debt to the tune of about $56 trillion.  That isn’t chump change, either.  If the US dollar were to be thrown out as the currency of choice for oil trades – and the US dollar has been the currency of choice for decades, much to our advantage – the US would lose most of its international clout overnight.

Another immediate consequence would be African freedom from the Western-controlled international lending institutions.  The IMF and World Bank haven’t done all that much to help the situation in Africa.  In fact, many intellectuals would argue that they have held Africa back.  This would have a serious effect on countries such as France, that still maintain a stronghold on their old African colonial states.  Now it begins to make sense, why Sarkozy was so keen to get the rebels in and get Gadhafi out.

Yet another curious occurrence involves the almost-immediate formation by the rebel government of a new central bank of Benghazi.  The article appeared in Bloomberg after the rebel government issued a statement saying that they had formed their own oil company and central bank.  Robert Wenzel of Economic Policy Journal finds it rather strange that this rebel government would be so keen to set up a central bank, of all things, while still on the hunt for Gadhafi.  It speaks volumes about the foreign influence in this revolution, that a rebel government would be able to set up a new central bank and appoint a president almost overnight.  It also says a lot about who has the most vested interest in control of Libya, as well as its vast oil and gold reserves.  I’d be interested to find out where all those gold reserves have gone.

Interestingly, there was a similar situation with Iraq and Saddam Hussein right before Bush ordered the invasion.  In 2000, Saddam  had started accepting euros as the trading currency for Iraqi oil.  Of course, we all know that after 9/11, the Bush administration was just looking for any excuse – really, any excuse would do – to go in there and get rid of Saddam, a guy the US government installed in the first place.  Of course, Iran has been trading in “petroeuros” since about 2006.  Iran has a free trade zone on Kish Island and is now using a basket of currencies, including the Iranian rial, the Chinese yuan, and others, to trade for its oil.  In fact, it does business in most any currency except the dollar.  Additionally, Iran supplies India with 400,000 barrels per day and China with a million, respectively.  Iranian oil counts for 15% of China’s petroleum imports.  In spite of the embargo that has been in place since 1979, Iran doesn’t seem to have problems finding buyers for its oil.

And therein lies the dilemma.  When the oil-rich countries stop trading in dollars, we have to stop printing them.  Essentially, when other countries buy our dollars, we get goods and services free of charge back home.  That’s why the US can run such a massive trade deficit year after year.  That’s also why we can keep on financing the printing of “free money” at the Federal Reserve.  That’s why the government doesn’t seem to care about reining in spending.  But if countries stop trading in dollars, well… Let’s just say it would speed what I personally believe is the now-inevitable demise of the US dollar.

Time will tell if we see a sequel to Libya play out in Iran, but I have to think that, unless Iran suddenly changes its mind and decides to start trading in USD overnight, it’s going to keep giving a confident middle finger to the US government.  And honestly, I’m not sure if I blame them.

Check it out yourself:

The New American: “Gadhafi’s Gold-money Would Have Devastated Dollar”
Deccan Herald: “Who Will Now Control Libya’s Gold and Oil?”
The Daily Bell: “Real Cause for Gaddafi’s Expulsion: Wanted Gold Currency”
The Final Call: “Gold, Oil, and Why the West Wants Gadhafi Dead”
Bloomberg: “Rebel Council Forms Oil Company to Replace Qaddafi’s”
CNBC: “Rebels Form Their Own Central Bank”
Rianovosti: “Sam’s Exchange: Iran’s Oil Bourse.  Who’s Next?”
Money Maker: “The OIL Currency”