(This may take a few days, but let's start with one of the most forgotten and obscure, but major reasons the price of oil is high again today, as it was in the 70s.)WHEN THE DOLLAR FLOATS SOUTH, OPEC GLOATS
REASON 1: Getting the US dollar off the gold standard. Oil prices began to rise inordinately after President Nixon untied the American dollar from the gold standard in 1971. This was a monumental economic mistake and caused the value of the dollar to plummet while sending commodity and gas prices through the roof. John Tamny explains it well here
When the dollar began to float in relation then only to other currencies, commodities started to float upwards and fluctuate wildly. Inflation was directly proportional to the falling dollars. It was the beginning of OPEC having any teeth at all.
While it's probably impractical except as some sort of partial reserve, if we really want to see the price of gas stabilize in the mid to long run, then we need a president who will put the dollar back on some kind of basis with the gold standard and let it stabilize accordingly. OPEC will suddenly find itself with much duller teeth, maybe with no teeth at all.
Today the dollar is at historic lows, commodity prices, including gasoline, are at historic highs and it looks like we're going up the creek without a paddle, as OPEC can yank our chain and pull our whiskers.
Oh yes it can.
Interesting. Ben Stein was on Glenn Beck's radio show today. He was a speech writer for both Nixon and Ford. He loved Nixon. I wonder why Nixon chose to do that. Did he not need the approval of Congress?
ReplyDeleteBob, I need to research this more, because I don't know the answer to that. Will see what I can find out about that.
ReplyDeleteA little from Wiki:
ReplyDeleteThe return to the gold standard is supported by many followers of the Austrian School of Economics, objectivists and libertarians.
U.S. Congressman and Presidential candidate Ron Paul is perhaps the leading advocate of a return to the gold standard (or at least the legalization of competing currencies which would include gold and silver) in the Western world.
Few lawmakers[who?] today advocate a return to the gold standard, other than adherents of the Austrian school and some supply-siders. However, many prominent economists have expressed sympathy with a hard currency basis, and have argued against fiat money, including former US Federal Reserve Chairman Alan Greenspan (himself a former objectivist) and macro-economist Robert Barro[citation needed]. Greenspan famously argued the case for returning to a gold standard in his 1966 paper "Gold and Economic Freedom", in which he described supporters of fiat currencies as "welfare statists" hell-bent on using monetary printing presses to finance deficit spending. He has argued that the fiat money system of today has retained the favorable properties of the gold standard because central bankers have pursued monetary policy as if a gold standard were still in place.
The current monetary system relies on the US Dollar as an “anchor currency” by which major transactions, such as the price of gold itself, are measured. Currency instabilities, inconvertibility and credit access restriction are a few reasons why the current system has been criticized[citation needed]. A host of alternatives have been suggested, including energy-based currencies, market baskets of currencies or commodities; gold is merely one of these alternatives.
In 2001 Malaysian Prime Minister Mahathir bin Mohamad proposed a new currency that would be used initially for international trade between Muslim nations. The currency he proposed was called the islamic gold dinar and it was defined as 4.25 grams of 24 carat (100%) gold. Mahathir Mohamad promoted the concept on the basis of its economic merits as a stable unit of account and also as a political symbol to create greater unity between Islamic nations. The purported purpose of this move would be to reduce dependence on the United States dollar as a reserve currency, and to establish a non-debt-backed currency in accord with Islamic law against the charging of interest.[1] However, to date, Mahathir's proposed gold-dinar currency has failed to become an accomplished fact