I was a bit slow in updating the blog this week in face of a busy news week because I have been studying the debate between those who believe Christ was crucified on Wednesday and those who believe Christ was crucified on Friday.
The big news this week (probably the biggest news of the year so far) came on Monday when it was revealed that the Chinese, Russians, Brazilians, Japanese, and Middle Eastern countries are all conspiring together to find a way to drop the dollar as a currency of exchange when buying and selling oil. The reported plan was to price oil using a basket of currencies, including gold and a new Middle East regional currency. The hope of the parties involved is to have the new pricing scheme ready within 9 years or by 2018.
This news is very bad for the U.S. Dollar. First, the end of the use of the U.S. dollar as the primary unit of exchange for oil would be devastating because it would remove a major reason for these major countries to want to own the dollar. Lower demand for the dollar will lead to a much weaker dollar. A weak U.S. dollar would wreak havoc on the U.S. economy as dollar weakness triggers much higher prices and interest rates. Also, the fact that these countries are discussing the inclusion of a new Middle East regional currency means that Middle Eastern countries are ready to ditch the dollar (Middle Eastern countries currently try to keep the value of their currency relative to the dollar stable). The ditching of the dollar by Middle Eastern countries could incite panic in currency traders leading to a dollar crisis. Therefore, it should be no surprised that gold prices reached new records this week in light of this news.
Nevertheless, I do not think the plan discussed will succeed in the long run. I believe that there will be global hyperinflation well before 2018 which will wipe out the value of all paper currencies. Pricing items using a basket of paper currencies will not work when paper money is worthless. I believe these countries will eventually need to price items, like oil, in terms of gold, silver, or some other type of commodity whose supply cannot be easily created out of thin air.
On Friday we learned that Barack Obama won the Nobel Peace Prize. Personally, I think this is a joke that somehow conjures up images in my mind of a Third World dictator wearing all sorts of badges and awards on his suit to make himself look important. Let me be clear, I am not comparing Obama to a dictator. It is just that the notion that someone is given an award when they did nothing to deserve it is completely absurd. I commend Obama for at least admitting that he really did not deserve the prize during his acceptance speech.
People are speculating on how Obama will be impacted with the acceptance of this prize. I think Obama actually feels embolden by being given this prize. The gravitas of the award probably has gone to Obama’s head and has given him (another) reason to believe that he is on a mission to change the world. Obama realizes that the award was given to him not for what he’s done but for what some people hope he will do. Obama probably feels a sense of duty to live up to the award by changing the world, and Americans will end up having to deal with the consequences. This explains why Obama mentioned that he would use the Nobel Peace Prize as a launching pad to push his agenda.
