A History of Rigged & Fraudulent Oil Price

Below, please find excerpts from an interview forwarded to me by Mr. Lars Schall of chaostheoren.de with oil expert F. William Engdahl. You may find the full transcript of this interview here. Whether you agree or disagree with Mr. Engdahl’s theories, his insight always presents perspectives given almost zero coverage by the mainstream media and for that reason alone, are worth reading for the balance provided to the normally one-sided views propagated by the mainstream press. Mr. Engdahl remains one of the few people out there that capably connects the dots among commodity manipulation schemes, currency devaluation policies, and politics including war.

Much of the fraudulent and deceptive practices of big global banks that Mr. Engdahl discusses regarding the oil markets can be extended to other commodity markets such as gold and silver. Regarding precious metals markets and whether the banking cartel’s price suppresion schemes can be broken here, Mr. Engdahl opines, “The problem with precious metals is that the two major contenders against dollar hegemony, as you know yourself, China and Russia, have pathetically low reserves of gold in their central banks. If they were go to a bi-metal system, gold and silver, that could function. The Chinese, I believe, and perhaps also the Russians, could have substantial reserves of silver”.

However, I would be quick to point out that the “officially” reported gold holdings of China and Russia are likely erroneous. Since Iran was, until recently, able to keep information about their massive gold purchases fairly confidential (that may suddenly make their sovereign gold reserves on par with those of the United Kingdom), since China was able to keep purchases that doubled its gold reserves secret for six years before information leaked regarding their gold holdings, and since the executive chairman of the precious metals consultancy GFMS, Philip Klapwijk, just acknowledged that the IMF’s country specific reports on gold reserves is inaccurate, probably the safest assumption one can make about oil reserves, gold reserves and silver reserves is that no country is reporting honest numbers in an effort to conceal its hand as it scrambles to prepare and position itself for the second phase of the global monetary meltdown.

Though Mr. Engdahl only briefly touches on gold and silver price manipulation at the very end of this interview, the first step in breaking the criminal banking cartel’s commodities rigging game that solely benefits them while destroying the wealth of the world’s citizens is gaining an understanding of their rigging mechanisms. The banking cartel succeeds in creating “false” prices for commodities such as oil, gold and silver through their creation of bogus paper markets (futures, ETFs, etc.), in which sometimes a hundred times or more of the commodity is bought and sold in paper form than exists in real physical form. At the end of the interview, Mr. Engdahl states that he believes the petrodollar system can be broken quite soon by major players in the world economy today. I believe that the bogus gold and silver futures markets and bogus gold and silver ETFs can be destroyed as well in the future as long as people understand the rigging games executed in the gold/silver markets. The problem today is that the majority of people fail to understand these rigging games and that is why they have persisted as long as they have and why the world’s elite bankers have built their wealth enormously in the past decade at the expense of almost everyone other citizen’s well-being.  For this reason alone, agree or disagree with Mr. Engdahl, I guarantee you will find the below interview fascinating and very much well worth your time if you truly wish to survive the next several years of global economic chaos that is coming.

“We are in the Midst of an Epochal Tectonic Shift”

Given the fact, that the oil price attracts strong attention these days, it is more than just fitting to have a detailed conversation with one of the most prominent observers of the “black gold”  business,  F. William Engdahl. In the following exclusive interview, he discussed his views on the current oil price, the history of the oil interests in the 20th Century, the true aims of the “War on Terror,” and last but not least Peak Oil.

By Lars Schall
Mr. Engdahl, is the oil price by and large driven by massive speculation? Mike Norman, the Chief Economist at the Wall Street firm John Thomas Financial (http://www.johnthomasbd.com), wrote to me in October of last year for example:

“Total NYMEX open interest in crude is 1.4 m contracts or about 1.4 billion barrels of crude. Daily volume of crude traded on NYMEX is over 1 billion barrels per day. Total daily global demand is only 83 million barrels per day. The amount traded on one single exchange is more than 10 times total daily consumption. It’s a giant casino with prices being driven up by speculators and consumers having to pay more and more.” (i)

FWE: I wrote back in the 2008 period, when oil briefly spiked-up to $147 per barrel and Goldman Sachs was issuing client-advisories that it was going quickly to $200, and when JP Morgan was advising the Chinese government that China ‘buy all the physical crude you can get your hands on because it is going to $200,’ at that point I wrote that roughly 60-70% of the price of oil then was pure speculation, manipulated by the GSCI, the Goldman Sachs Commodity Index. It’s a perfect scenario that they have created on Wall Street to control the oil price irrespective of supply and demand (ii).  I would just add that the crucial ingredient these days is not the NYMEX for the global oil price benchmark, but the ICE Futures in London.

Why do I say that? Because the ICE Futures is a daughter company of the International Commodity Exchange of Atlanta in Georgia, owned by Goldman Sachs, Morgan Stanley, JP Morgan Chase etc. – the big oil banks that benefit enormously from the inside. There is absolutely no serious regulation of the ICE Futures. The British keep their hands off it, and the U.S. Commodity Futures Trading Commission, the CFTC, since 2006 under the “Commodity Modernization Act of 2000“ allows ICE Futures to trade energy futures without disclosure to CFTC in the U.S. market through London. So, in fact, it has deregulated and taken away from any government supervisory role the entire trade in energy futures, especially oil.

This is a rigged game. All you need now is a plausible event like this madman Gaddafi going berserk, or even a CNN perception of such, to then kick-off a snowball effect in the futures markets. These games are not sustainable over a ten year time, of course. Eventually it has to come back to supply and demand on some level, but the reality is that this is pure price and perception manipulation right now.

How much is the current upward movement of the oil price connected to the turmoil in the Middle East?

FWE: Well, the upward movement in the oil price began well before Christmas. The hedge funds and banks, which control and own the NYMEX, the ICE Futures and the Dubai Exchange, are using the Middle East events. I think they want to try to use that to push the price up to maybe $150 to $200 per barrel over the next few months. And why? In order to put massive political pressure on Germany and the European Union. Why they want to do that is of course a different question. But ultimately pressure on the emerging giant, China, that is beginning to act more independently than some in Washington would wish.

In case more events in the Middle East disrupt supply in a serious manner: does the world possess right now enough oil in inventory or spare capacity to cover that decline and prevent a price spike? Gregor Macdonald wrote for example in an article with the headline “Spare Capacity Theory“ (iii):

“In truth, the spare capacity that the world cares about—that the oil futures market cares about—is not the inventory level. But rather, actual production capacity that can be brought on immediately (iv).”

What’s your take on this?

FWE: The problem is there is no independent, non-partisan authority on the planet that knows what the totality of really usable oil spare capacity is. The Saudis keep it a state secret and most other Arab OPEC countries keep it a state secret as well. Presumably the NSA and various intelligence agencies have access to certain sensitive data in these countries, but we don’t. Moreover, there are reports that OPEC has been cheating for a long time on quotas and already pumping at capacity. The Saudis have said that they have a capacity to absorb Libya’s oil shortfall. I think if we see one more country, whether it is Oman, Bahrain or Algeria, go into a serious crisis, then we are in a new domain of danger short-term. The question is then how long will it last.

Do you trust Saudi Arabia’s ability to increase its oil production or will they face significant difficulties in doing so? (v)

FWE: I think the question is how much infrastructure in Saudi is online and how quickly could that be brought to the market. That Saudi Arabia has more than some ample oil reserves in the ground is no question in my mind. I was informed 15 years ago in Washington DC by an insider that the US satellite and other intelligence had confirmed the presence of enough oil just alone in the disputed territory between Saudi Arabia and Yemen to feed the entire world appetite for crude oil over the next 50 years – and that is only that piece of the desert. So that the oil is under the ground in that part of the world is no question to me. Iraq as well. In Iran you have the sanctions, which conveniently keep a lot of Iranian oil from the market at this point.

I think this is all part of a very complex and long-time planned replay of the U.S. oil shocks of the 1970’s, with the goal in mind of maintaining not just U.S. control over the oil markets, but over the global economies’ development. Too many countries since September 2001 begin to explore finding solutions outside dependency on Washington. I know from direct discussions with leading people throughout the traditionally “pro-American“ Arab OPEC countries, that they are fed up to here with Washington and its heavy handed demands on them, with their military bases, with their attempts to bring war against Iran and cause constant turmoil. They are looking to Europe, they are looking to Russia, they are looking to China, there is all kinds of cross flux and activity going on in these countries. I think that is the reason why the whole chessboard in the Middle East is being thrown up in the air by Washington right now. Whether that means that Saudi Arabia has the oil or not, there is no reliable source of information that says yes or no that I know of, certainly not that Swiss report the oil traders always cite.

The oil price is now well over $100 per barrel. That might be good for oil exporting countries, because they suffered under the devaluation of the US dollar; but isn’t it poison for the economic growth patterns of the industrial societies and in particular for China?

FWE: It is certainly not good for China. I think we are in a band between $ 80 to 110, where it’s not a growth killer for China and the global economy, but it’s like a tax, a 20 % tax on energy use in China and the rest of the world in dollar terms. I think this is something that the Chinese can manage as long as it remains short-term and around this level. Were the price to double to around $ 200 per barrel and stay there, that would represent serious problems for China in transition. But that depends on whether the Chinese would be able to make bilateral producer-consumer long-term supply-contracts with oil producing countries that isolate them from that dollar price effect.

Mr. Engdahl, before we talk further on oil, I would like to take a look with you at the place you were born, the United States of America. Without any doubt the U.S. has some profound financial and economic problems. But isn’t maybe the American elite the biggest problem of them all, since it seems that those people who belong to it have not the best interests of the American public at heart?

FWE: Well, if you look at the American history over the last century and even more, going back to the Civil War, with the rise of the House of J.P. Morgan based on defrauding the government for the sale of rifles during that war, when Morgan emerged as the Titan and No. 1 among the Wall Street “Gods of Money”, as I’ve called them in my book, it becomes clear. The American elite in that sense—the people with real power like the Rockefellers, who succeeded the House of Morgan after 1931—they never have had the interests of the American public at heart and they never will. They simply regard themselves as perhaps some of the Russian oligarchs regard themselves towards the Russian people, but even more so, they think they are literally the gods of the world. People are simply for them so many objects to be dealt with as they see fit like so many drones in an insect colony.

When you’re dealing with the United States you always have to differentiate between some 300 million normal people like you and I, who are trying to get on with their lives and trying to provide for their families and work a decent job and live a decent life, and maybe a handful of a few dozens of ultra-powerful people like David Rockefeller or in an earlier generation the House of Morgan. They literally see themselves as a race separate. That is one of the reasons why they have been fanatic backers of eugenics over the decades. Well before the Third Reich, they financed what later became Hitler-Nazi eugenics in Germany – the Rockefeller Foundation I am talking about. This is the kind of mentality of these elites.

So you think that this elite in America does not have an interest to stop the next Great Depression?

FWE: Well, let me give you an example: In May of 2009 at the home of the president of the Rockefeller University, a very, very elite assemblage of billionaires only – not millionaires but billionaires only – were invited at the behest of David Rockefeller and Bill Gates, they signed the letter invitation. They called themselves “the Good Club.” These are some of the wealthiest people in the world – David Rockefeller, of course, and Bill Gates with the Microsoft fortunes, Warren Buffet was there and Ted Turner of CNN fame. The subject of discussion, according to reports that leaked out, was not: ‘How do we deal with this world financial crisis and this great depression?’ Their absorbing passion in this meeting that they had in New York at the Rockefeller University was: How do we stop global population growth over the next several decades?(vi) So that will give you an idea.

It is my estimation at this point that they are trying to use the great depression that their financial shenanigans have caused. They deliberately created this securitization fraud, this Ponzi scheme after 1999, when Tim Geithner and Larry Summers were both in the Treasury department of the Clinton administration and they drafted the legislation for deregulating the banking system, allowing financial derivatives to be traded without any supervision by the Commodity Futures Trading Corporation, the U.S. Government derivatives supervisory agency – and they knew what they were doing. As Paul Volcker said in an interesting interview – I am certainly not a fan of Volcker from his past, but in this case I agree with him. Paul Volcker said about a year ago when he was asked what he would point to as the most positive contribution of banking innovation in the last twenty years: Well, if I think about it, there is one positive contribution – the invention of the automatic teller machine (vii). Other than that, derivatives and all this financial innovation, has done nothing but harm. That’s a paraphrase, but I think in this case Volcker is right on his estimation.

One major problem of our time might be that the central bank of the U.S., the Federal Reserve System, is privately owned. First of all: is this normal that a central bank is owned by a private banking cartel that can in this case run the monetary policy of the U.S.?

FWE: Let’s leave out the “normal” right now, that’s the direction that these money interests are trying to drive the entire world to get the world banking system decoupled from any kind of participatory pressure from the electorate. The Federal Reserve was created, as you know, in 1913. It was passed by an almost empty session of Congress two days before Christmas Eve in 1913 and signed within hours by President Woodrow Wilson, who some people say was put in as President – he was Princeton University’s president before that and then Governor of New Jersey – but he was put in as President on the money of J.P. Morgan, Rockefeller and so forth, with the sole purpose as a Democrat of giving left cover if you will to the creation of the Federal Reserve. It was a very controversial proposal that has been battered around since well before  the financial crisis of 1907.

The fact is, and few Americans are even aware of this – they think that the President proposes a Chairman of the Federal Reserve and therefore the Federal Reserve is a government agency. It is not at all. The various distract banks of the Federal Reserve – the Dallas Fed, the San Francisco Fed, the St. Louis Fed, and above all the primus interparty is the New York Fed – are stock companies, who’s stock holders include companies such as A.I.G., JPMorgan Chase and so forth. So these are privately owned entities that make up the Federal Reserve System. And that is the core of the problem.

The Chairman of the Federal Reserve has one essential mandate: to preserve the power of the big banks – as one Congressional hearing in the 1920’s called it the “Money Trust” banks. And that’s really only about eight or at most nine institutions, I would estimate, that are really totally dominating the multi-trillions of derivatives worldwide, that are totally dominating the securitization scams and that are totally dominating Washington policy of the U.S. Treasury. So the  privately owned Federal Reserve is, I think, one of the major problems of the ruin of the American industrial and social economy let’s say since the decoupling from gold in August 1971 certainly, and even before then.

As a historian, would it be an exaggerated statement to say that the entire history of the United States of America up to the year 1913 is the story of a Republic’s struggle against a central bank highly concentrated in the hands of a few men?

FWE: I think that’s a very interesting way to look at that history. You had the creation of the First Bank of the United States under Alexander Hamilton, the first Treasury Secretary. Many, even American historians, are under the impression that was a national bank owned by the U.S. government. In no way was this bank majority owned by the U.S. government. There was a minor stock share held by the U.S. government, but the main shareholders were private banking interests. Interestingly enough, one of the largest block of shares in the Bank of the United States was held by the House of Rothschild in London. So what the British lost during the Revolutionary War after 1776, they tried to get back through the back door by owning the bank that handles the U.S. public debt. The charter of that bank was not renewed, there were bitter fights in the history of that. There was a Second Bank of the United States created some years later and Andrew Jackson as President was a bitter  enemy of the idea that the debt of the United States would be handled by a private entity.

And then during the Civil War, Lincoln issued Greenbacks. That was a form of fiat money in an emergency situation, but what it did, partially at least, was to take the control of the U.S. debt temporarily out of the hands of London and New York banks. That displeased London to an extraordinary extent. Interestingly enough, the evidence that has emerged about the assassination of Lincoln at the end of the Civil War all points to the hand of the House of Rothschild and London City bankers, financing through Judah Benjamin, who was a leading Confederate official – the whole John Wilkes Booth assassination of Lincoln. Judah Benjamin disappeared from the United States after the assassination and spent the rest of his years in England. So one can draw conclusions as to who had an interest in eliminating Lincoln, though of course we may never know conclusively.

The other thing was the war of 1812. A very bizarre war when you look at American history. The British started it with their ships off the coast of Washington and New Orleans. They started bombarding Washington and declared war, and they tried to move down from Canada. And that was apparently a revenge by the London banks for the fact that the U.S. President had allowed the charter of the First Bank of the United States to expire and not to be renewed. So very much of the history of the United States up to 1913 is about this struggle.

Also the whole question of silver versus gold. Gold was something in the interests of the House of Morgan in New York and certainly of the London banks, because they were the heart of the gold standard of that time. So if the United States would go on to a silver standard or even a bi-metallic standard, that would vastly diminish the power of J.P. Morgan, Rothschild and friends in London, Barrings and others. They bitterly fought William Jennings Bryant, a man famous for the speech “You shall not crucify mankind upon a cross of gold. (viii)” But they essentially defeated the silver faction through all sorts of Congressional corruption and manipulation and so forth. So very much of the American history is about these struggles, yes.

If all of this is true, then it is the more important to understand a) how the Federal Reserve Act was put in place, and b) how the Federal Reserve System actually functions. I think related to a) maybe you could talk a bit about the bank panic of 1907. Who was behind this?

FWE: Well, surprise, surprise: it was the House of Morgan and their friends. They created a run on a large independent bank in New York City and triggered what became the panic of 1907. It was turned into an industrial, economic depression across America with huge unemployment. Through that panic and their lobbying efforts they got the Congress to vote for setting up a national monetary commission to examine how to prevent future panics. Well, it was a panic engineered by the House of Morgan and friends, and the way to prevent future panics would be to give them the control of the nation’s money – take it away from the Congress, where it is mandated Article 1, Section 8 of the Constitution, and give it to the cartel of private banks that make up the New York Federal Reserve Bank, which was deliberately designed to be the most powerful of all the banks in the Federal Reserve System.

And then the Federal Reserve Act was passed. How does the Federal Reserve System function?

FWE: Today you mean?

Yes.

FWE: Basically, it has unlimited power to print money to put it in the popular jargon. This is what we see Ben Bernanke doing since 2008, these are trillions of dollars, but of course Bernanke refuses to divulge any great details about what they are actually doing with the banks and which banks are benefitting from this Federal Reserve largesse. They’re buying up all the toxic waste, putting it down on the Federal Reserves balance sheet and giving the banks then triple A rated U.S. Treasury notes in return.

The Federal Reserve has an Open Market Committee, the FOMC. They meet every six weeks to determine interest rate policy, essentially until today. Several members of the Federal Reserve Board in Washington, always the Chairman of the Fed, in this case Bernanke or before him Greenspan, would be on the FOMC, the other ten or eleven reserve banks around the country would have rotating seats on the FOMC. So not all eleven banks are represented at all times.

The thing is skillfully designed to give the majority power to the New York Fed. The New York Fed is always on the FOMC, because of the international role of the New York Fed – and the fact is that the Federal Reserve Act was drafted by Morgan & Company, Rockefeller, to give the power to the New York money center banks. So they are always on the FOMC. And of course the Chairman has enormous power over the decisions of the FOMC.

Officially, one of the mandates of the Fed is to maintain the stability and value of the U.S. dollar.  (Mr. Engdahl laughs.) But one of the real results of the Fed seems to be the continued devaluation of the U.S. dollar in a quite remarkable fashion – which accelerated since the 1970s. Why so?

FWE: Simply because that was to the benefit of Wall Street. After the break of the link with gold in 1971, which I’ve mentioned earlier, the group around David Rockefeller, then at Chase Manhattan Bank, the family bank, realized that they had an incredible capability in their hands with a floating currency and the fact that the U.S. was the sole military superpower outside the Soviet Union. The fiat dollars that were being printed by the U.S. ultimately drove this devaluation worldwide over this period – I think there’s been a 2900 per cent inflation—that is, a two thousand nine hundred percent increase of the quantity of dollars circulating in the world economy since August 1971, according to the last data that I have seen, and in the twenty years before that it was something like 56 per cent increase of dollar reserves worldwide, so naturally that was a period of relative stable inflation or non-inflation really, and then after the break you had this highly inflationary period.

Well, what certain people around Paul Volcker and others figured out is that the debt was their best asset – best that was for the banks, for the private banks, not for the nation, but for the private banks. So as long as U.S. debt is rated triple A, and, absolutely essential: so long as the US dollar remains the reserve currency of trade and in central bank reserves worldwide, then the United States essentially can export its inflation as it did to Japan in the 80’s, now today to China, to the European Union and to the rest of the world. In effect, the dollar surplus lands have no choice with their surplus dollars, but to buy U.S. Treasury debt – to finance America’s wars around the world, whether it’s in Iraq directed against China’s ultimate interests or Russia’s ultimate interests, or any of the U.S. wars. Those are in a sense being financed by the dollar accumulations in the central banks of Asia and elsewhere around the world. So it’s a diabolical and quite clever scheme that they have realized: They could do that after the decoupling of the dollar from gold in 1971.

Ever since the early 1970s the dollar has been essentially backed by oil.

FWE: Well, that’s what I’ve called it. In my book “Century of War” I talk about the Petrodollar. This is something that has been misunderstood by some writers of late; they think that the dollar is still today a Petrodollar. Oil is the largest dollar traded commodity in the world economy bar none, that’s very clear. But today the dollar, I would say, is a currency that is backed not so much by petroleum prices priced in dollars, but more by F-16 fighter jets and Abrams tanks, in other words by raw US and NATO military might. It’s getting down to the basic essentials of power here since the beginning of the Bush administration. Bush and Cheney were brought in by the elites in order to take off the velvet glove and show the iron fist to the world, because more and more things were getting out of control of an American hegemony or American sole superpower situation with the emergence of China, Russia and different things going on in the European Union.

Let’s say then the dollar was backed essentially by oil.

FWE: Yes, going back to the period after 1973.

I would like to talk with you about an important event in that respect. This was the oil shock of 1973/74.

FWE: Correct.

You figured out in your book “Century of War” that this event was politically intended by a club that met on a Swedish island in 1973. Can you share some light with us on this topic, please?

FWE: Sure, most happily. I had the fascinating pleasure of being invited personally by Sheikh Zaki Yamani in September 2000 to his annual retreat outside London. He has an energy center in London that he founded after Washington got him dismissed as the Saudi energy minister during the reverse oil shocks of 1986, where Yamani was quite opposed to U.S. State Department pressure on Saudi’s monarchy. Yamani invited me because he had read the “Century of War” book – an Iraqi friend had given it to him. He called on me to give a presentation to this grouping of energy bankers from the City of London and oil men about what really happened in 1973. He introduced it by saying: “This is the only account that exists of what really happened in ’73 when I was head of OPEC and Saudi energy minister. I lived through this and Mr. Engdahl has described it accurately.”

What happened is the following: There was a meeting – and some people might get scared off and say this is conspiracy theory, but I am in possession of the actual confidential documents that quite legally came into my possession by chance in Paris years ago: the protocol from the May 1973 meeting of the Bilderberg Group in Saltsjobaden, Sweden. I have the attendees list from the Hoover Institute of War and Peace in California, I have the facsimile of the American secretary to the Bilderberg about which guests would be invited including Henry Kissinger from the American side to this May meeting. And in there, if you make the calculation, they listen to a presentation and debate, and these are some of the most powerful people in Europe and the United States – hand-picked by David Rockefeller by the way. The heads of all the major oil companies, the Seven Sisters, were also in attendance. They talk about what amounts to a 400 per cent increase in the price of OPEC oil in the very near future. Of course, they do not give specifics, but they talk in the abstract.

The entire discussion was not how do we as some of the most powerful representatives of the world’s industrial nations convince the Arab OPEC countries not to increase oil prices so dramatically. Instead they talked about what do we do with all the petrodollars that will come inevitably to London and New York banks from the Arab OPEC oil revenues. Henry Kissinger, who coined the term after the oil shock in 1973/74, talked about “recycling petrodollars.” And in fact what happened was – and this came directly from Sheik Yamani privately in a discussion with me at his home in 2000, he said: “I was sent by my King, the Saudi King, as a trusted emissary to talk with the Shah of Iran and asked the Shah why at the September 1973 OPEC meeting after the Yom Kippur war he was adamant about such a huge OPEC price increase as a permanent price.” And he said: “The Shah turned to me and said: ‘Tell His Excellency, the King of Saudi Arabia, if he wants to have an answer to that question, he must go to Washington and ask Henry Kissinger! (ix)” In other words, this was dictated to the Shah.

So this oil shock came two years after the free floating of the dollar, when the dollar was essentially falling like a stone, because the U.S. economy was starting to show major ruptures from the Post-World War 2 period when the U.S. industry was a world class leading industrial power and the gold reserves and everything else was in an ideal correlation to one another. The U.S. economy was coming into very, very severe structural problems in the early 1970’s. So the dollar was falling and the French and the German economies were really beginning to boom as was the Japanese economy, and certain elites connected with the money center banks in New York, I think, decided that it was time for a major shock to reverse the direction of the global economy, even at the cost of a recession in the American economy – that didn’t concern them so much as long as they were in control of the money flows.

Back in 1975, Washington sent a very senior Treasury official to Riyadh, and essentially told Riyadh that OPEC was not to sell a single barrel of oil unless it is priced in dollars, because at that time the German government, the French government and the Japanese government were all knocking on the door of OPEC, promising their quality machine-tools, the excellent high-quality German machine tools, French or Japanese trade that the Middle East countries so dearly wanted to build up their economies. But they asked it be sold against oil prices in their own currencies so they would be less dependent on the dollar. At that point, Washington intervened and said: “That’s a no-no. Oil must never be sold except in dollars (x).”

Why was this of essential importance to the U.S.?

FWE: Because since 1945, U.S. power projection in the world has rested on two pillars. One pillar is that the U.S. has the overwhelming military might on this planet. Today it spends more on military equipment, personnel and power projection than the next 42 countries in the world including Russia, China and all of Europe combined! The second pillar of U.S. power is the role of the dollar as the world reserve currency. Both two have a combined synergy. If anyone wants to understand the power of “the American Century,” as Henry Luce, the owner of Time magazine, called it in 1941, then they have to look at these twin-pillars and how they both interact.

The oil price jumping by 400 per cent in 1973/74 saved the dollar. The dollar had floated up on a sea of oil. Again, we have to remember that Nixon broke the link of the dollar with gold unilaterally in August of 1971, and after that time it plunged by some 40 per cent against major trading currencies like the Deutsche Mark and the Japanese Yen. What saved the dollar, what saved Wall Street and the power of the dollar as a financial thing, but not the U.S. economy by any means, was the 400 per cent OPEC price shock. That halted growth in Europe, it smashed the developing countries, which were enjoying a rapid growth dynamic by the early 1970’s, and it tilted the power balance back into the direction of Wall Street and the dollar system.

So if you look at the whole ensuing history of the 1970s into the 1980s Latin American debt crisis or Third World debt crisis, which also destroyed Yugoslavia, Poland and some other East block countries as well, that was all about recycling petrodollars through the euro-dollar banks, U.S. banks in London, British banks. This was the heart of the so-called eurodollar market then, the City of London – as well select banks like Deutsche Bank, UBS and a couple of Japanese banks were junior partners in this.

But the main thing was: the Anglo-American banking elite recycled the surplus dollars that Saudi Arabia, Kuwait, the Emirates and all the other OPEC countries including Iran until the fall of the Shah circulated. By the way, the Shah himself ran all of the oil profits of the Iranian oil company through one single bank, and that was Chase Manhattan Bank of David Rockefeller – interesting fact of history. So through the recycling of Petrodollars, the dollar was tied to the price of oil and the oil majors, the Seven Sisters, the U.S. and British oil majors, really  controlled the price of oil. They blamed it on the Arab sheiks, but the control lay in New York and London.

Today, I think the U.S. is going to do everything in its power to keep oil priced in dollars, but the role of the oil price in dollars is not as strong as it was in the mid 1970’s, because of the emergence of these futures markets controlled by banks such as Goldman Sachs—the advent of so-called “paper oil“. With that control of futures like ICE Futures in London they can ramp up the price of oil, as they did in 2008 with a price of $ 147 and then crash it down to the high 30’s. For what reason? They knocked the wind out of Russia’s sails at the time when Putin and Medvedev were using oil and gas export to create a major counter-pole to U.S. power in the world.

Again, for those of you interested in reading the rest of this fascinating interview, I have posted the entire transcript on my blog here.

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