Posted on 11/29/2014 2:43:52 PM PST by ckilmer
An interesting way to harden the US dollar and make it less of a fiat currency would be to sell the US oil reserve and use the proceeds to buy gold to store in Ft Knox or elsewhere.
For those who know their dollar and oil reserve history--this is 180 reversal of policies set in the 1970's because of a 180 reversal of circumstances. In the 1970's US oil production peaked and went into decline while the US dollar went off the gold standard and went into decline.
What's different now?
1.)Fracking has shown that the USA now has 100 year supply of oil. The USA is not going to run out oil any time soon. The fear of limited supply was the original reason for creating the US oil reserve. Now we know that we will not run out in anyone's lifetime.
2.) There are dozens of countries around the world working at undermining the dollar as the era of petro dollars winds down. Increasing gold reserves will help to harden the dollar.
3.)Countries like Germany and Holland are starting to move their gold out of the USA. This doesn't look good. It shows a loss of confidence in the long term viability of the USA. Selling oil and using it to buy gold would be a confidence builder.
3.) Its likely that oil will return to the $90@barrel in a year or two as lower oil prices reinvigorate the world economy and thereby push up the demand for oil and consequently the price of oil. However, the long term direction of oil is now down. Why. Because car makers in Japan Europe and America are shifting transportation to alternate fuels like natural gas, electric and even fuel cells. This is not a fad. Europe and Japan have an even more profound need than the USA to become energy independent. They can't do that as long as oil is their main transportation fuel.
Therefor its best to sell oil over the next decade while prices for oil are relatively high. 10 years from now and beyond oil is going to $35@ barrel and below as demand for oil collapses.
Sell low, buy low?
With Russia threatening global nuclear war again, now is not the time to be getting rid of the stockpile.
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Its not likely that Russia will want to swap nukes for something or other that nobody understands.
Because oil is too cheap right now. We should be buying oil
As unstable as Putin appears to be, he is making the threats and taking very aggressive military posturing globally.
In the face of this post Reagan Russian aggression, now is not the time to be emptying this reserve.
The current model is not sustainable...
We can’t inflate the debt away as it is short term and the increased interest rates would throw our government into default.
Bu . Bu . Butttt.. Fort Knox is full of Gold!!
Not even the EU or its members have any claim
To the contents of the ‘In Gold We Trust’ repository.
“The USA is going to enjoy a massive surge of wealth in the next couple decades.”
Care to ‘splain where this info comes from?
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Easy enough. Currently the US economy is being propelled by oil production increases. Lower oil prices will slow production increases down—but light a fire under the US economy. Which higher prices will later cause more production increases in oil. This is a flat reversal of fortunes that have been at work since 1970-73,
There are currently two trillion US dollars parked overseas that American corporations have made overseas—that they can’t repatriate because they don’t want to be taxed. Likely in the next four years—the tax laws will be changed to allow the repatriation of US dollars in foreign banks without tax consequences.
We are in the opening years of another massive technological revolution in manufacturing that will result in most of the US overseas manufacturing coming back to America.
The result of energy independence, repatriation of capital and a new manufacturing revolution will be annual gdp grow north of 4% for two decades or so.
Sell oil at a 5 year low?
Economics has never been some people’s strong suit.....
Because you can fly planes, and drive hummers, trucks and tanks on oil (products).
Other than electronics, gold has no value except for what the recipient thinks it’s worth.
Fresh water, food and medicine will be the leverage in the next decades.
The current model is not sustainable...
We can’t inflate the debt away as it is short term and the increased interest rates would throw our government into default.
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The result of surging oil production is lower federal deficits. What’s more likely than not is that Obama will leave office with annual deficits under 200 billion and maybe under 100 billion. He may even get lucky and leave office with government deficits at 0. That leave a huge debt. But just balance the budget for a decade or two and the debt shrinks as a portion of gdp.
A pipe dream you say?
Maybe. We’ll see.
Sell oil at a 5 year low?
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Not now. Later. In a year or two.
I don’t see gold as the solution for the future. Yes, it’s better than nothing which is what currently backs our currency...
We switched to the petro dollar under Nixon when he took us off the gold... wasn’t it 1973 when he said that we would no longer redeem gold for dollars and our currency started spiraling. So he negotiated the petro dollar as the gold replacement by guaranteeing military protection for the Arab countries. I could be wrong, but until we find a replacement for oil, the petro dollar has given us a lot of roller coaster rides in the past 40 years.
This is my humble opinion based upon the school of hard knocks and a good memory (but it is short.)
Bu . Bu . Butttt.. Fort Knox is full of Gold!!
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True. But buying gold and pushing the dollar higher gradually over time will force capital from all over the world into the dollar. and American assets.
Typically this would kill exports. But the coming manufacturing revolution will kill exports worldwide as innovations in 3d printing and advanced robotics kill the business model for distributed manufacturing.
I like your pipe dream and would love that for my future and my children. Problem is that Gruber was correct about our countries stupidity and there are too many Democrats in this country who rob Peter to pay Paul, so Paul keeps voting them into office.
Exactly knowing how much this GOVT lies to us, The possibility that their is Gold in Ft Knox is about as sane as their is OIL in those Salt Domes in Louisiana.
Obummer, a long time ago, sold that OIL to Tattoo Parlors.
Fresh water, food and medicine will be the leverage in the next decades.
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The USA is doing fine on the medical technology front. You bump into a lot of people these days who have experienced one kind of medical miracle or anther. The docs/medical scientists say advances are only accelerating.
There is another revolution coming in water — but its probably a decade or two off. That revolution will be when the cost of desalination and transport is cheap enough so that water on any desert coast can be desalinated and pumped 1000 miles inland to grow crops competitively on world markets.
This is coming.
It will turn the world’s deserts green and double the size of the habitable earth.
Yes. Something like that.
As soon as we figure out how to burn gold in a crisis, that would be a great idea.
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