Friday, May 6, 2011

Gaddafi and Gold

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9 Comments:

OpenID danightman said...

Add that to the fact that the rebels dutifully created a national bank of Libya to kite checks with this, and a dark pattern emerges.

Is the capital offense among nations the crime of self-liberation from the Morgan / Rockefeller / Rothchild debt complex?

8:22 PM  
Blogger The Western Confucian said...

They did set up that central bank pretty quick. I've never heard of that happening before.

I was living in Malaysia when George Soros attacked the country's currency, leading to the Pan-Asian Crisis of 97-98. Dr. Mahathir refused to follow the IMF's plan, and his country's economy emerged far more unscathed than those who did, like South Korea.

I wrote about my experiences a few years ago -- I Survived the IMF.

8:53 PM  
Blogger Francis-Xavier said...

This is dead wrong.

Today you can buy - or sell - $50 million on the forex market in a thousandth of a second. In other words, people don't need to save dollars in order to buy oil, nor are sellers bound to accumulate dollars. If the price of oil were to be benchmarked in Vanuatu vatus, it would take about 15 minutes for everyone to adjust.

The reason Gaddafi's foes set up a central bank almost certainly is that the Gaddafi clan has many billions overseas, and that a country can have multiple central banks, as Hong Kong shows, but not multiple ministries of finance. Calling the receptacle they hope will receive Libya's foreign holdings a Central Bank makes it much easier for outsiders to oblige them.

10:56 PM  
Blogger The Western Confucian said...

"If the price of oil were to be benchmarked in Vanuatu vatus, it would take about 15 minutes for everyone to adjust."

Everyone but the Americans, who now produce nothing (thanks to our economic planners), and rely on the petrodollar to keep the Ponzi Scheme afloat.

11:07 PM  
Blogger Francis-Xavier said...

How does "the petrodollar keep the Ponzi Scheme afloat?"

11:54 PM  
Blogger The Western Confucian said...

Fair question. From Wikipedia's Petrodollar warfare page:

"Most oil sales throughout the world are denominated in United States dollars (USD).[1] According to proponents of the petrodollar warfare hypothesis, because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to continue imports. This creates a consistent demand for USDs and upwards pressure on the USD's value, regardless of economic conditions in the United States. This in turn allegedly allows the US government to gain revenues through seignorage and by issuing bonds at lower interest rates than they otherwise would be able to. As a result the U.S. government can run higher budget deficits at a more sustainable level than can most other countries. A stronger USD also means that goods imported into the United States are relatively cheap."

12:35 AM  
Blogger Francis-Xavier said...

This simply isn't true.

The price of oil is determined by supply and demand, and the metric by which it is measured is inconsequential, particulary today when you can "stockpile" dollars in a fraction of a millisecond.

It doesn't matter if you indicate your height in inches, feet, yards or miles, it won't change your height, and no less does the unit of measurement used change the price of oil.

1:00 AM  
Blogger The Western Confucian said...

But fiat currencies, unlike gold or the glorious British imperial units you mention, have no intrinsic value.

2:01 AM  
Blogger Francis-Xavier said...

The argument behind the "Saddam Hussein or Gaddafi or Mubarak or whoever else had to go because they were moving away from the dollar" arguments is that the dollar is not viable as a currency if moneys reserved to buy oil aren't kept in dollars.

If you are worried about keeping your assets in commodities "with intrinsic value," you can, assuming that gold has an intrinsic value, store gold in a safe under your bed, then bring it to the bank, and have them buy the dollars they need in a split-blink of an eye, and transfer the dollars to oil vendors in another split-blink of an eye.

In other words, some clowns pricing their oil exports in non-dollars need not force people to sell their dollars, nor does pricing oil in dollars prevent people from keeping their savings in gold. People used to buy the dollar because in cold war days the US dollar was the most solid currency you could buy, and they now largely hold dollars because there are few better options, and because they're lazy.

2:26 AM  

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