From the article....
"
Jim Rickards: The term "petrodollar" is shorthand for an understanding between Saudi Arabia and the United States that the US will guarantee the security of the House of Saud in return for the Saudis agreeing to price oil in dollars, to manage the dollar price of oil, and to redeposit those dollars in the banking system where they can be used to support international lending by major banks.
This lending, in turn, supports purchases of US and Western manufactured goods and agricultural exports by developing economies. From this deal, the US got cheap energy, exports, banking profits, and the ability to operate a fiat currency system. The Saudis got rich and survived. This system has existed implicitly since 1945 and explicitly since 1974 when it was negotiated by Henry Kissinger on behalf of the Nixon administration.
Now the petrodollar system is collapsing for two reasons. The US has abused its privileged reserve currency position by printing trillions of dollars in an effort to create inflation. More recently, President Obama has taken steps to anoint Iran as the regional hegemon of the Middle East, and to ease the way, in stages, toward Iran's possession of nuclear weapons capability. This is viewed as a stab-in-the-back by the Saudis and the Israelis and will lead quickly to Saudi Arabia obtaining nuclear weapons from Pakistan.
There is also a newly emerging alliance among Saudi Arabia, Israel, Egypt, and Russia. The new alignment will have no particular use for US dollars and no reason to support them. This turn of events marks the beginning of a significant diminution in the role of the dollar in the international monetary system. Since the price of gold is, in large part, simply the inverse of the value of a dollar, the decline of the dollar will presage a major increase in the dollar price of gold."
