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”