The Bankruptcy of American – End of the Petrodollar System

Currently, the world consumes more than 80 billion barrels of oil per day. And with each barrel sold, more demand for U.S. dollars is created. This continual demand for dollars means the Federal Reserve must keep dollars in plentiful supply, meaning printed regularly. More money in circulation leads to expansion of the monetary base, and a larger monetary base typically means higher standards of living.

All this is assuming the demand for U.S. currency and for U.S. debt securities remain strong. But if the petrodollar system ever crumbled, America would be stuck with lots of extra dollars that would no longer be in demand. Those dollars would quickly return to the U.S., which would lead to massive inflation.
Today America is living proof that having the world’s most important currency translates into a higher standard of living than most nations. At one point in our history, our nation’s largest export was a variety of consumer goods. Now our largest export is the U.S. dollar…a dollar that costs us practically nothing to create. How long will it be before the nations of the world figure out the dollar fiasco is a fraud?

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Two questions remain: (1) how realistic is it the dollar could lose its crown to the euro; and, (2) if that were to happen, how close are we to such an event?

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* A: The U.S. Department of Energy has already asked these same questions and provided answers in its report, “Peaking of World Oil Production: Impacts, Mitigation, and Risk Management.” The report drew several conclusions, including that the era of plentiful, low-cost petroleum is approaching an end; world oil supplies are beginning to peak in several areas; without massive intervention, problems will become pervasive and long-lasting; oil peaking will adversely affect global economics; oil production is in decline in 33 of the world’s 48 largest oil-producing countries; it is highly probable that when global oil supplies collectively peak, there will be less than 1 year’s warning; and, the world has never confronted a problem like this.

The ugly truth that few are telling you is the world is preparing to be plunged into an era of declining oil production that will lead to enormous energy price increases. And despite having foreknowledge of the issues we are facing today, the American government has done little or nothing to prevent such a predicament.

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