Wednesday, June 9, 2010

The Real Reserve Currency of the World

Can the world's reserve currency really be U.S. paper money that can be printed until they run out of trees?  (As I recall, "when something can't keep going, it will stop", and sooner or later the world's confidence in the greenback will too.)  On the other hand, Dennis Gartman believes that gold has already assumed the status of a reserve currency.  But no, it's not the US dollar, and it's not gold - I believe the real reserve currency of the future is oil.  No modern country can run without it.  It makes possible the cultivation and distribution of food, shelter, clothing, medicines, armies, etc. - not to mention all things plastic.  And until (if ever) we become energy self-sufficient via alternative sources, oil will be king.  Like land, "they're not making any more of it".  Of course oil is denominated worldwide in US dollars which means that the US dollar will always be around, but its buying power will devalue steadily after the US debt crisis (yet to come, in my view).  Sure gold and silver may initially be safe havens in that scenario, but they're impractical for the grocery store and can't be burned in the engine of your car to get there.  Oil, on the other hand, is relatively portable via tankers, pipelines and trucks.  Perhaps you think we haven't reached peak oil?  Just look at where we're having to go (the outer reaches of human technology miles under the seabed and into the arctic) to get it.  And with the current moratorium on offshore drilling in the U.S., the Canadian oil sands (the second-largest pool of oil on earth after Saudi Arabia) are looking mighty good.  Oil: buy and hold.