Petrodollar system.

Discussion in 'Politics' started by storch, Mar 6, 2019.

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  1. tumbling.dice

    tumbling.dice I Am Only An Egg Lifetime Supporter HipForums Supporter

    I'm going to plagiarize this because...well, it's easy and I'm tired.

    DEFINITION of Petrodollars
    The term petrodollar refers to the money received from the sale of oil. Coined in the 1970s, the term petrodollar was a result of the oil crisis in the mid-1970s when prices spiked to record levels and to increase stability oil prices were denominated in U.S. dollars.

    The term regained notoriety in the early part of the 2000s, when oil prices rose once again.

    BREAKING DOWN Petrodollars
    Petrodollars are the primary source of government revenue in many Middle Eastern countries that are net exporters of oil. Simply put, 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.

    The petrodollar system was one of the earliest happenings that set the U.S. dollar as the worlds reserve currency. Seeking stability, petrodollars set the price of oil in U.S. dollars and led to many Middle Eastern countries pegging their currency to the U.S. dollar. This enabled them to better forecast the money coming in from oil reserves or petrodollars.

    The petrodollar system creates surpluses, known as petrodollar surpluses. By definition, this is the money earned from sales after investment in the development of the oil industry. In fact, these funds represent a massive amount of investment capital and are often traded on the eurocurrency market.

    Although petrodollars initially referred primarily to money that Middle Eastern countries and members of OPEC received, the definition has broadened in recent years.

    In late 2017, China announced it was considering a move to price oil in its own currency, the Chinese yuan. Because China is the worlds biggest importer of oil, they saw it as a logical shift to price the worlds most important commodity. To-date, there has been no official move away from the U.S. dollar.


    So now we all know what a petrodollar is.
    Okiefreak and Driftrue like this.
  2. NotMyRealName

    NotMyRealName Member

    You haven't yet. Why start now?
  3. lode

    lode One Man Orgy

    Was this thread only for Balbus? Kinda feeling like a third wheel.

    If you converted it all to plankton and buried it in the backyard instead, you could come back to oil in a 'few' years.

    Then, you could trade those for petrodollars, which I believe is some sort of dollar soaked in kerosene.
  4. Okiefreak

    Okiefreak Senior Member

    But they'll be worthless. That's the whole point.
  5. lode

    lode One Man Orgy

    Everything's worthless without the power of human imagination Okiefreak.
    Driftrue and tumbling.dice like this.
  6. Balbus

    Balbus Super Moderator Super Moderator


    It’s not about left or right it is about does the argument hold up to scrutiny.

    I know right wingers that are not neoliberals that I agree with on certain economic ideas.

    Are you saying you would hold onto a viewpoint that you couldn’t defend just because it fitted in with your own bias?

    How smart is it to hold onto ideas that can’t be defended from valid criticism

    Again it comes down to what argument is been presented if one stands up to criticism or one that doesn’t which is the better one?

    Again it’s not a left or right thing it depends on the source does it stand up to scrutiny

    Sorry you seem to be trying to find excuses as to why your ideas don’t stand up well to criticism rather than looking for ideas that can stand up to criticism.
  7. Balbus

    Balbus Super Moderator Super Moderator


    OK I’ve read about the petrodollar but I still want to know why Storch connects it with the shadowy ‘produces’ that he seems to think run the world?
  8. Asmodean

    Asmodean Slo motion rider

    I also got my pen and notebook ready.
  9. Okiefreak

    Okiefreak Senior Member

    I guess we'll have to let Storch explain that. But conspiracy theorists "in the know" believe that the petrodollar system is the key to U.S. global hegemony, was the real cause of the U.S. invasion of Iraq, and is currently under major challenge from Iran, Russia and the BRIC countries, reinforced by declining U.S. oil imports, which will bring about the system's imminent collapse, destruction of the U.S. economy, and the downfall of the U.S. as a superpower. Broad acceptance of the dollar as the world's reserve currency has put the U.S. in the driver's seat of global finance and added to U.S. clout when it imposes economic sanctions or punitive measures against other countries for whatever reson--a state of affairs that Iran calls neo-imperialism. This has sparked efforts to back another currency as the reserve currency--the euro or the yuan. Saddam tried that in 2000, and everybody knows where that got him. Venezuela also joined the insurrection in 2006--and now the U.S. is making noises about invasion. The BRIC countries (Brazil, Russia, India and China) joined the chorus last July. The end is near! Keep working on your bunker.
    Asmodean likes this.
  10. Balbus

    Balbus Super Moderator Super Moderator


    Thank you it helps, but [and you knew there would be a 'but', this is balbus] - I understand that and in some aspects agree but that is in many ways just US government policies not some secret 'producers of the soap opera'.

    The bunker is a work in progress
  11. Okiefreak

    Okiefreak Senior Member

    The petrodollar system links us back to the Fed. "As the russian source explains, the petrodollar system "essentially puts the FED in the global driver's seat. In addition, it is the reason that America has been able to live beyond its means and rack up trillions of dollars of debt and run massive trade deficits, for decades, all at the same time." The FED, the dollar, gold & the petrodollar As another Russian source explains: These "petrodollars" going straight into the Federal Reserve system, backstop the US dollar, and enable the strategy of "controlled devaluation," needed to help service growing US debt by devaluing the money used to repay loans, to operate without running out of control and turning into an inflation rout. The Empire of the Petrodollar and the Price of Refusing It From an "alternative news" source:"The economic power held by the Federal Reserve has been key in financing the American empire." "As this transition (away from petrodollars and American hegemony) takes place, central bankers will sacrifice anything and everything to keep their Ponzi scheme going."

    Enter the eonomic whiz and savior"the Donald" Trump, who ( so the story goes) has the brilliant foresight to see all this coming, accounting for his potshots at the prepare them for the inevitable: "Trump is telling Wall Street and the world’s central bankers that as the petrodollar system goes away, so will their cash cow, therein lies the rub with those Federal Reserve banks. They stand to lose a major source of reserve deposits and the ability to issue mere paper to purchase real assets on the world market." Hank Sullivan: Trump on a Fed warpath

    Of course, as readers of "New World Order" conspiracy theorists Eustace Mullins (Secrets of the Federal Reserve (1983) and Gary Kah (1991) know, the Fed is really controlled by (((foreign elements))), who are getting super rich from it all Mullins tells us (p. 29) “the Constitution ceased to be the governing covenant of the American people, and our liberties were handed over to a small group of international bankers”.(p. 29) Kah tells us that the top eight shareholders were((( the Rothschild Banks of London and Berlin; Lazard Brothers Banks of Paris; Israel Moses Seif Banks of Italy; Warburg Bank of Hamburg and Amsterdam; Lehman Brothers of New York; Kuhn, Loeb Bank of New York; Chase Manhatten; and Goldman, Sachs of New York))) (Kah, p. 13). If you catch the drift.
    That's one theory. Storch may have a different version.
    Last edited: Mar 8, 2019
  12. Balbus

    Balbus Super Moderator Super Moderator

    Thanks Okie

    So for some it all comes back to the old Rothschild/Jewish conspiracy - yes it will be interesting what Storch comes back with.
  13. Okiefreak

    Okiefreak Senior Member

    There is one variant of the theory that we need to clear up: that you Brits are acting through the Rothschild's and the Fed to increase our national debt (which supposedly the Fed can do; who knew?) in order to take your former colonies back.Federal Reserve - RationalWiki Seems you've got some 'splainin' to do.

    Seriously, another important variant comes out of the Mises Institute and Austrian economics, popularized by leading disciple and former Libertarian Party candidate Ron Paul. Both petrodollars and the Fed are anathama to the Austrian economists, who are into the gold standard, oppose "fiat" currrency including petrodollars which they consider inflationary, and abhor central banking for tinkering with the money supply. Ron Paul's influential book End the Fed argues the case at length and has been quite influential. Storch's posts elsewhere suggest that he thinks along the same lines. Needless to say, this fringe position is out of the mainstream of economic thinking.
    Last edited: Mar 8, 2019
  14. storch

    storch The compliant

    Turns out you do have a sense of humor after all. Your statement there is nothing but a sneering, whining, and bitchy thing. But since you did say that you'd be happy to talk about it, let's both give a fuck, and then see who get's fucked.

    Well start here:

    The U.S. went off the gold standard in the early 70s, and tied the dollar to oil by striking a deal with the king of Saudi Arabia whereby the Saudis would sell their oil only in U.S. dollars in return for protecting their oil fields from potential enemies. By 1975, all of the members of OPEC (Organization of the Petroleum Exporting Countries) which included Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela, agreed to sell their oil in U.S. dollars only. As a result, every oil-importing nation in the world was forced to accumulate U.S. dollars in order to buy oil. This created a great demand for dollars, which meant that every oil-importing nation sought to sell their products to the U.S. to acquire the necessary dollars to purchase needed oil. This situation amounted to an oil tax applied to the world by the U.S.

    Your thoughts?
    Last edited: Mar 9, 2019
  15. neonspectraltoast

    neonspectraltoast Best Member

    Notes: Either Balbus or storch is getting fucked.
  16. Okiefreak

    Okiefreak Senior Member

    Actually, the U.S. began its departure from the gold standard on June 5, 1933, as part of FDR's efforts to combat the Great Depression. Americans would no longer be able to own gold bullion , although U.S. dollars would continue to be backed by gold held at Fort Knox at a price set at $35 per ounce. This was two years after Britain had done the same thing.--in keeping with Keynesian economic theory calling for in increase in the money supply to offset an economic downturn. Increasing the amount of the Federal Reserve's gold holdings increased its power to inflate the money supply. Many economists think a major reason why the U.S. got out of the Great Depression was the break with gold.Richard ("we are all Keynesians now") Nixon completed the departure when he said the U.S. would no longer convert dollars to gold at a fixed value to give him flexibility in combating stagflation and to stop foreigners from depleting our gold supplies by cashing in their dollars. In 1974, Americans were allowed to own gold bullion again. Keynesians argue that a fixed link between the dollar and gold would make the Fed powerless to fight recessions or put the brakes on an overheating economy. Austrian economics fans, like Ron Paul, think the loose money policies of the Fed have to be reined in by a return to the gold standard, and view petrodollars as an unstable fix for a dangerous situation. They are a minority view. Why Did the U.S. Abandon the Gold Standard?
    Balbus likes this.
  17. new Athenian

    new Athenian Member

    The Gold Standard ended in 1971 at which time a Dollar was redeemable at the Treasury's Gold Window for approximately .33 cents in gold. Since that time the Dollar is Fiat Money holding no value other than how it trades against other currencies. The purpose was to enable money printing which we've been doing ever since, therefore what would have costed 1.00 in 1971 will cost 6.22 in 2019.
    Fiat money relies only on debt and an ongoing cycle of money printing to survive because it has no intrinsic value as did the gold backed currency.
    Should the globe ever withdraw from the US Dollar as reserve currency the US will collapse like a pile of matchsticks very quickly because we will no longer be able to print our way out of trouble.
    storch likes this.
  18. storch

    storch The compliant

    In 1944, at the Bretton Woods conference, a new fixed exchange rate was established. All global currencies were pegged to the U.S. dollar. The reason that the rest of the world went along with this arrangement is because if at any time a nation didn’t feel comfortable with the dollar, they could easily convert their dollar holdings into gold at a rate of thirty-five dollars per ounce. Of course, this created a global demand for dollars, which gives the Federal government the “right” to print more dollars. I’m sure that you’re not ignorant of the fact that Washington’s preferred method of dealing with its economic problems is to print more dollars.

    By 1971, with a two-hundred billion dollar price tag on the Viet Nam war, other countries were getting nervous because of the growing imbalance between U.S. gold reserves and U.S. debt. The U.S. did not have the money to pay its debts. To add insult to injury, its gold reserves were at an all-time low because other countries started asking for gold in exchange for their U.S. dollars. But instead of doing something about its debt, the U.S. continued to rack up more debt, which in turn increased other countries’ demand for more gold from the U.S. In response, and in contravention of the Bretton Woods agreement, Washington decided to end the convertibility of the dollar to gold.

    This brings us to the issue of the petrodollar, which is, for all practical purposes, a “dollars for oil” arrangement to replace the “dollars for gold” arrangement.

    Imagine this: you are deep in debt but every day you write checks for millions of dollars you don't have -- another luxury car, a holiday home at the beach, the world trip of a lifetime. Your checks should be worthless but they keep buying stuff because those checks you write never reach the bank! You have an agreement with the owners of one thing everyone wants, call it petrol/gas, that they will accept only your checks as payment. This means everyone must hoard your checks so they can buy petrol/gas. Since they have to keep a stock of your checks, they use them to buy other stuff too. You write a checks to buy a TV, the TV shop owner swaps your checks for petrol/gas, that seller buys some vegetables at the fruit shop, the fruit seller passes it on to buy bread, the baker buys some flour with it, and on it goes, round and round -- but never back to the bank.

    You have a debt on your books, but so long as your checks never reaches the bank, you don't have to pay. In effect, you have received your TV free.
    This is the position the USA has enjoyed for 30 years -- it has been getting a free world trade ride for all that time. It has been receiving a huge subsidy from everyone else in the world. As its debt has been growing, it has printed more money (written more checks) to keep trading. No wonder it is an economic powerhouse!

    Then one day, one petrol seller says he is going to accept another person's checks, a couple of others think that might be a good idea. If this spreads, people are going to stop hoarding your checks and they will come flying home to the bank. Since you don't have enough in the bank to cover all the checks, very nasty stuff is going to hit the fan!
  19. Okiefreak

    Okiefreak Senior Member

    Austrian economics 101. So what do we do about it? put our heads between our legs and kiss our asses goodby? If what you say is true, shouldn't we be doing something about our $16 trillion national debt besides thinking of new ways to increase it? There goes Socialism, but also the tax-and-spend policies of the Democrats and the borrow-and-spend policies of the Republican Party since Reagan, with their lavish tax cuts for corporations and gazillionaires and their unquenchable appetite for military spending. The Achilles heel of Keynesian economics is the human reluctance to do the belt tightening needed to reign in spending during times of plenty.

    Realistically, I think your theory faces similar problems to Climate Change--that other major contender for Apocalyptic doom and gloom: many pundits and politicians don't believe it's real (considerably fewer than believe in climate change), and measures proposed to deal with it risk major dislocations that could make the cure worse than the disease. Should we return to the gold standard? Most economists outside the fringe Austrian economics school of the Mises Institute think that would be disastrous. John Makin, economist at the American Enterprise Institute, not known to be a hotbed of radicalism and left wing ideas, says "It could do massive damage to the economy." A gold standard commission under President Reagan voted by a wide margin against a return to gold. In a 2012 University of Chicago poll of 40 top economists, none supported bringing it back. Just backing the $2.7 trillion dollars currently in circulation and on deposit with some 261 million ounces of gold held by the U.S. government would require the gold price to rise from $1780 per oz to $10,000 per ounce, causing the Mother of all Inflation. “Why Did the U.S. Abandon the Gold Standard?.

    Or should we End the Fed, as the title of Ron Paul's book suggests. I think the Fed has done a commendable job doing what it was set up to do--making monetary policy independently of the President and Congress, whose fiscal policy is mainly responsible for that $16 trillion debt. BTW, if what you say is true, shouldn't we have runaway inflation, instead of the relatively tame levels we have in a period of full employment?
    Balbus likes this.
  20. storch

    storch The compliant

    Yeah, what I say is true, and nothing you've said addresses it. The gold standard is not what is being discussed. The discussion is about the U.S. pulling out of the Bretton Woods agreement, and the petrodollar arrangement between the Saudis and the U.S. whereby all oil sales would be made with U.S. dollars only, thereby creating an artificial demand for U.S. dollars. When the oil-producing counties begin accepting other currencies for their oil, what will happen when all of those dollars being held by the rest of the world come back to the U.S.?

    And the debt is not 16 trillion; it's 22 trillion.
    Last edited: Mar 9, 2019
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