Bailed out by Oil
Before 1973: The trans-national oil companies of US, Britain and Netherlands (BP, Shell, Standard Oil, Esso, Gulf, Texaco and Mobil) managed to use their overwhelming financial power to keep the oil prices low, with low royalties to the producer governments.
The price of oil in 1947 was US$2.20 a barrel; production costs (including royalties) were 20 cents and western taxes were around 50 cents a barrel made a huge corporate profits while subsidising the growth of capitalist countries. By 1973, oil was still selling for less than $3 per barrel, way behind inflation.
Oct 1973: Protesting unilateral US support of Israel occupation, the Arab allies of US (led by Saudi Arabia) began the oil embargo for countries that supported Israel unconditionally. When it ended in March 1974, the price for oil rose to $11.65 per barrel.
The US allowed the OPEC (Organisation of Petrol Exporting Countries), led by Saudi Arabia, to raise oil prices but on one conditions: that oil will be sold only in US dollars. Since then, the petrodollars are being recycled backed into the US (to buy US debts, arms and goods) to help its economy.
Since oil is the engine of production of worldly goods and comforts, it remains the bedrock of human civilisation. Having control over its spigots got the US unlimited powers on how it wants to run the world.
Preying the Hunts
1973: The Hunt family of Texas, who played a very significant role in the discovery and development of the oil fields in Libya, began buying silver as a hedge against inflation. Gold still could not be legally held by private citizens at that time.
1979: The Hunt Brothers, together with wealthy Mid-East investors, controlled a pool of more than 200 million ounces of silver, equivalent to half the world’s deliverable supply! The price of silver rose from $1.95/ounce in 1973 to $5 in 1979. Within a year, it was around $50. With gold hitting at $850, the silver/gold ratio was 15.74/1, very close to the historical ration of 15/1. Once the silver market was cornered by the Hunts, outsiders joined the chase.
1980: The New York Metals Market (COMEX) and the Federal Reserve intervened and, changed trade rules which punctured the speculative bubble – silver dropped to 50% value and later settled at $10.80. The Hunt brothers declared bankruptcy; their investors were hung dry. By 1987, the Hunt liabilities had grown to nearly $2.5 billion against assets of $1.5 billion. Next year, the Hunts were convicted of conspiring to manipulate the silver market.
Every US taxpayer was warned in no uncertain terms: only the US government has the monopoly on manipulating the markets. This has remained the ultimate mantra of economics since; the science is only a means to justify such a mantra.
With its house in order and oil in its pocket, the US spread across the world despite reversals like loss in Vietnam Invasion and spread of socialist creeds in its society.
Globalisation and Manipulation
By 1980s: The relatively cheap petrodollars went to NICs (Newly Industrialised Countries – Singapore, Hong Kong, Taiwan and South Korea). This first pangs of globalisation was called ‘inter-dependence’, as half of the world was still under communist rule. To their citizens, the slowdown in domestic growth in both US and Europe was explained as ‘overseas expansion’ and that the economy is not shrinking but growing beyond its borders.
To its trade partners, the US government (convinced by its financial companies) forced them to recycle their trade surpluses (in US dollars) by buying US Treasuries that always yield low returns; the low returns were appreciation of US security against the communist Soviet Union.
US Treasuries (bills, notes, bonds, securities) are US government debts that are issued by simply printing dollars on paper or creating money on computers (called Quantitative Easing – QE).
The Great Party Time
1991: After two years of the fall of Berlin Wall and liberation of Eastern Europe, the Soviet Union collapsed. The great human experiment in dunyavi (materialist) ideology, that results in more than 100 million deaths across the world, failed – no doubt hurting the sentiments of many of its beneficiaries and ideologues.
1992: However, the post-Soviet economic reform produced an inflation was 2,520%, as the prices were decontrolled suddenly in the most appalling manner. The rouble devalued from 40:1 US dollar in 1991 to about 30,000:1 in 1999. Massive amounts of wealth shifted across the Atlantic, just as it did in the 19th century, seeking safe haven in the US shores.
All this wealth, from easily picked investments (from mining projects to supplying computers) and money deposited in US banks, from Eastern Europe and Russia began the great party time in US. It was indeed a celebration worthy.
No ethics, No science – just Materialism
The fall of communism, and disappearance of its threat, did not bring in the sense of rule of law or fair play into US economic and financial institutions.
US institutions continue to print money with impunity and no responsibility, while its corporations continue to take these digit dollars to gullible or semi-literate societies selling their materialist dream in exchange of paper money. At home, they sell the same dream that keep people ever in debts to these institutions. For the resourceful countries in the Middle-East, Canada and Australia, it is not a problem; they have deep pockets to comfort their poor and buy their opponents. For the rest of the world, such practices are a source of instability and wanton destruction of our societies.
Winning the geopolitical battle, the US seems to have lost the cultural war.
Our Debts.3 – Dollar, doldrums and floating
