The "new" gold standard

[FoundingFathers]

As we all know, our currency is no longer backed by gold or silver. Technically our currency is backed by debt - US Treasury debt, which is nothing but another paper promise.

In reality however, our currency is backed by something else - it is backed by the Army,Navy,Airforce and Marines - and all of the high tech military might of our Armed Forces. The War in Iraq is as much a war for the US dollar as it is anything else. A quick easy overwhelming victory will result in a massive flow into US dollars. This was clearly discounted a bit last week. Anything less will result in a flood out of the US Dollar.
Victory in Iraq will undoubtably result in the repricing of Iraqi oil from Euros to Dollars. This message will be clearly understood be any oil nation considering to change from $ to Euros. The demand from new Iraqi petrodollars alone could shift the dollar out of its bear market. Combined with an overwhelming display of might, the dollar could enjoy a new sustained upsurge.

Unfortunately, in the long run, such a scenerio would only add to the current gross imbalances in the US economy. The remaining manufacturing jobs and plants would be at severe risk. The new "Pentagon Put" will take its place next to the Greenspan Put and encourage a new wave of speculative leveraged investing. The house of cards would only get higher - which would increase the real vunerability of our nation - the potential economic collapse.

My fear is, either way we are witnessing just one of many "wars" and muscle flexing of the Pentagon - and have ushered in the era of a "shock and awe" backing of our currency.