Tag Archives: Petrodollar

Why the End of the Petrodollar Spells Trouble for the US Regime, by Ryan McMaken

Posted on February 2, 2023 | Leave a comment

Saudi Arabia’s move away from the petrodollar is yet another sign of the U.S. government’s diminishing influence and power. From Ryan McMaken at mises.org:

On January 17, the Saudi minister of finance, Mohammed Al-Jadaan, announced that the Saudi state is open to selling oil in currencies other than the dollar. “There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal,” Al-Jadaan told Bloomberg TV.

If the Saudi regime does indeed embrace substantial trade in currencies other than the dollar as part of its oil-export business, this would signal a shift away from the dollar as the dominant currency in global oil payments. Or measured another way, this would signal the end of the so-called petrodollar.

But how large of a shift is this? With the increasingly frequent Saudi comments about trading in nondollar currencies, we’ve also seen an increasing number of pundits announcing the “collapse” of the dollar or the imminent implosion of the dollar’s currently outsized global power.

Will a shift away from the dollar in the global oil trade really lead to a big relative decline in the dollar? Probably and eventually. But a number of other dominoes would need to fall first, most especially the domino we call “Eurodollars.”

On the other hand, it would be foolish to simply dismiss the potential end of the Saudi preference for the dollar with hand-waving. The end of the petrodollar would indeed weaken the dollar, even if this would not be a mortal blow in itself. Moreover, it is especially foolhardy to ignore the status of the petrodollar because that status also has geopolitical implications. Saudi comments on the dollar signal that the Saudis no longer consider its alliance with the United States to be as important as it has been since the 1970s. What’s not an immediate economic problem for the US regime or the dollar may nonetheless be an immediate geopolitical problem.

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Russia’s intentions are clarifying, by Alasdair Macleod

Posted on January 27, 2023 | 1 comment

The Russians have a not-so-secret weapon that would devastate the U.S.: back the ruble with gold. From Alasdair Macleod at goldmoney.com:

We have confirmation from the highest sources that Russia and the Shanghai Cooperation Organisation (SCO) are considering using gold for pan-Asian trade settlements, fully replacing dollars and euros.

In an article written for Vedomosti, a Moscow-based Russian newspaper published on 27 December, Sergey Glazyev, a prominent economic adviser to Vladimir Putin who is heading up the Eurasian Economic Union committee charged with devising a replacement for dollars in trade settlements sent a very clear signal to that effect. It appears he will drop earlier plans to design a new commodity-linked trade currency because it has been superseded.

Furthermore, increasing numbers of nations have joined or have applied to join the SCO as dialog members, including Saudi Arabia and other important Gulf Cooperation Organisation members. The economic benefits of discounted energy, China’s investment capital, and sound money are the ingredients for a new, Asia-wide industrial revolution, while the economies of the western alliance sink under rising prices, rising interest rates, collapsing financial markets, and collapsing currencies.

While it will mark the end of the road for the western alliance and its fiat currencies, Putin must be careful not to take the blame. Now that the alliance is racking up tanks and other equipment for the Ukrainians, they are actively promoting a new battle, with NATO getting almost directly involved. It is that action which will drive up commodity prices, undermine western financial markets, undermine government finances, and ultimately collapse their currencies. 

Putin is likely to use NATO’s impetuous action in defence of Ukraine as cover for securing Russia’s future as an Asian superstate, which will be the west’s undoing.

Introduction

We forget, perhaps, that from 1 March 1950 the Soviet rouble was on a gold standard at 4 roubles 45 kopecks for 1 gram of pure gold until 1961, when Khrushchev devalued it and refixed it to the dollar. Stalin had been a signatory to the Bretton Woods agreement but refused to join it and make the rouble subservient to the dollar as its intermediary for a gold standard.

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A Dollar Collapse Is Now In Motion – Saudi Arabia Signals The End Of Petro Status, by Brandon Smith

Posted on January 26, 2023 | 1 comment

More and more countries are signalling that they no longer want to trade real commodities, particularly oil, for pieces of paper or computer entries. From Brandon Smith at alt-market.com:

The decline of a currency’s world reserve status is often a long process rife with denials. There are numerous economic “experts” out there that have been dismissing any and all warnings of dollar collapse for years. They just don’t get it, or they don’t want to get it. The idea that the US currency could ever be dethroned as the defacto global trade mechanism is impossible in their minds.

One of the key pillars keeping the dollar in place as the world reserve is its petro-status, and this factor is often held up as the reason why the Greenback cannot fail. The other argument is that the dollar is backed by the full force of the US military, and the US military is backed by the US Treasury and the Federal Reserve – In other words, the dollar is backed by…the dollar; it’s a very circular and naive position.

These sentiments are not only pervasive among mainstream economists, they are also all over the place within the alternative media. I suspect the main hang-up for liberty movement analysts is the notion that the globalist establishment would ever allow the dollar or the US economy to fail. Isn’t the dollar system their “golden goose”?

The answer is no, it is NOT their golden goose. The dollar is just another stepping stone towards their goal of a one-world economy and a one-world currency. They have killed the world reserve status of other currencies in the past, why wouldn’t they do the same to the dollar?

Globalist white papers and essays specifically outline the need for a diminished role for the US currency as well as a decline in the American economy in order to make way for Central Bank Digital Currencies (CBDCs) and a new global currency system controlled by the IMF. I warned about this years go, and my position has always been that the derailment of the dollar would likely start with the end of its petro status.

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Petrodollar System Flirts With Collapse… What It Means for Gold, Oil, and the Dollar, by Nick Giambruno

Posted on April 3, 2022 | 2 comments

If the petrodollar standard falls, so goes the American empire. From Nick Giambruno at internationalman.com:

Petrodollar

It’s been rightly said that “he who holds the gold makes the rules.”

After World War 2, the US had the largest gold reserves in the world, by far. Along with winning the war, this let the US reconstruct the global monetary system around the dollar.

The new system, created at the Bretton Woods Conference in 1944, tied the currencies of virtually every country in the world to the US dollar through a fixed exchange rate. It also tied the US dollar to gold at a fixed rate of $35 per ounce.

The dollar was said to be “as good as gold.”

The Bretton Woods system made the US dollar the world’s premier reserve currency. It forced other countries to store dollars for international trade or to exchange with the US government for gold.

However, it was doomed to fail.

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War and the Paper Standard, by L. Reichard White

Posted on May 11, 2019 | Leave a comment

This is the best article posted tonight. It’s long, but it explains much that is hidden about US foreign policy. From L. Reichard White at lewrockwell.com:

Maybe you’ve noticed the frenzied U.S. Government attempt to replace Venezuela’s duly elected hood-ornament — PresideNT Nicolas Maduro — with Juan Guaido, a nearly unknown U.S. prepped Venezuelan politician?

Why are they trying to do that?

With National. Security Advisor John Bolton suggesting a berth at Gitmo for Mr. Maduro if he doesn’t step down and flee the country — and Sen. Marco Rubio implying Muammar Gadaffi’s last minutes of life being intimate with a bayonett as another future for Mr. Maduro — “our” D.C. reprehensibles are displaying their unsavory colors.

Prominently showcasing this level of thuggery, usually hidden from polite society in smoke-filled back rooms, restricted C.I.A. workshops — and censored and classified “above top secret” for decades — marks a whole new phase in international relations.

But why?

With Mr. “Art of the Deal” Trump & Company seriously abusing the standard Games Theory and negotiation baseline — you know, “All options are on the table” — they’ve already (March 3, 2019) played the “suggest a U.S. invasion” card.

And pulling out all the Art of War stops too, Trump & Company — clearly with maximum arm twisting — have wheedled, cajoled, bribed, bullied, and/or threatened about one quarter of the world’s governments into suddenly proclaiming this relatively unknown to be PresideNT of Venezuela. Despite — or maybe because of — Mr. Maduro’s democratic victory last year (May 20, 2018.)

Merely labeling the democratically elected Maduro “dictator” while proclaiming unknown Guaido “PresideNT” — without an invasion or bloody revolution so far or even a vote — though ingenuous is pure Sun Tsu genius. If it works.

But why are they doing that?

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The Cardinal Sin of International Finance, by Nick Giambruno

Posted on November 23, 2017 | Leave a comment

When Saudi Arabia accepts yuan in payment for its oil the petrodollar standard will be over. From Nick Giaumbruno at internationalman.com:

As Doug Casey has correctly noted, the prime directive of any organism—whether it’s an amoeba or a person or a corporation or a government—is to survive.

That’s why the US government protects the petrodollar so zealously. It needs the system to survive.

World leaders who have challenged the petrodollar recently have ended up dead…

Why Everyone Uses the US Dollar… for Now

In the 1970s, the US government struck a series of deals with Saudi Arabia, creating the petrodollar system. The US promised to coddle and protect the Saudi kingdom. And, in exchange, Saudi Arabia would use its dominant position in OPEC to ensure that all oil transactions happened in US dollars.

Until recently, virtually anyone who wanted to import oil from any country needed US dollars to pay for it.

The dollar is just a middleman here. But countries and businesses use it in countless transactions amounting to trillions of dollars that have nothing to do with US products or services.

Plus, if foreign countries are already using dollars for oil, it’s just easier to use the dollar for other international trade. That’s why, in addition to oil sales, the US dollar is used for about 80% of all international transactions.

Take Saddam Hussein and Muammar Gaddafi, for example. Each led a large oil-producing country—Iraq and Libya, respectively. And both tried to sell their oil for something other than US dollars, before US military interventions led to their deaths.

In October 2000, Saddam had started to sell Iraqi oil for euros only. Iraq said it would no longer accept dollars for oil because it did not want to deal “in the currency of the enemy.”

A little over two years later, the US invaded. Immediately after Baghdad fell to US forces, all Iraqi oil sales were switched back to dollars.

To continue reading: The Cardinal Sin of International Finance

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