Iran now sells 85% of its oil in currencies other than the dollar, with 65% sold for euros and the other 20% for yen. Iraq threatened to sell its oil for euros; the Bush administration invaded soon after. In his book, The Age of Turbulence, Alan Greenspan reportedly claims that the oil issue was an important reason for the invasion.
We recall estimates that after the United States took control of Iraq, so much oil would be pumped that the price would fall back to US$10. It didn’t work out that way; nothing about the Iraq adventure worked out the way backers hoped. Except for one thing: now the US has a big, expensive base in the heart of the Middle East.
It costs about half a billion dollars per day to keep the operation up, or about US$180 billion per year. And recently, our elected representatives gave a thought to how the bill could be paid. Well, they thought about it for four hours. Then they decided to do what they always do…pass the buck.
A report from TheHill.com:
“All told, the Democratic proposal for an ‘Iraq tax’ lasted about four hours. That’s roughly the amount of time from when House Appropriations Committee Chairman David Obey (D-Wis.) gave life to the idea with his endorsement, to when House Speaker Nancy Pelosi (D-Calif.) strangled it.
“‘Just as I have opposed the war from the outset, I am opposed to a draft and I am opposed to a war surtax,’ Pelosi said in a statement issued this afternoon.”
Byron King comments:
“The US Constitution gives Congress the power to raise an Army and a Navy, and to declare War. The power of the purse is basic to the existence of national military power, and hence a controlling element of national strategy. Power of the purse is also the ultimate control of the Legislative branch over the Executive’s otherwise plenary role as ‘Commander in Chief of the Army and the Navy’ (a quaint role, designed in 1787 specifically with George Washington in mind, as opposed to any other George W.). Use it or lose it.
“Under the Republican political control of 2001 – 2006, and at the behest of a Republican president, Congress was OK with fighting the war in Iraq but not paying for it with increased taxes. Not even, say US$0.50 per gallon tax on gasoline. (It might interfere with peoples’ trips to Disney World). And certainly no 2% surtax on the hedge fund managers of Greenwich (who know quite a bit about 2% fees). Better to borrow the funds, was the apparent philosophy, and lay the cost off on future generations…
“Now under new management, Congress daily reminds us that it is not OK with fighting the continuing war in Iraq, but still refuses to pay for la guerre with increased taxes. Better to borrow more funds, apparently goes the thought process, and lay off even more of the cost on future generations.
“Fiscal Chickenhawks, all of ’em.”
When it comes to oil, gas, energy, war and politics, Byron is our go-to man – and with good reason. His hands-on experience in all of these topics has been very useful to him as editor of the Hulbert’s #1 ranked performing investment letter of the last five years.
Too bad about that next generation. They are going to have to pay for every ham sandwich eaten by government employees from the beginning of the 21st century to the end of time. And every drug handed out by Medicaid. And every retired civil servant’s pension…and every presidential tour…and every cartridge spent shooting at ‘insurgents’ in every godforsaken hellhole in the whole damned world.
The Daily Reckoning Australia