# News & Current Events > Economy & Markets >  [VIDEO] Reality Check: Is This The End of The Petro-dollar?

## Constitutional Paulicy

*Reality Check: Is This The End of The Petro-dollar?*




> Ben Swann Reality Check explains the petro-dollar and looks at how the national media isn't telling you that China is actively working to end it

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## Travlyr

That'll be a life changing event.

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## Steven Douglas

Sorry once again, I know I'm a long-winded bastard. Most of what I write is only to cement my own understanding -- and hopefully have holes poked in it, so that I can learn more.


Funny, petrodollars are just regular FRN's, like any other, referred to as petrodollars only because of their intended use.  We didn't only export our inflation to the rest of the world - we also exported a very real kind of _legal tender status_ for the dollar abroad, enforced by our military, by causing it to be the only medium of exchange that most oil producing countries are willing to accept, which forces artificial demand for that currency from virtually all other countries, the economies of which cannot function without oil - and therefore Fed dollars. 

The inflation that our _counterfeiters in charge_ exported to the world means that the "savers" of petrodollars abroad are also being invisibly taxed in a way that makes FRN's a hot potato of constantly eroding value. They all need to get rid of their petrodollars, pumping them to the Saudis before they command less oil tomorrow than they did today.    

Over 60% of the world's reserve currency is in petrodollars. Few people, however, consider what happens to all those petrodollars once they pumped into Saudis and others.  They don't just pile up in a vault somewhere, or circulate as massively inflated currencies in those economies. That would be stupid. Those petrodollars are recycled into the world economy as investments -- _mostly in US debt securities_.  

Petrodollars are like distant off-shore toxic waste tankers, because they represent nothing but debt no matter how they are spent. The biggest threat they pose to Americans is staved off so long as they remain offshore, or get converted into US debt, US Securities -- US commitments and promises of indebtedness heaped on future generations.  

Since every country requires oil, and that oil can only be purchased with Fed dollars, which can be expensive to obtain on the foreign exchange market, many countries have found it more cost effective to export cheap goods to the US, where they are paid directly in US dollars which can then be used to purchase oil.  That "oil for dollars" requirement is what created an artificial demand for importing cheap goods to the US.     

In the future, any country that stops spending dollars to obtain their oil are freed from the need to even have and hold dollars in reserve -- and therefore freed also from the need to export their own resources and goods cheaply to obtain those dollars.  Dollars no longer bought and pumped into the Saudi's coffers are no longer recycled into US debt securities. And the dollars that are held now just get dumped -- BACK TO US -- with no new petrodollars being bought in the future. 

So every 'tanker' (country) of toxic petrodollars "out there" becomes a massive spill, as petrodollars come flooding back to the US.  And it doesn't matter how they come back, whether they are sold on the foreign exchange, or used to buy US exports.  Every resource in the US is bid up by more dollars chasing fewer goods. In other words, _massive price inflation_ in the US.   

*The Petrodollar Legal Tender Effect* 

Most people are not even aware of the complexity and ironies involved in the US relationship with Israel and the rest of the Middle East, and the deals made in 1973 with the Saudis (and ALL members of OPEC by 1975).   It is a complex arrangement, with complex mechanisms in place, but the core arrangement is simple:  we agree to supply the Saudis and others with weapons and military protection -- _mainly from Israel and the former Soviet Union_ --  in exchange for their agreement to price oil in dollars only. 

Meanwhile, and here is the irony, albeit one that makes perfect sense: We also provide money, protection, technology, training, and _superior weapons, including nuclear, to Israel_, to make sure Israel remains an artificially strong, ever-viable threat to the Saudis, Iran, or anyone else in the Middle East.  Otherwise, eventually, given enough money and enough weapons owned by the oil-producing nations, the Soviet Union crumbles and Israel is no longer be considered a threat.  And if that happens, what is the value in that protection? What would be the point of continuing to price oil in dollars only?  IRONIC SOLUTION: Make the very threat we are supposedly 'protecting' them from _even stronger_.

Enter China, a bigger oil customer now than the US, with a massive military industrial complex of its own, and its own ability to offer protection -- for the oil spigots it is opening in Saudi Arabia for itself.  Any other country attempting to do what China did would have incurred the war-mongering wrath of the Treasury/Fed's hornet's nest, and received a major slapdown from any number of offensive political, economic and warfaring tentacles of the US.  Hard to do that with China, _the other rooster that is now firmly in the oil henhouse_.  They are no threat to the Saudis; only to the artificial US Oil for Dollars Only Legal Tender machine that they are helping to break. 

*THE BIGGEST IRONY OF ALL*

The Japanese attack on Pearl Harbor was triggered by the US, as we froze Japanese assets, along with their access to oil with an embargo (80% of which came from us at the time). That was the Japanese' most crucial import, vital to their economy and their war efforts.  Now, here we are some 70+ years later, making many of the same mistakes as the Japanese -- and just as ready to pick fights with anyone who threatens our stake and claims on foreign oil, both the physical oil and the debased thoroughly debauched currency, once it no longer makes economic sense for anyone to continue to engage in the scam.   

We attacked Iraq and are now sabre-rattling with Iran for reasons that have nothing to do with WMD's, rabid leaders, religion, human rights abuses, tyranny or anything else.  If that was true, Pakistan and North Korea alone took the cake on most of those fronts, and should have had the same sanctions placed on them as Iran does now. And if you just wanted to stand on principle, and battle tyranny and human rights abuses abroad for altruistic reasons, Iran would not even rank as a target.  There are lots of African countries ripe for the picking, with corruption, tyranny, abuses, mass murders, genocide and starvation by the literal millions.  But they don't have oil -- so there is no economic incentive to protect them.

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## Constitutional Paulicy

> That'll be a life changing event.


No doubt. We are going to piss away the value of our currency to the extent that a significant event such as this could likely be the nail in the coffin.

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## opal

Ben needs to be syndicated!

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## Acala

> Sorry once again, I know I'm a long-winded bastard. Most of what I write is only to cement my own understanding -- and hopefully have holes poked in it, so that I can learn more.
> 
> 
> Funny, petrodollars are just regular FRN's, like any other, referred to as petrodollars only because of their intended use.  We didn't only export our inflation to the rest of the world - we also exported a very real kind of _legal tender status_ for the dollar abroad, enforced by our military, by causing it to be the only medium of exchange that most oil producing countries are willing to accept, which forces artificial demand for that currency from virtually all other countries, the economies of which cannot function without oil - and therefore Fed dollars. 
> 
> The inflation that our _counterfeiters in charge_ exported to the world means that the "savers" of petrodollars abroad are also being invisibly taxed in a way that makes FRN's a hot potato of constantly eroding value. They all need to get rid of their petrodollars, pumping them to the Saudis before they command less oil tomorrow than they did today.    
> 
> Over 60% of the world's reserve currency is in petrodollars. Few people, however, consider what happens to all those petrodollars once they pumped into Saudis and others.  They don't just pile up in a vault somewhere, or circulate as massively inflated currencies in those economies. That would be stupid. Those petrodollars are recycled into the world economy as investments -- _mostly in US debt securities_.  
> 
> ...


Nicely stated.  This is one of the reasons the USA is not going to get away with a placid "lost decade" of economic doldrums like Japan, but will instead have a catastrophe.

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## Seraphim

Try not to forget that the USA holds most of the world's gold reserves. At the end of the day, when the petro peg fails - the gold peg will be reintroduced. It may take until the hour of Midnight, but full fledged self preservation instincts usually lead to concenssion.

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## jllundqu

I'll believe it when I see it... people have been saying this for years.

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## Travlyr

> I'll believe it when I see it... people have been saying this for years.


Yes, you are not alone. People will sit on their petrodollars until they see the loss first hand. The paper dollar has already lost plenty of value against commodities. Do you see that yet?

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## wgadget

Jim Willie agrees. He has much to say about the petrodollar and the House of Saud. 

Say...Wasn't 911 committed by the Saudis? Funny we're not at war with them. 

Oh, wait. 

http://www.silverdoctors.com/jim-wil...ar/#more-14531

HOUSE OF SAUD STARTS TO UNRAVEL
More loyal Jackass wannabee followers will recall a story (repeated often) that on the Easter Sunday weekend of April 2010, a secret gathering of over 200 Arab billionaires convened in Abu Dhabi. They arrived in unmarked jets. My source was one of only two or three white faces in the crowd, invited by his clients. One result of the meeting was an accord struck between the Persian Gulf oil producers, led by the Saudis, to work toward a pact with Russia and China as protector of the gulf in return for financial cooperation, economic construction, and forward progress. The implicit message was that the Untied States would be phased out in the protectorate. In the balance would lie the Petro-Dollar defacto standard as victim. Events continue to this day in movement toward that end.
*
However, since the Syrian uprising, a new lethal element has entered the mix. Account will be kept brief, since so volatile and controversial. Just some bare notes. The Assad family in Syria has suffered some assassinations. Apparently, the Saudis had a hand in the killings. HezBollah has vowed retaliation. Their ties to Iran might be longstanding, but perhaps are exaggerated. My view is their home is in Lebanon. In August, Prince Bandar was assassinated. He was the Saudi head of security, and long-time ally to the USGovt. The Saudi regime is concealing his death, with outdated photos and false statements. They are working toward a transition. The House of Saud has been unstable from threats to the south in Yemen. It is unstable from internal threats tied to the fundamentalists. Although cooperation and respect has been shown between Riyadh and Tehran, the Bandar hit has created an entirely new environment. The Saudi regime with high likelihood is in its final months.
*
More importantly, the Petro-Dollar is losing its all important Saudi leg. Implications are vast. The US public takes the USDollar for granted, with almost no concept of FOREX exchange rates. If the House of Saud falls, when it falls, the impact crater will include the entire waistline of the USEconomy and its financial dog tail that wags it. The USGovt and its banker handlers have relied heavily upon the Petro-Dollar in general, and on the Saudis in particular, ever since Henry Kissinger signed an accord that governs over the grand surplus recycling back in the 1973-1974 era. Watch the Saudis convert USTBonds to Gold, then bug out of the desert to their new mansions in Southern Spain.
*
CHINA AS INTERMEDIARY AGAINST PETRO-DOLLAR
Reports swirl that China is attempting to act as intermediary in global oil transactions, for Yuan currency settlement. The rebellion globally is picking up momentum against the USDollar. The Petro-Dollar defacto standard is slowly unraveling. The denizens of the Untied States have no idea the ravaging impact of a lost global reserve currency. It will unleash price inflation when the USFed central bank is letting loose the monetary flood gates. This declaration is an act of financial war directed at the US by China. To fortify the rear flank, Russia has promised to meet all requests for crude oil made by China, with settlement in Yuan and Ruble currencies. Take the pledge as a protection from any sudden USGovt threat or retaliation. The Russia-China Axis is forming more clearly in opposition to the USDollar, the Syndicate behind it, the many Embassies that offer sanctuary for espionage, and the global rules that enforce its hegemony.
*
Crude oil payments are the critical core of global trade. The rest of global trade will follow in non-USDollar payments, all in time. Entire banking systems will gradually make a transition away from the USTreasury Bond in its reserves managements. The banking practices will follow the trade payment structures, as it should be. The profound effect on the USEconomy will be clear, as blame is shifted as usual to external factors, even to extremists. In reality the US is up against vengeful Cossacks and the angry Mongol Horde. The entire world is moving against the USDollar, seen increasingly as a toxic agent within their internal domestic systems. They see the lack of solutions, the spreading bank insolvency, the accelerated debasement of currency, and the corrupted grants of multi-$trillion banker grants. They are taking action in response. They are following the Chinese lead with the Russians acting as a quasi-Rasputin.
*
Gerald Celente reported in early September, On September the 6th of 2012, China officially announced that any country in the world that wishes to sell crude oil using its currency the Renminbi instead of the USDollar can do so. The following day September the 7th, Russia announced that the nation will sell China all the crude oil they need, no limitations whatsoever. They will not use the USDollar for their trade. The claim by Celente is far reaching. The USDollar is dying a slow death. Its antagonists do not wish to speed the death process too rapidly, for fear of quickening the ravage to their own nations. They also do not wish to invoke the wrath of the USGovt, which since 2003 has enforced the USDollar as global reserve currency via its war machinery.
*
What China is offering is an intermediary clearing house role to sidestep the Petro-Dollar, where crude oil payments can be made in the Chinese Yuan currency. This offer is a financial act of war against the Untied States currency, where China will backstop all transactions. It is a violent offer to disrupt the USDollar. Look to see if any Saudi oil sales are settled in Yuan currency as alternative, even the Euro currency as expedient. The superpowers are openly attempting to isolate the USDollar, the clear victim to be the USEconomy, the land of consumption excess. The move is a tacit push of the US into an isolated place where it can very easily slide into the Third World.

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## Steven Douglas

+1

That was spot on. 




> The implicit message was that the Untied States would be phased out in the protectorate. In the balance would lie the Petro-Dollar defacto standard as victim. Events continue to this day in movement toward that end.
> *
> If the House of Saud falls, when it falls, the impact crater will include _the entire waistline of the USEconomy and its financial dog tail that wags it_. 
> *
> Reports swirl that China is attempting to act as intermediary in global oil transactions, for Yuan currency settlement. The rebellion globally is picking up momentum against the USDollar...It will unleash price inflation when the USFed central bank is letting loose the monetary flood gates. 
> *
> The USDollar is dying a slow death. *Its antagonists do not wish to speed the death process too rapidly, for fear of quickening the ravage to their own nations.* 
> *
> They also do not wish to invoke the wrath of the USGovt, which since 2003 has enforced the USDollar as global reserve currency via its war machinery.
> ...


The part I put in red is the only thing that has made this a stalemate, even now, because fiat currencies really are tied to and dependent the dollar.  



*Superman:*  Don't worry, Lois, I've got you.
*Lois Lane:* You've got me--who's got you?!

After Nixon Shock, the US was still able to borrow prestige for the USD from a number of angles, the strongest of which was the dollar's former reputation and strength when it was backed by gold -- the closest thing to a 'stable' currency the world had already in wide circulation. 

China has currency problems of its own with the Yuan, as the RMB is every bit an irredeemable fiat currency as the USD. Worse yet, the Yuan got its strength primarily from the Fed dollar through its trade with the US.  In the end, they are _all deliberately inflated fiat currencies_ in a bunch of fiat debt-money regimes.    

Even so, China has been pushing for some time to prop up the RMB in the eyes of the world, in the hopes of getting it into the PetroYuan catbird seat, if nothing for its inflationary-hiding/misery exporting benefits, as demand for that currency is increased.  Even selling off US securities and raising its peg against the dollar can some the illusion that the Yuan is 'standing on its own'.  Most of the players involved aren't that stupid, and realize this, but while China has been desperately trying to make the RMB appear conservatively managed and somewhat well-behaved, all the Fed's rounds of Quantitative Easing, especially this last one, assures that the Yuan at least looks like a much lesser of two evils. And what has this insane world of ours been about, if not kicking the can down the road a little longer?   

But there is much more to it than that. Whole economies are so intertwined with interdependency on trade with the US that a tsunami of increasingly worthless Fed-inflated dollars returning to the US could not only easily trigger hyperinflation in the States (a total loss of confidence in the Fed dollar at home), it could just as easily send the entire world into a massive, catastrophic depression.  

Oddly enough, any transition using multiple competing fiat petro-currencies would serve as a natural check and balance _against all of them_.  The US economy would still drown in its own worthless currency, but instead simply wiped out in a tsunami, it might be more like Chinese water torture. Economic water-boarding, as it were, as even our hyperinflation is 'managed' externally.

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## The Freethinker

Steven Douglas' post is solid and informative. Steven, never shy away from long-winded posts; I for one love to read.

I never thought I'd link a post from a leftist website like *Third World Travelever* while writing here, but in the defense of TWT, that is a website with tons of resources about global elites, the Federal Reserve, imperialism, and other things we liberty lovers read about. There is a lot on the Fed on TWT for anybody who wants more.

Anyway, regarding the petrodollar, I found *this 2004 piece*, which I excerpt below:

_Oil can be bought from OPEC only if you have dollars. Non-oil producing countries, such as most underdeveloped countries and Japan, first have to sell their goods to earn dollars with which they can purchase oil. If they cannot earn enough dollars, then they have to borrow dollars from the WB/IMF, which have to be paid back, with interest, in dollars. This creates a great demand for dollars outside the U.S. In contrast, the U.S. only has to print dollar bills in exchange for goods. .....

Fiat money or currency (usually paper money) is a type of currency whose only value is that a government made a "fiat" (decree) that the money is a legal method of exchange. Unlike commodity money, or representative money, it is not based in any other commodity such as gold or silver and is not covered by a special reserve. Fiat money is a promise to pay by the usurer and does not necessarily have any intrinsic value. Its value lies in the issuer's financial means and creditworthiness.

Such fiat dollars are invested or deposited in U.S. banks or the U.S. Treasury by most non-oil producing, underdeveloped countries to protect their currencies and generate oil credit. ..... Nevertheless, the foreign deposited dollars strengthen the U.S. dollar and give the United States enormous power to manipulate the world economy, set rules, and prevail in the international market.

Thus, the U. S. effectively controls the world oil-market as the dollar has become the "fiat" international trading currency. Today U.S. currency accounts for approximately two-thirds of all official exchange reserves. More than four-fifths of all foreign exchange transactions and half of all the world exports are denominated in dollars and U.S. currency accounts for about two-thirds of all official exchange reserves. The fact that billions of dollars worth of oil is priced in dollars ensures the world domination of the dollar. It allows the U.S. to act as the world's central bank, printing currency acceptable everywhere. The dollar has become an oil-backed, not gold-backed, currency._

And of course, the good doctor himself had *his say* in the matter in 2006:

_Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it — not even a pretense of gold convertibility, none whatsoever! Though the new policy was even more deeply flawed, it nevertheless opened the door for dollar hegemony to spread.

Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region. The arrangement gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as dollar influence flourished.

This post-Bretton Woods system was much more fragile than the system that existed between 1945 and 1971. Though the dollar/oil arrangement was helpful, it was not nearly as stable as the pseudo—gold standard under Bretton Woods. It certainly was less stable than the gold standard of the late 19th century._

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## psi2941

http://www.youtube.com/watch?v=K9VLp0FcJ6I

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## shane77m

As always a great video from Swann.

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