The Oil Drum

27 comments on Is this the Economic stage of the Peak?

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light299 on November 22, 2005 - 12:54pm

Your post is very interesting, especially as I have heard alot about the financial incentives driving U.S. forign policy. Currently the U.S. has a huge trade deficit and a massive budget deficit (and consequently national debt).
Since the U.S. enjoys the favor of being the World Reserve Currency, such deficits have been allowed to exist and grow. However, current U.S. spending is so large that the dollar is begining to become seriously devalued. Eventually countries will see that it is not in their best interest to use the dollar (Iraq, soon Iran). So far the Bush administration's answer has been to invade such a country. We shall see what happens as more countries decide to make the switch.

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jkissing on November 22, 2005 - 10:18pm

The real point is that we consume more than we produce. The higher consumption means we import more of everything - certainly including oil, without which we could not power the cars we import from Japan. If we did live within our means, and imported no more than we exported, we would significantly reduce world demand for many commodities.

How long the world will continue financing this binge is another question. It is not really in Japan and China's best interest for their people to fabricate and send us their best stuff, but their governments don't have the political will to reform their economies, which would throw many of those currently making things for us into the street, so the situation will go - for a while.