The U.S. And Saudi Arabia: Not Playing Well With Others (Each Other) (July 11, 2016)
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K “On August 15, 1971, President Nixon unilaterally cancelled the direct international convertibility of the United States dollar to gold. The U.S. abandoned the ‘gold standard’ and embraced the ‘oil standard.’ As part of the grand deal, the Saudi Arabians agreed to price oil in dollars and thereby created a new and extremely valuable thing dubbed the ‘Petrodollar.’”
J “I note to others that the Petrodollar is right up there with the steam engine and the Internet as the driver of innovation and progress in the United States.”
K “The Petrodollar is an almost cost-free export that has undergirded American expansion and power for the last almost 45 years. Now the two countries are in a spat that is not likely to turn out well for the U.S.”
J “I noticed. Life is like high school writ large. The Saudis did not receive O’Bama when he visited Saudi Arabia; O’Bama did not receive Saudi officials when they visited Washington. They do not play well with others. Or with themselves.”
K “Sounds more like elementary school antics writ small. Sales here and sales there of oil around the world today are being denominated in something other than the Petrodollar. If the use of the Petrodollar declines, the U.S. declines with it.”
J “The Petrodollar’s status as the world’s reserve currency may not be able to sustain it.”
K “The Petrodollar’s status as the world’s reserve currency is also being challenged and undermined by other countries advancing the creation of Special Drawing Rights (SDR).”
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[See the e-commentary at “The Percolating Middle East (February 22, 2016)” and “Venturing A Few Unfounded And Unwarranted Predictions (July 13, 2015).”]
Bumper stickers of the week:
The Petrodollar fuels the American economy: no Petrodollar, no economy.