Thursday, February 09, 2006

Digging Holes



Before Bush came to office, cutting budgets normally meant cutting planned budget increases. There was the odd pork cut, like the mohair goat subsidy that was eliminated entirely. But for the most part, programs seen as essential for the domestic well being of the country normally didn’t see actual budget cutbacks.

Since Bush has entered office and costs of goods and services have continued to rise to match the free wheeling Fed policies, budgets for domestic services have been cut, while budgets for foreign policy and security programs have seen an unending series of budget increases.

At this time, it appears that this trend is going to continue and accelerate.

Right now, the value of the US dollar is under fire. Under Greenspan, the virtual printing presses were running wide open. After the recession that began in May 2001, the Fed dropped interest rates to ridiculously low levels and flooding the international market with dollars. If you look at the chart at the top of the page, you can see how the US government has gone on an unprecedented spending spree, freely borrowing and spending money like there’s no tomorrow. Other nations have taken notice.

Japan and China are both making measures to reduce their dollar holdings. Iraq attempted to do the same and begin using Euros and their trading currency instead of dollars. That experiment was short lived. The US invaded and removed Saddam from power soon after he took that action. Now Iran has removed their money from the European banking system and is steadily exchanging dollars for Euros. In March, Iran plans to quit accepting dollars as legal currency for oil and require Euros instead.

This is not about which currency oil is priced in, this is about what currency you need to provide to buy oil. As the dollar is losing strength against the Euro, exchanging dollars for Euros to buy oil, means that not only does the price of oil rise in dollar denominated pricing, but its costs are also felt in fees for currency exchanges and time lags in making the exchange.

If oil is sold in Euros, then the best currency to hold in order to meet expected order for oil is Euros. This means that those buying oil, will be encouraged to trade in Euros and may take a hit if they in turn accept payments in dollars. The shift will come up the line with international corporations encouraged to divest dollars and keep their accounts in Euros. This means that the international banking system will be responsible for holding dollars, instead of corporations and nations and will incur losses when the dollar slips further in value. They will attempt to move the risk back, to US entities that will see an increase in the rate of dollar devaluation. The more nations we see selling oil denominated in Euros, the more risk will be moved upstream, back to the US Government to cover losses, currently covered by China, Japan, Saudi Arabia, Iran and others. Eventually the value of the dollar will rest on the actual industrial output of the US which sees exports at one quarter of its imports. The US will be forced to either control the rate at which the dollar inflates, or find itself unable to purchase foreign goods.

The Republican lead US Government, shows no sign that they wish to reign in spending or change economic policies to repair this deteriorating situation. Instead, the White House is working to further inflame Middle East tensions and is pushing Iran. Iran knows they are in Washington’s gun sights and they know that if they don’t escalate their arsenal, they’ll become another Iraq. They also know that adding nukes to their arsenal, they’ll likely be turned into another Iraq. The White House is following the same course it did against Iraq and this sends a clear message that war with Iran is a done deal. So from Iran’s point of view, war is imminent, so they must prepare for the fight. Preparing for war, means getting working their nuclear weapons working. And if they do have nukes, and the US does start bombing them, then we can be sure they’ll detonate those nukes somewhere. At this time we can’t even be sure that the Russians haven’t already provided them

If the US does not go to war with Iran, then Iran will lead the way in devaluing the US dollar. Other nations will see the wisdom in getting ahead of the trend and the rush will be on. If the US does go to war with Iran, then oil shipments out the gulf will be dramatically reduced and the world will be plunged into a deep recession/depression. Perhaps the US is simply looking at this as a Mutually Assured Destruction scenario? If so, go against Iran (a nation that’s much more used to war and sacrifice than the US), expecting them to back down, isn’t very smart.

I think whatever plan is in the works, has some intelligence behind it. I believe that the White House and friends know the situation is no irreparable, so they’re just taking what they can before it all burns down. I would think there’s a good chance that Bush and Cheney both have large holdings in Euros.

So the stripping of funding on education, Medicare, Medicaid, Amtrak and probably countless other useful programs will continue and accelerate. This will lead to civil unrest, so funding to support Homeland security is of course, without bounds.

The purpose appears to be to ready the nation for war. It’s to give the people a choice of starving in the dark or taking a bullet in the ME. And it will creep upon us in little pieces, in little bites. They know they can’t do it to us all at once.

The year of 2006 is expected to see the first major natural gas shortages. With that will of course come price gouging. So the people will be diverted to being angry, not with the government for bad policy, but at bad people who are exploiting the situation. Of course, our leaders have known all along that the US is running out natural gas, that’s why they created subsidy programs to pay corporations to move their operations overseas.

Enjoy the show.

15 Comments:

At 10:27 AM, Anonymous Anonymous said...

There is so much US money and other assets held by foreign governments that they don't know what to do with it. What can you do with $4 trillion? Buy oil? Then what do the people who sold the oil buy? If the US wanted to settle its' debts it would have to sell off whole states. Want to sell the Chinese California? No? How about Alaska? Oh yeah, there's oil in Alaska. How about if we sell all the politicians into slavery? Oh yeah, that's right, they already have enough slave labor. This is all going to end very badly.

 
At 4:33 AM, Anonymous Anonymous said...

Why is there going to be a gas shortage in 2006?

 
At 7:12 AM, Blogger Weaseldog said...

Old natural gas fields are being depleted and new ones no longer last for decades but, instead are on average, productive for only a year.

Richard Duncan and Matthew Simmons had been originally projecting the cliff in production to begin in 2008, but both have been arguing lately that it's more likely that actual shortages will be seen in 2006.

Matthew Simmons is the owner of a petroleum consulting group based in Houston Texas.

He's been giving paid presentations to industry leaders for years, on the oil and gas situation in the US. He was also an advisor to President Bush.

http://www.simmonsco-intl.com/

DOW and DuPont have been steadily moving all of their operations out of the US for the past decade. DOW told shareholders in a meeting some years ago, that they were making this move because they expected natural gas shortages and rising costs to become a major factor in doing business in the US and said that they were moving to Asia, to be where natural gas supplies would still be plentiful for years to come.

Had these industries not moved out of the US, we would be dealing with the shortage already. But by moving manufacturing out of the US, we've stretched the supplies out a little longer.

When supply and demand became close in 2000-2001 and Enron used the situation for profiteering, our leaders chose to build more natural gas powered electric plants to insure that the lights stay on in case of another natural gas shortage. It's a wonder they can tie their own shoes.

 
At 7:37 AM, Anonymous mr. x said...

The Florida tourism industry fought gas exploration off the west coast of Florida for years. I read an article the other day saying the exploration will go forward. Even so, it will likely take awhile to bring any finds from this effort on line though. Desperate times indeed. We dodged a bullet this year with a mild winter, industrial users moving overseas, and a pretty good natural gas find at an opportune moment. If this summer is hot or next winter is colder look for soaring prices.

 
At 11:36 AM, Anonymous Anonymous said...

Re: Natural gas running out...

Hmmm, I see, makes sense. But if there are going to be so many very serious problems ahead in 2006 why is the stock market going up and up all the time? Why aren't those who know this selling? I mean the big boys who move the markets.

 
At 1:29 PM, Blogger Weaseldog said...

They aren't the same peeps.

And there's still money to be made in gutting the value out of the US.

Look at how many economists get on magazine covers, arguing that there's a enough oil to last forever, or that the market will fix things.

The big financial institutions that move these stocks around only have one game they know how to play.

There are still a lot of power players that believe everything revolves around money and will stay in play through the next market crash.

Also the Fed is rumoured to be injecting money into the market on regular intervals to prop it up.

The banks moving funds around are making money off of other people's money.

the folks at DOW and Dupont, know chemistry, they know thermodynamics, they know how the physical world works. It's their bread and butter.

The finance industry only knows money and sees everything as interchangeable commodities. They don't have the capacity to understand the looming crisis.

I don't know that Richard Duncan and Matthew Simmons are correct about their timing. I do believe them when they describe the scope of the problem. I can't prove them wrong. If they're right, then it's best to know in advance.

In 2000, I used EIA numbers on natural gas and made a simple spreadsheet showing current production, and expected discovery curves and got 2008 as the data of the peak. The fact that EIA data gave me that answer, scared the crap out of me. Since then, there have been no big discoveries large enough to move the data around more than a few weeks or months.

The end of natural gas in the US as an energy source, doesn't have to be the end of everything, but it will bring some chaos. It will change America.

 
At 1:44 PM, Blogger Weaseldog said...

If we assume for a moment, that these gentlemen have the timing about right, then Bush will need to distract us, so most people won't get a clear handle on why this has happened.

Southern California will be especially hard hit because it's reliance on natural gas for electricity generation. That energy, is used to supply all of the water. Without electricity the taps will go dry.

Perhaps that's what the new detention center is for?

And why is Bush telling us that LA was barely saved from a terrorist plot?

 
At 4:26 PM, Anonymous mr. x said...

You gotta check this out:

http://portland.indymedia.org/en/2006/01/332775.shtml

 
At 2:58 PM, Anonymous Donna said...

So, Weaseldog, do you think the ports being sold to the UAE might have anything to do with the possibility, brought up in recent articles about petrodollar warfare and the Iranian oil bourse, that TPTB in the US may try to pull off another 9/11-style attack so the people would get behind nuclear war on Iran?

 
At 10:22 AM, Blogger Weaseldog said...

As you remember, recently we had an audio tape surface that was reputed to be from Osama Bin Laden. Then guy that Bush says is neutralized, that he doesn't think about much anymore, that is no longer a threat.

In the tape, the speaker says the US will be attacked again. Bush says, pay attention, he means what he says.

I take this to mean that Bush believes another attack is imminent.

 
At 2:36 PM, Anonymous Donna said...

An attack that TPTB in the US have nothing to do with? Or will be in collusion with?

 
At 5:33 AM, Blogger Weaseldog said...

Much of the US is owned by foriegn governments now. The Carlyle Group for instance, now handles Classified Personnel Databases with the background check information for everyone that has ever had a background check. They are responsible now for keeping our nation's top secret security databases safe.

And who are they? They are a corporation owned mostly by Royals in the Middle East. Some of the same folks that are on record as funding Al Queada own the corporations that manage our most seinsitive data. Oh yeah, Bush family members sit on this board too.

So I don't know if the US is in Collusion per se. The US is now owned by so amny foriegn entities, that it is no longer capable doing anything without the direction of foreign nationals.

 
At 9:36 AM, Anonymous Donna said...

I appreciate your thoughts, Weaseldog. Damn. Sounds like anything could happen now. See you back over on CFN.

 
At 6:43 PM, Blogger Douglass said...

Weaseldog!

I was sent here from one of your comments on Kunstler's blog.

I think you would thoroughly enjoy reading this article. It is old, but good. I think it backs many of your positions:

http://www.macleans.ca/topstories/world/article.jsp?content=20050307_101541_101541

 
At 10:53 PM, Anonymous Anonymous said...

Hi weas,may drop by from time to time to compare notes..snuffy

 

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