|
|
Posted by D. Sherman on Friday, February 29, 2008 at 15:06:30 :
In Reply to: Re: Partly true... posted by MoparNorm on Friday, February 29, 2008 at 14:01:15 :
The problem with your scheme is that the American oil producer, which might be some multinational corporation or might be some ordinary guy with a ranch in West Texas or Wyoming, is not going to like having the value of his oil pegged to a currency (US$) that's declining in value relative to the rest of the world. That guy might want to buy some imported things, and his oil won't buy as much of those things as if he could sell his oil at whatever price he could get. It's the same situation gold miners were in back when gold was still officially $35/oz, even though the free market world price was considerably higher. Your system requires the government to set a fixed price for oil in terms of dollars, which is just like the gold standard. It can work for a little while, as it does for communists like Chavez and Mugabe when they try to set prices of commodities in terms of their own junk currencies, but it can't keep working forever. Eventually producers simply won't produce for a ridiculously low price.
Follow Ups: