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What caused the financial crisis in the US?
When I started investigating on this subject, I didn’t know that the answer would be this much clear. Now I have the answer in hand, and I feel this is the real answer, as this really relates to a lot other issues in a realistic way.

There are a few terms to be understood properly to understand the causes for the financial crisis in the US better. Those may be :

What is a PetroDollar?
What is OPEC?
What is Currency Pegging?

I truly believe that the American people do not realize the real reason for the Iraq war and the current war threat against Iran. It’s not the nukes, it’s not the terrorism and it’s not the oil. It’s all about the protection and propping up of the greatest con-job in the recent history, the US Petrodollar Scam.

Every country with a stable economy would be having a financial authority to regulate the monetary activities within the economy/country. In India it is the Reserver Bank of India (RBI), in China it is the People’s Bank of China, and in the US it is the Federal Reserve Bank. These authorities keep an eye on the market, understand the demand, scarcity, flow, etc. and introduce different methods with which they can keep the economy balanced, and hence maintaining the value of their currency. If needed, they have the authority to print currencies for their country as well. But always, when a country prints their currency, the country has an obligation towards the international market to be truthful with the pegged value. If a currency is pegged against gold, it means that country can have their currencies printed only up to the amount equivalent to the value of gold they possess or they can possess (as per the pegged value). If a country prints excess currency, then automatically the currency would get devalued, adjusting the excess money with the available gold (ultimately whoever keeps money with them as cash would suffer).

For better understanding, consider that a country have 50,000 units of gold and they peg the value of their currency as 1000 units of currency = 1 unit of gold. this means, the country is authorized to print currencies to reach an amount of 50,000,000 units of currency so that for each 1000 units of currency, the country can exchange 1 unit of gold. But instead of 50,000,000 units of currency, what if the country prints double the amount (100,000,000 units of currency)? In this case, as per the pegged ratio, the country have gold only for the first 50,000,000 units of currency and the rest of the money would be excess. So the value of currency would automatically go down to a situation where 2000 units of currency = 1 unit of gold so that for each 2000 units of currency, the country have 1 unit of gold for exchanging.

Back in 1971, the USA printed and spent far more paper money than they could cover by gold. When the French demanded redemption of their dollar holdings in gold, the USA discovered that they could not honour the debt, thus committing an act of bankruptcy. So the USA went to the Saudis to cut a deal - we’ll keep you in power, no mater what you do, as long as OPEC denominate all sales of oil in US dollars (which was termed as Petrodollar). The deal was done.

From that point, every nation that needed to buy oil had to firstly hold US dollars, which meant that they exchanged their goods and services for dollars, which the Americans just printed (which were actually worthless as the Americans actually didn’t have enough gold to pay anybody as per the pegged value of dollar). The Americans bought their oil literally for free by printing those dollars and using inflation to reduce their value. The ultimate free lunch for the Americans at the expense of the rest of the world.

However, the scam (the Petrodollar Scam) began to unravel when Saddam Hussein started selling Iraq’s oil directly for Euro, abrogating the cosy arrangement the Americans had with OPEC. Thus Saddam had to be stopped. How?

He could not be persuaded, so the USA concocted up a pretext to wage war (drama of twin tower blast, anti-terrorism movement by the US, and then suspecting iraq to hold nukes) and invaded Iraq. The first thing the Americans did in iraq was to revert sales of oil back to dollars. The currency crisis was averted for the moment.

But Hugo Chavez (Venezuela President) also started selling Venezuelan oil for currencies other than dollars, so there were a number of attempts on his life and “regime change”, traceable right back to the CIA. The petrodollar cat was out of the bag.

Iran President (Ahmedinejad), watching all of this, decided to kick The Great Satan in the goolies and do the same thing - sell oil for every currency EXCEPT US dollars. All of a sudden, despite intrusive IAEA inspections and compliance with the NPT and the inalienable right to enrich uranium, Iran was called as the next biggest threat for the world.

Sure, Iran was a threat to the USA, but not because of anything nuclear. What Iran was doing was compounding the economic destruction of the USA by becoming another member of the oil producers club that were bypassing NYMEX and IPE and selling oil for Euro, Yen and other currencies.

The problem for the USA is that those dollars fund not only the American lifestyle and the free lunch at the expense of the rest of the world, but they fund the US military, which is used to force the American will onto nations that threaten the USA economically, such as Iran.

Now the shell game started coming to an end for the Americans. Nations around the world started finding that they can buy oil for their own currencies instead of holding paper US dollars, and more OPEC nations are expected to abandon the dollar.

The worst thing for the Americans is that eventually, they will also have to buy their oil with Euro or Rubles instead of just printing paper money to get it.

Many people predict this to be the end of the American Empire, the end of funding for the US military and thus the destruction of the US economy. There’s not a lot that the USA can do about it, except to accept the fate or to start another world war. If the US accept the economic crisis, then the US dollars are expected to get devalued terrifically.

India is expected to be safe from the financial crisis because Indian Rupee is not pegged against US dollar, and Indian economy is not completely dependent on the US economy. But the areas where Indian economy is dependent on the US economy are expected to get affected.