The Crash Course - Chris Martenson [122]
In 2014, interest rates are finally hiked in efforts to defend the dollar, but it is too little, too late. What follows next in 2015 shocks the world to its financial core: Faith in the U.S. dollar, having dwindled to the point that it is no longer revered as a store of wealth, loses its reserve currency status2 in March of that year. The U.S. government is suddenly forced to issue new debt denominated in a basket of currencies that doesn’t include the dollar, consisting instead of the Chinese renminbi; Brazilian real; euro; and Canadian, New Zealand, and Australian dollars. Forced to denominate its debts in foreign currencies, the United States must reduce its trade deficit to zero almost immediately. U.S. citizens rapidly discover the dramatic difference between living above your means and living within your means. Domestic production must now exceed domestic consumption—an enormous swing in the fortunes of a people long accustomed to the opposite arrangement.
U.S. federal and state government budgets are finally slashed, leading to profound but necessary economic pain. Other world governments follow suit. At the first signs of this shift toward financial prudence, some investors who previously invested in gold begin transitioning away from the yellow metal and back into productive enterprises, which now stand a chance of flourishing under a more solid and sound monetary system. These investors are among the fortunate few who managed to preserve a relatively large portion of their wealth during the turbulent years of Oil Shock III. The keyword is “relatively,” as no one is better off than before; everyone has taken a hit, but some just took more of a hit than others.
In the postanalysis, it is revealed that many members of the U.S. government had been tempted to wage a war to try and salvage the situation. Several plans were developed whereby the United States would secure much of the Middle East’s and Venezuela’s oil production and then protect the transport of that oil to U.S. soil. Some even mention Canada as a preferred target, noting its proximity, rich resources, and weak military.
However, in every war game attempted by the staff at West Point, no way is ever found to both secure the oil resources at their source and protect them during extended shipments across the sea. The resources just don’t exist. In every war scenario, it proves nearly impossible to defend the required number of ship convoys from attackers equipped with modern missile technology. No simulations are ever successful for more than a few months, and the ideas are dropped, despite a number of vigorous proponents.
In the end, the reality of Peak Oil takes the world by storm, although the evidence has been in plain sight for decades. There’s nothing left to do but rapidly realign expectations, ideas, and hopes around this new reality. Some places, just like some people, manage this transition more gracefully than others. Large fortunes are made and even more massive ones are lost; the past becomes like a fairytale to many who continue wonder how such abundant wealth could ever have existed at all. In the future, stories of roads so packed with cars that they couldn’t move are told to wide-eyed children who wonder to what extent their grandparents are exaggerating the truth.
As usual, the solutions adopted in the aftermath of this crisis are those that happened to be most convenient, and much of the world reverts to “backed” money of some form or another. In the case of oil producers, the backing is oil. For others, it’s gold. A few smaller, more culturally coherent countries are able to use unbacked fiat currencies effectively, but only because strict and inviolable legal constructs are deployed to remove human weaknesses from the management of these currencies.
The changes are so profound that humanity divides itself into