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A Theory About War with Iran, the Straight of Hormutz, the PetroDollar, and the Bakken Formation

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12/10/2011 01:31 PM
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A Theory About War with Iran, the Straight of Hormutz, the PetroDollar, and the Bakken Formation
The world economy is in crisis. Financial analysts expect for the Euro to collapse soon without an intervention from a powerful outside consortium. Some have looked to China, expecting them to bail out Europe given their increase in economic power coupled with large reserves of commodities. In reality, their own economy is largely based upon construction and huge inflation, and I expect that their own economic problems have largely been hidden. Of course Western demand for Chinese products has fallen given the real loss of net worth both in Europe and the United States. Still, the Chinese could demand that their currency, the Yuan, be used to replace the PetroDollar in exchange for bailing out Europe.

The US Dollar or PetroDollar has traditionally held a higher value given its control over the petroleum market. For those who don't know this, all petroleum transactions are denominated in US dollars, and as such, it creates an artificial demand for them, increasing the worth of the dollar, and giving the US more political and economic power.

Given the loss of world confidence in US markets, a transition to a service economy (from an economy based upon producing goods) and a rapidly declining real estate market, we can continue to see a decline in the US economy. On December 1 2011, the Massachusetts Attorney General announced a lawsuit against the five largest banks involved in the robosigning scandal, dooming future foreclosures, and we can expect more states to follow suit to protect the citizens, but destroying international banks' assets. In effect, we will see a further erosion of real wealth that will perpetuate through legal action (whether right or wrong). Recent articles have pointed to a net loss in real worth among US citizens of 21K over the last year, based upon a declining stock market, high unemployment, and the fall in US real estate.

US Sec. Of Defense Leon Panneta announces military cuts to cope with the US budget crisis. Couple this with the inevitable cuts in defense spending, and the return of Iraq and Afghanistan war veterans to a sagging US economy without a prospect of jobs for them.

What might the US government and the multinational corporations do to preserve wealth and political power? What could be one possible scenario that could in one fell swoop fix the US economy and reassert their geopolitical power?

Imagine the collapse of the Euro. Lots of multinational corporations would lose vast sums of money that are tied to European government securities. The collapse makes the value of the dollar rise even more, boosting its worth, but making the price of US goods even more expensive and non-competitive with Chinese goods. Still US banks are inextricably connected with European ones, and we would assuredly see a collapse by contagion to the US.

Imagine a war with Iran. No one would want such a thing since it would close off the Straights of Hormuz, and more than double the cost of shipping oil. Clearly such a move would severely damage US/China relations and US/Russia relations.

Of would they? Right now, one of the few places in the US that isn't experiencing high unemployment is North Dakota. The preponderance of jobs are the result of fracking light sweet crude from the Bakken Oil Fields, one of the largest reserves of oil ever discovered. Imagine if the US government in collusion with the petroleum companies, allowed a war with Iran to both put people to work in Defense while simultaneously gearing up the Bakken Oil Fields. Shutting down the Straights of Hormuz would have a negligible effect on US oil, but have a severe effect on China and Russia.

In one fell swoop, the PetroDollar could be renegotiated based on the Bakken Oil Field source, renewing confidence in the US market. In point of fact, the US monopoly on a stable oil supply would put them in control.