What Do Falling Oil Prices Tell Us about the Dollar?

I recently blogged about my bearish positions on the oil and gold markets.  Today, the Wall Street Journal observes that oil prices are falling on the Saudi oil minister's statement that despite falling prices Saudi Arabia won't change its output.  Despite prices that are below most US producers' break even points, the US producers are covering their variable costs.  The journal writes:  "U.S. oil stockpiles remain near levels not seen for this time of the year in around 80 years."  Stockpiles' rising to record levels will further pressure ]oil prices.  In the short run the situation is bearish, but in the long run it is bullish.

What does this tell us about the dollar?  America's Keynesian and monetarist economists, Democrats and Republicans, have created a monetary system whereby the dollar serves as a reserve currency; governments, central banks, and citizens around the world hold dollars; and the dollar is backed by the full faith and credit of the government that fought the Iraqi War in order to eliminate weapons of mass destruction. The rationale for this system is that the sovereign dollar holders will act rationally.

Nevertheless, the sovereign producers of oil are also the sovereign holders of dollars.  As producers of oil, many are now producing at a loss.  If there can be a glut in the oil market, how can these sovereign producers assume the mantle of rationality when it comes to holding dollars?

The famous game theory model of the prisoner's dilemma predicts that when two parties do not share information the solution to the problem of choosing whether or not to collude tends to be suboptimal.  Of course, central banks speak to one another--much as European governments spoke to one another before a millennium of wars. 

Trump versus Sanders

The Wall Street Journal blog reports that Bernie Sanders aims to win Donald Trump's supporters' votes, for they are anxious about the economy, whose decline Sanders blames on greed.  Greed, of course, has always existed, and there is no evidence that there is more greed now than there was in the free market period of American history, when real wages grew at 0.5% to 2.5% per year.

Mr. Sanders is right: There is little difference between Mr. Trump and him. Both are big government advocates. Mr. Sanders sees government redistribution as the cure to greed, an absurd, impossible plan, and Mr. Trump sees government immigration restrictions as the cure to job loss, an equally absurd non-sequitur.

While Hitler, like Trump, was a racist, he was also, like Sanders, a national socialist. The twenty-five-point Nazi plan of 1920 contains much overlap with Mr. Sanders's views, albeit Sanders's Brooklyn Jewish background may not have been to Hitler's taste.

Point six of the Nazi twenty-five-point plan, for instance, was nearly identical to Sanders's position on immigration: "Non-citizens may live in Germany, but there will be special laws for foreigners living in Germany."

The Nazis also agreed with Mr. Sanders's redistributionist schemes, as in points ten and eleven: "Every citizen should have a job. Their work should not be selfish, but help everyone. Therefore we say...No one should live off money from rents or other income unless they have worked for that money."

Like Sanders, the Nazis hoped to repeal greed.  Since greed is a natural impulse like sexual desire or hunger, aiming to repeal greed opens the door to repression and ultimately murder, as has been the case with a long list of large-scale socialist states over the past century.

The Nazis' immigration policies, redistributionist schemes, and opposition to selfishness parallel  Bernie Sanders's platform. The American left is a reincarnation of the Nazi movement, with the racist (but not anti-Semitic) element excised.