petrodollar Archives - Dr. Rich Swier

The U.S. standard of living has been artificially boosted by the dollar’s status as the global reserve currency, but what happens as that status crumbles?

The 50-year-old petrodollar agreement between the U.S. and Saudi Arabia has been allowed to expire, according to multiple news reports.

The so-called petrodollar refers to the U.S. dollar’s role as the currency used for crude oil transactions on the world market. This arrangement has its roots in the 1970s when the United States and Saudi Arabia struck a deal shortly after the U.S. went off the gold standard that would go on to have far-reaching consequences for the global economy.

Writes Paul Hoffman for MSN.com:

“In the history of global finance, few agreements have wielded as many benefits as the petrodollar pact did for the U.S. economy.”

Hoffman explains that the petrodollar agreement, formalized after the 1973 oil crisis, 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 return, the U.S. provided military support and protection to the kingdom. This arrangement was a win-win situation for both; the U.S. gained a stable source of oil and a captive market for its debt, while Saudi Arabia secured its economic and overall security.

With the deal now collapsing, the U.S. will no longer have a financial support structure in place to support its massive national debt of $34.5 trillion. The dollar will collapse, it’s just a matter of when not if.

This new economic reality, with the nations of the world turning up their nose at the dollar, represents a tectonic shift in the world economic order. And therein lies the real reason for the Washington establishment’s eagerness to start World War III with Russia. Those who have benefitted most from this arrangement of endless wars financed by endless debt see that their gig is up. Those who are reading the tea leaves can see for the first time the potential end of the American empire coming into focus. Whether it will happen or not remains to be seen, but this much is not in dispute: No empire in history has gone down without a fight.

If you are still living in denial, it’s time to wake up. It’s time to prepare for war. The governments of Germany and Great Britain are already telling their people to prepare for war with Russia, but the corrupt Biden regime has been silent on the matter, even as it continues to poke the bear with more and more armaments sent to kill Russians in Ukraine, and now they’ve even given the green light for Ukraine to use U.S. weapons to strike into the heart of Russia.

No election and no politician is going to save us. So let’s get on our knees and pray for peace, while preparing ourselves and our families for hard times ahead.

Hoffman explains that by mandating that oil be sold in U.S. dollars, the agreement with Saudi Arabia elevated the dollar’s status as the world’s reserve currency, adding:

“This, in turn, has profoundly impacted the U.S. economy. The global demand for dollars to purchase oil has helped to keep the currency strong, making imports relatively cheap for American consumers. Additionally, the influx of foreign capital into U.S. Treasury bonds has supported low interest rates and a robust bond market.”

In his December 2023 book, Bonfire of the Sanities, investment manager David Wright argues that the strength of the dollar has been a key factor behind America’s high standard of living. Wright states that the reason why people in the U.S. enjoy “as high of a standard of living as we do is because the dollar is strong.” And this strength is largely due to a perceived faith in our economy “and because energy can’t be bought without U.S. dollars.”

I concur with Hoffman when he says, “This expiration has far-reaching implications, as it has the potential to disrupt the global financial order.”

The agreement between the U.S. and Saudi Arabia expired on June 9, 2024.

That means the dollar is now going to sink or swim on its own merits. The problem is, it no longer has any merits. Our currency was taken off the gold standard decades ago, and for the first time in more than 50 years it won’t be backed by oil, either. In the meantime, our politicians have recklessly piled up unprecedented debt that can never be paid back. The central bankers will always get theirs. Hence the need for a reset. The new system won’t come into being without birth pains, war being among them. Yes, global resets can be messy, and we’re about to find out just how messy this one will get.

A UK friend emailed me about the mess in the Middle East, saying that the tribal differences make it hard to grasp the situation there. Yes, from the standpoint of the inhabitants of the region, the situation is labyrinthine. But from the U.S. standpoint there is nothing complex about it at all. It is a secret hidden in the open, IF you know about the petrodollar agreement signed in 1973. You can truly call it blood money. Of course, in one way, the motivation of the U.S. policy is still hard to grasp, namely, how it could be so utterly and irredeemably EVIL?

Here is my response:

Dear X,

The key to ALL our Middle East wars in recent decades is the petrodollar agreement with the Saudis. It is not at all hard to grasp.

From the U.S. standpoint, the wars (and support for revolutions) are disarmingly easy to understand. Here is a digest explaining exactly why the U.S. has been fighting in the Middle East: http://www.americandailyherald.com/pundits/donald-hank/item/how-the-petrodollar-perpetuates-Islamic-terror

It all boils down to the petrodollar agreement signed between Nixon and King Faisal in 1973. Under this agreement, the Saudis agreed to demand payment for oil in dollars in exchange for “protection” of the Saudi royals and their oil fields. But in reality, the Saudis were not only interested in protection. Their aim was to have the US wage proxy wars against their religious opponents, mostly Shiites but also secularists.

In reality, every single war in the Middle East was fought by the U.S. as a proxy for the Saudis, essentially in defense of Saudi Wahhabism (radical fundamentalist SUNNI sect) against two groups:

Secularists like Qaddafi and Saddam.
Shiites like Iran and Syria (Shiites are in fact the less violent and radical of the two groups. You see why the ME has exploded, with the U.S. supporting the radical SUNNI Wahhabi sect and their minions — al-Qaeda, Taliban, ISIS? — Incidentally, Afghanistan and the Taliban are a somewhat complicated case. The Saudis turned against them because they were refusing to bow to the Saudis and were making bad publicity for Saudi Arabia)

That is just about all you need to know about U.S. motivation. In a word, money.

Young men from a “Christian” country dying for radical Muslims and their religion, and Christian churches standing with our contemptible government in support of these proxy wars. Easy to grasp the mechanics. Almost impossible to grasp the evil behind it.

Best,

Don

P.S.: Consider how IRAN is one of the countries having religious differences with the Saudis and how Christians have supported confrontation with that country without understanding what is behind it and without making a rational comparison of Iran with other Muslim countries (which would show Iran, with its 600 churches, to be significantly more Christian-friendly than Saudi Arabia, which bans all churches). Jesus commanded us to be gentle as doves and wise as serpents. You can’t have wisdom without any knowledge. Most American Christians are guilty of the sin of willful ignorance, something God hates as much as any other sin. He says My people are destroyed for lack of knowledge – Hosea 4:6.

Judging by the way Europe and even our allies in Asia have been turning away from the US-dominated World Bank and becoming founding members of the Chinese AIIB, we are truly being destroyed by our obstinate refusal to know the truth. Instead we prefer hokus-pokus, signs like blood moons and other nonsense. Please read the following article on the AIIB vs World Bank and leave a comment.

Tag Archive for: petrodollar

Petrodollar deal with Saudi Arabia has expired: What will be the consequences?

Hard to grasp the Middle East situation?