Why high oil prices are actually good for the US... And why that's bad.

[Taco John]

Americans need to understand that the American dollar is tied to oil, and why this is not a great thing for us.

Our monetary system is intrinsically tied to this war. As it is right now, it's actually in America's WORST interest to discover alternative energy and decrease the demand for oil. Most Americans don't understand this, because the economy seems to work, and thus "no problem." Let me try to explain this in simple terms that anyone can grasp...

In 1971, in response to protect a delpeting gold reserve, Nixon acted to detach the gold backing from the dollar. Our notes then became "government-backed" dollars, which is basically "faith-based" currency, otherwise known as the "Fiat System." The Fiat System is a socialist system, requiring central economic planning (as opposed to the free market system, which organizes itself based on supply and demand).

Not long after the jettison of the gold standard, the US and the Organization of Petroleum Exporting Countries (OPEC) struck a deal, and it was determined that OPEC would only accept US dollars for oil purchases. This created a worldwide demand for US Dollars, and thus our economy has chugged along, with the dollar being backed by the demand for the oil of the OPEC nations. So rather than our money being backed by a tangible asset (gold), it is backed by an intangible assett (the worldwide demand for oil). Can you see why the founders were adamant against this practice and mandated that we stick strictly to a gold standard?

Here's the rub: the higher oil prices go, the more demand is created for the US dollar. Other nations require more US dollars in order to cover the rising costs. The higher the price of oil, the more valuable our dollar is. Thus, anything we do to decrease the price of oil is harmful to our economy (for instance, building our own refineries to compete on a cost basis against oil from the Middle East, is actually in our worst interest). The more we can do to increase the price of oil, the better off we are.

Ron Paul very much wants to move to a gold standard, knowing that a fiat system is doomed to collapse as a cyclical matter of course. What you have to understand about a fiat system is that it is a socialist system that requires central planning. A gold system requires little to no central planning. The market determines how much gold is worth, and thus the value of the currency which it is backing.

Ron Paul wants to move America back to a standard where our dollars are being backed by hard currency. Paul wants to do this, not because he thinks it would be a fun thing to do, but because like all students of Austrian free-market economics, he knows that Fiat money systems inevitably collapse. This happened in the United States once before when several Colonies released Continental dollar with no solid backing. They flooded the market with Continental dollars, and then the British counterfeitters went into action flooding the market, hastening the depreciation of their value. Before too long the currency was so wracked with inflation that it lost nearly all its value. In 1779, $100 in gold translated to $2600 in Continental paper currency. Two years later, the same amount could buy $16,800 worth. This kind of collapse is what Ron Paul would like to protect the American dollar from by re-establishing the Gold standard.

You're going to find people who will insist that it's not practical to switch to a gold standard. And in a sense they're right. When you produce nothing as a nation to attract gold *to* your nation, then a gold standard is impractical. This is like someone with no revenue producing job, but a kick-ass set of credit cards saying "using cash is impractical, when I can just use these to pay for whatever I want. If I need more money, I just get another credit card, and pay the others off with it." (This isn't a perfect analogy, but it's not as far off as I wish it were either.) There's a good argument that we would still have a thriving manufacturing industry if we were on the gold standard, as it would very much be in our nation's best interest to export goods.

There isn't a shortage of people who will tell you that getting off the socialist fiat standard and switching to a free market gold standard is the recipe for a great depression. They're wrong, and worse, they're supporting a socialist system which is inevitably headed off a cliff towards the depression they are warning about. It's already been proven that socialism doesn't work, so why would we want their monetary system?

But don't take my word for any of this... Read what Alan Greenspan has to say about the Gold Standard.

[Bronco Bob]

Wasn't the reason Nixon moved the US off the gold standard was because
most of the gold had been blown through financing the Vietnam war
and the US was about to run out of gold. Does anyone really know
how much gold the US has left? Fort Knox is so heavily guarded that
not even Congress is allowed inside to look around. We might not even
have any gold left, so trying to return the US to a gold standard might
be akin to Hitler sending in non-existent battalions to fight the Soviets.

[Taco John]

Originally Posted by Bronco Bob

Wasn't the reason Nixon moved the US off the gold standard was because
most of the gold had been blown through financing the Vietnam war
and the US was about to run out of gold.

Yes, this is correct. The Vietnam war depleted the reserves, creating inflation because there were plenty of dollars out there, but the reserves were depleting substantially, meaning less value per dollar. Right now, to increase the value of the dollar, we have to increase the worldwide demand for oil. One way to do that is war.

Does anyone really know how much gold the US has left? Fort Knox is so heavily guarded that not even Congress is allowed inside to look around. We might not even have any gold left, so trying to return the US to a gold standard might be akin to Hitler sending in non-existent battalions to fight the Soviets.

That's a good question. I wouldn't begin to know how to answer it.

[Taco John]

Originally Posted by Bronco Bob

We might not even
have any gold left, so trying to return the US to a gold standard might
be akin to Hitler sending in non-existent battalions to fight the Soviets.

One thing to remember though... there is always ways to get gold back into your country. All you have to do is produce.

[ak1971]

Originally Posted by Taco John

One thing to remember though... there is always ways to get gold back into your country. All you have to do is produce.

or steal it.

[yavoon]

**** the gold standard. god damnit, its a shiny metal on the periodic table of elements. its value beyond industrial is no less imaginary then anything else.

[Taco John]

Originally Posted by yavoon

**** the gold standard. god damnit, its a shiny metal on the periodic table of elements. its value beyond industrial is no less imaginary then anything else.

Why would we need to place any value past industrial? It's industrial value alone is enough to provide sound backing without inhibiting technological advances. We can't afford to build refineries in America, because if we were to sell our oil on the world market in competition with the OPEC nations, two very dangerous things would happen:

1. The price for oil would go down, and thus the value of the dollar would depress

and

2. The OPEC nations would feel betrayed and switch to the Euro (which they arlready want to do. That was the last major mistake that Saddam made -- In 2000 he started accepting Euros for his oil, which the US wouldn't stand for -- within two years our dollar declined 17% on the world market losing almost 20% of its value! You're not going to have wild fluctuations like that on a steady gold standard.


Any new technology developed to diminish the demand for oil depresses the value of the dollar. This is why there hasn't been any real innovation in this area since the 1970s. It's not because we've hit some technological ceiling...

[Bronco Bob]

Originally Posted by yavoon

**** the gold standard. god damnit, its a shiny metal on the periodic table of elements. its value beyond industrial is no less imaginary then anything else.

I was sort of thinking the same thing myself. From a purely technical point
all gold has going for it is it is relatively inert so it doesn't corrode easily.
This it makes a good coating over electrical conductors, such as the
RCA plugs on your VCR audio and video inputs.
And it has a shiny yellow color so it's less boring looking than silver or platinum.
But it is too soft to make tools out of. And other heavy metals such as
lead and uranium are more common if you are looking for a good ballast or
to use as radiation shielding.
So if anyone has any of this useless metal just lying around, send it
to me and I'll dispose of it for you.

[Taco John]

Originally Posted by Bronco Bob

I was sort of thinking the same thing myself. From a purely technical point
all gold has going for it is it is relatively inert so it doesn't corrode easily.
This it makes a good coating over electrical conductors, such as the
RCA plugs on your VCR audio and video inputs.
And it has a shiny yellow color so it's less boring looking than silver or platinum.
But it is too soft to make tools out of. And other heavy metals such as
lead and uranium are more common if you are looking for a good ballast or
to use as radiation shielding.
So if anyone has any of this useless metal just lying around, send it
to me and I'll dispose of it for you.

No doubt! You know what happens if the dollar falls through the floor? Everybody starts imagining that they want gold!

[cbs1177]

Originally Posted by Bronco Bob

Wasn't the reason Nixon moved the US off the gold standard was because
most of the gold had been blown through financing the Vietnam war
and the US was about to run out of gold. Does anyone really know
how much gold the US has left? Fort Knox is so heavily guarded that
not even Congress is allowed inside to look around. We might not even
have any gold left, so trying to return the US to a gold standard might
be akin to Hitler sending in non-existent battalions to fight the Soviets.

I am sure we have some loans not paid back for World War II loans and thus each successful war. I mean just recently we repealed the phone tax that was to fund the Spanish American War. And recently England just paid off its war debts.

http://news.bbc.co.uk/1/hi/magazine/4757181.stm

So if need be America could call in loans it has made over the course of its 200 year history.

[W*GS]

Why not rhodium? It's at about $6200/oz., almost 10x gold.

[L.A. BRONCOS FAN]

This is like someone with no revenue producing job, but a kick-ass set of credit cards saying "using cash is impractical, when I can just use these to pay for whatever I want. If I need more money, I just get another credit card, and pay the others off with it."

That just about sums up the Bush economy, eh?

As for the petro dollars issue, it has long been postulated that one of the main reasons Bush was so intent on "regime change" for Iraq was because Saddam Hussein was planning to switch from the dollar to the euro as Iraq's reserve currency for oil purchases.

[Bronco Bob]

Originally Posted by L.A. BRONCOS FAN

That just about sums up the Bush economy, eh?

As for the petro dollars issue, it has long been postulated that one of the main reasons Bush was so intent on "regime change" for Iraq was because Saddam Hussein was planning to switch from the dollar to the euro as Iraq's reserve currency for oil purchases.

Isn't Iran thinking of doing the same thing? That would explain the sabre rattling against Iran by Bushco.

[L.A. BRONCOS FAN]

Originally Posted by Bronco Bob

Isn't Iran thinking of doing the same thing? That would explain the sabre rattling against Iran by Bushco.

Yep.

The bush junta is in the process of creating the same sort of phony case to show why Iran is a "threat" to our security that it created with Iraq.

The idea that the same lemmings who fell for the Iraq con job would believe these liars a second time is almost incomprehensible.

[yavoon]

Originally Posted by Taco John

Why would we need to place any value past industrial? It's industrial value alone is enough to provide sound backing without inhibiting technological advances. We can't afford to build refineries in America, because if we were to sell our oil on the world market in competition with the OPEC nations, two very dangerous things would happen:

1. The price for oil would go down, and thus the value of the dollar would depress

and

2. The OPEC nations would feel betrayed and switch to the Euro (which they arlready want to do. That was the last major mistake that Saddam made -- In 2000 he started accepting Euros for his oil, which the US wouldn't stand for -- within two years our dollar declined 17% on the world market losing almost 20% of its value! You're not going to have wild fluctuations like that on a steady gold standard.


Any new technology developed to diminish the demand for oil depresses the value of the dollar. This is why there hasn't been any real innovation in this area since the 1970s. It's not because we've hit some technological ceiling...

haha I dont know about the conspiracy end. but the gold standard is retarded=D.

[Bronco Bob]

Originally Posted by yavoon

haha I dont know about the conspiracy end. but the gold standard is retarded=D.

Gold is only valuable because it is rare. When the Spaniards discovered
the new world they stole so much gold from the Native Peoples and shipped
it back to Europe that it actually wrecked the Spanish economy because it
drove down the value of gold in Europe.

[Taco John]

Yes, Iran started doing that late last year.

[Taco John]

Originally Posted by yavoon

haha I dont know about the conspiracy end. but the gold standard is retarded=D.

What conspiracy end? This is basic economics. It's simple supply and demand.

[yavoon]

Originally Posted by Bronco Bob

Gold is only valuable because it is rare. When the Spaniards discovered
the new world they stole so much gold from the Native Peoples and shipped
it back to Europe that it actually wrecked the Spanish economy because it
drove down the value of gold in Europe.

one of the bad things it did to the spanish(not all of europe) was it caused massive inflation. goods/services that were an ounce in germany were 5 ounces in spain. but I'd hardly call the economy "wrecked."

gold is valuable mostly because it was a good thing to make coins out of back in the day. doesn't rust, is malleable, shiny, relatively rare. even with limited skills you can work gold.

it does have other good industrial properties, like its extreme conductivity.

[yavoon]

Originally Posted by Taco John

What conspiracy end? This is basic economics. It's simple supply and demand.

it all starts w/ the "we can't afford to build refineries in america." which is crap. the western world has decided, through the eco-lobby that building things like nuclear plants, refineries, coal plants are bad and should be opposed. thats why we don't have new refineries in america, they are big nasty polluting things. interestingly the worlds refining capacity is gna be met by singapore/china/india all who are building MASSIVE refineries. and none of them have huge amts of oil.

[Taco John]

Originally Posted by yavoon

it all starts w/ the "we can't afford to build refineries in america." which is crap. the western world has decided, through the eco-lobby that building things like nuclear plants, refineries, coal plants are bad and should be opposed. thats why we don't have new refineries in america, they are big nasty polluting things. interestingly the worlds refining capacity is gna be met by singapore/china/india all who are building MASSIVE refineries. and none of them have huge amts of oil.

I had a pretty lengthy reply written out, but then it dawned on me... I've got to remember who I'm talking to. You're the guy that said that Dennis Northcut was better than Rod Smith. You like to argue just for the sake of argument, even if you don't know what you're talking about.

Environmentalists grinding refinery production to a halt when there are billions of dollars at stake! Silly kid...

It's simple economics.

[Bronco Bob]

Originally Posted by yavoon

it all starts w/ the "we can't afford to build refineries in america." which is crap. the western world has decided, through the eco-lobby that building things like nuclear plants, refineries, coal plants are bad and should be opposed. thats why we don't have new refineries in america, they are big nasty polluting things. interestingly the worlds refining capacity is gna be met by singapore/china/india all who are building MASSIVE refineries. and none of them have huge amts of oil.

Singapore? I've been to Singapore and it isn't all that big and is
heavily populated. Plus they are fanatical about cleanliness.
You can actually be arrested for chewing gum in public.
Where are they going to put a refinery?

[L.A. BRONCOS FAN]

Originally Posted by Taco John

I had a pretty lengthy reply written out, but then it dawned on me... I've got to remember who I'm talking to. You're the guy that said that Dennis Northcut was better than Rod Smith. You like to argue just for the sake of argument, even if you don't know what you're talking about.

[yavoon]

Originally Posted by Taco John

I had a pretty lengthy reply written out, but then it dawned on me... I've got to remember who I'm talking to. You're the guy that said that Dennis Northcut was better than Rod Smith. You like to argue just for the sake of argument, even if you don't know what you're talking about.

Environmentalists grinding refinery production to a halt when there are billions of dollars at stake! Silly kid...

It's simple economics.

its worked with more than just refineries, look at california's power infrastructure. canada sells its coal to china because it doesn't build new coal plants, so it lets china burn the coal instead.

its extremely difficult to build anything thats polluting in america, for better or worse.

[yavoon]

Originally Posted by Bronco Bob

Singapore? I've been to Singapore and it isn't all that big and is
heavily populated. Plus they are fanatical about cleanliness.
You can actually be arrested for chewing gum in public.
Where are they going to put a refinery?

singapore already has refineries, they are just planning expansions. exxon mobil has two refinery locations in singapore.

http://www.exxonmobil.com/AP-English...o_refinery.asp