but gas taxes are still considered political suidcide in the us. in some deep sense, the us has the mentality of a major oil exporter (keep oil cheap) not a big importer. a holdover from 1900-1950 …

My guess is that a lot of dollars will be pouring into the riyal and other pegged currencies that don’t have exchange controls.
This will be increasing the local money supplies and causing inflation.
Maybe this is what Greenspan meant about causing inflation.
This will pressure them to float.
The reason that money is piling into these currencies is that everybody must know by now that the US$ has to devalue to help fix it’s problem.
They are protecting their post devaluation dollar purchasing power.
Better float sooner than later, I’d say the Hungarians are the start of a trend.

What is happening is not easy to capture in a few sentences. Already there is a strong move to find alternate sources of energy–global warming is one incentive; the other is oil as a soon to be dwindling commodity. The noise for other sources grows daily in the press. And OPEC seems to have lost the power to control the price of oil with more pumping. Certainly, it is aware of the enormous stress the high price of oil is having.

(I think May 2005 still stands as a high point for crude…not sure) SA certainly did not heed…could not heed..GW’s plea for more oil.

The increasing cost of energy is inflationary…overcoming the deflationary effect of globalization. Talk of peak oil was the province of those thought as “nut” cases.

I agree that at this point it would be wise now to diversify away from the dollar.

All of this has happened so quickly…really. Not too long ago, we had started to talk about China’s opaque black currency box; we were all speculating on how fast they would allow their currency to rise. But China was…and still is…on a mission to develop as rapidly as possible. As I have said many times, I don’t see how they are going to do it….the cost of energy alone is going to curtail their efforts. Global warming and pollution…well, you know what I think there. China is a Johnny-Come-Lately to the party.

In some ways, I think events in many areas have moved faster than anyone expected…and far more out of control than anyone thought could happen. I, for one, sense it.

I think we are fast approaching the time when events are in the saddle, as Emerson said, and they ride mankind. (But then I am always given to hyperbole lol)

Sorry, if I ramble.

More importantly, i don’t think you would want to have as much of your wealth tied up in the dollar as is now the case. the US is the oil importing region with the biggest current account deficit. it also likely accounts for the majority of the saudis external assets. that isn’t a great combination.

If you were a Saudi prince, what would you do? Seems to me he would play his cards precisely as they have been played. Keep the peg so that the purchase of other assets are possible. Create new niches for yourself.

Peak oil does not mean that oil will run dry, just that production capacity will diminish. Consider what is happening a “transition” game.

In MBIA Admits $30.6 Billion CDO Exposure we saw that in addition to the $30.6 billion in worthless CDOs that it guarantees, MBIA has an additional $8.1 billion in worthless CDO squared (CDOs of CDOs) securities that it guarantees. That’s makes MBIA’s total CDO exposure $38.7 billion. And it hid that for months. It has total cash of $5.73 billion. Even if one pretends those CDOs will be worth 50% on the dollar, how does one possibly get AAA out of that mess?

1. MBIA hid $38.6 billion in CDO exposure for months
2. MBIA Posted a loss of $1.93 billion last year
3. MBIA CEO will not sign off on results
4. MBIA may have losses of $5.5 billion before tax, eliminating its entire capital cushion.
5. MBIA wants to hide losses for up to 5 years, hoping nothing else blows up, and future earnings cover the losses.

To top it all off, earlier today the S&P Sniffed Horse Hockey and Called it a Rose, by reaffirming the AAA rating of MBIA and Ambac. What a complete joke.

Rising Inflation Creates Unease in Middle East
Inflation, caused in part by the skyrocketing price of oil, is pushing many ordinary people toward poverty even as oil money stimulates a new surge of economic growth in the gulf.