dorlomin wrote:GoIllini wrote:Perhaps we should try and break the OPEC cartel,
What cartel?
The fact that OPEC is willing to step in and cut production when oil prices drop basically helps set a floor on the price of oil. Everyone knows Saudi Arabia is turning off the derricks if oil drops below about $60/barrel- not because it's too expensive to produce, but because they're part of the cartel. That floor limits how much people are inclined to bet on a drop in oil prices.
If I offer someone a share of Chevron worth $105, most people would be willing to pay $105 for it.
But if I offer someone a share of Chevron worth $105 and promise I will buy it back from them if it goes below $70, some people will pay $110 or $115 for that. It's a concept called convexity. Oil is worth *more*- even at $95/barrel than it would otherwise be worth because everyone knows Saudi Arabia will quit producing and stabilized prices if it starts to drop below $60. That fact there probably adds about $3-5 to the price of oil even up at $95/barrel.
Is it good? Is it bad? I don't know. I would imagine that if you want us transitioning off of oil or at least saving some energy for our kids, it doesn't hurt to cut production when prices get low.
Obviously OPEC holds less power to reduce price spikes- that comes from having spare, idle capacity. But short of something worse than the crash of 2008/2009, Saudi Arabia and OPEC can certainly prop oil prices up to $60/barrel pretty darned easy. If we were to stop that, oil prices would be noticeably lower. (And also a little more volatile).
Once oil producing countries stop accepting worthless dollars from the US for oil, the US will collapse over night. China, Russia, India and a few other countries have already dumped the Petro Dollar and are trading oil in other currencies. The US is also having trouble selling its debt. Once you can't sell your debt, you have to monetize it. This is one of the last straws before currency collapse. Fiat currencies are unsustainable.
Hardly. We control the world's grain market. Impose some grain export quotas, watch the middle-class in India and China eat gruel for a couple weeks, and watch what happens to the price of foreign labor- and the dollar. Additionally, the US, Australia, and South Korea are the only OECD countries who've seen their NET debt to GDP (including public and private) decrease over the past four years.
Seriously, grain prices aren't finished with their run-up, and we are the Saudi Arabia of the world's most important commodity- staple grains. We also have one of the world's best militaries and can keep China on their side of the Pacific if we tighten grain exports a little.
I don't think we need to get to that point, though. Consumer debt and corporate debt is coming down according to a recent study by McKinsey.
In fact, it's come down so much that it's offset the increase in public sector debt.
This isn't to say the US is in great shape. But stories of our recent demise have been greatly exaggerated. The frugal, hard-working American worker/consumer of the 1930s, 40s, and 50s is making a comeback.