Wednesday, November 28, 2007

Paying the Piper

The U.S. dollar is hovering near a new low today … $1.47 per Euro … and I’m afraid it is destined to go lower. Why? Very simply, because our balance of trade is so abysmal (running about a negative $55 billion per month!), partly traceable to the outrageously high price of oil (closing in on $100 per barrel), and this traceable primarily to an international oil cartel that has (through collusion and the politics of fear) decoupled the price of oil from what a free market would dictate (many believe that the free-market price of oil would be below $50 a barrel.) (If the UN were to ever aspire to become a world government, it would do away with international cartels of any stripe.)

What are the U.S.’s options to deal with this conundrum? Unfortunately there are only a few … and most of them are onerous:

1) Continue to lower U.S. interest rates and, as a consequence, weaken the U.S. dollar further. This, in turn, would devalue the dollar reserves held by foreign governments (often now being called “sovereign funds”) and probably cause a stock market swoon. But, this would make our exports cheaper and much more attractive to world markets and therefore should help to improve our balance of trade.
2) Install high import duties on oil and many Chinese (read Wal-Mart) items. Unfortunately this would likely cause a trade war (which many claim caused the economic depression in the 1930’s).
3) Establish a clear national priority to become energy independent within five years. This would mean increasing mileage standards for new cars and trucks, building many new nuclear power plants, reducing clean-air standards for coal-fired power plants, placing greater emphasis on bio-fuels, drilling for oil in ANWAR and in the gulf of Mexico (e.g., off-shore in Florida), and harvesting/processing the oil shale deposits in Utah. (Other talked-up alternatives such as wind power, solar power, etc. would have minimal effect.)
4) Devalue the U.S. dollar. Basically, say that our dimes are now called “dollars” with many of the same results as noted in #1.
5) Disavow our foreign debts. This could be done by declaring that only U.S. citizens or companies could redeem government debt obligations. This would force foreign governments to sell their U.S. government debt obligations to U.S. citizens/companies at pennies on the dollar.
6) Invade and take over the oil supplies of one or more Middle Eastern countries (or even Venezuela). I would suggest maybe Saudi Arabia and Kuwait. We could also directly usurp most of the Iraqi oil production to our benefit (over ¾ billion barrels per year).
7) Permit or even encourage foreign ownership of U.S. companies (e.g., Citigroup, NASDAQ, etc.) and then, at some point in the future, nationalize these companies. (Russia, Cuba, Venezuela, China, Mexico, Saudi Arabia, etc. have all done this very thing to us in the past.)

Let’s pretend you’ve just been elected President. Which one (or ones) would you choose?

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