Posted on 11/29/2014 2:43:52 PM PST by ckilmer
An interesting way to harden the US dollar and make it less of a fiat currency would be to sell the US oil reserve and use the proceeds to buy gold to store in Ft Knox or elsewhere.
For those who know their dollar and oil reserve history--this is 180 reversal of policies set in the 1970's because of a 180 reversal of circumstances. In the 1970's US oil production peaked and went into decline while the US dollar went off the gold standard and went into decline.
What's different now?
1.)Fracking has shown that the USA now has 100 year supply of oil. The USA is not going to run out oil any time soon. The fear of limited supply was the original reason for creating the US oil reserve. Now we know that we will not run out in anyone's lifetime.
2.) There are dozens of countries around the world working at undermining the dollar as the era of petro dollars winds down. Increasing gold reserves will help to harden the dollar.
3.)Countries like Germany and Holland are starting to move their gold out of the USA. This doesn't look good. It shows a loss of confidence in the long term viability of the USA. Selling oil and using it to buy gold would be a confidence builder.
3.) Its likely that oil will return to the $90@barrel in a year or two as lower oil prices reinvigorate the world economy and thereby push up the demand for oil and consequently the price of oil. However, the long term direction of oil is now down. Why. Because car makers in Japan Europe and America are shifting transportation to alternate fuels like natural gas, electric and even fuel cells. This is not a fad. Europe and Japan have an even more profound need than the USA to become energy independent. They can't do that as long as oil is their main transportation fuel.
Therefor its best to sell oil over the next decade while prices for oil are relatively high. 10 years from now and beyond oil is going to $35@ barrel and below as demand for oil collapses.
all the gold in ft knox is a miniscule fraction of our national debt
We switched to the petro dollar under Nixon when he took us off the gold... wasn’t it 1973 when he said that we would no longer redeem gold for dollars and our currency started spiraling. So he negotiated the petro dollar as the gold replacement by guaranteeing military protection for the Arab countries. I could be wrong, but until we find a replacement for oil, the petro dollar has given us a lot of roller coaster rides in the past 40 years.
This is my humble opinion based upon the school of hard knocks and a good memory (but it is short.)
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That’s a pretty good memory. What happened in 1973 was the first OPEC oil embargo.
According to this piece from the richmond fed.
https://www.richmondfed.org/faqs/gold_silver/
Is U.S. currency still backed by gold?
No, when the United States stopped selling gold to foreign official holders of dollars at the rate of $35 an ounce in 1971, it brought the gold exchange standard to an end. In 1973, the United States officially ended its adherence to the gold standard. Many other industrialized nations also switched from a system of fixed exchange rates to a system of floating rates. In August 1974, President Ford repealed the prohibition on the public’s owning gold or engaging in gold transactions. Today, no country bans private ownership of gold.
I bet the greenies find a way to stop it.
Sell low, buy low?
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oil is going to gyrate violently for the 10 years or so but the long term direction is down. Its generally better to buy buy low and sell high. oil sales any time in the next decade will be much better than the following decades.
Because oil is too cheap right now. We should be buying oil
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Not this year or 2015. but in 2016 when prices spike from rising world demand for oil caused by lower oil prices.
The O'Conomy Conundrum:
The more Obama works to destroy America the more he finds that America is stronger and more resilient than he and his handlers ever guessed.
Emperor Obama pretends to be trying to improve the US economy to keep his ignorant True Believers on the plantation.
Yet, at the same time, he works behind the scene in his sneaky, slimy way to destroy the economy.
From Day-1 he has done everything he could to destroy the so-called fossil fuel industries, oil and coal.
Yet he has been stymied over and over again by the oil boom as the industry fights back and keeps the Obama economy from a total collapse.
So what does Emperor Two-Face Obama do?
He brags about the economy that is being pumped up by the very oil industry he is working so hard to destroy.
And then he issues more regulations and builds more roadblocks to take oil down.
But so far he is getting beaten at every turn.
I like your pipe dream and would love that for my future and my children. Problem is that Gruber was correct about our countries stupidity and there are too many Democrats in this country who rob Peter to pay Paul, so Paul keeps voting them into office.
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Likely for the next 6 years the dems are going to be on the defensive because obamacare and the border has defenestrated them.
As soon as we figure out how to burn gold in a crisis, that would be a great idea.
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except that there is now gobs of new oil accessible byo of fracking. In a pinch all the feds would need to do would be to buy private oil.
It will turn the world’s deserts green and double the size of the habitable earth.
I bet the greenies find a way to stop it.
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Maybe in California but not in texas mexico north africa,the middle east Australia etc
It’s the reserves.
We can buy now and hold.
I don’t see it falling below $65, but that is more gut than economic science.
Heck we could play the commodities market and pay off a percent or two on the debt. /S
Why doesn’t the U.S. flood Europe and Asia with cheap oil and crash that duplicitous Saudis
Yep - all that's needed is a reliable source of power, and lots of it.
Well, solar power, windmills and unicorn farts won't do it.
If only mankind had developed a technology to power something like that.
Too bad we didn't find a way to harness the power of the atom and use nuclear power to run electric generating plants.
Or to power submarines, aircraft carriers and unmanned interplanetary space vehicles.
Its worse than that. By the end of Obama’s term imho the federal government’s deficit will be somewhere between 0 and 200 billion dollars. There will be a strong growing economy. That will be Obama’s legacy. A strong economy and a nearly balanced budget. Same as Clinton. Even though Obama — like Clinton — had nothing to do with a growing economy and a balanced budget and in fact fought tooth and nail to prevent a balanced budget and a growing economy from happening.
Barack Obama and other American leftists and Islamos wouldn't stand for it.
I don’t see it falling below $65, but that is more gut than economic science.
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I’m in favor of oil bottoming at $65.
But there’s no telling where the price of oil goes. I figured 90 then 80 then 70. Now WTI is under 70.
Why doesn’t the U.S. flood Europe and Asia with cheap oil and crash that duplicitous Saudis
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The saudis produce cheap oil.
The USA produces expensive oil. It will be USA drillers that get hit first by lower oil prices.
True.
Supposedly, China is putting a lot of effort into Thorium nuclear.
The horrible irony of it!
Obama is being saved by the Ogre of capitalism that he works so hard to slay.
Then pull back our military agreements. Of yes the Russians and Chinese are getting good at that too.
What do you suggest?
Well, solar power, windmills and unicorn farts won’t do it.
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Agree.
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Too bad we didn’t find a way to harness the power of the atom and use nuclear power to run electric generating plants.
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Well there’s plenty of work going on right now in 4th generation nuclear reactors with msr lftr designs. These designs are often lifted from some successful prototypes that were completed in the late 1960s. These reactors promise to drop the price of electricity to 1/4-1/10th current cheapest coal/natural gas created electricity.
Prototypes on these are expected out in 5 years of so. A number of countries are working on them.
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