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Is BP a bank?

A very interesting piece has appeared in Jim Sinclair’s Mineset – the allegation that if BP goes down, it will trigger a global run on the financial system similar to the Lehman crisis. 

You can read it here.

Oil and gas are commodities that have money-like qualities.  They are fungible and easily divisible, they can act as stores of value and therefore they can be used as a stable measure of value.  They are inherently limited and as essential commodities will always be in demand.   Oil has often been termed “black gold” for these reasons.

Interestingly, with the discovery of durable paper, intangible representations of gold and silver replaced physical gold and silver, and formed the basis of the modern monetary system.

An equitable interest in oil can also act like paper money – an intangible representation of a money-like commodity.

If BP has been financing credit and derivatives interests in world financial markets, then if it goes bust it will be impossible to determine what financial intermediary has swallowed the poison.  That will freeze CDOs and securitized debt instruments because no bank will know what the other banks are holding.  Treasuries and government debt yields will fall yet again as market players become desperate to find a debtor who is guaranteed to pay them back.  They will suck on the government’s teat until that teat finally runs dry and governments worldwide go bust.  Then they will be forced back to physical money.  Money that has no counterparty risk.  Gold and physical oil.

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