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The Petrodollar Era – What is the Endgame?
After World War II, a new international monetary system called Bretton Woods was created. Bretton Woods established three main things: (1) the U.S. dollar was to be an international reserve currency, (2) the U.S. dollar would be backed by gold at a price of $35 per ounce, and (3) any country could exchange dollars for gold. Countries running trade surpluses with the US sought to exchange their dollars for gold, and this rapidly shrunk US gold reserves. This then led to the so called Nixon shock – President Richard Nixon effectively ending the Bretton Woods system in 1971. The world economy entered a new era: the US Dollar became the global reserve currency. The US made no effort to rein in deficit spending, in fact quite the opposite. Therefore, the US needed to continue to find ways to sell government debt (i.e. to find buyers of US Treasury Securities) without driving up interest rates. By 1974, the enormous flood of dollars from the US into top-oil-exporter Saudi Arabia suggested a solution. That year, Nixon sent new US Treasury secretary William Simon to Saudi Arabia with a mission… The task: neutralise crude oil as an economic weapon against the US and find a way to persuade a relatively hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. The basic framework was simple: the US would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into US Treasuries and therefore finance America’s spending. A win-win: the Saudis would receive protection from geopolitical enemies, and the US would get a new place to unload large amounts of government debt. This became known as “petrodollar recycling” By spending on oil, the US was creating new demand for US debt and US dollars. Moreover, since Saudi Arabia dominated the OPEC – the Organisation of the Petroleum Exporting Countries – this dollar deal was extended to OPEC overall, which meant that the dollar became the preferred currency for oil purchases worldwide. And so the petrodollar era began… This petrodollar system has had massive implications for US foreign policy. Although they have tried to keep it under wraps, Saudi Arabia is believed to be one of America’s largest foreign creditors. Undoubtedly, Saudi holdings of US debt and other assets are significant. All else being equal, the US should be growing less dependent on foreign holders of debt, certainly in terms of Saudi and OPEC-held debt, since the global role of OPEC and the Saudis has been diminishing in terms of global market share. But all else isn’t equal, and the US has been piling on ever-larger amounts of debt in recent years. In 2019, for example, the annual deficit topped one trillion. This immense growth in debt obviously makes the US regime more sensitive to changes in demand for US debt, and ever more reliant on foreign demand for both US debt and US dollars. In order to avoid a crisis, the US must ensure that interest rates remain low and that foreigners want to acquire both US dollars and US debt. Were petrodollars and petrodollar recycling to disappear, it would have a twofold effect on US government finances: First of all, a sizable decline in petrodollar recycling would put significant upward pressure on interest rates. The result would be a budget crisis for the US government, as it would have to devote ever-larger amounts of the federal budget to payments on the debt. The other option would be to have the US central bank monetize the debt by purchasing ever-larger amounts of it to make up for a lack of foreign demand. But this would lead to growing price inflation. Furthermore, if participants began to exit the petrodollar system (and, say, sell oil in euros instead) demand for dollars would drop, exacerbating any scenarios in which the central bank is monetizing the debt. This would also generally contribute to greater price inflation, as fewer dollars will be sucked out of the US by foreign holders. The result could be ongoing declines in government spending on services, and growing price inflation. The US regime’s ability to finance its debt would decline significantly, and the US would need to pull back on military commitments, pensions, and more. Either that, or keep spending at the same rate and face an inflationary spiral. Or…how about another option? Anyone fancy a Great Reset?
5 Comments on "The Petrodollar Era – What is the Endgame?"
Abraham van Helsing on Sat, 7th Nov 2020 9:55 am
The Petrodollar Era – What is the Endgame?
Simple:
https://wolfstreet.com/wp-content/uploads/2020/01/Global-Reserve-Currencies-share-all_2014-2019-Q3.png
Put the EUR at the spot, the USD is currently holding, the USD will disappear altogether and the RMB will make a significant move upwards (roughly the position the EUR is currently holding), but not threaten the EUR. The CHF and certainly GBP will sink. The YEN will slightly improve and keep 3rd spot.
Abraham van Helsing on Sat, 7th Nov 2020 11:45 am
“Der mächtige Euro wird zum Symbol für Europas Rückkehr an die Weltspitze”
(The mighty euro becomes a symbol of Europe’s return to the top of the world)
https://www.welt.de/finanzen/plus215055258/Dollar-Verfall-Maechtiger-Euro-wird-Symbol-fuer-Europas-Comeback.html
Abraham van Helsing on Sat, 7th Nov 2020 4:00 pm
The Hidden Hand at work:
https://twitter.com/realDonaldTrump/status/1324139387546984449
https://twitter.com/DLoesch/status/1324162805927391232
“Pennsylvania has a Jewish Governor, a Jewish Attorney General, a Jew Secretary of State, and a (transgende) Jewish Health Secretary – and the election will depend on what happens in Philadelphia | Rudy Giuliani, Trump’s personal attorney, is suing the state of Pennsylvania for voter fraud.“
Courtesy David Irving, who, I had the honor of joining his private meetings on history twice, in London and The Hague.
http://www.fpp.co.uk/online/index.html
Abraham van Helsing on Sat, 7th Nov 2020 4:11 pm
About hard-left Kamala Harris:
Kamala Harris and Douglas Emhoff made history for interfaith families. All Jews should celebrate that.
November 6, 2020 By Irene Katz Connelly
Douglass Emhoff, a man only slightly less devoted to mask-wearing than to hugging his wife. by the Forward
When Kamala Harris becomes Vice President in January, she’ll have the privilege and burden of representing many “firsts.” She’ll be the first female, first Black, and first South Asian person to serve in the position.
As if that’s not enough, Douglas Emhoff, Harris’s infamously infatuated husband and a Forward-certified “hot Jewish dad,” is making history as the first Jewish presidential or vice presidential spouse. For Jews, this moment represents not one but two “firsts:” The Harris-Emhoff clan will be the both first Jewish family and the first interfaith Jewish family to occupy the vice presidential residence.“
Let’s say she has the “propper guidance”
The full Irving quote:
Jewish hand is everywhere President Trump tweeted a link to this article explaining how Attorney General Shapiro, a Jew, is attempting to steal the election | Pennsylvania has a Jewish Secretary of State (tasked with counting the ballots). Her impartiality has been questioned due to her anti-Trump tweets. Donald Trump’s son retweeted | Pennsylvania has a Jewish Governor, a Jewish Attorney General, a Jew Secretary of State, and a (transgende) Jewish Health Secretary – and the election will depend on what happens in Philadelphia | Rudy Giuliani, Trump’s personal attorney, is suing the state of Pennsylvania for voter fraud. He gives an emergency press conference from Philadelphia, Pa.
https://www.unz.com/article/chris-hedges-and-matt-taibbi-media-as-propaganda-and-censorship-bureau-the-jewish-angle/
“Chris Hedges and Matt Taibbi: Media as Propaganda and Censorship Bureau: the Jewish Angle“
Theedrich on Sun, 8th Nov 2020 4:21 am
Now that the criminals have won, we need chaos. The ghoul from the dungeon who takes payoffs to sell out America to foreign countries needs to be exposed as the traitor he is. The Leftist media needs to be revealed as the information perverters they are. The profound corruption of the entire government must be made evident to the citizenry.
This is clearly a difficult task, since the foxes are now guarding the chicken coup. Nonetheless, as the perversion of the civilization becomes more obvious to even its dullest inhabitants, the chances for making some headway against the organized crime now in control will increase.
The only things America has upholding it now are its financial stranglehold on the globe and its military-industrial complex. The latter is operating hundreds of “mini-bases” secreted inside the military installations of other, especially ThirdWorld, countries. The reason for this is primarily to be able to deny that the U.S. has any “bases” abroad. It’s the usual military practice of lying and obfuscation, of course. As for the financial part, the dollar as the world’s reserve currency makes most other lands dependent on the U.S. Federal Reserve. But as the BRIC nations gradually wean themselves off of the dollar with their own “baskets” of currency, Yankeeland is bound to weaken.
The fossil-fuel industry is undergoing increasing stress because of depletion and politics. The Great Geezer will exacerbate the situation, as he has made clear. And the population overload due to unrestricted immigration from melanin-rich lands will worsen the situation, especially as the Left deals mainly in fantasy, unfounded speculation, and pop psychology to “solve” problems of every type.
The Democrats have stolen the election with voting machines pre-programmed to produce results that favor Biden the Zombie and his Indo-Negroid replacement. The media syndicates are now screaming that the proletariat must “come together” (in a collective orgasm?) to support the dead man walking.
Au contraire, the solution is Resistance.