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Petrodollar system is critical to our high standard of living
invite response
2016 Dec 14, 11:03am 4,717 views 12 comments
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What this means in practical terms is that american relationship with saudi arabia is absolutely critical for us to continue to enjoy meaningful advantages over our competitors who love "multipolar world." Do not listen to foreign agents and their unwitting propagandists who would love nothing more than to hurt us economically and to benefit in the process.
Tenpoundbass
2016 Dec 14, 11:41am
Oil is the world’s most traded and most strategic commodity.
Yeah but people don't realize that transaction is only a small minuscule portion of the overall impact that Oil has on Global and Local economies as it oozes through the commerce systems in various states.
If the last 39 years of politics has taught me anything, is that the economy, any economy. Is what ever, how ever they say it is.
By that I mean, Oil could trade in Zimbabwe or Venezuelan currency tomorrow and the only people that would miss a step are the people who shouldn't be trading in it in the first fucking place. The speculating investors. The rest of the world would chug along just fine, as long as there was no other price collusion or commodity manipulation taking place. In fact the world would probably benefit from it.
The Rothschild's decide and describe a healthy economy. What does that tell you?
Tenpoundbass
2016 Dec 14, 11:45am
America has a strong dollar for the benefit of all of the rich people who live and trade in Countries with weak currency.
All of that hard work setting up a sweat shop so they could extract lots of little Yuan out of, would be worthless if they couldn't convert it into Dollars in the US.
Where being a millionaire means more than being a Chinese millionaire.
RealEstateIsBetterThanStocks
2016 Dec 14, 9:42pm
CIA already has plan B covered. first a sudden rise of a out-of-nowhere militia group followed by a hostile takeover coup by a U.S friendly opposition.
marcus
2016 Dec 15, 6:11am
First you try to understand what the question is, and if possible, understand the answer. Many of us defer to what experts say in issues such as this, the impact of the petro dollar system.
But then when you really want to go the extra mile understanding what it all means, you read TPB.
If the last 39 years of politics has taught me anything, is that the economy, any economy. Is what ever, how ever they say it is.
By that I mean, Oil could trade in Zimbabwe or Venezuelan currency tomorrow and the only people that would miss a step are the people who shouldn't be trading in it in the first fucking place. The speculating investors. The rest of the world would chug along just fine, as long as there was no other price collusion or commodity manipulation taking place. In fact the world would probably benefit from it.
MY guess is there may be a future authoritarian world in which we are told there is no investing or speculating, becasue it's bad for prices. Of course, right ? You can only keep markets honest by not having speculators. Only then will prices not me manipulated.
Y
2016 Dec 15, 6:19am
Well then to keep the saudi happy we should build more trade center buildings for them to bomb.
This time build them on rural anti-aircraft missile test sites. More bang for the buck...
What this means in practical terms is that american relationship with saudi arabia is absolutely critical for us to continue to enjoy meaningful advantages over our competitors who love "multipolar world."
marcus
2016 Dec 15, 6:58am
We're you a crack addict in 2005, or just living under a rock?
I saw what happened. IT was in part a speculative bubble. But there was a lot more at work there than meets the eye. Global economies including India and China were expanding at rates that were not sustainable. Markets are future looking, and there is a lot of information at work. There were a lot of interests involved in that.
I'll put it in terms of an assertion you might understand (but you'll choose not to). Sometimes markets get things wrong. But not anywhere close to as wrong as if prices were simply set by the most powerful interests. Even Russia has learned that lesson.
Here's an interesting side thought. Maybe oil is wildly under priced now, relative to the price that would be best for the future of humanity. Or maybe we will get large scale energy systems up soon enough to displace a lot of oil usage with electric. WE don't know how this plays out. But it is hugely complex.
The value of market pricing that includes speculators is a more abstract question than the question of oil pricing. But it's easier to understand the answer (regarding the value and necessity of speculation), at least for some of us.
Strategist
2016 Dec 15, 7:15am
Petrodollar system is critical to our high standard of living
Ironically, the lower the price of oil, the better is our standard of living.
We also produce more of the stuff ourselves.
Ironically, the lower the price of oil, the better is our standard of living.
We also produce more of the stuff ourselves.
The most important thing to understand is that agreement with the saudis made U.S. dollar the reserve currency and allows us to deficit spend without suffering proportionate inflationary side effects that would sink most other nations. This agreement must be preserved if we are to out maneuver the competitors and maintain the dominance/advantage. A vote against the U.S/Saudi "friendship" is effectively a vote for destruction of United States.
The price of oil is only of tangential importance and is actually protected by petro-dollar agreement.
Strategist
2016 Dec 15, 10:45am
The most important thing to understand is that agreement with the saudis made U.S. dollar the reserve currency and allows us to deficit spend without suffering proportionate inflationary side effects that would sink most other nations. This agreement must be preserved if we are to out maneuver the competitors and maintain the dominance/advantage. A vote against the U.S/Saudi "friendship" is effectively a vote for destruction of United States.
The dollar will remain the reserve currency, with or without the Saudis, simply because we are the biggest kid on the block. We really don't need the Saudis. They need us.
justme
2016 Dec 15, 10:50am
Before 1972-1974, was not all oil purchased in USD anyway? And how could Saudis "force" all oil transactions to be denominated in USD?
finehoe
2016 Dec 15, 11:06am
The most important thing to understand is that agreement with the saudis made U.S. dollar the reserve currency
The dollar was the world's reserve currency long before the early 70s.
"The Petrodollar System
From 1972 to 1974, the U.S. government made a series of agreements with Saudi Arabia. These agreements created the petrodollar system.
The U.S. government chose Saudi Arabia because of its vast petroleum reserves, its dominant position in OPEC, and the (correct) perception that the Saudi royal family was corruptible.
In essence, the petrodollar system was an agreement that the U.S. would guarantee the survival of the House of Saud. In exchange, Saudi Arabia would:
Use its dominant position in OPEC to ensure that all oil transactions would happen in U.S. dollars.
Invest a large amount of its dollars from oil revenue in U.S. Treasury securities and use the interest payments from those securities to pay U.S. companies to modernize the infrastructure of Saudi Arabia.
Guarantee the price of oil within limits acceptable to the U.S. and prevent another oil embargo by other OPEC members.
Oil is the world’s most traded and most strategic commodity. Needing to use dollars for oil transactions is a very compelling reason for foreign countries to keep large U.S. dollar reserves.
For example, if Italy wants to buy oil from Kuwait, it has to purchase U.S. dollars on the foreign exchange market to pay for the oil first. This creates an artificial market for U.S. dollars that would not otherwise exist.
The demand is artificial because the U.S. dollar is just a middleman in a transaction that has nothing to do with a U.S. product or service. Ultimately, it translates into increased purchasing power and a deeper, more liquid market for the U.S. dollar and U.S. Treasuries.
Additionally, the U.S. has the unique privilege of not having to use foreign currency to buy imports, including oil. Instead, it gets to use its own currency, which it can print.
It’s hard to overstate how much the petrodollar system benefits the U.S. dollar. It’s allowed the U.S. government and many Americans to live beyond their means for decades."
https://www.equities.com/news/how-important-is-the-petrodollar-to-us-economic-stability