Comment 60427

By Undustrial (registered) - website | Posted February 28, 2011 at 20:54:19

As much as I don't particularly think a return to the gold standard is a solution, A Smith is onto something with many of his points.

a) The Gold Standard. Abandoned in the early 1970s so the US government could print more money to finance the Vietnam War, this had huge effects on the world's economies. Around this same time American oil peaked and mideast tensions (once again) came to a head, leading to round of oil embargoes which quickly created the oil crisis. What this all meant was that countries like Iraq and Saudi Arabia suddenly found themselves with enormous amounts of captital, and started investing it - usually in regions like Sub-Saharan Africa. This is the primary root of today's third world debt crisis. A fascinating topic to be sure.

b) Oil is not the only commodity price going up. This suggests, without a doubt, that there's some common causes (ie: speculation, etc), but also something far more frightening: oil is not the only resource running out. Not really surprising given that most uses for oil also involve copious amounts of water, metals, land etc. And much like oil - it isn't that they're vanishing altogether - simply becoming harder to economically extract in useful forms. We'll probably never run out water we could drown in - but we're rapidly running out of water we can drink or water crops with. Check out Richard Heinberg's "Peak Everything" for more info.

c) Even if there is a real basis for rising oil prices, it's taking place in an utterly absurd economic context. And while I might argue that such a context was able to keep oil prices artificially low for most of the last few decades - it's now doing the exact opposite. If a 2% drop in supply can jump prices by 20-30%, then what can we expect from a sustained 10% drop? Our society needs to take a really serious look at why we're so willing to print billions of dollars of make-believe money because the people we give it to tell us it's good for us.

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