Posted on 06/19/2024 10:59:58 AM PDT by bitt
This month, rumors about the petrodollar have spread like wildfire all over the Internet. Some of what is being said is true, and some of what is being said is false. When other sources were reporting on “the death of the petrodollar”, I was asked why I was not writing about it. Well, the truth is that I was not writing about it because the petrodollar is not dead. It is certainly in trouble, but it is not dead. Today, most oil continues to be sold in U.S. dollars, and most global trade continues to be conducted in U.S. dollars. But that could change as other countries lose faith in our currency. In particular, we will want to carefully watch what the BRICS nations choose to do. 45 percent of the world’s inhabitants live in the BRICS nations, and they have been implementing strategies that are designed to promote their own currencies and reduce dependence on the U.S. dollar. As U.S. relations with leading BRICS nations continue to deteriorate, I would expect that trend to accelerate.
So I am not optimistic about the future of the petrodollar at all.
But what some other sources reported about the petrodollar earlier this month was simply not accurate.
Let me start at the beginning. According to Investopedia, petrodollars are “simply U.S. dollars accepted as payment by an oil exporter”…
Petrodollars are oil export revenues denominated in U.S. dollars. Petrodollars are not a distinct currency; they are simply U.S. dollars accepted as payment by an oil exporter.
Global crude oil exports averaged approximately 88.4 million barrels per day in 2020. That pace would generate annual global petrodollar supply of more than $3.2 trillion a year, assuming an average price of $100 per barrel.
Petrodollars are the primary source of revenue and wealth for many members of the Organization of Petroleum Exporting Countries (OPEC) as well as non-OPEC oil and gas exporters including Russia, Qatar, and Norway.
MORE..
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Good find, very interesting!
The petrodollar theory has always failed to understand that when joules are sold in the form of barrels of oil, the seller can accept any payment he chooses.
And maybe he will choose to accept counterfeit 1s and 0s to pay for the oil, which then are forwarded elsewhere.
The US has no control of this. “Petrodollars” are not any sort of advantage.
The origin of the petrodollar was a 1974 agreement between the US and Saudi, that Saudi would only accept dollars in payment for their oil. Other oil exporters went along. This meant that foreign countries needed to buy dollars to pay for oil imports. This strengthened the dollar’s place in the world economy, with great benefit to the U.S.
Definitely a reference to a quote at the start of WWI (which I consider to be the key event which shaped the whole 20th century):
"The lamps are going out all over Europe, we shall not see them lit again in our life-time" -- British Foreign Secretary Sir Edward Grey
But I just got my suit pressed for dollar death 87,541.
No plausible alternative even exists despite $200,000,000,000,000 of debt.
The Euro barely left a dent despite being invented to displace the dollar.
It is going to take Europe, Asia and the BRICS cooperating to create a reasonable alternative like it took the Vandals, Goths and Barbarians(much of the known universe) added together to take down Rome.
or something not happening anytime in the near future.
No nation can be a first world nation without the international banking system. We have a hammerlock on this system like never before in US history. Trump got Turkey out of Syria in 9 days by blocking the Turkish banks access-a world record at getting a muslim nation to heel as an example.
Interesting since 1972’s peak of 74% of all commerce on earth it has declined to the last figure that I saw which was in the low 60%s.
Petrodollars are the primary source of revenue and wealth for many members of the Organization of Petroleum Exporting Countries (OPEC) as well as non-OPEC oil and gas exporters including Russia, Qatar, and Norway.
Need to update that. Russia does not anymore since we confiscated their cash and gold on deposit.
“The US has no control of this. “Petrodollars” are not any sort of advantage.”
They were a huge advantage when the Saudis would only sell worldwide to people who brought them US Dollars. That was in return for the USA protecting the house of Saud from any attacks, from anywhere. That has ended now.
Unfortunately, we have weaponized the SWIFT system, and have shown our willingness to seize foreign cash and metals on deposit in our banking system.
We do not have a hammerlock like never before. Trust has been destroyed. The Euro was invented in 1995. Back then we had 4.9 trillion in debt.
Today we are at 35 trillion and ad another trillion about every 100 days.
Our abuse of trust, and massive money explosion has ended that hammerlock. The dollar is no longer as sound as a pound... so to speak.
You beat me to it. What I would also point out is how well Russia has done financially after being kicked off of SWIFT.
By doing well financially-
he is borrowing at 17% and the ruble is off 70% vs the dollar since the Crimean invasion in 2014.
The Russian economy is the size of 1 1/2 NY’s economy with a 145milion people.
What does that mean exactly?
But boots on the ground!
The usual heads I win/tails you lose.
Weaponized vs military action.
Putin has found out in spades how his grand plan to evade sanctions has fared.
Here’s a pic of it-
https://www.xe.com/currencycharts/?from=RUB&to=USD&view=2Y
At no time in world history except nuclear bomb days has the US been mightier relative to the rest of the world.
Europe is indefensible to a swarm of gnats. Russia is a regional gas station and China is a second world nation.
The second part of that equation is that the Saudis would roll those dollar profits into US Treasuries.
This provided a constant market for the USTs, AND it established a “need” to retain dollars in central bank reserves to allow for the international settlement.
The question that I don’t see many people answering is what is Saudi Arabia supposed to do with Yuan or Rupees? They will certainly use the Yuan to import stuff from China, but I think a lot of it will be converted into dollars and used to buy stocks, USTs, and other investments priced in dollars.
The way I see it, we’ll have a debt crisis in 5 years or so. Congress will come to an agreement to reduce social security payments by 33% for everyone. But nothing will happen until the markets demand it.
Sorry I meant to add that we’re borrowing at 4 1/2% with $200,000,000,000,000 of debt.
That’s objective soundness.
It s/b noted that when the dollar replaced the pound sterling as the world standard bearer beyond the UK not vanishing from earth-
the dollar was the obvious, bright shiny successor-
no such thing even currently exists.
They just want our leaders to keep flooding the system with more money so that the party can continue.
Yes, the party will continue for a little while longer, but once the lights are finally turned off nobody will ever be able to turn them back on again. ***
I think the author is somewhat wearing blinders. 1/. It is true that the U.S. population is not much interested in the dollar as the world's 'reserve currency'. However, we are on track to have a $2 trillion deficit in the federal budget just for this year {despite the administration's continuing lies.}
Going on in the background is inflation, which the administration is continuing to lie about. It has to be at least 20% at present and almost certainly will continue to rise. The deficit spending is being financed by borrowing, and the desirableness of lending America more money is diminishing. The Fed appears to be generating loan money from the country's banks buying the Fed Notes.
At present the interest on that debt is approaching $1 trillion annually, bumping down the defense budget, the entitlements like Social Security, Medicare and welfare type support $$$.
Meanwhile, those national banks are holding Fed Notes that pay 1% - 2% while inflation starts to top 20%. If an individual has a savings account that pays 4% and the inflation rate is 20%, obviously the individual is losing his savings principle value with each passing month. The same would seem to hold true with national banks investing its equity wealth in low yield Fed Notes.
Banks can offset such losses by raising interest on its own loans and cash advances; but such increasing squeeze on available currency for spending will show up in the banks balance ledgers and in the national available currency totals {the term escapes me on this hectic day.} Banks are already failing.
2/. They just want our leaders to keep flooding the system with more money so that the party can continue... That looks good for Wall Street and financial markets but it does not generate a growth economy. The crash of the Great Depression in the '30s proves the folly of such strategies.
3/. Yes, the party will continue for a little while longer, but once the lights are finally turned off nobody will ever be able to turn them back on again ... This is Occam's Razor: when will the bubble burst❓ Some say soon, some say in a year or two, some say in eight or ten years - or more.
The problem is that no one knows, and most are not going to say when and be accused of causing a 'bubble' to burst❗ I think that the Fed and the administration have been playing games to hide the reality of the present danger; just hiding a constantly rising inflation rate while continuing to flood the economy with monopoly dollars is lulling the average citizen into hoping for the best. We 'elders' have all been ensnared in that trap - in 1980, in 1987, in 2008, etc.
Do your best to be prepared for when "the lights are finally turned off." Think 'Barter Economy'✔
It’s going to be inflation, spending freezes and tax hikes.
The result is going to be Japan like anemic growth for an extended period of time.
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