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When Currencies Cannot Be Trusted, Stock Up On Oil

By: Steve Johnson

12/29/2008 - 13 Comments

Central Banks around the world are increasing their money supply faster then at any time in history, quickening the devaluation of all paper currencies. 

The US Federal Reserve is leading the world down a dangerous path to flood the globe with money in order to stifle the global financial crisis that started in August, followed by the bursting of the US mortgage industry.

Increasing the supply of a currency will decrease its value against real assets like, oil and gold.  Unless every nation increases their currency at the same rate, the result is massive currency fluctuations and interest rates swings.

One way to stay clear of the coming currency fluctuations is to trade your currencies for real stuff like oil that is sure to be in short supply in the near future and therefore hold value better then any paper currency.

China is now filling its oil reserve tanks, taking advantage of tumbling world crude prices, which are now down 78 percent from their highs a few months ago.  China began the construction of four strategic oil reserve facilities earlier this decade, and two of these are now in operation.

According the article from which I read about this, this is just the first phase, which will eventually have an overall capacity of more than 50 million barrels of crude.  The investment in the first phase of the project is close to $1 trillion dollars

China in planning to continue increasing its oil consumption for years to come.  In 2007, China imported around 1.2 billion barrels of crude, up 12.4 percent from the previous year.  China is looking past the global financial meltdown and realizing that a large stable oil supply will be a very strategic position in the near future as nations tussle for a larger piece of the global political and economic pie. 

China's strategic oil reserves are expected to reach 101.9 million barrels by the end of this year and rise to 145.9 million barrels in 2010, with 511.9 million barrels a long-term goal.

I can only hope the US is also filling its oil reserves at this time.

This week I participated in two blog carnivals

They did an excellent job and as usual, there are tons of great articles. If you have the time, I highly suggest you skim through this week’s carnivals.

The Carnival of Personal Finance #184: From the Land Down Under  

The 90th Edition of the Carnival of Money Stories

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A Demon of Our Own Design

Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street–from Morgan Stanley to Salomon and Citigroup–and a member of some of the world’s largest hedge funds, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe.

Energy Victory: Winning the War on Terror by Breaking Free of Oil

Ethanol is perhaps the best strategy to reduce our dependence on oil. Flex-fuel technology has already been developed by an inventive woman engineer at Ford named Roberta Nichols, enabling an engine to run on any mixture of alcohol or gasoline. Our oil money is the primary source of revenue for the terror supporting nations like Saudi Arabia, Iran and Venezuela. With the rising price of gas, ethanol is now cost effective to produce and a strong weapon against the terrorist.

Gold: The Once and Future Money

Governments and central bankers around the world today unanimously agree on the desirability of stable money, ever more so after some monetary disaster has reduced yet another economy to smoking ruins. Lewis shows how gold provides the stability needed to foster greater prosperity and productivity throughout the world. He offers an insightful look at money in all its forms, from the seventh century B.C. to the present day, explaining in straightforward layman’s terms the effects of inflation, deflation, and floating currencies along with their effect on prices, wages, taxes, and debt.

Your Money or Your Life

There's a big difference between "making a living" and making a life. Do you spend more than you earn? Does making a living feel more like making a dying? Do you dislike your job but can't afford to leave it? Is money fragmenting your time, your relationships with family and friends? If so, Your Money or Your Life is for you. From this inspiring book, learn how to, get out of debt and develop savings, reorder material priorities and live well for less, resolve inner conflicts between values and lifestyles, convert problems into opportunities to learn new skill, attain a wholeness of livelihood and lifestyle, and much more.