Petrodollar Is DYING And The US Is Seriously Worried | This Changes Everything In The World Economy
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The Saudi Minister of Finance, Mohammed Al-Jadaan, recently announced that Saudi Arabia is open to accepting payment for its oil exports in currencies other than the US dollar.
This could mark a change in the global use of the dollar as the main currency for oil payments. But it's not clear yet how big of an impact this will have.
The US dollar has been the dominant currency in international trade and finance for many years. However, recent changes in the global economy are causing some to question its future role. And the shift away from the dollar in oil trade might become more widespread. That's why in this video, let's take a look at how the petrodollar is dying and how it will change the world!
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The use of the US dollar as the currency for global oil trade, known as the petrodollar system, has been in place since the 1970s.
And if this were to change, it could result in a decrease in the value of the dollar. However, this is a complex issue that involves several factors.
This includes the demand and supply of the dollar, monetary policy, and the overall economy of the US and other countries.
It's important to understand that the end of the petrodollar system would also have political consequences.
The US-Saudi alliance has been closely tied to the petrodollar system. So, shifting away from this system could indicate a change in the relationship between these two countries.
The end of the petrodollar is a significant event that could change how the global economy operates. The petrodollar has been a key factor in supporting the dollar's role as the dominant currency in the world for the past several decades.
However, with its potential end, there may be a shift away from the US currency, affecting the country's power and influence in the global arena.
The end of the petrodollar could lead to increased financial instability as investors and markets adjust to the new reality. This could result in a drop in the dollar's value, higher inflation, and increased interest rates, making it more expensive for the US to borrow money.
This, in turn, could impact the US economy and reduce its global influence. The US dollar was in a crisis in the 1970s.
The country was spending heavily on war and welfare programs, causing a surplus of dollars and a decrease in their value compared to gold.
The US struck a deal with Saudi Arabia, the top oil exporter, to restore confidence in the dollar and find buyers for government debt. And under the agreement, the US would buy oil from Saudi Arabia and provide military aid and equipment.
At the same time, Saudi Arabia would use its earnings to purchase US Treasury bonds and finance US budget deficits.
This "petrodollar recycling" allowed the US to create new demand for the dollar and debt.
It also cemented the dollar's status as the preferred currency for international oil transactions through the influence of Saudi Arabia and OPEC.
Meanwhile, the Eurodollar trade is massive, but it's hard to determine just how big it is.
Some estimates suggest that the value of Eurodollar assets is around $12 trillion, which is close to half of all assets in US banks, which total about $22 trillion.
Still, the petrodollar trade only amounts to less than $3.5 trillion annually.
And although this is still significant, a decrease in this trade won't cause the global demand for the dollar to collapse.
In recent years, the Eurodollar market has shrunk from its peak of 87% of the US banking system to under 60%.
In addition, the share of US dollars in foreign central bank reserves has fallen from 71% to 60%, the lowest in 25 years.
Countries like Russia, China, and India have expressed interest in freeing the world from the US dollar. However, the US dollar still reigns supreme as the dominant global currency.
It's widely used for international trade and financial transactions, and the US has a strong economy, making it a safe haven for investment.
The US dollar is also widely accepted as a reserve currency, which helps maintain its dominance. The demand for the dollar won't suddenly vanish in the near future.
And this is due to a large amount of debt denominated in dollars globally and the fact that the dollar is still considered a safe currency.
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