[niky]

The only way to effectively store billions of dollars is to exchange them for gold or securities. Foreign governments buy trillions of dollars worth of US Treasury bonds... which is part of US external debt. It's a fair bet Saudi Arabia has tens or hundreds of billions in US Bonds.

A whole lot of China's gigantic piggy bank is stored in this denomination. Over a trillion dollars, I believe, at last count. This is a vote of confidence in the US Economy, and reinforces the dominance of the dollar as an exchange currency. A dollar isn't just a dollar. It's a security with value beyond its face value. During the 08 crisis, people started moving to Euros and Yen to find that security, but with the Euro currently sinking and the Japanese economy moribund, the US$ is still an in-demand currency.

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The problem of capital outflows... that's the name of the game. People spent $100 billion on Apple products last year, guess how much of that left the US for China to pay for production? As long as other countries can provide stuff cheaper that you want, then you'll continue to buy it. There was hope of jobs leaving China if it became prosperous enough... but it seems like Chinese growth is starting to grind down... and the billions they throw at useless infrastructure projects with no rhyme or reason is not going to stop that. China is about due for a housing crisis, as many developments are well overpriced and terribly undersold.

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All of this makes oil more problematic. Right now, the US is benefitting from Canadian tar sand, but a poor economy makes it unfeasible to start new developments there. Tar sand is cheap. Too cheap. When WTI oil (which indexes US oil and tar sand prices) goes below $80, new developments are unfeasible. Brent oil is oscillating wildly... and if it falls below $100 again, global supplies will become really tight. Deep sea oil is expensive.Those rich, "greedy" Saudis? They spent a lot of that money on high-end housing, tourism infrastructure and foreign investments because they needed to. Spending it on new oil refineries would have been foolish.

Peak oil is past. We're at the stage where it is not economically feasible to start tapping new sources of oil because people don't have enough jack to pay for it. That's why some countries have this feverish need to prop up oil supplies with subsidies and tax breaks. If oil is too cheap, there won't be enough to go around, because they can't afford to produce it. If it's too expensive, there won't be enough demand to support production, anyway.

And it's becoming too expensive, which is why prices are fluctuating so. Speculators and investors keep pumping up oil prices looking for a return on investment, because oil is as good as gold, right? But it keeps crashing back due to low demand and speculator sell-off at higher prices, which spooks other investors off and triggers a price crash. Rinse. Repeat. Can't keep the investors in it, can't fund new wells.

High growth markets like India, China and Indochina can't keep growing indefinitely on the strength of an internal consumer market... they need export to fund high growth rates. And pretty soon, there's going to be no one left to export to but each other.