This Could Easily Crash The American Economy

In explaining why oil is traded in American dollars, Quora reports the following history:

Allegedly, In a series of meetings, the United States — represented by then U.S. Secretary of State Henry Kissinger — and the Saudi royal family made an agreement. The United States would offer military protection for Saudi Arabia’s oil fields, and in return the Saudi’s would price their oil sales exclusively in United States dollars (in other words, the Saudis were to refuse all other currencies, except the U.S. dollar, as payment for their oil exports). By 1975, all of the oil-producing nations of OPEC had agreed to price their oil in dollars and to invest surplus oil proceeds in U.S. government debt securities in exchange for similar offers by the U.S.

That agreement has propped up the American dollar during Washington’s wild spending binges. It has allowed America to create the massive debt we now have without going bankrupt. Just for the record, high inflation makes it easier to pay off that debt.

Yesterday Yahoo News posted an article that is not good news for the future of the American dollar.

The article reports:

Saudi and Chinese officials are in talks to price some of the Gulf nation’s oil sales in yuan rather than dollars or euros, The Wall Street Journal reported Tuesday, citing people familiar with the matter.

The two nations have intermittently discussed the matter for six years, but talks have reportedly stepped up in 2022, with Riyadh disgruntled over the United States’ nuclear negotiations with Iran and its lack of backing for Saudi Arabia’s military operation in neighboring Yemen.

Nearly 80 percent of global oil sales are priced in dollars, and since the mid-1970s the Saudis have exclusively used the dollar for oil trading as part of a security agreement with the U.S. government, according to the Journal.

The talks are the latest in an ongoing effort by Beijing both to make its currency tradeable in international oil markets and strengthen its relationship with the Saudis specifically. China previously aided Riyadh in construction of ballistic missiles and consultation on nuclear power.

Conversely, the Saudi-U.S. relationship has been increasingly frayed in recent years. Crown Prince Mohammed bin Salman initially put forth a public image as a reformer, liberalizing the country’s policies on women’s rights and criminal justice.

However, the 2018 assassination of dissident journalist Jamal Khashoggi has been catastrophic for both the crown prince’s public relations offensive and relations with Washington. The rift intensified after President Biden, who has said the assassination should make the kingdom a “pariah,” took office.

During the same period, China’s economic relationship to Saudi Arabia has grown closer, with the kingdom providing 1.76 million barrels of oil a day to the country in 2021, according to the Journal, citing China’s General Administration of Customs. While the country plans to maintain the dollar for the majority of its oil trading, a shift by the Saudis could create a domino effect for China’s other major oil suppliers, such as Russia, Angola and Iraq.

I am not a financial expert and would not presume to tell anyone what a safe investment would be for the future, but I can say that this is not good news for the American economy.

The Omnibus Spending Bill

Kevin Roberts, The Heritage Foundation President released the following statement on Wednesday regarding the Omnibus Spending Bill:

“Americans are tired of the elites in Washington playing political games and using cheap tricks to pass massive spending bills that will only increase our debt and further drive inflation. Both parties in the House and Senate are working together this week to pass a $1.5 trillion omnibus bill that spends more money that we simply do not have, and they are playing games with our national security to do so. 

“Instead of following a transparent appropriations process, the House is using a procedural stunt to separate the 2,700-page omnibus bill into two divisions. This move is designed purely to secure enough votes to pass the bill in the House and send it to the Senate as one package, allowing House and Senate leadership to have full control over the outcome. 

“The national security spending in this bill is necessary, but it shouldn’t be used as leverage for a laundry list of far-left domestic priorities. The American people need relief from soaring inflation, higher prices, and a national debt that increasingly threatens their financial futures. Congress is showing that they still don’t understand this basic reality and are intent on causing more hardship for working Americans across this country.  

“It’s time for Congress to end the political games and govern responsibly. If Republicans are serious about governing like conservatives next year, they should start by rejecting this irresponsible approach to the people’s money.” 

It’s time to go back to the real budget process where every government department submits a budget to Congress for Congressional approval.

Someone asked the website Quora when the last federal budget was passed using the conventional budget process.

The website posted the following answer:

Usually a President’s first year in Office is under the previous President’s budget. However knowing that Barack Obama was winning, the Congressional Democrats used Continuing Resolution to push the budget forward. With Obama in Office, they passed the full budget in April 2009. I think since then we have only operated in a world of continuing resolutions and an omnibus budget. After gaining the control of the congress in 2014, Republican promised to return to regular order and it hasn’t happened yet.

To answer your question, the 2007–08 budget was probably the last regular budget passed.

We need to elect people who will return to the normal budget process.

Armchair Quarterback Theories

Yesterday Breitbart posted an article about a recent comment by Pope Francis about the bombing of Nagasaki and Hiroshima that essentially ended World War II.

The article reports:

“I will soon visit Nagasaki and Hiroshima, where I will offer prayers for the victims of the catastrophic bombing of these two cities, and echo your own prophetic calls for nuclear disarmament,” the pope told an assembly of the nation’s bishops in Tokyo Saturday evening, shortly after his arrival in the country.

“I wish to meet those who still bear the wounds of this tragic episode in human history, as well as the victims of the triple disaster,” he said. “Their continued sufferings are an eloquent reminder of our human and Christian duty to assist those who are troubled in body and spirit, and to offer to all the Gospel message of hope, healing and reconciliation.”

“Evil has no preferences; it does not care about people’s background or identity,” he continued. “It simply bursts in with its destructive force, as was the case recently with the devastating typhoon that caused so many casualties and material damage.”

This past week, Francis sent a video message to the people of Japan, denouncing the use of nuclear weapons as “immoral” just prior to his departure for a six-day visit to Asia, including Thailand and Japan.

“Your country is very aware of the suffering caused by war,” said the pope in reference to the U.S. bombing of Nagasaki and Hiroshima in August 1945. “Together with you, I pray that the destructive power of nuclear weapons will never be unleashed again in human history.”

“Using nuclear weapons is immoral,” he said, speaking in his native Spanish.

The only part of that statement I agree with is his prayer that nuclear weapons will never be unleashed again. Unfortunately nuclear weapons are a scientific fact in our world. Unfortunately not everyone in our world cares about the human toll involved in using one.

I went to a website called Quora to find the other side of the story:

The Japanese Army effectively was the civilian government of Japan. They intended to make the war as costly as possible so that at some level they would remain in power after the war, if in a chastened, more peaceful form. They were probably right, as the US population and military was very war-weary and may have settled for a negotiated peace at some point.

The Allies, quite reasonably, thought that scenario would lead to a later war and an eventual return to conquest as Japanese foreign policy. It certainly would not have led to a free, democratic society.

This doesn’t really answer the question however. The war would definitely have been prolonged. By August 1945 the Japanese population was already on minimal rations, every harbor they had was mined and/or patrolled by submarines and larger ships. They had no real way to import oil, rubber, and the other necessities of war. They had dozens of divisions on the Asian mainland that would slowly wither away. Without the bomb, the Japanese would likely have tried to hold out longer, look for more favorable terms, and the starving Japanese population would have suffered even more greatly from privation, firebombing of all the major and most medium sized cities, and the US invasion in Operation Downfall, along with a Northern front of invading Soviet forces. If the US invasion failed, they would have maintained the bombing and blockade for a long time.

By the end of WW2 all sides had so dehumanized the enemy that it’s hard to say where the bottom was, but it would have been very bad and almost certainly worse for all sides than the state of affairs after the surrender.

World peace is a wonderful idea as is a world without nuclear weapons, but neither idea is rooted in reality. Reality is that there are those among us who want unlimited power and are not necessarily concerned about how they get it. Throughout history we have seen examples of that–Hitler, Mao, Stalin, Lenin, Pol Pot, etc. Until human nature changes (which it won’t), the good guys need the best weapons to protect the world from tyranny.