The current situation is the first international monetary crisis since the world went off the gold standard (the US under Nixon).
In British politics and economics, Black Wednesday refers to 16 September 1992 when the Conservative government was forced to withdraw the pound from the European Exchange Rate Mechanism (ERM) due to pressure by currency speculators--most notably George Soros who made over US$1 billion from this speculation. In 1997 the UK Treasury estimated the cost of Black Wednesday at £3.4 billion.
The crisis started in Thailand with the financial collapse of the Thai baht caused by the decision of the Thai government to float the baht, cutting its peg to the USD, after exhaustive efforts to support it in the face of a severe financial overextension that was in part real estate driven.[neutrality disputed] At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency. The drastically reduced import earnings that resulted from the forced devaluation then made a quick or even medium-term recovery impossible without strenuous international intervention. As the crisis spread, most of Southeast Asia and Japan saw slumping currencies, devalued stock markets and asset prices, and a precipitous rise in private debt.[1]
Now, the fallout when OPEC stops trading in $ is going to be... interesting - particularly considering that the US has very little control over the timing of such a move.
As an aside, I believe you forgot Argentina, which is arguably an even better analogy to the current US situation.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
ie the gold standard was backed by bullion reserves.
The US were not the ones exchanging oil for dollars: they were creating and exchanging dollars for oil.
It wasn't that the the US was on an "Oil Standard" - it's that the rest of the world (and the oil nations in particular) has been on the Dollar Standard, and kept reserves in dollars, thereby giving the US a free ride on the seignorage on the dollars.
The solution IMHO is that we get on to an energy standard backed by an energy-based value unit, and "pools" of energy, whether carbon-based or renewable.
This would allow the monetisation (and hence inescapable taxation/levying) of the energy content of carbon, not the completely fatuous concept of monetising the carbon content of emissions, or carbon credits.
These are both "deficit-based" solutions brought to us by the same people who brought us the Credit Crunch, and as the guy said...
"...if you want to keep a donkey healthy you don't regulate what comes out of it, you regulate what goes in...". "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
The fallout will still be interesting, but for different reasons than I thought...
