So what commodity backed the dollar after Nixon defaulted on our international debts and took America off the gold standard?
Oil was that commodity.
OPEC nations must sell their oil priced in dollars. If they don't then the dollar becomes worth nothing more than a Euro or a Yen, except with massive trade and budget deficits. Those trade deficits are currently funded by simply printing more dollars, but if other nations didn't need dollars to purchase oil what would we fund our trade deficits with?Could this be the reason why we have never invested in alternatives to oil?
The Nazis ran their war machine on a synthetic oil created from coal. For ages, we heard that this process was cost-effective only because the Nazis used slave labor. But technology progresses, and the price of oil may soon hit the $100 a barrel mark.
A commenter here says that
South Africa today generates synthetic oil from coal in a process similar to what Nazi Germany did. It cost $23 for one barrel.I've seen higher figures elsewhere, but not much higher.
Ten years ago, scoffers used to say that we would never switch to synthetic oil unless the price of the real stuff rose to over $30 a barrel. Well...?
(Synthetic fuel derived from coal is worse on the environment. Some scientists have proposed artificial carbon sequestration as a way to combat these adverse effects. At any rate, I think that economic concerns -- not environmental worries -- explain why Bush, Cheney & company don't talk about switching to a life of syn.)
2 comments:
While the cost of oil 'trades' st over 90 dollars a barrel. Oil's real cost to pump out of the ground is fractionally less.
Not that it matters:
The Nixon devaluation of the dollar had the effect of halving its value in only a few years, which also doubled most prices in US dollars, especially oil fuels (and real estate!). Coincidentally, the huge Interstate Highway System had been laid, mostly completed, and become busy. Also coincidentally, the African states and nations had become politically independent and de-colonialized during the 1960s.
With cheap oil, and the explosion in technologies (owing largely to WW2 inventiveness) many 'new' countries in Africa could essentially leap-frog the mule and slave-labor intensive industrialization process that the 'developed' countries had relied on. African countries were poised and ready to build 20th-century infrastructures (roads, schools, hospitals, airports, power grids, etc.) with earth-moving Caterpillars, worker-moving busses, and jet-plane moving buyers and sellers. Mass agriculture also relies on sweet crude. But doubling the cost of fuel made such independent leaps impossible.
While the USSR had huge oil, coal, and natural gas resources, it was landlocked; so the OPEC traders maintained a monopoly.
By the end of the 1970s, most of the cars in the US had to meet the ever-stricter EPA standards. Most inexpensive (4-cylinder) European models disappeared from America's roads (Fiat, Renault, Simca, Peugeot, Morris Minor, MG, Triumph, and so on), probably because it was economically prohibitive to meet the US EPA standards. The exceptions were exceptions: Sweden's Volvo and Saab, and the British luxury cars.
The key word in EPA was "protection".
Only Germany and Japan seemed able to make cars in significant quantity for US drivers during the Boomer Age, even as US consumers were willing to pay a 20% premium because of the exchange rates in the late 1970s-early 1980s. Have the full terms of "unconditional surrender" ever been made public?
Did you know that in the 1980s the US steel workers were bargaining for wages so they could own a second home away from the city? I know what you're thinking: there are no US steel workers anymore.
Nuclear power plant construction in the US had its big setback in 1979 when the Three Mile Island catastrophe revealed inherent 'design' defects. Did you know that metal fittings and pipes for nuclear power plants, which were required to be heat-treated to prevent fatigue, weren't always heat-treated but were nonetheless signed off as being heat-treated? It was never reported because it was never discovered by outsiders. It was laziness or incompetence, not greed, but criminal nonetheless; and adjusting for inflation in today's marketplace of thought, it would be called terrorism.
The economic manipulations that effectively prevented the African nations from industrializing also mooted many of the provisions of the Civil Rights legislation of the 1960s. White folks always be acting scared, pissing jive guilt, thinking the black man go' rise up and smite their fat ass, or fry chicken next door to them. Do you remember how George Wallace used to enunciate "bussin'" so it would sound like anal rape? (Yeah, that's an unfair, extremist distillation of Paul Krugman's "The Conscience of a Liberal".)
All of this was self-evident at the time, none of it based on hindsight. Things like ozone depletion and acid rain are understood through hindsight.
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