• Watch Out for Scammers!

    We've now added a color code for all accounts. Orange accounts are new members, Blue are full members, and Green are Supporters. If you get a message about a sale from an orange account, make sure you pay attention before sending any money!

I hope some of you understand this.

Bender

Known Troll
Full Member
Minuteman
  • Feb 12, 2014
    12,629
    44,242
    Cheyenne WY.
    446A366E-0041-414D-BFAA-A64D04D0B9AB.png


    US taxpayers paid $562 Billion in interest alone in fiscal year 2021 to issue our own currency out of thin air in the form of bond debt
    $562 billion
    ($562,000 million)
    Pic related

    How it is:
    >US government needs currency
    >US treasury prints up some bonds
    >Federal Reserve creates money out of thin air and buys said bonds from US Government
    >US government now has new currency created out of thin air by Fed banks
    >Now, US taxpayers owe interest (and principal) on said US bonds, as well as paying a fee to the Fed’s shareholders which are called the primary dealers (the big banks), this is the US Public Debt

    How it should be:
    >Congress makes annual budget
    >Tax revenues are collected and any budget shortfall (deficit) is then new debt-free US Notes issued by the US Treasury itself, no bonds needed, no US Public Debt to issue our own currency
    Are Americans ever going to realize this fraud?

    >when a generation sells the futures of their country and their offspring for unsustainable and lavish wealth and their offspring are too stupid to realize it

    And in addition to the scheme above, then they use these treasuries like chips in a big casino with QE, repos, reverse repos, margin loans, and foreign swap transactions.....

    (Copy pasted)
     
    I don't get it. Am I supposed to care about shit I can't do anything about?

    Shit, I wouldn't sleep at all anymore for worrying about all the shit that is happening that I can't do anything about. Have an adult beverage, dude. Chill and harden yer perimeter. Load some ammo....do some pushups. Chase the Old Lady around the house.....you can obsess about stuff we can't resolve but I'm just gonna have a couple shots and chase Mama around and then clean guns.

    You can freak out for all of US. Thanks in Advance!

    VooDoo
     
    Here’s a great step-by-step about how it happens.

     
    Charlie Munger had an interesting interview recently in regard to this topic.


    Tim Poole was recently commenting on the fact that oil is no longer exclusively traded in dollars which is a danger to the sceme we have going.

    On the non-doom side, the fed is finally starting to get hawkish about interest rates. They’re awful late to act on this but finally taking it seriously. No one wants to be the one to take away the punch bowl but now the risk of not doing so is much higher.
     
    We are currently witnessing the fall and destruction of the US petrodollar.
    Ironically, it’s the petrodollar that has propped this clown car up as long as it has. There is so much US Monopoly money spread out around the world because it’s still valued… more than most other monopoly monies. Once nobody gives a shit about it and it starts flooding back here things will get worse
     
    the best part is, JP morgan makes money buying and selling this stuff for the FEDs...
    oh, interest?? , print some more money to pay it.. all those bonds that people were getting, will pretty much be worthless; by the time Peedo is done with them.
     
    View attachment 7961615

    US taxpayers paid $562 Billion in interest alone in fiscal year 2021 to issue our own currency out of thin air in the form of bond debt
    $562 billion
    ($562,000 million)
    Pic related

    How it is:
    >US government needs currency
    >US treasury prints up some bonds
    >Federal Reserve creates money out of thin air and buys said bonds from US Government
    >US government now has new currency created out of thin air by Fed banks
    >Now, US taxpayers owe interest (and principal) on said US bonds, as well as paying a fee to the Fed’s shareholders which are called the primary dealers (the big banks), this is the US Public Debt

    How it should be:
    >Congress makes annual budget
    >Tax revenues are collected and any budget shortfall (deficit) is then new debt-free US Notes issued by the US Treasury itself, no bonds needed, no US Public Debt to issue our own currency
    Are Americans ever going to realize this fraud?

    >when a generation sells the futures of their country and their offspring for unsustainable and lavish wealth and their offspring are too stupid to realize it

    And in addition to the scheme above, then they use these treasuries like chips in a big casino with QE, repos, reverse repos, margin loans, and foreign swap transactions.....

    (Copy pasted)
    oyvey!
     
    • Haha
    Reactions: 91Eunozs
    View attachment 7961615

    US taxpayers paid $562 Billion in interest alone in fiscal year 2021 to issue our own currency out of thin air in the form of bond debt
    $562 billion
    ($562,000 million)
    Pic related

    How it is:
    >US government needs currency
    >US treasury prints up some bonds
    >Federal Reserve creates money out of thin air and buys said bonds from US Government
    >US government now has new currency created out of thin air by Fed banks
    >Now, US taxpayers owe interest (and principal) on said US bonds, as well as paying a fee to the Fed’s shareholders which are called the primary dealers (the big banks), this is the US Public Debt

    How it should be:
    >Congress makes annual budget
    >Tax revenues are collected and any budget shortfall (deficit) is then new debt-free US Notes issued by the US Treasury itself, no bonds needed, no US Public Debt to issue our own currency
    Are Americans ever going to realize this fraud?

    >when a generation sells the futures of their country and their offspring for unsustainable and lavish wealth and their offspring are too stupid to realize it

    And in addition to the scheme above, then they use these treasuries like chips in a big casino with QE, repos, reverse repos, margin loans, and foreign swap transactions.....

    (Copy pasted)
    On the other hand the treasury is paying around 9.5% on Series I bonds. Only catch is you can only buy 10K pre year.
     
    • Like
    Reactions: brianf and mike278
    I don't get it. Am I supposed to care about shit I can't do anything about?

    Shit, I wouldn't sleep at all anymore for worrying about all the shit that is happening that I can't do anything about. Have an adult beverage, dude. Chill and harden yer perimeter. Load some ammo....do some pushups. Chase the Old Lady around the house.....you can obsess about stuff we can't resolve but I'm just gonna have a couple shots and chase Mama around and then clean guns.

    You can freak out for all of US. Thanks in Advance!

    VooDoo
    I’m sorry you are too slow to understand this.

    This is how (((they))) stole money to get Coke and hoes for Hunter Biden, and burden your great grandchildren with the debt. That is if your dumb ass ever had sex.
     
    View attachment 7961615

    US taxpayers paid $562 Billion in interest alone in fiscal year 2021 to issue our own currency out of thin air in the form of bond debt
    $562 billion
    ($562,000 million)
    Pic related

    How it is:
    >US government needs currency
    >US treasury prints up some bonds
    >Federal Reserve creates money out of thin air and buys said bonds from US Government
    >US government now has new currency created out of thin air by Fed banks
    >Now, US taxpayers owe interest (and principal) on said US bonds, as well as paying a fee to the Fed’s shareholders which are called the primary dealers (the big banks), this is the US Public Debt

    How it should be:
    >Congress makes annual budget
    >Tax revenues are collected and any budget shortfall (deficit) is then new debt-free US Notes issued by the US Treasury itself, no bonds needed, no US Public Debt to issue our own currency
    Are Americans ever going to realize this fraud?

    >when a generation sells the futures of their country and their offspring for unsustainable and lavish wealth and their offspring are too stupid to realize it

    And in addition to the scheme above, then they use these treasuries like chips in a big casino with QE, repos, reverse repos, margin loans, and foreign swap transactions.....

    (Copy pasted)
    But don’t miss the fact that QE has now led to quantitative tightening which buys back the bonds with made up money.
     
    Charlie Munger had an interesting interview recently in regard to this topic.


    Tim Poole was recently commenting on the fact that oil is no longer exclusively traded in dollars which is a danger to the sceme we have going.

    On the non-doom side, the fed is finally starting to get hawkish about interest rates. They’re awful late to act on this but finally taking it seriously. No one wants to be the one to take away the punch bowl but now the risk of not doing so is much higher.

    Yep, the end of the petro dollar will be big for America.
     
    We are currently witnessing the failure of The Republic. Control the crash as best you can in your geographic area with the resources you have. The Republic has failed. As predicted.

    VooDoo
    This too is true!
     
    the real issue is what currency will take its place....there isnt one

    world currency needs:

    very liquid bond market
    historical data of proper accounting and recording methods
    currency valuations based on free market not government mandates

    the only possible currency is the Euro but the markets that make up the currency (all the separate countries fiscal policies) are too fragmented and not liquid enough

    japan made a little headway but their economy is too small, its really based on the small population

    china is a currency under control of the govt not the free market which is why its only used in about 3-5% of total transactions.
    Financial institutions do not trust the currency value to be accurate

    things will change over time but try and think of a currency or country other than the US which will have a economy large enough and govt stable enough that your money will be there in 10 years...there isnt one on the planet

    we are a shit show but we are 1000% less of a shit show than anyone else out there
     
    the real issue is what currency will take its place....there isnt one

    world currency needs:

    very liquid bond market
    historical data of proper accounting and recording methods
    currency valuations based on free market not government mandates

    the only possible currency is the Euro but the markets that make up the currency (all the separate countries fiscal policies) are too fragmented and not liquid enough

    japan made a little headway but their economy is too small, its really based on the small population

    china is a currency under control of the govt not the free market which is why its only used in about 3-5% of total transactions.
    Financial institutions do not trust the currency value to be accurate

    things will change over time but try and think of a currency or country other than the US which will have a economy large enough and govt stable enough that your money will be there in 10 years...there isnt one on the planet

    we are a shit show but we are 1000% less of a shit show than anyone else out there
    Current front runner is a commodity based currency.

    Similar to the gold backed dollar.

    This is my understanding, I could be wrong.

    Edit: I don’t believe one single country but a group that comes together “under one banner” so to speak.

    Bric would be an example.
     
    Last edited:
    • Like
    Reactions: brianf
    Current front runner is a commodity based currency.

    Similar to the gold backed dollar.

    This is my understanding, I could be wrong.
    they have been talking about that for a while, i am not a market expert by any stretch

    the problem with a "backed" currency is there is a limit to how large the economy can get

    if gold is 1$ a oz and there is only 100oz in the world...the economy can only be 100$

    ...that means there will never be anything worth more than 100$ because "there isnt enough money in the world to pay for it"

    and commodity currency is very hard to deficit spend against which is why nixon dumped it

    deficit spending makes the currency worth less, making the actual paper currency worth less, which is fine for the single country.
    but then "our" deficit spend is going to mess with the france paper dollar worth as they are matched to the paper dollar matched to gold and they werent involved the vote to deficit spend

    simplistic understanding why the modern world economy can not base its currency or economy on commodities

    then add in what happens if they find more or the commodity, economy tanks because the 1$ a oz is worth .30$ tomorrow

    or if your commodity is found to be useless compared to a new commodity used by a new currency...your currency/ economy is now worth zero
     
    All are “kinda” good examples. Your 100 gold would be perfectly fine if you could buy 1000 houses with a penny.

    You could use corn or wheat or anything to tag it to.

    Or

    Something like the crypto’s do.

    Many options.

    I’m not an economist so I have not idea how that plays out. I’m just throwing out what I have heard. 🤷‍♂️

    Deficit spending would have to be through loan/ bond offerings. No more printed money.
     
    part 2.. hit post to fast

    i could be wrong as well, but thats from my economics major 20-25 years ago ..getting old lol

    deficit spending and debt is the reason we are who we are in the world

    its impossible to grow without debt, and commodity backed currency makes choices more limited

    so it might be more stable but economy is growing at a snails pace

    good for the other countries as its slow and steady but when you are the owner/ leader there are no limits

    thats why we won the cold war, we just out spent the russians

    their economy could not product enough revenue that could create enough to borrow against, our economy was large enough to borrow then spend then borrow more again. they were a manipulated non open traded currency, almost like china today

    that spending was not possible with the gold standard from 1944-71 or 72..i forget

    with the gold standard Vietnam almost bankrupted the US and the cost of the war was approx 200 billion...we jsut didnt just not enough gold to print enough money against. i think at one point in time we had 80% of the gold on earth, but as the economy started faltering countries started trading paper dollars back for gold. thats further causes inflation and the spiral starts. in theory the world could want all the physical gold back and we have a 100% worthless currency.

    yet if its all fake/paper money we can just print more...might be worth almost nothing but almost nothing is not actual nothing

    global war on terror was averaging 1 billion per day at some points (good or bad), there isnt enough gold/commodity to fund that

    again could be wrong but im not 100% wrong


    @eca7891

    your correct on using other commodities or combinations, but those commodities need to be a agreed upon resource and agreed upon value across all countries who use the currency. if europe thinks corn is useless then they will be unwilling to use a currency backed by that resource etc

    people have suggested krypto, but i dont think block chain currency is ready for the main stage

    bitcoin went from 60k to 20k (2/3)in only a few years, the market in 2008 only dropped 1/3 in comparison

    add to it AI and quantum computing is supposed to crack blockchain within 5-10 years because of the computing power, ive read a few articles about how that will change things moving forward

    i truthfully think that currency will become digital but it will probably mirror our current or someone else paper system around the world, as its on that path for the last 50 years

    i dont think citizens and small developing nations could function knowing that your "money is in the cloud and you cant go to a bank a pull it out"

    with paper money it might be worth "nothing". but a physical nothing is worth more than a invisible nothing

    after WW2 europe inflation was so high they were printing money on one side only, as the paper was worth more than the currency. people would go to the bank take every penny they just made and buy bread. there are photos of people pushing wheel barrows full of bills to buy goods as fast as they could

    no right answer...thats why the world isnt dong anything different.

    even the big guys dont know if there is a better way or currency, which is comforting yet scary at the same time
     
    • Like
    Reactions: JohnDoe1 and Woder
    Ya’ll know the dollar has been gaining strength vs European $$.
    60DBA395-EC06-4B0C-8250-4ADBAB4F90F2.jpeg


    C69980B2-537D-4A94-9228-1030A55FCCF9.jpeg


    And rebounding against the Yuan.
    6488D56B-6007-4A1F-8B52-00167C73F68C.jpeg

    Indian Rupee.

    C0A7C395-55BB-4418-A185-05CFC5376858.jpeg



    While I hear the concerns about the creation of more and debt through interest. In the last year the dollar has been on a tear. Its every one else who is loosing out.

    Just wanted to twist that knife...
     
    they have been talking about that for a while, i am not a market expert by any stretch

    the problem with a "backed" currency is there is a limit to how large the economy can get

    if gold is 1$ a oz and there is only 100oz in the world...the economy can only be 100$

    ...that means there will never be anything worth more than 100$ because "there isnt enough money in the world to pay for it"

    and commodity currency is very hard to deficit spend against which is why nixon dumped it

    deficit spending makes the currency worth less, making the actual paper currency worth less, which is fine for the single country.
    but then "our" deficit spend is going to mess with the france paper dollar worth as they are matched to the paper dollar matched to gold and they werent involved the vote to deficit spend

    simplistic understanding why the modern world economy can not base its currency or economy on commodities

    then add in what happens if they find more or the commodity, economy tanks because the 1$ a oz is worth .30$ tomorrow

    or if your commodity is found to be useless compared to a new commodity used by a new currency...your currency/ economy is now worth zero
    Wrong, it will just make the currency more valuable. We can go back to 5 cents for a hamburger.
     
    your correct on using other commodities or combinations, but those commodities need to be a agreed upon resource and agreed upon value across all countries who use the currency. if europe thinks corn is useless then they will be unwilling to use a currency backed by that resource etc
    This is the current stage of the bric.

    It gets complicated but I read somewhere about how it is set up to work.

    Who knows that the future will hold but currently the dollar is threatened.
     
    • Like
    Reactions: brianf
    part 2.. hit post to fast

    i could be wrong as well, but thats from my economics major 20-25 years ago ..getting old lol

    deficit spending and debt is the reason we are who we are in the world

    its impossible to grow without debt, and commodity backed currency makes choices more limited

    so it might be more stable but economy is growing at a snails pace

    good for the other countries as its slow and steady but when you are the owner/ leader there are no limits

    thats why we won the cold war, we just out spent the russians

    their economy could not product enough revenue that could create enough to borrow against, our economy was large enough to borrow then spend then borrow more again. they were a manipulated non open traded currency, almost like china today

    that spending was not possible with the gold standard from 1944-71 or 72..i forget

    with the gold standard Vietnam almost bankrupted the US and the cost of the war was approx 200 billion...we jsut didnt just not enough gold to print enough money against. i think at one point in time we had 80% of the gold on earth, but as the economy started faltering countries started trading paper dollars back for gold. thats further causes inflation and the spiral starts. in theory the world could want all the physical gold back and we have a 100% worthless currency.

    yet if its all fake/paper money we can just print more...might be worth almost nothing but almost nothing is not actual nothing

    global war on terror was averaging 1 billion per day at some points (good or bad), there isnt enough gold/commodity to fund that

    again could be wrong but im not 100% wrong


    @eca7891

    your correct on using other commodities or combinations, but those commodities need to be a agreed upon resource and agreed upon value across all countries who use the currency. if europe thinks corn is useless then they will be unwilling to use a currency backed by that resource etc

    people have suggested krypto, but i dont think block chain currency is ready for the main stage

    bitcoin went from 60k to 20k (2/3)in only a few years, the market in 2008 only dropped 1/3 in comparison

    add to it AI and quantum computing is supposed to crack blockchain within 5-10 years because of the computing power, ive read a few articles about how that will change things moving forward

    i truthfully think that currency will become digital but it will probably mirror our current or someone else paper system around the world, as its on that path for the last 50 years

    i dont think citizens and small developing nations could function knowing that your "money is in the cloud and you cant go to a bank a pull it out"

    with paper money it might be worth "nothing". but a physical nothing is worth more than a invisible nothing

    after WW2 europe inflation was so high they were printing money on one side only, as the paper was worth more than the currency. people would go to the bank take every penny they just made and buy bread. there are photos of people pushing wheel barrows full of bills to buy goods as fast as they could

    no right answer...thats why the world isnt dong anything different.

    even the big guys dont know if there is a better way or currency, which is comforting yet scary at the same time
    We're on a commodities system right now. Whoever has the most plutonium (and uranium) and the means to deliver them, rules
     
    Wrong, it will just make the currency more valuable. We can go back to 5 cents for a hamburger.
    that will work and it has before, but as soon as the next guy unhooks their currency we are blown away

    we become central africa, there is a economy but its to small to do anything with.
    so your always borrowing from the unhooked countries...limited growth if any at all

    5 cent hamburgers do not generate enough revenue, taxes or make enough when it goes through the money multiplier

    commodity based 100% of a dollar is 1$
    unhooked 1% of 1,000,000 is 10,000$

    as long as everyone follows suit that 10,000 becomes another 1mm

    rising tide raises all ships, no country is giving that up
     
    Im sorry, I’m probably too slow to understand all this. I know that I don’t really comprehend what a billion dollars is.
     
    Perspective. I saw this recently and it might be helpful:

    A million seconds is 12 days from now.

    A billion seconds? 32 years.

    And a trillion? Just under 31,689 years
     
    Perspective. I saw this recently and it might be helpful:

    A million seconds is 12 days from now.

    A billion seconds? 32 years.

    And a trillion? Just under 31,689 years
    Dern.:eek:
     
    The US doesn't "create" the money. The US BORROWS the money from a small cabal of globalist bankers. And that cabal of bankers doesn't "have" the money, they create it out of thin air. So one group creates the money for free, and then loans it to the US Government, then the taxpayers have to pay that loan back WITH INTEREST. The loan costing the originating small group basically nothing.

    What is happening as we speak is a number (increasing as we speak) of governments around the world are (finally) saying NO, we're not going to sell our labor and resources to you for digital bits that are created for free out of nothing. And for the last about 50 years the only thing that kept that Ponzi scheme going was US military force. You don't like the game, we'll bomb the shit out of you. But after 20 years of misadventure around the globe, the bully isn't looking as strong as it used to be post world war 2.

    May you live in interesting times.
     
    Ya’ll know the dollar has been gaining strength vs European $$.
    View attachment 7962050

    View attachment 7962051

    And rebounding against the Yuan.
    View attachment 7962052
    Indian Rupee.

    View attachment 7962053


    While I hear the concerns about the creation of more and debt through interest. In the last year the dollar has been on a tear. Its every one else who is loosing out.

    Just wanted to twist that knife...
    Inflation sir.
    Compare to Russian Ruble since sanctions.
    You do also understand that economically that the extremely high dollar is bad for companies that have significant foreign operations that transact business in local currency? To place those earnings under the US parent company requires conversion from local currency (low) to dollars (high) which potentially further degrades the earnings.
    If your post was a patriotic cheer because of the high dollar then good. If an extremely high dollar cheer was from an economic view then no, not good.
    If an almost historically high dollar is good then why is the market(s) and economy tanking?
    Since you appear to like graphics, here you go. No explanation necessary. Yay high dollar.
    CF72E118-16C0-49AA-8716-4F9E7EAA8204.png

    251AABE9-969E-46AF-83AE-E3EAE7BD66C1.png
    8A2E50E7-C7A2-423E-A069-A985CF646C4A.png
    972823A3-164D-4940-AD7B-7706B2CD0BE3.png
     
    Inflation sir.
    Compare to Russian Ruble since sanctions.
    You do also understand that economically that the extremely high dollar is bad for companies that have significant foreign operations that transact business in local currency? To place those earnings under the US parent company requires conversion from local currency (low) to dollars (high) which potentially further degrades the earnings.
    If your post was a patriotic cheer because of the high dollar then good. If an extremely high dollar cheer was from an economic view then no, not good.
    If an almost historically high dollar is good then why is the market(s) and economy tanking?
    Since you appear to like graphics, here you go. No explanation necessary. Yay high dollar.
    View attachment 7962239
    View attachment 7962240View attachment 7962241View attachment 7962242
    The point was if you think it sucks here, it’s going really bad in these other places.

    Since the sanctions started in 2014 ruble has severely weakened vs the dollar.

    0169B444-C0A0-4609-AA74-8801FFB9C940.jpeg


    I don’t even closely follow financial markets and I see that

    Globally the dollar is doing better, compared to others. Even given some of the mentioned short cummings. edit... cumming lol.
     
    The point was if you think it sucks here, it’s going really bad in these other places.

    Since the sanctions started in 2014 ruble has severely weakened vs the dollar.

    View attachment 7962249

    I don’t even closely follow financial markets and I see that

    Globally the dollar is doing better, compared to others. Even given some of the mentioned short cummings. edit... cumming lol.
    Ok.
    ‘Chart from 2014 disagrees

    ED7A08A6-D0FB-4BB6-BB24-FC79759C650C.png
     
    Huh... da faq?

    Pre sanctions the ruble was around 30 rubles to 1 dollar. Now its in the upper 50’s.

    View attachment 7962257
    Ok. You post denial when I post the actual price history.
    I’ve been nice.
    If facts don’t work for you, good luck.
    Let’s see. Sanctions. Another brilliant stroke.
    Price of oil (major Russian export) fertilizer (another one) and natural gas (another one) have all gone up significantly along with the value of the ruble. Putin is probably smiling in his sleep.
     
    Ok. You post denial when I post the actual price history.
    I’ve been nice.
    If facts don’t work for you, good luck.
    Let’s see. Sanctions. Another brilliant stroke.
    Price of oil (major Russian export) fertilizer (another one) and natural gas (another one) have all gone up significantly along with the value of the ruble. Putin is probably smiling in his sleep.
    Lol... 👋🏻...
     
    Govt. bonds.
    'quantitative easing'.

    here endeth the lesson.
    Further down the totem pole, fractional reserve banking. Or even worse, some bullshit gov giving a bank monopoly control of the money supply
     
    Ironically, it’s the petrodollar that has propped this clown car up as long as it has. There is so much US Monopoly money spread out around the world because it’s still valued… more than most other monopoly monies. Once nobody gives a shit about it and it starts flooding back here things will get worse


    On January 17, the Saudi minister of finance, Mohammed Al-Jadaan, announced that the Saudi state is open to selling oil in currencies other than the dollar. “There are no issues with discussing how we settle our trade arrangements, whether it is in the US dollar, whether it is the euro, whether it is the Saudi riyal,” Al-Jadaan told Bloomberg TV.

    If the Saudi regime does indeed embrace substantial trade in currencies other than the dollar as part of its oil-export business, this would signal a shift away from the dollar as the dominant currency in global oil payments. Or measured another way, this would signal the end of the so-called petrodollar.

    But how large of a shift is this? With the increasingly frequent Saudi comments about trading in nondollar currencies, we’ve also seen an increasing number of pundits announcing the “collapse” of the dollar or the imminent implosion of the dollar’s currently outsized global power.

    Will a shift away from the dollar in the global oil trade really lead to a big relative decline in the dollar? Probably and eventually. But a number of other dominoes would need to fall first, most especially the domino we call “Eurodollars.”

    On the other hand, it would be foolish to simply dismiss the potential end of the Saudi preference for the dollar with hand-waving. The end of the petrodollar would indeed weaken the dollar, even if this would not be a mortal blow in itself. Moreover, it is especially foolhardy to ignore the status of the petrodollar because that status also has geopolitical implications. Saudi comments on the dollar signal that the Saudis no longer consider its alliance with the United States to be as important as it has been since the 1970s. What’s not an immediate economic problem for the US regime or the dollar may nonetheless be an immediate geopolitical problem.

    Related: No, The World Isn’t Running Out Of Lithium

    In context, probably the best way to look at the potential end of the petrodollar is to see it as one piece of the dollar-based portion of the global economy. Since the 1950s, the dollar has experienced an immense amount of support in terms of global trade and investment and in terms of dollar reserves held by foreigners. This has greatly propped up demand for US debt and for dollars, and this has had enormous disinflationary effects in the domestic US economy. That is, newly created dollars are soaked up by foreigners who both want and need dollars to pay off dollar-denominated debt and to pad bank reserves. But if global dollar dominance truly is in decline, we could potentially expect both higher domestic price inflation and higher interest rates than what Americans have become accustomed to over the past thirty years. In other words, as the dollar declines, the US regime will no longer be able to monetize debt and heap up immense new deficits without fear of high price inflation or falling Treasury prices. The end of the petrodollar is not a reason to panic right now, but it is the latest sign that the US regime’s power via the dollar is being reined in.


    What Is the Petrodollar?

    The petrodollar is the result of US efforts to secure access to Middle Eastern oil while also lessening the slide of the dollar in the early 1970s.

    By 1974, the US dollar was in a precarious position. In 1971, thanks to profligate spending on both war and domestic welfare programs, the United States could no longer maintain a set global price for gold in line with the Bretton Woods system established in 1944. The value of the dollar in relation to gold fell as the supply of dollars increased as a byproduct of growing deficit spending. Foreign governments and investors began to lose faith in the dollar.

    In response to these developments, Richard Nixon announced that the US would abandon the Bretton Woods system. The dollar began to float against other currencies. Not surprisingly, this devaluation did not restore confidence in the dollar. Moreover, the US had made no effort to rein in deficit spending. So the US needed to continue to find ways to sell government debt without driving up interest rates. That is, the US needed more buyers for its debt. Motivation for a fix grew even more after 1973, when the first oil shock further exacerbated the deficit-fueled price inflation Americans were enduring.

    But by 1974, the enormous flood of dollars from the US into Saudi Arabia, the top oil exporter, suggested a solution. Nixon secured an agreement in which the US would buy oil from Saudi Arabia and provide the kingdom military aid and equipment as well. In return, the Saudis would use their dollars to purchase US Treasurys and help finance US budget deficits.

    From a public finance point of view, this appeared to be 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. Moreover, the Saudis could park their dollars in relatively safe and reliable investments in the United States. This became known as “petrodollar recycling.” By spending on oil, the US was creating new demand for US debt and US dollars.

    As time went on, thanks to Saudi Arabia’s dominance in the Organization of the Petroleum Exporting Countries (OPEC), the dollar’s dominance was extended to OPEC overall, which meant that the dollar became the preferred currency for oil purchases worldwide.

    This petrodollar arrangement proved to be especially important in the 1970s and 1980s, when Saudi Arabia and the OPEC countries controlled more of the oil trade than they do now. It also closely tied US interests to Saudi interests, ensuring US enmity toward the kingdom’s traditional rivals, such as Iran.


    The Petrodollar Is a Type of Eurodollar

    In terms of its economic role, however, the petrodollar has always just been a type of Eurodollar.

    What is a Eurodollar? According to Robert Murphy:

    The term Eurodollar actually refers to any US dollar-denominated deposit held at a financial institution outside of the United States, or even a USD deposit held by a foreign bank within the US. It thus has nothing to do with the euro currency, and is not restricted to dollars held in Europe; they are dollar deposits that are not subject to the same regulations as US dollars held by American banks, nor are they guaranteed by FDIC (Federal Deposit Insurance Corporation) protection (and hence they tend to earn a higher rate of return).

    The trade in Eurodollars is huge, although it’s difficult to quantify exactly how huge. One estimate puts Eurodollar assets at around $12 trillion. For context, we can consider that all assets in US banks total about $22 trillion. Or put another way, “offshore dollar banking now amounts to about half of the US total.” So, the Eurodollar economy is very large, and this “dollar zone” is also a key component of many of the world’s leading economies, given that half or more of the world economy lies in that zone.

    In contrast, in 2020, the petrodollar trade amounted to less than $3.5 trillion annually. That’s not insignificant, of course, but even a sizable reduction in this amount will not on its own cause global demand for the dollar (relative to other currencies) to collapse. With so many trillions in dollar-denominated loans floating around the global economy, the petrodollar remains only a piece of a larger pie.

    Nevertheless, we could also conclude that the end of the petrodollar is part of a larger and important trend away from the dollar. The relative size of the Eurodollar market has decreased since 2008, dropping from a peak of 87 percent of the size of the US banking system to under 60 percent. Meanwhile, the share of US dollars in the reserves of foreign central banks has fallen, dropping from 71 percent twenty years ago to 60 percent today. This is a twenty-five year low. Russia, China, and India all have shown interest in freeing the global economy from the dollar.

    Even if this trend continues, demand for the dollar will most certainly not disappear next week or next month, or next year. There is still a hoard of trillions of dollars’ worth of dollar-denominated debt in the global economy, and—for now, at least—that means continuing demand for dollars. Moreover, the dollar remains one of the safest currencies to keep on hand, given that the central banks in Japan, Europe, the United Kingdom and China, are hardly embracing “hard money.” Given that the US economy remains enormous, and US Treasuries remain at least as safe as other regimes’ bonds, foreigners will still keep a lot of dollars on hand to buy American assets. This is also true because—in spite of the myth that “America doesn’t make anything anymore”—foreigners also buy US products and services.

    This certainly doesn’t mean everything is just fine for the dollar, though. A movement away from the dollar—even in slow motion—will mean a rising cost of living for Americans. With fewer foreigners holding on to dollars, the US regime’s current runaway monetary inflation will create more domestic price inflation. In other words, movement away from the dollar will mean the US regime must engage in less monetization of the nation’s debt if it wishes to avoid runaway inflation. It also likely will lead to a need to pay higher interest rates on US government bonds, and that will mean a need for more taxpayer money to service the debt. It will mean that it will become more difficult for the US regime to finance every new war, program, and pet project that Washington can think up.

    The Geopolitics of the Petrodollar

    The more obvious short-term effects of the move away from the petrodollar will be in geopolitics rather than in the currency order. In addition to signaling that it is no longer wedded to the dollar, Saudi Arabia has also recently announced its openness toward Russia and a willingness to join the Brazil, Russia, India, China, and South Africa (BRICS) nations. This shift in strategic interests for Saudi Arabia potentially poses an immediate threat to US strategic interests, in that the US regime has become accustomed to dominating the entire Persian Gulf region through the US’s Saudi ties. A Saudi turn away from the petrodollar will magnify this shift. That will be enough to further threaten the American standard of living, but not enough in itself to end the dollar. After all, the pound sterling did not cease to exist after its own fall from its vaunted position as the preferred global reserve currency. But it did become far less powerful. The dollar is headed in the same direction

     
    no one is leaving the dollar for a very long time
    on top of that, the article fails to mention the haircut the saudis will exact for non dollar transactions as an extra risk of non liquid currencies. The only reason, ONLY reason the euro exists still is due to usd/ecb swap lines that have stupidly kept the euro afloat. we ought to let it collapse and force us Hegemony on them again
     
    • Like
    Reactions: Hobo Hilton
    NEW DELHI/LONDON, March 8 (Reuters) - U.S.-led international sanctions on Russia have begun to erode the dollar's decades-old dominance of international oil trade as most deals with India - Russia's top outlet for seaborne crude - have been settled in other currencies.
    The dollar's pre-eminence has periodically been called into question and yet it has continued because of the overwhelming advantages of using the most widely-accepted currency for business.

     
    • Angry
    Reactions: RUTGERS95