This Could Mark The End Of The US Dollar

Online, February 28, 2011 (Newswire.com) - The turmoil across North Africa and the Middle East is threatening not only to overthrow aging dictatorships,
autocracies and monarchies, but also to upset the geopolitical
balance between the countries of that region and the Western
powers that has existed since at least the 1950s.

Libya and Middle East Aid

For the West,the issue has always been the security of oil. For the US there is a second issue, and that is the security of Israel. Now both are under threat.

Some 56 per cent of the world's oil reserves are in the Middle
East, with another nine per cent in Africa. Therefore, unrest in the region could be the catalyst that sets off a global monetary-oil shock. The unrest in Libya has sparked a sharp rise in oil price.

The US is the world's largest consumer of oil, at roughly 19
million barrels per day. It imports almost 10 million barrels per day. China is now the second-largest consumer. Neither of them are in the top 15 for production.

It has often been said the US dollar is a petrodollar. That is to say, it is earned through the sale of oil. Oil-producing countries such as Saudi Arabia and Venezuela, which peg their
currencies (within a band) to the US dollar, are as result
quite dependent on the value of the US dollar. These countries and many others earn large amounts of US dollars because of their oil production.

The US dollar is also the world's reserve currency. All commodities are priced in dollars - not just oil. It is the most marketed currency in the world and it is owned more widely than any other currency. One would therefore believe that a strong dollar is not only in the interest of the United States, but everyone else as well.

But the US dollar is also a fiat currency. A fiat currency has value only because the government says so. Today, all national currencies are fiat currencies. The trend began in August 1971 when President Richard Nixon took the US dollar off the gold standard thus also taking the world off of the gold standard.

Increasingly from then on, money was whatever a government said it was. As such it has no real value except being declared legal tender. Fiat currencies have a long history, mostly of failure .

But the US dollar is a declining currency. In the last 100 years it has lost over 96 per cent of its purchasing power (this process accelerated after 1971).

Many would say that it doesn't matter, that society today is far better off than it was 100 years ago. And it is, and more appear to be joining the middle class. But technological advances have changed society in a dramatic way from 100 years ago. That and lots of money provided by a rapidly expanding money supply and debt all courtesy of a fiat currency.

With nothing tangible to back money, money intrinsically has no
value - except what the government says it is.

Source: GoldSeek.com

If you found this article helpful, check out my other financial
survival blog posts as well. You can also go to my facebook page to read more and "like" me there.