The term petrodollar refers to the concept of the United States dollar (USD) serving as the dominant currency for international oil transactions. It originated in the early 1970s when a series of agreements were reached between the United States and Saudi Arabia. Secretary of State Henry Kissinger played a crucial role in these negotiations. The circumstances that led to the establishment of the petrodollar system can be traced back to the 1973 oil crisis, triggered by the Organization of Arab Petroleum Exporting Countries (OAPEC) imposing an oil embargo on countries that supported Israel during the Yom Kippur War.
The basic premise of the petrodollar system is that oil is typically priced and traded in US dollars. In the early 1970s, after the oil shocks and the collapse of the Bretton Woods system, the United States negotiated with Saudi Arabia to ensure that oil would continue to be priced in dollars. In exchange, the United States offered military protection and support to Saudi Arabia.
This arrangement created a significant demand for US dollars, as countries that needed to purchase oil had to acquire dollars first. Consequently, oil-exporting countries accumulated large amounts of US dollars, which they often invested in US Treasury bonds or other dollar-denominated assets.
The petrodollar system has had several effects. It has helped to maintain the value and international acceptance of the US dollar as the world’s primary reserve currency. It has also provided the United States with a certain level of economic and geopolitical influence, as it allowed the US to exert control over global oil markets and maintain a dominant position in international trade. This advantage is slowly disintegrating.
Shifting to another reserve currency takes time but it’s happening
However, it’s worth noting that the petrodollar system has faced some challenges in recent years. Some oil-exporting countries have sought alternatives to the US dollar in their oil transactions, and there have been discussions about shifting away from dollar-based oil trading. Nonetheless, the petrodollar system continues to play a significant role in global finance and energy markets.
BRICS are a threat to US Dollar Hegemony
BRICS is an acronym for an association of five major emerging national economies: Brazil, Russia, India, China, and South Africa. The BRICS countries represent a significant portion of the world’s population, landmass, and economic output. These countries are considered to be at similar stages of newly advanced economic development and are recognized for their influence on regional and global affairs. They are doing more transactions in their local currencies and outside of the US dollar. The BRICS are a real threat to the US Dollar as the world reserve currency.
The list is long for possible BRICS members
There are currently eight nations that have formally applied for membership in BRICS and 17 others that have expressed interest in joining. The eight formal applicants are Algeria, Argentina, Bahrain, Egypt, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates. The 17 countries that have expressed interest according to Jim Rickards are Afghanistan, Bangladesh, Belarus, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Senegal, Sudan, Syria, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe.
The BRICS Leaders’ Summit Conference this year is on August 22–24, 2023
The BRICS Leaders’ Summit Conference is an annual meeting of the heads of state or government from the member countries of BRICS. The first BRICS Leaders’ Summit was held in 2009 in Russia, and since then, the summit has been held annually, with each member country taking turns to host the event. The purpose of the summit is to provide a platform for the leaders of these countries to discuss and coordinate on various issues of mutual interest, primarily focusing on economic cooperation, development, and global governance.
During the summit, leaders engage in discussions on topics such as trade and investment, infrastructure development, financial cooperation, innovation, technology, and sustainable development. They also exchange views on geopolitical matters, global governance reforms, and other international issues of common concern.
The BRICS Leaders’ Summit Conference has gained significance over the years as a forum for enhancing cooperation and coordination among these major emerging economies. It aims to promote economic growth, strengthen South-South cooperation, and voice the collective concerns of the member countries in international forums. Additionally, the leaders often issue joint statements or declarations outlining their shared positions and priorities.
The BRICS+ currency could be announced at the Summit Conference
In recent years, the scope of the BRICS summit has expanded to include outreach sessions with other invited countries and regional organizations, fostering dialogue and partnerships beyond the BRICS group itself. The BRICS Leaders’ Summit Conference this year is on August 22 to August 24. What is alarming to the US dollar is we could see the announcement of a new BRICS currency called BRICS+.
The BRICS+ currency is a real threat to the US Dollar
What is so different between this currency and the US dollar is that it could be pegged to a basket of commodities like oil, wheat, copper, and other essential goods traded globally in specified quantities. Based on the impracticality of commodity baskets as uniform stores of value, it appears likely that the new BRICS+ currency will be linked to a weight of gold. The US dollar is total fiat and backed by nothing except a promise to repay debt. A rollout of a major new currency would weaken the role of the dollar in global payments and ultimately displace the US dollar as the leading payment currency and reserve currency. According to Jim Rickards, the world is not prepared.
Western world hegemony is under threat
Western hegemony refers to the dominance and influence exerted by Western countries, particularly those in Europe and North America, over global politics, economy, culture, and institutions. It is a concept that originated from the historical and contemporary power held by Western nations, stemming from their economic, military, and technological advantages.
Western hegemony emerged in the aftermath of World War II, with the United States emerging as a superpower and establishing itself as the leader of the Western bloc. The Western powers, led by the United States, played a significant role in shaping the global order, including the establishment of international organizations like the United Nations, the International Monetary Fund (IMF), and the World Bank.
The balance of power is shifting to the BRICS
Under Western hegemony, Western countries have enjoyed significant economic influence, controlling major multinational corporations, financial institutions, and global trade networks. The dominance of the Western financial system, with the US dollar as the primary reserve currency, has further reinforced Western economic power. It can be argued that Western countries have abused this privilege in many ways, especially financially.
In terms of culture and ideology, Western values, norms, and lifestyles have often been seen as the global standard. Western media, entertainment, and consumer brands have reached a wide global audience, influencing cultural trends and preferences worldwide. Western political and legal systems have also been promoted as models for other countries to emulate.
Critics argue that Western hegemony has led to imbalances of power and perpetuated inequalities between Western and non-Western nations. It has been accused of marginalizing the perspectives and interests of non-Western countries and imposing Western values and norms on diverse societies. Some have argued for a more inclusive and multipolar world order that recognizes the voices and contributions of non-Western nations. The BRICS and the possible new members are a real threat to Western hegemony. That’s bad news for the value of our money as the demand for US dollars and US Treasuries will be significantly less.
The US dollar sanctions against Russia have repercussions
US dollar sanctions are a form of economic punishment imposed by the United States Government on individuals, entities, or even entire countries. These sanctions restrict or prohibit the targeted parties from using the US dollar for financial transactions, which can have severe consequences given the global dominance of the US dollar in international trade and financial systems.
When the US imposes dollar sanctions, it typically involves blocking access to the US financial system, which is heavily reliant on the US dollar for transactions. This means that the targeted parties are restricted from using US banks, engaging in dollar-denominated transactions, or accessing US-based financial services. Additionally, the US can also impose secondary sanctions on non-US entities that continue to do business with the sanctioned parties, effectively cutting them off from the US market.
The US dollar’s importance in global finance means that being cut off from the dollar-based system can have significant ramifications. It can hinder the ability of sanctioned entities to engage in international trade, access international financing, and conduct cross-border transactions. It can also damage their reputation and credibility in the global financial community, making it difficult for them to attract foreign investments or secure loans.
US dollar sanctions are often imposed for various reasons, including human rights abuses, support for terrorism, nuclear proliferation, cyberattacks, or other actions deemed detrimental to US national security or foreign policy interests. The Office of Foreign Assets Control (OFAC) within the US Department of the Treasury is responsible for administering and enforcing these sanctions.
The US has sanctioned countries like Iran in the past. The Biden sanction of Russia after the Ukraine invasion was significant. Other countries saw that sanctioning and must have thought to themselves “Well that can happen to any of us.” It only makes sense that other countries will want to become less dependent on the US or the US dollar.
The BRICS+ presents a realistic effort to de-dollarize global payments and eventually global reserves. This will take some time, but the trend is headed in that direction. Less demand for the dollar means fewer buyers. Fewer buyers mean falling values. Falling value means less trust. The world and the US people will trust their money even less because it will lose significant value.
Now we are seeing real deals. Dubai will accept the Chinese yuan for oil export payments. China and Saudi Arabia could do the same. China and Brazil now have a bilateral currency deal. We all know China and Russia are developing a much stronger relationship. And remember a new currency could be announced in less than 2 months. In the meantime our leaders are falling down, mumbling on teleprompters, partying with topless transvestites on the White House lawn, and just being an absolute embarrassing disgrace. The whole world sees this. We see this.
Sanctions are also shocking. What if you were sanctioned based on your political or religious beliefs and your money was cut off? Does that sound like America to you? Well, it is happening more and more as we see in everyday events. The dollar and the FBI are being weaponized against anyone of us. In the meantime, the fox has entered the henhouse, and your dollar and your freedom are under attack. We would suggest protecting yourself, your freedom, your privacy, and your money. The easiest way to do that financially is to hedge your bets with some physical gold while you still can.