Here are two points of view for fairness and balance.
First Greg Palast presents the theory that by recycling petrodollars, we can keep the party going forever. We buy oil from the Saudis and the Saudis bail out our banks and stuff to recycle their dollars. Following Palast is the notion that the Saudis will run short faster than folks are admitting.
George of Arabia: Better Kiss Your Abe ‘Goodbye’
By Greg Palast
18/01/08 “ICH” — — Bend over, pull out your wallet and kiss your Abe ‘goodbye.’ The Lincolns have got to go – and so do the Hamiltons and Jacksons.
Those bills in your billfold aren’t yours anymore. The landlords of our currency – Citibank, the national treasury of China and the House of Saud – are foreclosing and evicting all Americans from the US economy.
It’s mornings like this, when I wake up hung-over to photos of the King of Saudi Arabia festooning our President with gold necklaces, that I reluctantly remember that I am an economist; and one with some responsibility to explain what the hell Bush is doing kissing Abdullah’s camel.
Let’s begin by stating why Bush is not in Saudi Arabia. Bush ain’t there to promote ‘Democracy’ nor peace in Palestine, nor even war in Iran. And, despite what some pinhead from CNN stated, he sure as hell didn’t go to Riyadh to tell the Saudis to cut the price of oil.
What’s really behind Bush’s hajj to Riyadh is that America is in hock up to our knickers. The sub-prime mortgage market implosion, hitting a dozen banks with over $100 billion in losses, is just the tip of the debt-berg.
Since taking office, Bush has doubled the federal debt to more than $5 trillion. And, according to US Treasury figures, on net, foreign investors have purchased close to 100% of that debt. That’s $3 trillion borrowed from the Saudis, the Chinese, the Japanese and others.
Now, Bush, our Debt Junkie-in-Chief, needs another fix. The US Treasury, Citibank, Merrill-Lynch and other financial desperados need another hand-out from Abdullah’s stash. Abdullah, in turn, gets this financial juice by pumping it out of our pockets at nearly $100 a barrel for his crude.
Bush needs the Saudis to charge us big bucks for oil. The Saudis can’t lend the US Treasury and Citibank hundreds of billions of US dollars unless they first get these US dollars from the US. The high price of oil is, in effect, a tax levied by Bush but collected by the oil industry and the Gulf kingdoms to fund our multi-trillion dollar governmental and private debt-load.
The US Treasury is not alone in its frightening dependency on Arabian loot. America’s private financial institutions are also begging for foreign treasure. Yesterday, King Abdullah’s nephew, Prince Alwaleed bin Talal, already the top individual owner of Citibank, joined the Kuwait government’s Investment Authority and others to mainline a $12.5 billion injection of capital into the New York bank. Also this week, the Abu Dhabi government and the Saudi Olayan Group are taking a $6.6 billion chunk of Merrill-Lynch. It’s no mere coincidence that Bush is in Abdullah’s tent when the money-changers made the deal just outside it.
Bush is there to assure Abdullah that, unlike Dubai’s ports purchase debacle, there will be no political impediment to the Saudi’s buying up Citibank nor the isle of Manhattan.
So what? I mean, for the average American about to lose their job and their bungalow it doesn’t matter a twit whether it’s Sheik bin Alwaleed who owns Citibank or Sheik Sanford Weill, Citi’s past Chairman.
It’s the price paid to buy back our money from abroad that’s killing us. Despite the Koranic prohibition on charging interest, the Gulf princes demand their pound of flesh, exacting a 7% payment from Citibank and 9% from Merrill. That hefty interest bill then pushes adjustable rate mortgages into the stratosphere and pushes manufacturing into China by making borrowing and energy costs impossible to overcome. Forget the cost of health care: General Motors’ interest burden quintupled in just two years.
As the great economist Paddy Chayefsky wrote in the film The Network:
“The Arabs have taken billions of dollars out of this country, and now they must put it back. … It is ebb and flow, tidal gravity…. There are no nations, there are no peoples. There is only one vast and immense, interwoven, multi-national dominion of petro-dollars. … There is no America. There is no ‘democracy.’ The world is a business, one vast and ecumenical holding company, for whom all men will work.”
In 2005, the US consumer paid Arab and OPEC nations a quarter trillion dollars ($252 billion) for oil – and the USA received back 100% of it – and then some ($311 billion) via Gulf nations’ investment in US Treasury bills and purchases of US businesses and property. Bush’s trip to Abdullah’s tent is all about this vast business of keeping this petro-dollar treadmill spinning.
The Bush Administration, rather than tax Americans to cover our deficits or make the banks suffer the consequences of their predatory lending practices, is allowing the Saudis to charge us big time at the pump with the understanding they will lend it all back to us – so the party never has to stop.
It has been reported that the President’s Secret Service men traveling with him seemed embarrassed by the eye-popping loads of diamond and gold gifts which they have to carry back for President Bush. They need not feel they have taken too much from their hosts: Bush has assured Abdullah that the King can suck it back out through our gas tanks.
Greg Palast is the author of “The Network: The World as a Company Town,” in the New York Times bestseller, Armed Madhouse. Hear Ed Asner read from the book and the film ‘The Network’ at www.gregpalast.com.
Here is another point of view. We have perhaps two years until all hell breaks loose, as the following analysis based on connecting the dots based on info reported by the New York Times, Wall Street Journal etc., indicates. The analysis is based on the fact that the producing countries themselves are using a lot of their own production. Another scenario would be a depression so bad that we are also unable to buy enough oil to keep the economy running, but it could conceal the true cause so we end up blame the economy rather than oil supplies. Choose your poison?
The peak oil crisis: the NY Times drops the first shoe
by Tom Whipple
Peak Oil started as a story about geology. It was once relatively simple. After 150 years of pumping up oil, the easy-to-find kind was gone and from here on out it was going to be much more difficult to find and eventually prohibitively expensive.
In recent years, however, the peak oil story took on new facets such as rapidly increasing consumption of oil in Asia and producing countries, concentration of most production in the hands of a few governments, unstable world finances, rapidly increasing cost of production and a growing inability or unwillingness to export oil to other countries.
Of all the reasons that gas prices are going up, only the geologic constraint – “supplies are running out” – has an air of finality. There is nothing anybody can do about it.
Other constraints on unlimited oil flows sometimes called “above ground factors” carry with them the subtle implication that there is something that can and just might be done to set things right. A war on top of your oilfield? Stop it! Getting too expensive to produce the necessary oil? Invest more. Government failing to step up production? Change the government! You get the idea. Peaking of world oil production by definition implies that the oil age is on the way out. Almost any other reason for restricted oil flows implies there is a “fix” which will allow us to continue on for awhile without any great disruption.
For over 25 years now, nobody in America has had to think much about oil. It was cheap, hardly taxed at all (by European standards), and available in unlimited quantities. In the last few years, this has started to change with gasoline circa $3 a gallon, oil in the $90s and, thanks to the ethanol craze, food prices going through the roof. Our newspapers are starting to take notice. The problem has become too big to ignore.
Three weeks ago the Wall Street Journal took a stab at explaining what was happening and came up with the notion that world oil production was only “plateauing,” not peaking [“Oil officials see limit” Wall Street Journal November 19, 2007]. Plateauing carries the implication that life as we know it can go on for awhile. All the oil we import today will continue to be available and, if only the Chinese economy would stop growing so fast, all will be well.
Last Sunday, the New York Times came at the high gas price problem from a different direction – availability of imports [“Oil-Rich Nations Use More Energy, Cutting Exports” New York Times December 9, 2007]. Drawing on the combined wisdom of no less than seven of their reporters strung out around the earth, the Times boldly concluded that “The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad.”
The Times then told its readers some very scary stuff. “Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.” I particularly like the “if it continues” clause which suggests that the Russians, Mexicans, Venezuelans, Iranians and all those incredibly rich Persian Gulf Arabs might just stop buying new cars, building themselves places to live, and buying flat screen TV’s so they can export their oil to their good friends in America instead.
After more scary talk about world oil exports dropping by 2.5 million barrels a day in the next three years and how a drop of this size could lead to major economic problems, the Times switches to a reassuring mode. “The trend, though increasingly important, does not necessarily mean there will be oil shortages. More likely, experts say, it will mean big market shifts, with the number of exporting countries shrinking and unconventional sources like Canadian tar sands becoming more important, especially for the United States. And there is likely to be more pressure to open areas now closed to oil production.”
They even go so far as to suggest that an era of peace and friendship might just break out in the next few years. ”Greater political stability and increased drilling in some important oil states, notably Iraq, Iran and Venezuela, could help offset the rising demand from other oil exporters.”
After reassuring us that all is not necessarily lost, the Times concludes by reinforcing its basic point by saying “Internal oil consumption by the five biggest oil exporters — Saudi Arabia, Russia, Norway, Iran and the United Arab Emirates — grew 5.9 percent in 2006 over 2005, according to government data. Exports declined more than 3 percent. By contrast, oil demand is essentially flat in the United States. CIBC’s demand projections suggest that for many oil countries, including Saudi Arabia, Kuwait and Libya, internal oil demand will double in a decade.”
The Times and the Journal have taken a major step forward by admitting for essentially the first time in front-page stories that the U.S. is going to face a big problem in the next few years. Neither however has connected the dots.
Nowhere does the Times remind us that the U.S. is now importing two-thirds of its oil consumption each day and that a drop of a few percent in daily flow is likely to cause pandemonium at the pumps as it did back in the 1970’s. Neither paper has as yet mustered the editorial courage to discuss the 800-pound gorilla, oil depletion, which every year quietly eats away 4 or 5 percent of our oil supply – the life blood of modern civilization.
Until our major newspapers begin discussing in a frank and open manner what will soon be the first major crisis of the 21st Century, the U.S. Congress is doomed to empty posturing and debating energy red herrings. It is clear that most have no clue as to what is about to befall us.
I don’t understand the importance for the Left of whether the economy crashes or not. A recession might open people’s eyes and be an opportunity to organize. It also might drive people further into the hands of the Right. If this is important as a proof that capitalism is bad and doesn’t work, that’s something we already know and only one reason of many– surely it’s not worth waiting for when we could be organizing for economic justice and toward an alternative economic system right now.
I never suggested that organizing efforts should slow down, but I do think it is VERY important to have as accurate an understanding of where things are headed as possible. Timing and political dynamics are important factors to keep in mind when working out a political organizing strategy.
Most average Americans are now very uneasy about the economy according to the polls, and I am willing to best that a Democrat will be elected president as a sort of backlash against Bush. As things get worse, I imagine they will probably expect the president to act like FDR and heal the economy somehow.
Kucinich has the best platform IMO, but Edwards is meanwhile openly talking in terms of class struggle against corporate domination. Obama is the safe non-scary nice guy Black, who is a little to the left of corporate centrist Hillary.
To look for historical parallels, I think this is like 1929 in economic terms. We will see in the next year. Bush may now be as unpopular as Hoover was after 1929. This bleak economic situation elected FDR as a backlash.
The left is not now as strong now as it was in the 1920’s perhaps, but lets recall that the great growth of the left came in the mid 1930’s, despite FDR’s more mainstream efforts. Economic crisis is very conducive to radical organizing efforts; people demand stronger medicine when they get pinched and have trouble feeding their families, etc.
In 1932, tens of thousands of war veterans came to Washington as a bonus Army to squat until they were paid their promised military bonuses.
This army was dispelled by Gen. Douglas McArthur. At about the same time, there was a Fascist coup against FDR organized by top US industrialists (including Prescott Bush, GWB’s grandfather), but it was revealed with the help of Gen. Smedley Butler:
I imagine that if you are looking for historical parallels, that our current problems are good news for radical activists; I think we are headed into a decade of hard times that might lead to something like the growth of the Communist Party and the labor movement and the CIO during the 1930’s.
The main problem now, as I see it, is that we are not suffering solely from an unequal distribution of wealth, although that problem has never been worse than under GWB now. A big additional problem now is that the USA is hopelessly addicted to imported oil and facing resource wars (and global warming) in addition to the same mal-distribution of social wealth or worse than we saw in the 1930’s.
In other words no matter how you slice up a shrinking pie, I think folks are going to feel cheated. That is what is most different now compared to the 1930’s when our industrial might was much more intact.
Marx thought that the working class would win in the long run through the inherent dynamics of class struggle under capitalism. And some revolutions did succeed, but they were primarily in the less developed countries like Russia and China, etc. Now China has evolved into a kind of state capitalism that has defeated its own working class.
I think we need new radical political thinking that look at broader factors than Marx was able to see, that include the environmental limits to growth as capitalism bumps up against the limits of the natural world. In Lenin’s day, it was becoming apparent that capitalist alliances would start fighting with each other and lead to imperialist wars. Now the capitalists are additionally at war with nature herself.
I still think that Marx was basically right, but now there are things going on that Marx didn’t foresee. And the path out of the wilderness to the promised land, if there is one, has gotten more complicated. I think our future will have to be based on a system that is as sustainable and non-expansionist and sustainable as Chinese history indicates that it is possible for human societies to be.
Despite certain misgivings about the future, I remain provocative, politically engaged, and willing to work for a better world. But I do think it will take active debate and discussion about where we are and where we are headed to get there.