Sunday, June 15, 2008

IRAN has Bush over a Barrel

If you follow this blog regularly, you know I've been talking about IRAN for a couple of years now, and I've been predicting that we'll probably start dropping bombs before the end of Bush's tenure in office.



Why do I feel this way? Well, it's complicated, but I'll try to keep the explanation simple:

The US Dollar has been the World's reserve currency since the end of WWII. This reserve status was seriously threatened in 1971, when Nixon removed the Dollar/Gold peg and changed the dollar from a "commodity" to a "Fiat" currency.

The US-Saudi Arabian Joint Commission on Economic Cooperation of 1974 restored waning confidence in the dollar by mandating that OPEC sell its oil for US Dollars ONLY. Any country who needed oil now needed to earn or borrow dollars to pay for their oil -- creating a huge worldwide demand for the US dollar and any excess dollars eventually got recycled back to the US.



For many years, this excess dollar recycling created a boon for America and these Petrodollars were used by our banking system to create new credit/debt -- helping our economy to grow.

If there were no good reasons for other countries to buy all those American dollars, the dollar would decline in value until the US economy could no longer afford to import goods from abroad.

Additionally, this excess foreign savings that America has grown used to would also dry up—putting us in quite the predicament.

The deal with OPEC however, means other countries have no choice but to buy all those excess American dollars, which props up the value of the dollar and allows the American "import economy" to go on year after year.

Effectively, America's main export is US dollars, and it is absolutely imperative to preserve a captive market for those dollars among oil-consuming countries -- the continued viability of the US economy depends on it. Americans today can still afford to consume because the economy is inundated with cheap imports, but a continued falling dollar will significantly raise the prices of imported goods and our cost of living.

For three decades, America has reaped the benefits of trading our printed dollars (created from nothing) for oil, but as our trade deficits continued to grow beyond comprehension and foreign policy blunders created new enemies, things started to change.

IRAN's Oil Bourse and refusal to take US Dollars for Oil

For decades, most worldwide oil trading took place on the New York Mercantile Exchange (NYMEX) and the London-based International Petroleum Exchange (IPE). This monopoly has recently come under threat.

In Feb 2008, IRAN opened its own oil Bourse (oil trading platform -- similar to NYMEX & IPE) and then refused to accept dollars for their Oil. (Note: Russia has taken similar steps recently and their new Bourse now trades oil for the ruble).

Theses new monetary threats are seriously jeopardizing the artificial "dollar-for-oil" prop and if the threat is not eliminated soon, the status of the US dollar as the world's reserve currency could be called to question.



Recap: Oil replaced gold in the mid 70's as the underlying peg for the USD and until Iran's recent actions all oil transactions around the globe had to be made in USD's. For three decades, oil provided the foundation for the World's reserve currency, but that foundation is starting to crack...


Shifting gears a bit

Though I disagree with Time author Robert Baer's assertion (that Bush can't attack IRAN) made in the article below, Mr. Baer has several very good points that I think everyone needs to think about.

How Iran Has Bush Over a Barrel

If wasn't clear before it should be now: the Bush Administration can't afford to attack Iran. With gas already at $4 a gallon and rising almost every day, Iran figuratively and literally has the United States over a barrel. As much as the Administration is tempted, it is not about to test Iran's promise to "explode" the Middle East if it is attacked.

The Iranians haven't been shy about making clear what's at stake. If the U.S. or Israel so much as drops a bomb on one of its reactors or its military training camps, Iran will shut down Gulf oil exports by launching a barrage of Chinese Silkworm missiles on tankers in the Strait of Hormuz and Arab oil facilities. In the worst case scenario, seventeen million barrels of oil would come off world markets.

One oil speculator told me that oil would hit $200 a barrel within minutes. But Iran's official news agency, Fars, puts it at $300 a barrel. I asked him if Iran is right, what does that mean?

"Four-dollar-a-gallon of gasoline only reflects $100 oil because the refiners' margins are squeezed," he said. "At $300, you have $12 a gallon of gasoline and riots in Newark, Los Angeles, Harlem, Oakland, Cleveland, Detroit, Dallas."

In either case, whether at $200 or $300, Bush does not want to be the President who leaves the White House on a mule-drawn cart. But Iran's blackmail is not just about oil. The Iranians truly believe they have us hostage in Iraq — our supply lines, the acquiescence of the Shi'a in the occupation. It would all change in an instant, though, especially if we were to borrow Iraq to attack Iran. The way Fars put it: "In Iraq, fighters would rise up in solidarity with each other and begin ... making the Tet Offensive in 1968 Vietnam."

If this all sounds very alarming, Iran meant it to, and it seems to be working. On Tuesday Bush was talking about the prospect of new sanctions rather than attacking.

Which leaves Israel. Are the Israelis, who have a lot more on their minds than the price of gas in the United States, going to launch a pre-emptive attack? One hard and fast rule in the Middle East is never rule out Israel's readiness to turn the table over. But an Israeli hawk on Iran, with close ties to Israel's Ministry of Defense, told me to forget about it. "There's not a chance Israel will do anything. Maybe there's a window after the American elections and the new President but even that's doubtful. Washington does not have the stomach for another war."

Israel cannot attack or contain Iran on its own; it needs the full military might of the United States behind it. So in the meantime Israel can only huff and puff, hoping new sanctions on Iran will do the trick.

Closing:

I certainly hope Bush/Cheney aren't stupid enough to wage war with IRAN, but the recent resignation of CENTCOM Commander Admiral William Fallon -- over Iran policy -- really makes one wonder what the heck they are up to.

Once again, take a good look at the Strait of Hormuz below and realize that nearly 40% of the worlds oil passes through it and right by IRAN. What would happen to the price and supply of oil IF war were to happen?


Regards

Randy

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17 Comments:

At 6/16/2008 5:18 AM, Blogger annas e said...

I don't think Bush will ever attack Iran. With American forces stretched and $4 gas at home, Bush is just playing bluff on Iran. At the end, with a war with Iran or not,Bush will leave office as the worst President in US history.

 
At 6/16/2008 7:29 AM, Anonymous Anonymous said...

Will the United States enlarge military/political interventions involving both Iran and Syria? I say yes and before the November elections.
News information about inflation, unemployment and such are so massaged and manipulated. Quality and freedoms of our daily lives are rapidly decreasing. Orlav's book Reinventing/Collapse is a must read.

 
At 6/16/2008 9:03 AM, Blogger Justin_n_IL said...

Excellent post Randy! The U.S.A. is certainly in quite a predicament concerning this topic. It is going to be interesting to see how it plays out.

 
At 6/16/2008 4:24 PM, Anonymous Anonymous said...

Israel is Americas GOD and MASTER!

ANY QUESTIONS!

AmeriKA has been 'blessing' Israel since 1948 and the TRUE GOD of heaven has been sending America one curse after another since 1948!

Has Big light gone on yet????

You want so see WHO used 'TERRORISM' to get their way????

Google the Stern gang! See Israel's 'HERO'S'

Want to see what YOUR (American) Gov't thought of YOUR children??? OUR men in Uniform!!!!!!!!!!

Google the USS liberty!!!!

WAKE UP! GOYIM

 
At 6/16/2008 4:27 PM, Anonymous Anonymous said...

Hi Randy;

Good post as usual, and who knows if Bush will attack Iran? Eventually something must be done!

I have a somewhat differing opinion of Israel than do most. It's based both upon history (their past four wars) and prophecy.

If one is to believe some of the (more reliable)reports that Israel has the 400+ nuclear warheads we hear so much about (even if it has 200+), they could turn much of the ME into a sea of glass. Will they do that? I argue that if they believe their survival depends on it yes, they will. Their 'Samson Option' would take over in the instance of Isrel's ultimate demise (which will not happen!), and a whole new ME would be on (or off!) the map.

If one puts credence in Scripture, Ezekiel 38 & 39 are the perfect scenario of this 'all out war', with participating countries even named!

Even if one places no value on Biblical prophecy, secular history also tells us that the 1948, 1956, 1967& 1973 (don't even count 1982!) 'miraculous' victories for Israel would make any anyone stand up and take notice. One thing is certain however. This ME 'problem' cannot/will not go on forever! There will be a 'solution' of sorts.

Pay attention to the Middle East. It is the stage for all things future.

Regards,
David

 
At 6/16/2008 5:00 PM, Blogger Justin_n_IL said...

To David,

Who says the Jerusalem of the end days prophecy is the sand box across the sea? You have to understand that prophecy is often spoken in the "spiritual" sense. Just read Revelation 11:8 to help you understand this. America is the New Testament Jerusalem. It is the last days Jerusalem. Check out Zechariah 2:4-7. America is referred to as a host of different names in prophecy. Take care!

 
At 6/16/2008 5:48 PM, Anonymous Anonymous said...

To justin_n_l

Respectfully, our theologies are poles apart! AND, Randy's fine news site is not the proper place to debate them, nor to challenge someone. Enough said!

David

 
At 6/16/2008 6:58 PM, Anonymous Anonymous said...

Hi David:

I would like to point out to you that the Jews HATE Jesus and reject him!

Check out the Talmud and see what they think of Jesus and his Mother!!!!!

SHOCKING!!!!

That makes them : ANTI CHRIST

Just think, AmeriKA the so called 'Christian' nation.... supports a land grabbing theiving nation, MURDERS of Women and Children the ANTI CHRIST nation of 'Israel'

It's no wonder the TRUE GOD of heaven is CURSING ameriKA......

Since 1948!!! Our nation has been going down the tubes....and fast!

We have lost every war since 1948, drugs, divorce,morals down the tubes, floods, Hurricanes,fires, you name it!!!!!

It's worth noting...the Muslims Think of Jesus as a TRUE prophet of GOD!!!

Christians have MORE in Common with Muslims than with ANTI CHRIST Jews

and that is a FACT!

Regards!!

 
At 6/16/2008 7:01 PM, Anonymous Sing Expat said...

I think Bush, Cheney and Rumsfeld (yeah, he is probably still pulling strings) will do their best to attack Iran.

The DOD has already had to dismantle Cheney's private Air Force. Control of nuclear weapons is not lax; the "slip ups" were intentional efforts to preposition nuclear weapons in preparation an attack.

Bush has already driven oil up by over ONE HUNDRED PERCENT. What does he care if it goes up by another fifty percent? He needs high oil prices to prop up Iraq and Saudi Arabia. Without oil at these levels, both of those countries would implode (ok, so Iraq is not a country, but it will need high oil prices now).

 
At 6/16/2008 7:18 PM, Blogger Randy said...

I certainly (unintentionally) spurred some very strong emotions with this post.

Regardless of viewpoints, at least everyone seems to understand how serious this issue is.

Appreciate all the comments. Now, if we could just Washington to pull their heads out.

Randy

 
At 6/16/2008 8:42 PM, Anonymous my 2 cents said...

It's not just Bush. It's all the Washington establishment. They wasted so much money that the dollar isn't what it used to be anymore. But they still act like it is. Only it ain't.

Iran knows that, so they tell them to go pound sand. Venezuala knows that, so they tell them to go pound sand. China is saying hey, we'll buy your oil and no strings attached. Oh and bye the way. If the US gives you any problems we just put the nuke smack down on their asses and pretends it was Al Qeada did it. Cause nobody knows where they lives.

Iran says right on. Venezuala says right on. Saudi is thinking about it, yeah we tired of being their bitches. We in too.

Washingtons going crazy. Gotta do somethins. Make an example of someones. Iran. Yeah dats it. Cause deys terrorits. Right?

Only watch your asses. Your back door is wide open. And it aints gonna be just two buildings next time. It's gone be enough so you don't even have no use for oil no mo.

Price falls. Game over.

 
At 6/16/2008 9:07 PM, Blogger Randy said...

Well said my 2cents -- you nailed it!

 
At 6/17/2008 2:12 AM, Anonymous Anonymous said...

America will not declare War on Iran, in the short term, though America does need to be firm.

America is not the only party getting ready for some sort of conflict over the Middle East oil fields. The European Union is forcing through a Treaty, which will greatly increase it's capacity to wage war on a greatly increased scale. Oh, guess what, it is part of the EU energy policy. Just when the US starts behaving sensibly and trying to find ways around the energy problem, Old Europe seems to be finding it's way back into colonial misadventures again. The political elite of Europe are rather dismayed that the Irish electorate rejected the Imperialist charter. For that reason no other electorate will no be given the chance to vote on it.

So much for hoping that world was going to see some peace. The politicians never want peace. They keep promising peace, and then they go about creating peace, by provoking other people to go to war with them.

We need a Thomas Edison type fugure to invent an electric car, and battery that stores energy from renewable sources. Then we can call an end to these 'ambitious foreign policies'. An 'ambitious foreign policy framework' seems to be the source of much of the killing and maiming in this world. If both the US and the EU would wait, that mad fool in Tehran will get replaced by a moderate and things will get back to normal. Or maybe they want to act before things get back to normal ????

The ordinary people are once again, deceived by the schemes by their political masters ....

 
At 6/17/2008 5:52 AM, Blogger Matt said...

Great summary Randy! I think some of us got a little sidetracked in here, but one thing that caught my eye was the call for "a Thomas Edison type figure to invent an electric car, and battery that stores energy from renewable sources." We just had him and lost him. Google "Brown's gas" and "Stan Meyer". You can find some good videos about them as well. Safe Hydrogen gas (HHO). If you dig for Stan Meyer you will hear him say that he feared for his life and he had been threatened. I don't rule that out.

 
At 6/17/2008 6:16 PM, Anonymous Anonymous said...

The Bush Cheney group have destroyed everything that was great about America in a self serving game to make themselves and their people rich at the expense of the American people. They are the worst most corrupt group to ever hold executive office in the USA. Time to emigrate.

 
At 8/19/2008 11:44 PM, Blogger rusi.reena12 said...

The Bush Administration can't afford to attack Iran.Just think, America the so called 'Christian' nation supports a land grabbing thieving nation, MURDERS of Women and Children the ANTI CHRIST nation of 'Israel'.Bush has already driven oil up by over ONE HUNDRED PERCENT. What does he care if it goes up by another fifty percent? He needs high oil prices to prop up Iraq and Saudi Arabia. Without oil at these levels, both of those countries would implode
==============================================
reena
Nevada Drug Treatment

 
At 1/10/2010 6:09 PM, Anonymous Anonymous said...

Wrong again (but then again, "It's all Bush's fault!")

 

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