Posted on 06/13/2024 10:24:11 AM PDT by algore
(Kitco News) – The established financial world order of the past 50 years is now transitioning to a new and unknown paradigm as the petrodollar agreement between the U.S. and Saudi Arabia was allowed to expire this past Sunday.
The term ‘petrodollar’ described the U.S. dollar’s (USD) role as the currency used for crude oil transactions on the world market. It traces back to the early 1970s when the United States and Saudi Arabia struck a deal shortly after the U.S. went off the gold standard – and the agreement has had far-reaching consequences for the global economy.
The petrodollar agreement came about following the 1973 oil crisis. It stipulated that Saudi Arabia would price its oil exports exclusively in U.S. dollars and invest its surplus oil revenues in U.S. Treasury bonds. In exchange, the U.S. provided military support and protection to the kingdom.
This helped the USD cement its position as the world’s reserve currency and ushered in an era of prosperity for Americans as they enjoyed the benefits of being the preferred market for global corporations to sell their wares. Additionally, the inflow of foreign capital into U.S. Treasury bonds has supported low interest rates and a robust bond market.
All that is set to change now as Saudi Arabia is looking to move beyond an exclusive relationship with the U.S. – as evidenced by the kingdom becoming one of the newest members of the BRICS bloc.
While many point to escalating global tensions and shifting geopolitical allegiances as the impetus for allowing the agreement to expire, changes in the power dynamics of the global oil market have also played a crucial role in this development as the world moves towards alternative energy sources.
At present, the Kingdom is still accepting U.S. dollars in exchange for oil, but some of the world’s largest economies are attempting to change that, notably China. For years, China has been actively trying to get Saudi Arabia to accept the yuan for oil purchases, and while the Kingdom has thus far refrained from making the switch, they have expressed openness to the idea.
According to digital news service Sputnik, “Nearly 80 percent of global oil sales are priced in dollars. However, Russia, Iran, Saudi Arabia, China, and others are increasingly shifting to local currencies in energy trade. In 2023, 20 percent of global oil was bought in other currencies, as per the Wall Street Journal.”
The Kingdom’s acceptance into the BRICS bloc has the potential to influence this decision. If Saudi Arabia moves to expand beyond the USD, it would materially weaken the currency’s dominance in the oil market – and as a result, its place on the world stage. A decline in global demand for the greenback could result in higher inflation, higher interest rates, and a weaker bond market in the United States.
This is a continuation of the BRICS vs Dollar central bank conflict.
Way to go Joe!!!
Hi.
Everywhere I went on this planet the dollar was fungible.
Europe, S. America and the ME.
The devalued dollar will still facilitate commerce
5.56mm
Well this could be a good thing as it will speed up the demise of the Federal Government as we know it.. Only way to break a drug user is cut off the drug which is money in this case.
This may be the only reason they would let Trump win in November.
Let him be in the hot seat when the currency collapses and we need to replace it with a CBDC. Leftists will go along with whatever the news tells them but Republicans will need to be convinced. “Only Nixon could go to China”
The economic gurus will tell him, “If you don’t move to a CBDC the people will starve and there will be widespread ruination.” They are gambling that he will believe them.
Hopefully he will handle it better than he did the last crisis they unleashed on him. I think he learned his lesson. He won’t let the snakes guide him this time.
I also hope his VP pick is as steadfast or they will just remove Trump and allow his VP to enact the CBDCs.
buying gold at costco is big business. they sell out quickly. people do it for points and rewards
they used to do similar at the US mint. I did it once years ago when it didnt cost me anything. The package ended up lost and it was a nightmare
This would have “probably” never happened under Trump’s administration. Thanks to the current regime for furthering the desires of the nations to turn the USA into a banana republic.
Thanks to Pedo Biden and his communist posse.
Sorry, but once other currencies are used to start trading oil those currencies will grab a share of the benefits of the petrodollar and diminish the current fungibility of the USD.
“In exchange, the U.S. provided military support and protection to the kingdom.”
The Kingdom will no longer be under the protection of the US. They don’t have much in the way of outside threats, but that could easily change in the future. It all sounds like a good idea, but it could end very badly for the Saudi’s in the future.
I suspect China and/or Russia will be there to protect them.
...and China and Russian leaders aren’t as fickle as the current American government.
Wonder how long it will be until they get a little “democracy” from Uncle Sam?
Iran.
No one kills Sunnis like Shi’ites do.....
Lol…just cause they take tourist dollars and AMEX doesn’t mean their governments will continue to buy USD to pay for oil and gas
The Democrat Curse on America is coming home to roost.
A step along the way to the U.S. dollar no longer being the global reserve currency. Actually, a major step. What that means to the U.S. government is that the fiat ends…the multi-trillion deficits and the accumulated debt will actually have an impact on The American lifestyle. The music will stop. And all the sociopaths and psychopaths that we have elected to rule us over the last three decades will disappear suddenly with their hunk of the Golden Goose.
And America will be poor. Dirt poor. Central America style poor. Maybe then this climate change bullshit, and no growth communism will get shuffled aside and America will finally use its natural resources like any sane nation would.
But first, we’re gonna get poor like no one here has ever seen before, except in some very old movies. And we’re gonna get dystopian like even Orwell would be amazed by.
Rollover (1981)
https://www.youtube.com/watch?v=q9d30RBJkf0
They’ll Be back , LOL
More de-dollarization.
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