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Old 03-06-2014, 07:34 AM
 
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I read in a controlled opposition site that the U.S.A are using the profit from selling petrodollar to finance their wars, and I have a question about that. Isn't the federal reserve private, and the war-budget taken from the tax payers money? So how can the selling of petro-dollar finance their wars then? Can someone explain how it works ?

Thanks
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Old 03-06-2014, 09:10 AM
 
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For starters, no federal spending uses taxpayer dollars.

All Federal Spending is done through printing. The Federal Reserve acts as the Federal Government's accountant. It sets the short term interest rates and has various other tools to manipulate rates and the economy further (such as QE).

As far as the petro dollar, the US has a treaty with OPEC where oil is exclusively quoted in US dollars. It effectively preserves the international demand for the greenback. This agreement is enforced by the full faith and credit of the US military. Any oil producing country in the Middle East trying to circumvent this "agreement" has been invaded (Afghanistan, Iraq, Libya).
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Old 03-06-2014, 11:43 AM
 
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ErikBEggs: Can you mention more federal spendings financed by the printing of money? What do the tax-money go to then, and what is financed by printing? And what do the U.S.A get in return for the petrodollar which is used in oil sales? Thanks a lot.

Last edited by Hans12; 03-06-2014 at 11:53 AM..
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Old 03-06-2014, 12:19 PM
 
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Quote:
Originally Posted by Hans12 View Post
ErikBEggs: Can you mention more federal spendings financed by the printing of money? What do the tax-money go to then, and what is financed by printing? And what do the U.S.A get in return for the petrodollar which is used in oil sales? Thanks a lot.
All Federal spending is done by printing.

Money is credited to the accounts of parties through the clearinghouse (via commercial banks) on a computer. That same money is destroyed by taxes (pressing the delete button). Congress drafts the budget so that we can run deficits. The deficit means there is a positive balance of payments from the public sector to the private sector. That debt is monetized over time into what we know as money.

"Printing" in the traditional sense is expensive. It really isn't done in a significant fashion anymore.

The return for the petro-dollar is basically uncontested status as the world reserve currency.

"Taxation" is purely a means of constraining inflation. It is the main tool to keep money growth and inflation within the Fed's annual goal, which is currently 2%. The uncomfortable fact most people don't accept is that your taxpayer money doesn't actually fund anything. The government could collect $0 and pay all of its bills at any time (this would be pretty inflationary). Insolvency is actually an impossibility for the Federal government.
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Old 03-06-2014, 12:23 PM
 
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How can the U.S.A finance their wars with petrodollar if all they get back from it is status as the world reserve currency? Are you sure they don't get goods back from other countries? They can't just be giving away free money? Thanks
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Old 03-06-2014, 12:32 PM
 
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Originally Posted by Hans12 View Post
How can the U.S.A finance their wars with petrodollar if all they get back from it is status as the world reserve currency? Are you sure they don't get goods back from other countries? They can't just be giving away free money? Thanks
Of course they can. Money is made up, lol. It is declared legal tender in the issuing country. Monetary sovereign governments such as the USA, Australia, Canada, UK, Japan, etc. have their currencies float internationally.

Money is just made up. There really is no other way to explain it. The USA doesn't need anything from anyone to issue US dollars to pay US bills. As long as the full faith and credit of a country remains in tact, their currency holds international value.
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Old 03-06-2014, 12:59 PM
 
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Why did the article say that they finance their wars by petrodollars used in oil sales then ? If they are just giving it away, that can't finance any wars.
Thanks
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Old 03-06-2014, 01:30 PM
 
11,768 posts, read 10,216,937 times
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Quote:
Originally Posted by Hans12 View Post
Why did the article say that they finance their wars by petrodollars used in oil sales then ? If they are just giving it away, that can't finance any wars.
Thanks
What article? I would venture to guess that the author was implying that the dollar would lose value if oil producing countries could trade in non dollars.
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Old 03-06-2014, 02:01 PM
 
Location: Warwick, RI
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Any oil producing country in the Middle East trying to circumvent this "agreement" has been invaded (Afghanistan, Iraq, Libya).
ErikBeggs, Afganistan is NOT an oil producing country. Yes, they have moderate sized oil reserves, but their productions levels are very low and they do not export. The country is mineral rich, but none of their vast mineral deposits have been tapped yet, and none will until they stabilize their government and improve the security situation, which will probably be never. Also, while we're setting the record straight, why has Iran not been invaded? Just sayin'.
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Old 03-06-2014, 02:06 PM
 
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ErikBEggs: Do the countries which buy oil print the dollars themselves, or do they get them from the fed-res? Thanks
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