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Forget the Gold Standard: The World has had an Oil-Backed Currency for Years

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That humming sound you hear is Republican Congressman Ron Paul, trying to decide if he's maybe behind the eight-ball on his conspiracy theories. For years, Paul has argued that the fiat money system the world operates under is the source of many economic woes. Paul advocates returning to the gold standard, where U.S. dollars would back all U.S. currency.

“The gold standard would keep you from printing money and destroying the middle class. Every country where you have runaway inflation, there's no middle class. Mexico, there's no middle class. You have a huge poor class, and a lot of wealthy people. Today we have a growing poor class, and we have more billionaires than ever before. So we're moving into third world status,” Paul said.

What Paul doesn't realize is that we already live in a world where the U.S. dollar is backed by a commodity. It just isn't his preferred commodity. The U.S. dollar is, for all intents and purposes, backed by oil. It's been that way by design since the 1970s, when the United States worked with OPEC to ensure a steady flow of oil to the country.

In exchange for the oil-producing countries only accepting dollars for oil, the US would support regimes like Saudi Arabia. This tied the dollar to oil, giving it a de facto commodity backing, and keeping it as the dominant currency — as close to a universal world currency as we've seen. Dollars are, or rather were, accepted anywhere on the planet.

This dollar-first policy has been the cornerstone of American foreign policy since Vietnam. It was the primary thrust behind the decision to invade Iraq and replace Saddam Hussein. The war in Iraq had nothing to do with establishing democracy or overthrowing a dictator. It had nothing to do with freedom or weapons of mass destruction.

No, America invaded Iraq and killed Saddam Hussein because Hussein sought to be paid for his oil exports in euros. This threatened to end the easy dollar times, as a shift to the euro as the currency of note for oil would have sunk the dollar.

In 2001, Venezuela's ambassador to Russia mentioned that Venezuela wanted to switch to the euro for all of Venezuela's oil sales. It took less than 12 months for the CIA to assist on a coup attempt against Chavez's government.

During the Bush years, dictators mostly got the point: stick with the dollar for your resources, or get replaced. Moammar Ghaddafi of Libya hadn't so much as sneezed at the United States in years. Suddenly, he starts stockpiling gold reserves rather than dollars, and he's enemy number one. NATO and US troops are currently bombing the hell out of Libya in an attempt to silence one more voice whose individual monetary goals do not match the banking cartel's interests.

What now? The United States is stuck with a currency whose fate is tied to a dwindling resource. The Fed has always shown an interest in printing as much money as it can get away with putting into the money supply. And why shouldn't they? Dollars are backed by oil.

So long as there is oil in the world, those dollars don't inflate the way your savings erode via inflation. So long as there are simpletons in the world willing to put on a uniform, ride a humvee around the desert, and take a bullet for a banker, the Americans will always have a means to acquire more oil — by force, if necessary — to protect the assets of the powerful.

Who knew that Ron Paul, of all people, would be right about the problem and absolutely wrong about the solution?

 

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