FPC: The Dollar-Oil Nexus
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This is a critique of the theory of Freegold (F-theory), which is part of an ongoing series entitled, Freegold: Perspectives and Critiques (FPC). A ke
[See the full post at: FPC: The Dollar-Oil Nexus]The Big Ass Military is what sustains the Dollar-Oil Proxy, and not until said BAM is fully confronted and shown to be a Paper Tiger will Gold or any other currency leapfrog the Dollar.
What will show this to be true? When true Cruise Missile Warfare begins. Cheap and plentiful Cruise Missiles can take out Carrier Groups, Troop Transport ships and VLCC Super Tankers, as well as fixed targets like Refineries, Pipelines and Oil Rigs. They are all Sitting Ducks. Like the Maginot Line in an era of Tank Warfare, the older Naval technology is just too vulnerable to chep unmanned missiles flying at supersonic speeds. It will send all the hardware to the bottom of Davey Jones Locker in no time at all.
Meanwhile, the House of Saud will keep selling Oil for Dollars, because they have a great Big Gun Duct Taped to their Heads. The Gun of the Big Ass Military.
The viciousness of the US empire is being pitted against the size of China. Further at some point the whole world will realize the US is the world trade currency because they are a dictator to the world. Not a gold standard, not oil dollar, but the threat of violence.
This time its different. The US is going to engage an someone with just as many toys and an interest in proving a point.
The demographics of the US is not good. Populations of older people are not that willing to send their grandkids to war.
see https://www.youtube.com/watch?v=VRf7JariuqI&feature=share
As for a dollar I can see some advantage to pegging the currency solidly against something finite like gold. Much of the time politicians buy votes making promises that are beyond the ability of the economy. The real thing that I can see working is the type of Libertarian Socialism that started the internet, Linux and the open source community.
Since capitalism is the redistribution of wealth, and we are not going to have lots of that in the future, capitalism will become less relative to our needs. If we join into collective associations that freely donate we have a chance.
We have been at the trough for some time now and its been a great party but we might want to move on. If we continue to live in the plastic drive thru instant gratification lives we will find ourselves to be disposable in the future.
We are looking at taking an hour to make food again if we run out of our surplus spending cash. Items might have to last and fashion becomes irrelevant. The next generation is going to look at us strange when they hear about planned obsolescence. The future might not be that bad just different, more cooperative, less conflicted and a little less junk.
Agreed, I feel that military power projection capability has been a critical component to the USD remaining the reserve currency – as was British military power a key for the Pound prior to WW1.
Military power is always ultimately based on economic power, but after the hardware is constructed, it can provide military utility for decades after the economic power that constructed it has peaked and has fallen off. We’re still using B52s first built in 1955.
(Sigh …)
Economic populism running amok …
https://nowandfutures.com/d3/Wicksell_Hayek_Keynes_Friedman,_Minsky.pdf
Read this and that:
https://fraser.stlouisfed.org/docs/meltzer/fisdeb33.pdf
There are better arguments out there already …
There are better arguments out there already …
Minsky’s FIH was a key part of my critique in Part IV of my original series – Deflationary Canyons and Caves
After being confronted with that critique, a few of the Freegold people implied that they agreed with most of what Keen/Minsky have to say, but thought the debt deflation theory was incomplete, in terms of how central authorities can make sure the Mother of All Deflations never really takes off.
I disagree, but the point is that they are not unaware of these arguments.
One thing is for certain – none of these people ever talk about the dollar-oil military nexus.
The US has used threats of violence and outright violent force since its inception to control and spread markets. “Market” non-intervention is an historical oxymoron. The dollar -Oil nexus is the US’s final conquest, which it is so deceptively and violently trying to maintain. When it goes down, so goes the capitalist world system.
Electroinic frauds, backed up with mass destruction weapons, ARE the fundamentals of the real world’s current “economy.”
“Economic” competition is just war by other means
Reverse Engineer post=3175 wrote: Meanwhile, the House of Saud will keep selling Oil for Dollars, because they have a great Big Gun Duct Taped to their Heads. The Gun of the Big Ass Military.
In other words, capitalist BAU.
After being confronted with that critique, a few of the Freegold people implied that they agreed with most of what Keen/Minsky have to say, but thought the debt deflation theory was incomplete, in terms of how central authorities can make sure the Mother of All Deflations never really takes off.
First of all, Fisher implies the (offhand) reflation strategy without going further. Leijonhufvud doesn’t offer any strategies at all! (Why should he?) However, (Free)gold folks’ awareness of nuanced (sensible) economic arguments never seems to emerge from their arguments. It seems to me that the monetary gold arguments were all made — and settled — by Wicksell and Bagehot a hundred and ten or so years ago.
Part of the problem is the absence of conventional ‘solutions’. Our dilemma lies within the inter-temporal balance sheet beyond the reach of monetary policy.
Almost no (as in zero) conventional economist makes reference to energy or resource inputs. Herman Daly equates money capital with resources (and Charlie Hall and Robert Costanza) but equilibrium economics is built around unlimited substitution. This is a dead end.
A conceptual problem is that we are at the beginning of post-industrialism. Nobody can figure out what ‘Post Industrial Society’ is going to look like or how it will function. Some think virtual reality (Kurzweil), others think ‘hunter-gatherer’ (J. Hansen) and still others a steam-punk version of modern Detroit (Greer). Human extinction is not out of the question: how does modern industrial economics factor all of these different possibilities and others beside?
Brand X economist: “Don’t blame me!”
In this context, the gold-money argument presumes a specific post-modern industrial economic society that functions/trades a specific way … a society that has conveniently forgotten Bagehot (and have never bothered to look up Wicksell). This is argument in a vacuum: not a real argument at all.
What does come next? Hard to say but the constant will be ‘less’.
steve from virginia post=3186 wrote:
In this context, the gold-money argument presumes a specific post-modern industrial economic society that functions/trades a specific way … a society that has conveniently forgotten Bagehot (and have never bothered to look up Wicksell). This is argument in a vacuum: not a real argument at all.
What does come next? Hard to say but the constant will be ‘less’.
Well stated Steve.
Overall, it is a conceptual problem. The tendency is to accept axiomatically that even though the Fiat will crash, Homo Sapiens will continue to hold the same things valued and pursue “trade” in more or less the same manner.
This may however be one of those Roads that is a One Way Street, or even a Dead End One Way Street.
On the assumption (hope) it is not DEOWS, where will we go from here? What happens once we reach the end of this road?
It’s all speculation, because insofar as we know (unless Atlantis really had an industrial culture before) we are breaking new ground here. Nobody knows what a Post-Industrial world will look like. Though of course there is no shortage of speculative Imagery out there from Mad Max to the Children of Men.
Personally, I think there will be a “Scavenger” period during which the flotsam and jetsam of the Age of Oil gets repurposed to keep stuff like the Railroads still operational for a while. I don’t see a great future for money during this period, though if Goobermints of some sort hold together you may have some for a while. You definitely cannot have functioning “Money” without functioning Goobermint. After that it’s just barter, even Gold Coins are just Barter Items. To make them “Money”, you need a Stamped Value placed on them so they are always worth the same thing inside a given trading system.
Money requires a SHARED AGREEMENT system between all in the society on the relative values of things. When that breaks down, when some people no longer value a McMansion at all and others place preposterous Numerical Values on them, you have Mark to Make Believe which no longer makes any sense at all. That really is the problem here now, relative valuations based on the monetary system are not reflecting reality. In fact, McMansions are WORTHLESS, and so are the Carz. Helicopter Ben cannot MAKE a McMansion worth anything, he can only print Bills. Even if he gave you a Billion of those Bills, there still would be no reason to trade them for the McMansion.
Our Value System is changing, MUST change because the Oil which powered this value system just isn’t there in quantity enough to keep the engine running, not on a Global basis anyhow. Now we have to figure out how to value everything we still do have in the ABSENCE of Oil. That is quite a challenge.
I excerpted and reposted Steve’s commentary and my own on the Diner Blog.
https://www.doomsteaddiner.org/blog/2012/05/26/the-dollar-oil-nexus/
Ashvin, WHEN are you guys gonna fix the Avatars? I could go and substitute, but I left the defaults for the purpose of fidelity to the original commentary.
RE
[quote=steve from virginia post=3186]
It seems to me that the monetary gold arguments were all made — and settled — by Wicksell and Bagehot a hundred and ten or so years ago.
…
In this context, the gold-money argument presumes a specific post-modern industrial economic society that functions/trades a specific way … a society that has conveniently forgotten Bagehot (and have never bothered to look up Wicksell). This is argument in a vacuum: not a real argument at all.
What does come next? Hard to say but the constant will be ‘less’.
Perhaps the monetary gold arguments were settled, but Freegold theory does not argue that gold will act as (transactional) money. Instead, it says that fiat currencies will continue to act as money and will not be fixed to any commodity, but gold will trade parallel to it as a store of value – only used by those who want to “save” their excess wealth.
The specifics aren’t really necessary here, and I obviously agree that the theory runs into many problems when confronted with reality (such as its presumption of a functioning post-modern industrial economy at a global scale). My point in these comments, though, is that I try to be fair to the theory when I critique it – I want to portray it accurately and address very specific issues that it raises, usually based on quotations from A, FOA or FOFOA.
I don’t really believe it’s satisfactory to reference a few economists from ANY era and say that they have settled the entire matter.
Reverse Engineer post=3190 wrote: Ashvin, WHEN are you guys gonna fix the Avatars? I could go and substitute, but I left the defaults for the purpose of fidelity to the original commentary.
REGood question. I have been on our web guy about it for awhile now, but I think he has been busy dealing with the site access issues, among other things. I will remind him about it again soon.
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