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The Dollar and MENA

April 10, 2011

Its clear that the thesis of this weekends Bretton Woods is that the US Dollar can no longer be the worlds reserve currency. Geithner said the same thing a few weeks before, and some other major players along the way. I think its clear that we are being pre-conditioned to this idea or notion that the dollar will officially lose its reserve status.

Lets say this were to happen over the next 12 months, give or take a few months. One of the main reasons that the US is the worlds reserve currency is because oil is priced and traded (in general) in USD. In the past some have tried to challenge this or go around it (Saddam & Iraq and more recently Iran & India via Germany). So consider this is the threat: that the US really only “controls” the Mid East oil reserves through the dollar being the worlds reserve currency. The Saudi’s could elect to sell in other currencys, just as the Iranians do, and of course Russia and China. The US could take down Iran militarily but I don’t think China and Russia (at least not at the same time).

Now, if we are able to get physical control of the oil in the middle east then do we care if the US dollar loses its official position? If we control the oil and are either A: shipping it back to the US or B: dictating what currency its sold in then do we necessarily care if its the reserve currency?

If you consider this in light of the fact that the ONLY way we have any shot at paying off or keeping up with our debt is to continue to devalue the dollar – then this scenario seems much more plausible.

To summarize:
1) US takes over middle east oil (Iraq, Libya, Saudi’s etc)
2) US controls oil supply maintaining its oil control
3) Let dollar devalue to help destroy trillions and trillions of debt owed (and screwing over many, many people)
4) Agree on new currency with much higher value

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