Cheap Oil, Cheap Money, And Our Culture of Debt and Speculation   (September 13, 2011)

Was the end of abundant cheap domestic oil and the end of the gold-backed dollar not coincidental, but causally related?

Oil and finance are inextricably linked, for as long as the US (Fed) prints dollars, and exporters accept them in trade for physical oil, then the US is able to effectively act as if it still has lots of cheap oil, for in a real sense, it does as long as it can trade paper for oil.

Correspondent David P. recently connected the end of the gold backing of the dollar with the decline of domestic production and the rise of the debt/speculative "financialized" economy:

Interesting, the concept of trading paper for oil. This is something we engineered when Nixon closed the gold window in 1971. Before we'd have had to trade gold for oil, and now? Just paper. A nice trick. But that was simply a coping mechanism that came about because we needed to maintain our supplies of cheap oil and didn't want to give away our gold in return.

And, when one does that, it doesn't come for free - there are winners and losers. When the US prints dollars, it effectively taxes savings to make this happen. What that does is encourage debt, and discourage savings. The 1970s trashed savers, and encouraged all sorts of debt and speculation to stay ahead of inflation. So perhaps we can say, a direct result of losing our oil superpower status was stripmined savings. This educated a generation of Americans formerly used to saving that saving is wrong and accumulating debt is the right strategy since debts are inflated away.

Perhaps one can say today's casino ridden debt-laden society came directly from the end of domestic cheap oil and our decision to print money instead of downsize our energy usage?

Thank you, David, for a most insightful commentary. Printing money for oil may well be the initial Devil's Pact that started the U.S. down the road to its present addiction to debt, money-printing and "cheap" oil imported from elsewhere and paid for with paper money.


Email alert: As a result of family visits and obligations, I will be unable to respond to email for the next few weeks. Blog entries will likely be sporadic as well. Your understanding is greatly appreciated.


Fall Garden/Seed Special: Our friends at Everlasting Seeds have put together a Fall Garden Special on seeds: "George at UrbanSurvival suggested a new fall garden collection that would allow folks to extend their gardens, concentrating on the more hardy [and 'table substantial', in contrast to, say, herbs/seasonings], especially those with cold frames or greenhouses; this collection consists of 188 seeds per variety (click link below to view entire list). The price of this special offer, normally $88.00, is $80.00."


PRINT EDITION DISCOUNT: The print edition of An Unconventional Guide to Investing in Troubled Times is now available at a 31% "pre-release" discount for readers of oftwominds.com through the publisher, Createspace. (List price $25.85, discount price $17.85) You will have to set up an account with Createspace to order the book directly and receive the 31% discount. After you click "add to cart," insert this discount code M4A8ED8B in the "options and discount" section of the following page.

The print edition will be available through amazon.com at the retail price later next week.


If this recession strikes you as different from previous downturns, you might be interested in my new book An Unconventional Guide to Investing in Troubled Times, now available in Kindle ebook format. You can read the ebook on any computer, smart phone, iPad, etc. Click here for links to Kindle apps and Chapter One. The solution in one word: Localism.


Readers forum: DailyJava.net.



My new book An Unconventional Guide to Investing in Troubled Times is available in Kindle ebook format. You can read the ebook now on any computer, smart phone, iPad, etc. Click here for more info about Kindle apps and the book.

Order Survival+: Structuring Prosperity for Yourself and the Nation (free bits) (Mobi ebook) (Kindle) or Survival+ The Primer (Kindle) or Weblogs & New Media: Marketing in Crisis (free bits) (Kindle) or from your local bookseller.

Of Two Minds Kindle edition: Of Two Minds blog-Kindle





"This guy is THE leading visionary on reality. He routinely discusses things which no one else has talked about, yet, turn out to be quite relevant months later."
--Walt Howard, commenting about CHS on another blog.


NOTE: contributions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Robert Z. ($100), for your monumentally generous contribution to this site -- I am greatly honored by your steadfast support and readership.   Thank you, Bob B. ($15), for your exceptionally generous contribution to this site -- I am greatly honored by your ongoing support and readership.




Or send him coins, stamps or quatloos via mail--please request P.O. Box address.

Subscribers ($5/mo) and contributors of $50 or more this year will receive a weekly email of exclusive (though not necessarily coherent) musings and amusings, and an offer of a small token of my appreciation: a signed copy of a novel or Survival+ (either work admirably as doorstops).

At readers' request, there is also a $10/month option.

The "unsubscribe" link is for when you find the usual drivel here insufferable.

 
 
Your readership is greatly appreciated with or without a donation.
For more on this subject and a wide array of other topics, please visit my weblog.

                                                           


All content, HTML coding, format design, design elements and images copyright © 2011 Charles Hugh Smith, All rights reserved in all media, unless otherwise credited or noted.

I would be honored if you linked this essay to your site, or printed a copy for your own use.


                                                           


 





Making your Amazon purchases
through this Search Box helps
support oftwominds.com
at no cost to you:


Add oftwominds.com to your reader:

Survival+   blog  fiction/novels   articles  my hidden history   books/films   what's for dinner   home   email me