De-coupling FRN from world oil trade

1 post / 0 new
BungeeBones's picture
Status: Bronze Member (Offline)
Joined: Oct 2 2009
Posts: 38
De-coupling FRN from world oil trade

Gold spiked on a news report (later retracted) that China, Russia, the Middle East oil producers, France and Japan were meeting to come up with a plan to replace the dollar as the currency of world oil trade. People, if that ever happens the party is over, completely, 100% finished. The only thing holding up the FRN internationally is its use for purchasing oil. As long as the oil producing nations maintain its monopoly for that purpose other countries needed them by the trillions to fund their oil imports. Without that monopoly they would abandon the FRN in droves.

Whether the report is true or not, the thought of such a meeting occurring is not beyond a reasonable expectation considering our current fiscal irresponsibility. We have basically told our creditors we are willing to print as much money as we want thereby making their savings worth less and less. We have forced them to either abandon the FRN or watch helplessly as half or more of their wealth is wiped out. While the report or rumor of the meeting alone could start a stampede of abandonment  of the FRN around the world, the flight to gold is just the tip of the iceberg of the ramifications of the decoupling. The US economy would collapse in no time without the oil nations backing the FRN.

The countries mentioned would almost certainly be joined by Venezuela and perhaps Mexico. The US would have to come up with gold or whatever payment method they decided upon. No matter what one they decide the bottom line is we wouldn't be able to create IT from thin air like we do the FRN.


Login or Register to post comments