This is a bit odd - I posted the below material about a week ago, but it never appeared, (or perhaps got lost in the server upgrade) so here it is again:

I have been reading Clark's work for some time and it is excellent.

So I'm pleased to have him in our community. Welcome!

Firstly, I think someone should post a reader review on Amazon.com,

when I last looked the book didn't have any, poor thing....



Secondly, could anyone advise me of a bookshop that doesn't charge a large amount of shipping for the US>UK? I tried Amazon, and the costs were too high, but I want to get this book asap. William, when's it out in the UK?

julianj,

Thanks for the kind words. The book is not yet avialable in the UK, so you will have to buy from amazon.com, or directly from the publisher. Here's the link if interested: http://www.newsociety.com/bookid/3877

There are now 2 reviews on amazon.com, but the most thorough and detailed review was recently found on an unexpected website: Palestine Chronicle. Jim Miles does their book reviews, and I am grateful for his kind words re Petrodollar Warfare. I corrected one minor sentence in the 9th paragraph (my edit is in brackets [ ]). Anyhow, here's the full review for those interested in my little magnum opus:

http://new.palestinechronicle.com/story ... 0523163568


Petrodollar Warfare: Book Review

"As an explanation of economic forces around the globe today, Clark’s writing is clear and effective.."

Petrodollar Warfare – Oil, Iraq and the Future of the Dollar, William R. Clark. New Society Publishers, Gabriola Island, Canada. 2005. 265 p.

Reviewed by Jim Miles
PalestineChronicle.com

The average consumer of oil, if they read the newspapers, will understand that the world’s oil supply is currently being processed at peak capacity and that current infrastructures are running full out to meet the demand. The main common complaint is the seemingly excessive amount of taxes that the consumer pays on top of the actual costs of the oil – but the real costs of the oil, in massive U.S. military subsidies to grab and protect the global oil resources, would have us paying much more at the pump than we do now if that cost were passed on to the consumer (instead of being gobbled up by the enormous American debt). It can only get worse and it will get worse in potentially cataclysmic ways if the Untied States continues its unilateralist hegemonic attempts to control the oil supply but more importantly, to control the value of the American dollar as the World Reserve Currency.

That seems a long way from the local gas station but the connection is direct: I never believed the war in Iraq was about WMD’s or chemical weapons or al-Qaida connections; it never was about Hussein being a despotic ruler or about providing democracy to Iraq and the Middle East (a perverse reverse domino affect); and somehow I could never believe that it was about oil either. Whether a despot or not, the U.S. would be willing to buy the oil from anyone who wanted to sell it to them, and despot or not, a government would be willing to sell it to the highest bidder or to a previously signed contractor. William Clark’s excellent book Petrodollar Warfare highlights that the real problem is the American dollar.

Not just the dollar, but the American economy as a whole is in trouble. As an explanation of economic forces around the globe today, Clark’s writing is clear and effective. He uses only the basic graphs and statistics needed to support the underlying themes. Those themes are several. First is the concept of Peak Oil, a period in which the oil fields globally are all producing at their maximum output – a situation I would suggest we are entering as of now. Next is his discussion of the amazing indebtedness of the American economy and how frail the support for the dollar is in domestic terms (manufacturing, job losses, personal debt) and international terms (foreign debt, imports of manufactured consumer goods, Chinese and Japanese holdings of American treasury bills). Thirdly the U.S. is governed by neo-Straussian followers who believe fully in the concept of global domination and the control of the “vulgar masses”. The media in the U.S., now reduced to five major corporate conglomerates is strongly criticized as it has lost its ability to work independently and think critically about U.S. policies and actions. These all come together in Iraq, a country that was doomed to be invaded anyway, but made it all the more worthwhile by abandoning the petrodollar to price its oil supplies and to price oil with the new euro.

It is a large picture, sometimes difficult to grasp, and is not easily represented in neoconservative terms of black and white, “with us or against us”, good and evil. There are far too many nuances to make it an easy straightforward argument, but the summation is clear, “The beginning of the 21st century will either be a disastrous period of oil related military and economic warfare, or an unprecedented and noble effort at international cooperation.” That seems fairly black and white, but the route there is not.

The introduction is quite clear about the war in Iraq, as it is “to prop up the US’ declining economic status as the sole superpower…for both macroeconomic and geostrategic considerations.” Further, it is “about retaining the dollar as the world’s reserve currency, and it is also about securing its continued use as a mechanism for effortless US credit expansion and global supremacy.” Another factor is the “message to OPEC and other oil producers: Do not transition from the petrodollar to a petroeuro system.”

In simpler terms, the dollar is supported by its use as the pricing mechanism for oil, similar to the previous standard when gold was used as the pricing asset. Every country needs oil, therefore every country needs the American dollar. If that were to change, the dollar would (and is) losing value to the euro, which, as demonstrated by Clark, is becoming the de facto world currency. As the dollar grows weaker, countries may wish to divest their reserves, essentially selling them off at lower and lower prices. As the U.S. no longer has a strong manufacturing base to support the economy (thanks to globalization) and must rely on consumptive consumerism to support the economy, the selling off of the dollar would be disastrous for the economy. There is more complexity to it than that, but Bush’s exhortation to Americans to keep shopping and keep flying after 9/11 reveals more truth than he probably wished.

It is a web of deceit and lies. There is a war against “terror”, an endless war that is conveniently located in the major oil producing area of the world. The media support the arguments of the government unquestioningly, and when revealed to be false, proceed on to the next unquestioned reason. Britain has not used the euro and is thus tied to the American dollar, explaining a bit of Blair’s enthusiasm for the war. The American government is ideologically controlled by a handful of people – Bush, Cheney, Perle, Feith, Bolton, Wolfowitz, (formerly), Rove – none with military experience but firm in their belief of military dominance.

It is a web of complex geopolitical manoeuvring. China and Japan hold the American debt and could easily send a dangerous signal to the Americans if they decided to sell off their investment. The Chinese Yuan is “becoming a de facto convertible currency the Asian Pacific economies” and “eventually the demographic and economic trends in Asia should create a consumer base that will eclipse the American consumer base.” The Saudis are working in concert with the Americans to provide mutual stability for the dollar. Iran has signalled that it will be moving to the euro and starting a competing bourse for oil sales. Russia has been invited to consider the euro as its pricing base for its oil sales, most of which go to Europe anyway. Although not dwelt upon, the “Israeli-Palestinian conflict, the central flashpoint for all Middle Eastern affairs, facilitates anti-American sentiments and potentially facilitates the recruitment of al-Qaeda members.” The home of the euro, the European economic union, now consisting of twenty-five countries, is economically more stable than the U.S.

The solutions to the problems all make common sense, but common sense is somewhat lacking in the current American political mainstream. Energy consumption is obviously a target and Clark suggests converting the majority of the military budget into a budget for remaking a rail based transit system throughout America. Primarily he advocates [disavowing-WC] the preventative war doctrine, [while-WC] promoting fiscal discipline, international energy projects, “real wealth creation” through “manufacturing and production”, energy allocation agreements with other countries as oil runs out, and global monetary reform to hopefully prevent the catastrophe of a major U.S. recession when the euro gains ascendance.

It is not a pretty picture, but it offers hope as well as calamity. While the U.S. may continue the course, it can be defeated economically if not militarily – a dangerous route to go but perhaps a necessity – a fine balancing act between military or economic global cataclysm. The hope is that there is room for change but that change must occur soon, as we are entering the Peak Oil period and the people of the world do not wish to live in a perpetual state of fear promulgated by a group of narrow minded, ignorant high priests, “we must not allow our government to cynically use the “war on terror” to frighten the citizenry in order to gain our complicity for more unprovoked oil-related warfare.”

While there are other books written on the topic of oil and the oil economy, and several are referenced by Clark, Petrodollar Warfare serves as an excellent source of information about the American global position economically and militarily, and the realization that it is very thinly spread. This has been one of the more interesting and comprehensive reads of the year and the ideas within it need to be understood by the major players in the world, hopefully to take positive ameliorative action. At the same time, the average reader can gain good insights into the workings of the global economy without getting tied up in economic or political jargon and wishful thinking. In sum, a must read for everyone.


Copyright © 2003 palestinechronicle.com. All trademarks and copyrights on this page are owned by their respective owners.

I was not logged into the forum with the prior post, but obviously, it is I, Mr. Petrodollar, who posted the above review.

BTW, I emailed an 1,800 word essay to the admins of this forum yesterday as an editorial, and I think they will publish it shortly...

Clark,

I would like to know what your view is on the situation of the Iranian Oil Bourse (IOB) and the Dubai Mercantile Exchange (DME). Both are expected to begin trading in the first half of 2006. Is this a coincidence, or is the DME a reaction to the IOB? It will trade ME sour crude oil futures, however I guess the contracts will be traded in US$? I haven't read about the DME anywhere so I'm guessing it's not a big deal, but I thought you might be able to tell me?

Thanks, I'm waiting for your book to be delivered (should be any day now), looking forward to reading it.

CARVER,
Quite honestly, I do not know enough about the DME to make any worthwhile analysis. It is the Iranian bourse that should impact global oil trades, and I have commented extensively on that issue. (in fact, I won my 2nd Project Censored award for writing about it last year.)

http://usa.mediamonitors.net/content/view/full/17450

Anyhow, I hope you find my book informative.

Clark

I would only argue that the following is not true even if they read the newspaper.



I listened today to Gordon Brown and it seemed to me he was not raising any meaningful alarms.

A small group understands the problem but not the average Joe/Mary.

If I have anything to do with it, it will...

I've read the book and I think it is excellent. It looks at peak from a different ( and nasty) view: not geology, but geopolitics and economics.

I can't recommend it enough - some of the topics were not new to me,but I think that's because of Clark's earlier work.

The last part of the book is a plea for a saner, multilateral, non-international-law-breaking USA to confront its (and the world's)problems with diplomacy/compromise rather than force. It was nice to read it, and gave me a brief flash of hope,like sunshine through a skylight, but then I came back to reality and realised that the Whitehouse Whackos are gonna take it to the max.

I have started a new topic at Geopolitices
Boston Globe "Foreign policy realism" with Condolezza Rice


Petrodollar, I'd very much appreciate your commentary. Thanks.

plug, plug, plug....



Wrong, China's foreign purchases of US treasuries are now larger than Japan's.


and



Source:
Decreasing appetite for US treasuries by Asian central banks?




Source:


Asian purchases of US treasuries





Source:


China's foreign reserves surpass Japan's

rkerver,
Regarding the article, "Foreign policy realism," I think it is a little too early to claim that the executive branch is returning to a "realist" tradition that runs contrary to neoconservative doctrine.

However, I do hope this article is correct. I suspect the abject failure of the Bush administration to internationalize the Iraq situation is a driver of any such transition on foreign policy outlook. The former head of the National Security Agency under Regan, Retired Lt. General William Odom, recently stated the painfully obvious truth of the matter, "The invasion of Iraq, I believe, will turn out to be the greatest strategic disaster in U.S. history." I try to make the same point in my book, but not nearly so candidly.

So, it may well be this administration has seen the error in their ways, but the true test, IMO, is the Iranian situation. If over the next 6-12 months the Bush administration refrains from acting overtly or covertly against Tehran, then and only then will I be satisfied that "realism" has returned to US foreign policy during Bush's 2nd term.

Although speculative, I think it is possible that some other world leaders could have told this administration that support for the dollar will stop if they try anymore "restructuring" in the Middle East. Such a message could have come from China and/or Russia, but again, that is speculation, as nothing public has been reported.

We have also developed some serious tensions with Latin America...Most notably, Chavez appears fearful of being overthrown (again, by the CIA) or worse (according to nutty Pat Robertson), and I think that China et al will not tolerate any more US organized shennanigans with regard to Venezuela.

Indeed, this administration has backed itself into a corner with both energy and monetary issues, and as Colin Powell tried to warn Bush in 2002: "It's nice to say you can do it unilaterally, except you can't..." Let's hope that article is right, and that Rice got the message, has some say, and that Cheney and Rumsfeld can be "kept in the box" so to speak...


MrBill,
As noted in my poist, the figures I used re China and Japanese holdings of T-Bills and other dollar assets were from early 2005 when I finished writing my book. You are correct that China has recently nudged out Japan as the largest holder of dollar denominated assets. Thanks for the articles.


julianj,
Thank you for the very kind words regarding my book. I am glad you found my recommendations for a "more sane" world hopeful, even if somewhat fleeting...

I think you are quite right about Iraq & Iran. I certainly hope the current administration has learnt its lesson about unilateralism and returns to a more balanced, saner foreign policy. However, I would like to explain my ideas on why things went down the way they did.

First the UN does not work. Too many competing national interests, especially amoung the security council members. So in the end, institutional paralysis.

What are the options?

1. Unilateralism or a coalition of the willing as tried in Afgahnistan & Iraq. Mixed results. But, more importantly no exit strategy. As you said, maybe the worst strategical error in US history.

2. Rely on your 'allies' to negotiate a solution as tried between the EU & Iran over their nuclear ambitions. Again, this softly, softly diplomacy approach has not worked. The EU looks weaker and less credible than before and they did not achieve their intended results. Okay, at least you do not have a commitment of troops & money as in Iraq. But, also no foreign policy success that say we should negotiate a settlement.

3. Multiparty talks as is ongoing between China, S. Korea, Japan, Russia and the USA with N. Korea. Again, no success. N. Korea plays its usual brinkmanship and the intended result is not achieved. To a certain extent they are contained, but they are still a threat to themselves and others. Nevermind the costs in terms of human suffering.

So, the UN does not work as it is currently organized. Unilateralism carries specific threats and costs, can achieve some goals, but often has unintended consequences. So, are the EU option has not worked, so they refer it to the UN, which will be unsuccessful because both China and Russia oppose sanctions, which didn't work against Iraq in the first place. Thirdly, you try to get all interested parties to talk and put pressure on N. Korea, but like all game theory, unless there is a credible threat for punitive actions then the carrots are not going to entice them to give up their nuclear ambitions just stall and backtrack once the spotlight is off them.

I mean seriously, in a perfect world, the UN would function, multiparty talks would work, your allies would help you, and unilateralism & force would be a last resort. However, I don't see any of these approaches working at this time? End result, any nation can acquire nuclear weapons and conduct ethnic cleansing on a grand scale, so long as it is too dangerous to confront them head-on. I dunno, not a very ideal world is it, so although you may not agree with America, at least you have to understand from where their policy options start from.

These are the type of conflicts that America gets dragged into because of a lack of a functioning, credible UN. Of course, they should not have to, but then these countries slip deeper into the abyss and they become breeding grounds for poverty, war, ethnic cleansing & terrorism.


Report on Sudan

MrBill:

We have a bit of a dilemma worldwide with respect to the nuclear question. In the face of the inevitable decline of world oil and NG, nuclear energy remains a viable option, in the opinion of many, despite the objections. A new definition of a nuclear power is a country that has used their fossil legacy to leverage themselves into having nuclear power plants and all the necessary expertise to build and operate them, like France.

A multilateral coalition, open policy, a commitment to peace and frequent inspections are the only means to insuring that nuclear capability is not further leveraged into the making of bombs. That approach did succeed in Iraq, according to UN Monitoring and Verification Commission Chairman Blix and IAEA director-General ElBaradei. They already reporting each month to the Security Council that they could find no indication that Saddam Hussein had made any attempt to reconstruct his WMD programs in Iraq.

The Slow Enmeshing of Iran By Linda S. Heard, Al-Jazeerah, October 5, 2005, Article Here

I support Iran's hopes for the peaceful use of nuclear energy and becoming a part of the multilateral coalition. It was the PNAC spawned neoconservative elite that labeled Iran an "axis of evil," in order to push their global hegemony everywhere in the mideast. If you were Iran and understood the limits of oil, you'd also have nuclear ambitions.

MrBill,
I agree that the current UN is not working very well. However, it worked well enough from 1948-2000. As one U.S. congress member once stated a few decades ago (paraphrasing) "The purpose of the UN is not to get you into Heaven, but to keep you out of Hell." In otherwords, it is a vehicle originally designed to prevent the outbreak of global warfare. It served this purpose well enough during the Cold War standoff. Thank God.

However, for the past 5 years, the United Nations has not worked well because the sole superpower has been acting unilaterally in an attempt to maintain its declining economic status, while also attempting to strategically control the world's largest remaining hydrocarbon energy supply - this strategy be default requires that the UN be purposely undermined. Need more evidence? just review comments of John Bolton regarding the UN.

These recent developments may ultimately become the real tragedy of this new century, which began with the unilateral war against Iraq. Why could this become the tragedy of the 21st century? Its becoming obvious, what the world needs desperately is the UN to step-up and engage in multilateral negotiations with the G-8 (plus China and India) regarding the global energy challenges: mainly the pursuit of both demand side strategies and cooperateion regarding alternative/renewable energy implementation. Monetrary reform is also required, but energy is first.

Specifically, the UN needs to advocate something like the Upsalla Protocol, otherwise known as the Oil Depletion Protocol. Failure of the UN to get nations to adopt to such a multilateral treaty may lead to what Heinberg calls the "Last One Standing" strategy. That outcome will indeed lead us into Hell on Earth...global resource warfare

BTW, to address your comments about North Korea, pages 184-185 of Petrodollar Warfare:

Korea
Resolving the Korean peninsular dispute requires at the very minimum the reinvigoration of the Sunshine Policy rapprochement and ending this administration’s rather irrational antagonism of North Korea. A German-style reunification should become the ultimate target of US foreign policy, with UN involvement for the reassimilation of North Korea’s disastrous economy. Furthermore, the $13 billion South Korean military budget alone is larger than North Korea’s entire $9 billion governmental budget. Negotiations should entail blanket amnesty for Kim Jong Il as well as all North Korean officialdom, a concrete US military withdrawal timeline (as a concurrent de-escalation), and an economic revitalization development plan could easily include $8 billion of the current South Korean annual military expenditure bolstered with $2 billion of US assistance ($100 billion/10 years).

To gain amnesty, the North Korean government would be required to forfeit all 8,000 spent uranium fuel rods, transferable technology, and related nuclear material to the UN or International Atomic Energy Agency (IAEA). Additionally, in exchange for massive economic, food supplies, and agricultural development, the North Korean government should agree to cease all exports of advanced missile technology. For this, the US and world community should fulfill the earlier pledge to build two light-water nuclear power plants for North Korea’s energy needs. In effect, the proposed reassimilation of North and South Korea, along with general amnesty for the current North Korean regime, should remove the impetus for such weaponry.

....Now, to answer your larger question: What are the options? Well, below are exerts from the final chapter in my book. Numerous recommendations are found throughout the book, but this should give you some perspective on the macro challanges that are involved from my perspective...

(Petrodollar Warfare, pages 212-216)

In order to save the American experiment and stop the slide toward an authoritarian state, Americans must elect an enlightened administration in 2008 and create revolutionary changes in the current political establishment. Both of the major political parties have failed the American people, as the main constituencies of the current governing body are simply different factions of the richest two-percent of the population (the elites who run the military–industrial–petroleum–banking complex). This is a function of our structurally flawed campaign finance system that renders both Congress and the president incapable of voicing the concerns and interests of the other 98 percent of Americans.

There is no easy way out, and I do not envy the arduous journey that awaits the 44th president, who will likely face a combined economic and energy crisis. Global monetary reform and a compromise with the EU ultimately means the US will have to forfeit its hyperpower status and revert to being a realistic nation as one among equals. Many Americans do want to hear this message, but the US’extraordinary economic imbalances will ultimately unwind. Americans believe the myth that the other G–7 nations’ living standards would somehow be unfulfilling if we lived “their way.”

In reality their living standards are all excellent relative to the global community, and each of the citizens in those privileged nations should be thankful. Perhaps many of us will have to give up our irrational attraction to gas-guzzling SUVs, but do we really want these excesses to define our “values?” Regardless, we may not have the luxury of choice for much longer, as the dictates of the global economy and physics will soon come to the forefront.

The only solution is international cooperation, real leadership, global monetary reform, and sacrifices by the American citizenry to reduce energy consumption. US politicians are not interested in being truthful with the people, as both parties are more or less in the pockets of the military–energy conglomerates. The US media conglomerates are not serving the public’s interest. Consequently, real campaign finance reform and the comprehensive rejection of corporate personhood may be the only way for the US to possibly enact the required energy reforms with the onset of global Peak Oil.

In order to save the American experiment from the shared destiny of all empires — military overextension and subsequent economic decline — I recommend the following suggestions. While these proposals are bold, imperfect, and contentious, it is obvious that adjustments will be required to begin rebalancing the global economy and preparing the world community for the challenges presented by global Peak Oil.

Disavow the Preventative War Doctrine
The unrealistic neoconservative goal of global domination must be quickly discarded by any new US administration if it seeks to reduce current and future geopolitical tensions. The concept of the US openly violating international law with unilateral “preventative wars” in the oil-rich regions of the world will simply not be tolerated by most industrialized nations. Hopefully one of the first official acts of the 44th president will be to officially disavow the “Bush doctrine” and state a desire for a multilateral approach to international terrorism. Such a gesture would allow the world community to breathe a collective sign of relief and extend to the new administration much needed political capital. Multilateral cooperation will be needed for the following issues/reforms.

US Fiscal Discipline
We must restore some semblance of fiscal responsibility in this country if we want to save the dollar. The Iraq conflict had cost approximately $300 billion by the end of 2004, and estimates of current military expenditures are approximately $1 billion per week. US taxpayers (and their children and grandchildren) will pay for the 2003 Iraq War, unlike the 1991 Gulf War. The credit worthiness of a currency is based upon the ability of the government to collect tax revenue from its citizens. The devaluation of the dollar in 2002–2004 reflected the world community’s lack of faith in US economic policies.

International Energy Projects
Washington should propose to the UN that it form an international consortium of energy scientists and researchers to develop alternative fuels for transportation. IHS Energy has stated that least 85 percent of the world’s total oil deposits are already in production. The most recent findings of worldwide oil “mega projects” going online from 2004 to 2010 suggest an “unbridgeable supply-demand gap [for oil] opening up after 2007.” If alternative fuels for transportation cannot be developed and implemented over the next decade, disastrous consequences will beset the global community. Ideally, the US and UN would immediately advocate investments totally hundreds of billions to be spent annually on simultaneous, international Manhattan Project/Apollo-type energy programs pursuant to global energy reconfiguration.

• Ultra-fuel-efficient gasoline and diesel engines (as a “bridge technology”)
• Clean coal technology with mitigation of carbon dioxide emissions
• Geothermal power (retrofitting commercial and residential buildings)
• Hydrogen/Ammonia Fuel cells for mass transit (land, sea, and air)
• Small-scale solar retrofitting of residential and commercial buildings
• Large-scale solar power plants (e.g., 200-megawatt solar “Power Tower”)
• OTEC (e.g., fleet of 100-megawatt floating plantships producing liquefied ammonia/hydrogen fuel and potable water)
• Biomass and biodiesel for localized, agriculture-based farm production
• Wind power (rapid deployments in both small and large-scale settings)
• Thermal deployermization (new technology that warrants more R&D)
• Nuclear fusion (still unproven technology but warrants more R&D)

Advanced Manufacturing to Reduce US Trade Deficit
Alan Greenspan, the chairman of the Federal Reserve, has given Americans the peculiar impression that is does not matter where American products are made, just so long as people can continue to buy them. This is simply not true. The demise of over 2.8 million US manufacturing jobs since 2000 has led to decreased income, growing levels of personal debt, and new records of personal bankruptcies.

A superpower that loses its manufacturing base will not be a superpower for long. One of the most outspoken observers of this truism is Eamonn Fingleton, whose 1999 book In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity was somewhat derided during the “New Economy” frenzy. Following the dot-com/technology bubble, it appeared that he was right: there is no “New Economy paradigm,” and real wealth creation requires manufacturing and production.

The US must substantially reinvest in sustainable energy technology, advanced manufacturing, and various other export sectors in order to gradually but earnestly move the economy from a trade account deficit position back into a trade account surplus position. This will take decades, but on a positive note, the imperative for large-scale “energy reconfiguration” and development of alternative energy technologies provides the US workforce with an opportunity to makes gains in its advanced manufacturing base, while also enhancing long-term security.

Energy Allocation Accords
The UN should form an international group of scientists and engineers to study energy depletion stemming from global Peak Oil. Under UN supervision, the global community should devise a methodology and formal agreements regarding the distribution of hydrocarbons based on the global depletion rate (i.e., Upsalla Accord). Successful implementation of such a worldwide treaty would undoubtedly be a modern miracle. The incentive to abide by such an accord is the inescapable fact that the alternatives are either oil depletion warfare in the Persian Gulf and/or economic warfare in the international foreign exchange markets. These adverse events can be avoided, but only if the international community can agree to an energy treaty that reflects oil depletion, while also transforming the current economic/monetary system and implementing strict measures to control population growth.

It is essential that the US uses less energy and immediately improves its infrastructure before the full effects of Peak Oil make any energy reforms excessively painful and expensive. Given that Americans consume 25 percent of all hydrocarbons, we have the most to both gain and lose if energy reforms are not implemented during this decade while we still have the capability to pursue a gradual Powerdown scenario.

Global Monetary Reform
The main problem with the current global economy is that excess levels of credit creation (i.e. a credit/derivative bubble) have facilitated the building of supply capacity that is well beyond the requirements of global aggregate demand. As a general rule a period of deflationary contraction would permit a decline of supply capacity until such time that growth in demand initiates a new expansionary cycle.

Economists, such as Richard Duncan (author of The Dollar Crisis), have argued that excessive growth of global credit and subsequent structural problems of the US dollar may unleash a deflationary contraction of the global economy. A depression could occur with a significant devaluation of the dollar, and the downturn will be very long-lasting unless global aggregate demand increases, particularly in the EU and East Asian economies.

Therefore it seems imperative that the US government begins discussions with the G–8 nations (plus China) to reform the global monetary system, ideally, to allow for a controlled expansion of markets in Europe and East Asia. The global economy will be more balanced and better off with three engines of global growth: the US, the EU, and Asia. The great challenge will be to implement a gradual, controlled decrease in the US money supply, while attempting to minimize dislocations in the US and global economy. The first reform should be the euro as the second International Reserve Currency, at parity with the dollar, thereby allowing a dual-OPEC oil transaction currency standard. This should join the US with the EU as two equal “co-hegemons.”

While this rebalancing is necessary to create sustainable long-term growth, any broad transition from a dollar to a euro standard or euro/dollar standard with subsequent enormous capital market reorientation will be forcefully opposed by the American elite of the political and business establishment.

Regardless, the ascendance of the euro and ultimately the yuan has likely been fortified given the structural debt, trade, and fiscal imbalances in the US economy. The US consumer cannot go into indefinite debt as the single engine for global growth, nor can the Federal Reserve continue to reinflate bubbles indefinitely.

Both the EU and East Asia will have to recognize that the party is over and they cannot ride the American consumer in perpetuity. Whether or not they wish to confront the challenges of this transition, they will find these imposed by brutal economic realities.

***

(If I post anymore of my book, I'll have to charge you for it... )