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.
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.
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