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Page added on September 21, 2017
The Petrodollar Is Under Attack: Here’s What You Need To Know
Once upon a time, the U.S. dollar was backed by the gold standard in a framework that established what was known as the Bretton-Woods agreement, made in 1944. The dollar was fixed to gold at a price of $35 an ounce, though the dollar could earn interest, marking one notable difference from gold.
The system ended up being short-lived, as President Richard Nixon announced that the U.S. would be abandoning the gold standard in 1971. Instead, the U.S. had other plans for the future of global markets.
As the Huffington Post has explained, the Nixon Administration reached a deal with Saudi Arabia:
“The essence of the deal was that the U.S. would agree to military sales and defense of Saudi Arabia in return for all oil trade being denominated in U.S. dollars.”
This system became known as the Petrodollar Recycling system because countries like Saudi Arabia would have to invest excess profits back into the U.S. It didn’t take long for every single member of OPEC to start trading oil in U.S. dollars.
A little-known economic theory, rejected by the mainstream, stipulates that Washington’s stranglehold over financial markets can be at least partially explained by the fact that all oil exports are conducted in transactions involving the U.S. dollar. This relationship between oil and currency arguably gives the dollar its value, as this paradigm requires all exporting and importing countries to maintain a certain stock of U.S. dollars, adding to the dollar’s value. As Foreign Policy – a magazine that rejects the theory – explains:
“It does matter slightly that the trade typically takes place in dollars. This means that those wishing to buy oil must acquire dollars to buy the oil, which increases the demand for dollars in world financial markets.”
The term “those wishing to buy oil” encompasses almost every single country that does not have an oil supply of its own – hardly a trivial number. An endless demand for dollars means an endless supply, and the United States can print as much paper as it wants to account for its imperial ambitions. No other country in the world can do this.
In 2000, Iraq announced it would no longer use U.S. dollars to sell oil on the global market. It adopted the euro, instead, which was no easy decision to make. However, by February 2003, the Guardian reported that Iraq had netted a “handsome profit” after making this policy change.
Anyone who rejects this petrodollar theory should be able to answer the following question: if currency is not an important factor in America’s imperialist adventures, why was the U.S. so intent on invading a country (based on cold, hard lies), only to make it a priority to switch the sale of oil back to dollars? If they cared so much about Iraq and its people, as we were supposed to have believed, why not allow Iraq to continue netting a “handsome profit”?
In Libya, Muammar Gaddafi was punished for a similar proposal that would have created a unified African currency backed by gold, which would have been used to buy and sell African oil. Hillary Clinton’s leaked emails confirmed this was the main reason Gaddafi was overthrown, though commentators continue to ignore and reject the theory. Despite these denials, Clinton’s leaked emails made it clear that Gaddafi’s plan for the future of African oil exports was a priority for the U.S. and its NATO cohorts, more so than Gaddafi’s alleged human rights abuses. This is the same Hillary Clinton who openly laughed when Gaddafi was sodomized and murdered, displaying no regrets that she single-handedly plunged a very rich and prosperous nation into a complete state of chaos.
At the start of this month, Venezuela announced it would soon “free” itself from the dollar. Barely a week or so later, the Wall Street Journal reported that Venezuela had stopped accepting dollars for oil payments in response to U.S. sanctions. Venezuela sits on the world’s largest oil reserves. Donald Trump’s threats of unilateral military intervention — combined with the CIA’s admission that it will interfere in the oil-rich country — may make a lot more sense in this context.
Iran has also been using alternative currencies — like the Chinese yuan — for some time now. It also shares a lucrative gas field with Qatar, which could be days away from ditching the dollar, as well. Qatar has reportedly already been conducting billions of dollars’ worth of transactions in the yuan. Just recently, Qatar and Iran restored full diplomatic relations in a complete snub to the U.S. and its allies. It is no surprise, then, that both countries have been vilified on the international stage, particularly under the Trump administration.
In the latest dig to the U.S. dollar and global financial hegemony, the Times of Israel reported that a Chinese state-owned investment firm has provided a $10 billion credit line to Iranian banks, which will specifically use yuan and euros to bypass U.S.-led sanctions.
Consider that in August 2015, then-Secretary of State John Kerry warned that if the U.S. walked away from the nuclear deal with Iran and forced its allies to comply with U.S.-led sanctions, it would be a “recipe, very quickly…for the American dollar to cease to be the reserve currency of the world.”
Iran, bound to Syria by a mutual-defense pact, was reportedly working to establish a natural gas pipeline that would run through Iraq and Syria with the aim of exporting gas to European markets, cutting off Washington and its allies completely. This was, of course, in 2009 — before the Syrian war began. Such a pipeline deal, now with Russia’s continued air support and military presence, could entail the emergence of a whole new market that could easily be linked to the euro, or any other currency for that matter, instead of the dollar.
According to Russian state-owned outlet RT, the Kremlin’s website announced Tuesday that Russian President Vladimir Putin has also instructed the government to approve legislation to ditch the U.S. dollar at all Russian seaports by next year.
Further, the Asia Times explains that Putin dropped an enormous “bombshell” at the recent BRICS summit in Xiamen early September, stating:
“Russia shares the BRICS countries’ concerns over the unfairness of the global financial and economic architecture, which does not give due regard to the growing weight of the emerging economies. We are ready to work together with our partners to promote international financial regulation reforms and to overcome the excessive domination of the limited number of reserve currencies.” [emphasis added]
According to the Asia Times author, the statement was code-speak for how BRICS countries will look to bypass the U.S. dollar as well as the petrodollar.
China is also on board with this proposal. Soon, China will launch a crude oil futures contract priced in Chinese yuan that will be completely convertible into gold. As reported by the Nikkei Asian Review, analysts have called this move a “game-changer” for the oil industry.
Both Russia and China have been buying up huge quantities of gold for some time now. Russia’s present gold reserves would back 27 percent of the narrow ruble money supply – far in excess of any other major country. The United States’ Federal Reserve admitted years ago that they haven’t held any gold for a very long time.
China is also implementing a monumental project, known as the Silk Road project, which is a major push to create a permanent trade route connecting China, Africa, and Europe. One must wonder much control over these transactions will the U.S. have.
These are just a few of the latest developments that have affected the dollar.
Can those continue to reject this petrodollar-related theory answer the following questions with confidence: Is it a coincidence that all of the countries listed above as moving away from the dollar are long-time adversaries of the United States, including the ones that were invaded? Is it a coincidence that Saudi Arabia gets a free pass to commit a host of criminal actions as it complies with the global financial order? Are Saudi Arabia’s concerns with Qatar really rooted in the latter’s alleged funding of terror groups even though Saudi Arabia leads the world in funding the world’s most vile terror groups?
Clearly, there is something far more sinister at play here, and whether or not it is tied solely to a deranged, psychopathic currency warfare will remain to be seen. The evidence continues to show, however, that the U.S. dollar is slowly being eroded piece by piece and ounce by ounce — and that as these adversarial countries make these developments in unison, there appears to be little the U.S. can do without risking an all-out world war.
15 Comments on "The Petrodollar Is Under Attack: Here’s What You Need To Know"
Anonymouse1 on Thu, 21st Sep 2017 7:05 pm
Not to worry, our oily, resident denier-in-chief, narrativeman, will be along shortly to remind everyone that, and i’ll paraphrase his here, how, ‘currencies don’t matter in the oil trade’. After implying washindum and tel aviv don’t really care or mind(lol sure they dont) what currencies ‘other’ nations sell their oil for, he will then crow over the vast quantities of oil being transacted in uS toilet paper. Then he likely follow that up on how the amounts being traded by the dollar-ditchers, are so trivial as the be insignificant.
What he wont (can’t) do, is acknowledge the uS dollar is backed by nothing more than threat of military force these days and dollar denominated demand (for oil). And once that bluff is called, as it increasingly is, the amerio-zionist empire will cease to be.
The article explains it so simply, even narrativeman should( but won’t) grasp it, Demand for oil is, for all intents, infinite, even if the supply is not of course.
Infinite demand for oil>’infinite’ demand for dollars>’Infinite’ (uS) debt and deficits.
That system worked for a time, but nothing lasts forever does it? Cracks are beginning to appear already. How will the uS fare in a world where the most valuable currencies are petro-rubles, petro-yuans, gold, or whatnot, and not endless bales of uS petro-dollars controlled and issued by Jew York, London and Tel Aviv?
makati1 on Thu, 21st Sep 2017 7:20 pm
“How will the uS fare…”
Simple, it will join the list of 3rd world nations that have to live withing their means and not at the expense of others. A sever shock, to the spoiled snowflakes and their drugged up parents, is coming. The Great Leveling.
Davy on Thu, 21st Sep 2017 7:46 pm
Dedollarization is a great happening we should all be cheering on. The more diversified the global economy the better. Where the flatlander anti-Americans deceive themselves is thinking it is the end of the US and the dollar. That is just not the case. The world is going to trade and invest in the US and the US in the world. Dollars are not going away. The nature of the global financial system is going to adapt somewhat to a more multipolar world. It should and must do this. This will be what really puts the US into a multipolar world not the military element. It will be the business and finance of the world that changes the US. Let us see what happens in the next downturn when all the dirty laundry is exposed for everyone to see then we can draw conclusions on where this current global system is heading.
Cloggie on Thu, 21st Sep 2017 7:52 pm
“Are Saudi Arabia’s concerns with Qatar really rooted in the latter’s alleged funding of terror groups even though Saudi Arabia leads the world in funding the world’s most vile terror groups?”
More likely this KSA stunt vs Qatar was instigated by the US in an attempt to keep Qatar in western orbit.
Boat on Thu, 21st Sep 2017 8:30 pm
clog,
Much of the Syria, Iraq etc bombing comes from the US air base in Qatar. Doubt the US messes with that orbit.
print baby print on Fri, 22nd Sep 2017 3:50 am
printing business is in jeopardy now
paulo1 on Fri, 22nd Sep 2017 7:32 am
A small disagreement with both Mak and Davy.
Mak, (and I know this is your meme), The US will not sink into a 3rd world shithole.
Davy, The US will not go unscathed with investors still investing in the US because it is, well, The US.
IMHO, if and when the US $ as reserve currency is deliberately eroded, there will be a rapid debasement with reulting US inflation for the goods that keep people sated and poor. That will really shock the WalMart shoppers into bewilderment. There will be anger as exceptionalism meets the rocky road of reality. People will become poorer, and any sense of opportunity will erode, year by year, political failure after political failure….but much worse than it is, now.
What on earth could possibly come after a Trump? A Statesman/woman who actually cares about their citizens? yeah, righhhhhht. A leader with leadership skills independent from contributors? hahah
I don’t think it will be a 3rd world shithole, instead, I think of a place where the wealthy stay behind their gated communities and grow wary of the sidelong glances of the locals. Crime will increase and it will be both random and highly organized. (Much like it is now, but moreso). And there will be more tribalism as opposed to Globalism. Much like there are city neighbourhoods where one does not venture, ever, there will be whole rural regions where you will be fine to pass through and buy a meal, but don’t hope to settle in if you aren’t “from there”.
Really, when you think about how things are unfolding, all of us are well along that path right now. I think the only thing holding it together are student loans and tv commercials.
What I am looking at with this surge away from the US dollar is currency collapse and the inability to simply print into a false narratiave of Exceptionalism. As I think about just how precarious everything is, and add in a bit of history, maybe Mak is right? The endless wars, (ENDLESS), looming conflicts, an irrational Govt creating more divide and conflict everywhere, natural disastors requiring massive debt for rebuilds, a crumbled infrastucture; if you take away the ability to just print money to fix everything, well collapse could happen pretty damn fast. One thing is for sure. It sure won’t get better.
In hindsight, this time might be seen as the last opportunity to get somewhere realistic to ride out the storm. Many on this site have already done so. If you haven’t, I wouldn’t wait much longer.
regards
makati1 on Fri, 22nd Sep 2017 7:50 am
paulo1, the US is already a 3rd world nation covered up by piles and piles of bullshit. When (not if) the SHTF, 3rd world America will burst out in the open like a bad case of diarrhea. When the safety nets come down, (food stamps, welfare, SS, subsidies, etc) it will be obvious. Over half of Americans receive government money in some form. The printing presses and MSM hide the lack of growth in the economy and wages. If Trumpet starts a trade war with China you will see how fast the facade collapse’.
The wealthy will have nowhere to run. Nowhere to hide. Gated communities are NOT independent of necessities. Not for long anyway. And walls/locks only stop the honest and law abiding, not the gangs/rioters. I would not bet that there will be any police or military to save them. Those people will be home protecting their families.
“… this time might be seen as the last opportunity to get somewhere realistic to ride out the storm.” So right.
Hello on Fri, 22nd Sep 2017 7:58 am
>>>> inability to simply print into a false narratiave of Exceptionalism
Loosing the reserve currency is the best thing that will happen to the US. It will finally be able to manufacture, produce and export again. It seems there’s a new golden aga for Amercia dawning.
Davy on Fri, 22nd Sep 2017 8:12 am
“Davy, The US will not go unscathed with investors still investing in the US because it is, well, The US.”
Where did I say unscathed? I said it will not go irrelevant like most anti-Americans say here. Big difference
fmr-paultard on Fri, 22nd Sep 2017 8:24 am
our supertards are to tard exremist nazi preachers like donald to liberals. this is because tard exsremist nazi preachers are hyper revisionists, funded by putin’s shekles and anti american forces.
some supertards will be their Cambridge Five.
I don’t necessarily promoting putting women in most dangerous situations. There are too many jobs in armed forces that can really help alleviate poverty in women without much possibility of dying. this is a mental block. everyone dies eventually and it doesn’t prevent people from living so women joining armed forces or combat should be a normal way to advance economically.
http://www.dailymail.co.uk/news/article-4908678/Marines-field-woman-infantry-officer-time.html
“our failure is their livelihood” -famous senator
Davy on Fri, 22nd Sep 2017 8:25 am
I agree with you Hello but I doubt there will ever be a golden age anywhere. Let’s call it normality where we make more of what we use locally in a poorer.
Davy on Fri, 22nd Sep 2017 8:33 am
“The Demise Of The Dollar? Smith Warns “Don’t Hold Your Breath”
http://tinyurl.com/y7g22gdn
“The demise of the U.S. dollar has been a staple of the financial media for decades. The latest buzzword making the rounds is de-dollarization, which describes the move away from USD in global payments. De-dollarization is often equated with the demise of the dollar, but this reflects a fundamental misunderstanding of the currency markets. Look, I get it: the U.S. dollar arouses emotions because it’s widely seen as one of the more potent tools of U.S. hegemony. Lots of people are hoping for the demise of the dollar, for all sorts of reasons that have nothing to do with the actual flow of currencies or the role of currencies in the global economy and foreign exchange (FX) markets. So there is a large built-in audience for any claim that the dollar is on its deathbed. I understand the emotional appeal of this, but investors and traders can’t afford to make decisions on the emotional appeal of superficial claims–not just in the FX markets, but in any markets.”
Outcast_Searcher on Fri, 22nd Sep 2017 11:41 am
Right Davy. If the deniers are going to pretend like the mature FX markets make their doomer predictions about the dollar silly, that’s on them. No major country’s currency has been fully backed by gold for decades now.
It’s all about trust. In the real world, as long as the US economy does OK (which the doomers deny constantly despite ANY facts on the ground), the trust will make the dollar internationally relevant.
The rest is just self-interested noise.
Antius on Fri, 22nd Sep 2017 12:17 pm
Interesting reference Davy. China would appear to be in a weak position in attempting to issue a global reserve currency.
(1) It runs a trade deficit with the rest of the world, meaning that the Yuan is basically non-existent as a reserve currency;
(2) It’s currency is not free floating and is pegged to the dollar.
The only other currency that presents any real challenge to dollar hegemony is the Euro and even this is in a relatively weak position as a reserve currency.
It is also clear that the US pays a price for the privileged position of the dollar. With the dollar used as reserve in so many countries, its value is artificially high. This doesn’t do US exporters any favours and has must have made it easier for the likes of China (and previously Japan) to cream off a lot of US industries.