Pompeo makes unannounced visit to Baghdad amid rising tensions with Iran

Washington Post ^ | May 7, 2019 | Carol Morello

[NorseViking]

OK. Iraq still need to sell oil, right? Independent US companies too. Lybia, Iran, USSR, Venezuela, Norway too.

[Zhang Fei]

[There is no way anyone can justify 18 years of sacrificing American blood and treasure in the Middle East.]

---

The cost is peanuts, although the Democratic media complex has been hyping it up. We lost 5000 dead in Iraq. That’s compared to 58K in Korea and 38K in Vietnam. Budget-wise, we spent 1/4% of annual output per year on Iraq. We spent 50% per year on WWII.

As to refugees, there’s no problem. Post-war Japan an Germany had refugee problems. Millions of orphans and widows. 10% of Germany and 5% of Japan lay dead. Millions of homes turned into rubble. The world said you will deal with it, and shut the door to them. So they did. There is no refugee problem - there’s a run to the West; there’s an open door policy problem.

---

[Still, you don’t seem to acknowledge the real reason for our interest in oil-rich ME, namely, the preservation of the petrodollar.]

---

I don’t know which crank originally came up with this theory, but it’s a load of hooey. Oil is traded in dollars because the US is the largest and most economy in the world. They use the dollar as the benchmark currency because it is the most liquid currency, meaning switching between dollars and riyals costs the least. The fact that oil is priced in dollars confers no particular advantage to us. When the dollar weakens against the major currencies, oil suppliers simply raise the dollar price of oil. For instance, while the price of oil in dollars is double what it was in the 80’s, the price in yen has actually gone down.

[Zhang Fei]

[OK. Iraq still need to sell oil, right? Independent US companies too. Lybia, Iran, USSR, Venezuela, Norway too.]

---

Standard economic theory - is price collusion easier with fewer or more members? The question answers itself. Check out how the prisoner’s dilemma becomes less of a issue with fewer participants. What I find kind of amusing is how you think the US should be fine with Saddam expanding his territory to control ~1/3 of the world’s oil production, yet Russia feels threatened enough by an independent Ukraine to the point that it invades.

[NorseViking]

There are diplomatic ways to negotiate the problem.
Ukraine is just irrelevant on this issue.

[Zhang Fei]

[There are diplomatic ways to negotiate the problem.
Ukraine is just irrelevant on this issue.]

---

Why use diplomacy with a guy who used force? Saddam had decades to get his country going. Instead, he wasted that time invading Iran and then Kuwait. It was clear he had to be blocked from invading Saudi Arabia and evicted from Kuwait. Funny how the Russians helped their allies invade South Korea and South Korea, yet objected when the US acted to evict Saddam from Kuwait. The principal theme here is perhaps that Russia’s allies should be allowed to expand at will against America’s allies.

[NorseViking]

It is great that you mentioned South Korea. South Korea was the nation which has the best perception of modern Russia as for a several years ago among all nations. It seems like South Korean is not buying Western propaganda on the issue.

[NorseViking]

Israel, Japan also. If you are a Russian man in Japan the women are all yours. If you are a better off tech person in Israel who reaches his a wage ceiling where would you do? US takes Mexicans for immigrants but deport Israelis. Russia considers Israel for near abroad and any Israely has the way to green card shortened.

[Zhang Fei]

[It is great that you mentioned South Korea. South Korea was the nation which has the best perception of modern Russia as for a several years ago among all nations. It seems like South Korean is not buying Western propaganda on the issue.]

---

South Korea has a lot of Communist fellow travelers. I was acquainted with one who made it stateside. Big Russophile who ended up working for a Korean company.

[NorseViking]

Half of South Korean military equipment is of the Soviet or Russian make. More so than of North Korea recently which has the most Chinese Equipment. How would you explain Israel and Japan?

[Zhang Fei]

[It is great that you mentioned South Korea. South Korea was the nation which has the best perception of modern Russia as for a several years ago among all nations. It seems like South Korean is not buying Western propaganda on the issue.]

---

Pew has Russia not doing all that well. I expect it’s the usual Russian media problem with the truth:

https://www.pewglobal.org/database/indicator/27/country/116/
https://www.pewglobal.org/database/indicator/2/country/116/

Now, I’m sure there’s some sense in which what the article you read is true, just as Bill Clinton did not have sex with Ms Lewinsky. It’s just not true in the normal usage of the words printed.

[NorseViking]

Nominal GDP rating is the remnant of the USD dominance myth.
Japanese or South Korean wives travelling to Russia and enjoying the better quality of life at less the nominal income are one example. So are the Israelis moving to Russia for tech jobs.

[Paulie]

Trillions of dollars and untold gallons of American blood (due in no small part to insane rules of engagement) is “peanuts” to you?

You are one sick silicone sister.

By the way, please educate yourself on the petrodollar - how it came into being, why it is important, and the situation we face today.

[Paulie]

Just re-read your ill-informed piece on the US Dollar.

As I asked before, take the time to educate yourself on this topic. You are woefully ignorant in this area.

[Zhang Fei]

[Trillions of dollars and untold gallons of American blood (due in no small part to insane rules of engagement) is “peanuts” to you?

You are one sick silicone sister.]

---

Point and sputter is a great debate tactic. It means not having to justify your position. What we’ve always said about WWII is that an ounce of prevention would have saved us the need for a pound of cure. The pound of cure needed during WWII, with respect to the US, was 400K GI dead and 2 years of economic output spent on the war. In today’s terms, $40T was spent on WWII. If you include all the other junk leftists have put in (disability pensions, suicides from Dear John letters to individual soldiers, and so on) then the total tab would have been over $100T. So, just over 1% of WWII’s casualties and dollar expenses are, relatively-speaking, peanuts. We are evaluating this the way policy-makers should, not weeping widows or orphans. Peace has a cost. We are paying the cost in Afghanistan and Iraq.

---

[By the way, please educate yourself on the petrodollar - how it came into being, why it is important, and the situation we face today.]

---

I’ve been reading about the petrodollar, and impending disaster for decades. It’s the biggest load of hooey I’ve read. It was my first impression back when I needed to show proof of ID to buy alcohol, and it’s my impression today, when no one asks any more. The dreary reality is that oil prices in dollars have an inverse relationship to the dollar’s value in the major currencies. In other words, when the dollar’s value in other currencies falls, the dollar price of oil rises. And vice versa. That’s not just true of oil - it’s true of every commodity we buy. Trust me - we’re not getting over. The people who think we are - chiefly a mix of our enemies, leftists and some number of paleos, don’t understand micro-economics.

We have the largest economy in the world. That has been true for 100 years. As someone who was once on one side of a foreign exchange desk, with daily trade amounts in the hundreds of millions of dollars, I can tell you that customers don’t care what currency they trade in, as long as the bid-ask spread (transaction cost) is the smallest it can be. And for currencies, one side of the transaction was invariably the dollar. If transaction costs involving the USD had increased vs JPY, DEM, FRF or GBP, they would have done that other side in those currencies.

The total value of worldwide annual production at $60 per barrel is $60/barrel x 80m barrels/day x 365 days/year = $1.752T. The sum total revenues of the top 5 US companies by revenues is $2.2T. The combined revenues of the top 500 US companies are $12.1T. It’s the real economy that’s providing the dollar’s liquidity. Oil producers are merely piggy-backing on it because it’s convenient.

Apple really does sell over $100b of products to foreign countries. Microsoft’s Windows really is the world’s operating system of choice on desktops, and Intel’s Pentium chips and AMD’s Ryzen chips really do dominate those computers. On top of which Qualcomm really does make the guts of smartphones and phone switches alike. That’s not even getting into the pharmaceuticals, where Gilead has made the first drug ever to permanently cure Hepatitis C at a cost over $50K per course of treatment, which is still cheaper than the previous drugs, which merely dealt with the symptoms, but had to be taken forever, vs Gilead’s one treatment and cured.

As long as we are a huge economy and leaders on the technological frontier, the dollar will have huge transaction volumes and continue to be the reserve currency for foreign countries. Once we falter, some other currency will take over that function. And it won’t be particularly noteworthy. The British pound used to be the world reserve currency. That’s no longer the case. Does Britain, with its per capita output of $40K (vs Germany’s $40K, Japan’s $38K and our $59K) seem like it’s a disaster zone?

The bottom line is that if Robert Fisk, the Guardian’s favorite left-wing journalist, is talking about the “petrodollar”, you know there’s something not quite right about the concept. Take it from someone who has literally spent tens of thousands of hours thinking about the financial markets.

https://en.wikipedia.org/wiki/Angus_Maddison_statistics_of_the_ten_largest_economies_by_GDP_(PPP)
https://foreignpolicy.com/2009/10/07/debunking-the-dumping-the-dollar-conspiracy/

[Paulie]

Wow - you sure know how to baffle people with BS, I’ll give you that.

However, not everyone is gullible.

Nice try.

[NorseViking]

You wrote a lot of right things but the entire message is confusing to say the least.
First you said the removal of Saddam resulting in deaths and empoverishment of millions of people is justified because his control of a couple more out of hundred oil producers would ‘ruin American industry’. Now you are saying that petrodollar and oil markets are peanuts and bring Apple and big pharma to prove it.
And you say 9/11 and all the people who died because of Islamic terrorism are peanuts ‘because WWII, Korea and Vietnam’?
Are you a Zbig Brzezinsky ghost?

[Zhang Fei]

[Wow - you sure know how to baffle people with BS, I’ll give you that.

However, not everyone is gullible.

Nice try.]

---

Which part is BS? Be specific.

Oil prices went from $3 to $12 around the time of the “petrodollar”. It has now gone to $60. That’s a 20-fold increase. Where’s the benefit to the US? The underlying assumption seems to be that the US is a failed state that would resemble North Korea if not for the “petrodollar”. It’s a close cousin of the notion that American military bases are an oppressive presence that keeps foreign imports cheap. People who believe that the “petrodollar” gives the US an edge or that foreign garrisons = cheap imports are uttering falsehoods. Neither oil nor imports are especially cheap in dollar terms, and they have been getting more expensive over the years vis-a-vis other countries as the dollar has depreciated. It’s a truism that oil has stayed more or less the same in Japanese yen terms while doubling in dollar terms over the past 30 years. It’s the same reason Japanese cars have become more expensive than Detroit iron in that time frame - dollar depreciation.

[NorseViking]

“” “” Oil prices went from $3 to $12 around the time of the “petrodollar”. It has now gone to $60. “” “”

Everything went up in price since when. Would you produce a barrel of oil for $3 today?
This point is irrelevant.

[Zhang Fei]

[First you said the removal of Saddam resulting in deaths and empoverishment of millions of people is justified because his control of a couple more out of hundred oil producers would ‘ruin American industry’. ]

---

It’s not clear how Iraq is impoverished. When the US invaded in 2003, Iraq’s GDP per capita was $609. It’s now around $5000. Besides, it’s not as if Russia took a look at the effects on Ukraine’s economy before it decided to invade Ukraine and annex the Crimea.
Besides, it’s not as if Russia took a look at the effects on Ukraine’s economy before it decided to invade Ukraine and annex the Crimea.
https://en.wikipedia.org/wiki/List_of_countries_by_past_and_projected_GDP_(nominal)_per_capita#IMF_estimates_between_2000_and_2009

Millions of people have not been killed in Iraq. The total body count there is less than 300K. That’s less than 1%
of Iraq’s population of 38m.
https://www.iraqbodycount.org/

Ultimately the low body count is the real problem. The German and Japanese occupations were fairly peaceful because these nations were all fought-out. 10% and 5% of the German and Japanese populations lay dead at the end of the war. Whereas probably less than 2% of Iraq’s Sunni Arab population has been killed in 16 years of sporadic war. Until enough of them are killed, war weariness won’t set in. While the country’s non-Sunni Arab population is working on this, they really need to carry out Saddam-style proscriptions in order to bring the Sunni Arabs to heel.

---

[Now you are saying that petrodollar and oil markets are peanuts and bring Apple and big pharma to prove it.]

---

You’re confusing two different things. The use of a given currency by producers for cost reasons worldwide has nothing to do with the control of resources by a single entity. We’re not worried about an Iraq choosing to price their oil in some other currency. Ultimately, the price will work out the same in dollar terms. Dollar goes up against major currencies, price of oil goes down. And vice versa. It makes no difference what currency the oil producers use to quote their products.

But it makes a difference if the number of independent producers goes down, especially when 5% (Saddam’s Iraq) of the market becomes 33% (Iraq with all of the Arabian peninsula under Saddam) of the market. It won’t destroy the US economy, but it will cost us hundreds of billions of dollars per year, dwarfing the cost of removing and killing him.

With oil priced at $60, the cost of oil to the American economy, is about $450b a year. Take prices to $180, ball-parked in 2008, and the cost goes to $1.35T. That took the world economy into recession, with the US economy recording a 3% drop and the major European economies (France, Germany, UK) reporting a high single digit drop.

It’s the same reason we got involved in Europe during WWII. It was against the American interest for either Germany or Russia to conquer Western Europe, one of the most productive regions on the planet. It’s the reason we’re remain in NATO today - to ward off either the Russians or Germans getting too big for their britches. Bottom line, the construction of empires by foreign countries, whether oil or land, is detrimental to US interests.

Trump could order US troops out of Syria tomorrow. But he won’t, for the same reason he approved the destruction of the company-sized Russian mercenary unit in Syria. His approach is to smile at America’s adversaries, while inserting a stiletto between their ribs. That’s why Putin is a great guy, but we’re supplying Ukraine with anti-tank weapons and sniper rifles, and we’re pulling out of the nuclear arms treaty.

[Zhang Fei]

[Everything went up in price since when. Would you produce a barrel of oil for $3 today?
This point is irrelevant.]

---

But, but, “petrodollar”. If the “petrodollar” can’t prevent a 20x *oil* price increase, what’s it good for? And why have prices gone up less in German and Japanese currency terms? Wasn’t the “petrodollar” supposed to preserve American buying power at the expense of other major currencies? What other things have gone up 20x in price since the 1970’s, apart from real estate and college tuition? Meat is 4x-6x. Clothing is maybe 2x-3x. Electronics have gone down. Cars are maybe 10x, but with major improvements like catalytic converters, air conditioning, ABS, air bags, traction control, and so on standard equipment, whereas oil is exactly what it was in the 70’s. So where’s the benefit of the “petrodollar”? Wasn’t it supposed to provide cheap oil? What cheap oil? Every time the US dollar value depreciates against foreign currencies, the dollar oil price goes up. Where’s the dollar oil price stability I keep hearing about that the “petrodollar” was supposed to bring?