The Final War

As we debate the daily machinations of the stock market, the real game is being played out in the oil pits and as of now the game is straight down for the petrodollar. Nixon shut down the gold window that backed the dollar in the 70s when France called the dollar bluff and Kissinger opened up the oil spigot to protect the dollar cartel. It was nothing short of genius. To keep the dollar afloat in the 80′s when oil collapsed, we began a series of inflationary bubbles all backed by a newly developing weapon of financial destruction called derivatives. These were basically weapons designed behind the petrodollar to keep the cartel intact so it was able to extract the assets of the developing/resource rich countries. In exchange for allowing this extraction to proceed through the last few decades the Western Banking Cartel played lets make a deal with a number of Eastern powers. 

They were forced to open the door for China to take our manufacturing and maintain the ceiling on precious resources with China keeping their Yuan pegged to the dollar in the 90s. While this exchange was maintained, China built a nation from the ground with infrastructure that is the envy of the West through their Central planning. In exchange our Western Banker/corporations reaped immense dollar profits as their global banking structure thrived with the continued derivative expansion. No one seemed to notice the rapid destruction of the U.S. manufacturing base while the banking sector “quietly” expanded to a monumental segment of the U.S equity earnings. Media talking heads extolled their contribution to the growth of the U.S. economy until 2008 and CONfidence struck out of “nowhere”.

Instead of stopping the insanity and allowing real market forces to wash out the speculation and malinvestment, a tragic decision was made by a new administration to go down the road of re-inflating an already over-inflated bubble. Simply put, taking an obvious ponzi and just making it that much bigger. This task was made possible by paying of the biggest creditor and strongest economy. Timmy traveled to China and guaranteed them we would allow them to accumulate Western physical gold if they didn’t drop the hammer on the ponzi. This would buy time for the Western Banks to try and find a way to gather “other” assets before the final plug was pulled on the ponzi. The ponzi relied upon a number of important components but none was more vital than the Dollar. If its value could be maintained then the West and most importantly the U.S. could maintain its dominant Global position. 

It was a delicate dance. The East was essentially allowing the West to create continued conflict, often in their backyard while solidifying the transition to another system that was not dominated by the petrodollar. A number of these systems are now in place and the results are now apparent. The crash in the price of crude is the first sign of the crash in the petrodollar. The ramifications will become more apparent as the shock waves hit the derivative’s markets later this year and next. When CONfidence wanes from these paper markets the search for true shelter will become intense. gl