Mover Mike

As you know, we in the US now owe over $8 Trillion. I can't imagine how big that number is, but Richard Russell in today's Dow Theory Letter offers this perspective:

A billion seconds add up to 31.7 years. But a trillion seconds adds up to 31,700 years!

Russell also calls our attention to an editorial at Gold-Eagle entitled The Proposed Iranian Oil Bourse by Krassimir Petrov, Ph.D.. Reading this editorial feels like the curtain has parted and I just got a glimpse of a very important truth and it scares the hell out of me. Dr. Petrov argues that the opening of the bourse where oil will be traded in Euros is a very serious threat to the USD as a reserve currency and by implication, the US may have to resort to war to end the threat.

I have always thought that we had a great deal. We spend money we don't have on foreign goods and they (China, Japan, etc.) take our USDs and buy our debt. They accumulate piles and piles of USDs that have no intrinsic value and we devalue those dollars further by printing more. It just occured to me. We have no intention of ever making those dollars good.

Dr. Petrov writes that a nation-state taxes its own citizens, while an empire taxes other nation-states.

The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military. One part of the subject taxes went to improve the living standards of the empire; the other part went to strengthen the military dominance necessary to enforce the collection of those taxes.

When we closed the gold window in 1971, we became an empire and we have exported our inflation to the world.

For the first time in history, in the twentieth century, America was able to tax the world indirectly, through inflation. It did not enforce the direct payment of taxes like all of its predecessor empires did, but distributed instead its own fiat currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of inflating and devaluing those dollars and paying back later each dollar with less economic goods-the difference capturing the U.S. imperial tax.

If we allow the Bourse to open, we will find the Europeans and their Euros against us, the Russians with their new found love of gold against us, the Chinese with their huge piles of depreciating USDs against us, and the arab oil producers against us. We will stand alone!

A collapsing USD will trigger inflation in this country and interest rates will go sky high. Dr Petrov says

History teaches that an empire should go to war for one of two reasons: (1) to defend itself or (2) benefit from war; if not, as Paul Kennedy illustrates in his magisterial The Rise and Fall of the Great Powers, a military overstretch will drain its economic resources and precipitate its collapse.

We are two months away from the end of the Empire or the Empire striking out for preservation of its life. This is a very dangerous time for Iran!

Irangold USD Mover Mike

Update: For additional information on the "oil weapon" and the Oil Bourse see Regime Change Iran