America’s conundrum in needing to give Saudi Arabia the benefit of the doubt isn’t about Saudi’s money, but the fate of the U.S. dollar. By Shotgun Economics.
It has been more than a generation since the United States monetary system discarded the long-standing Gold Standard and embarked on a fiat currency system by which they tied the dollar and reserve currency to oil. And to facilitate this ‘Petrodollar’ system, they needed the partnership of the leading authority over OPEC, which of course was the Saudi royal family.
This bargain between thieves has lasted now for 44 years, and has been the primary foundation behind America’s empirical power, and the vast wealth accumulation by the House of Saud. And because of this, not even Saudi citizen involvement in 9/11 could break that bond because it would mean the financial collapse of the United States.
President Trump knows this, and realizes that to stand with the rest of the globalist world in vilifying, castigating, and even sanctioning Saudi Arabia without absolute proof would mean that he is accepting the fact that the world economy could be plunged into chaos by his hand because the probable reaction by the Saudi government would be to instantly disband the Petrodollar, and to cause oil prices to spike up to levels that would crush a majority of nations.
In the end there is too much at stake for the United States to simply respond with reactionary outrage in order to appease opposition forces that already hate President Trump, his policies, and what he is trying to do by dismantling the globalist built system. And like any good leader, there will be time enough to dole out the proper punishment when the evidence finally avails itself, especially since this event was done not to the United States itself, but most probably by rogue Saudi officials on one of their own citizens.
Petrodollars are oil revenues denominated in U.S. dollars. Because petrodollars are denominated in U.S. dollars, the true purchasing powering of them are reliant on both the core rate of U.S. inflation and the value of the U.S. dollar. …
Petrodollars are the primary source of government revenue in many Middle Eastern countries that are net exporters of oil. …
The petrodollar system was one of the earliest happenings that set the U.S. dollar as the worlds reserve currency.
The petrodollar system also provides the United States’ financial markets with a source of liquidity and foreign capital inflows through petrodollar “recycling.” …
Since the most sought-after commodity in the world – oil – is priced in U.S. dollars, the petrodollar helped elevate the greenback as the world’s dominant currency. In fact, according to the Bank for International Settlements (BIS) triennial survey, 88% of all foreign exchanges deals initiated in April 2016, involved the USD on one side. With this status, the U.S. dollar enjoys what some have asserted to be an “exorbitant privilege” of perpetually financing its current account deficit by issuing dollar denominated assets at very low rates of interest as well as becoming a global economic hegemony.
Because the world uses US dollars for buying oil (because that is what the Middle East demands in exchange for its oil), there is a large demand for US dollars outside the US. Thus the US can print and export US dollars, and receives real goods and services in exchange. Neat, eh?
