Do alarmists make too much drama of the threat to the Petro Dollar (US Dollar)?

The dollar might be shitty but it is by many orders of magnitude, the most transparent and reliable currency of the shitheap of currencies. There's a reason India and Russia tried to settle with rupees and gave up, there were chicken littles all over twitter and then nothing came of it.

I think alot of doomsayers miss the biggest thing with macro: it's all relative. It's not like your household economics. If everyone on the street has 10 maxed credit cards, and you have 9, you are in great shape. It's almost like not being in debt relative to your street.

good stuff man

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If the U.S. dollar were to lose its link to the oil trade and wasn't backed by gold, the way of life we have now is over.

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thing is, I just don't see how that's possible


care to break that down? We will never be backed by gold again, I get that.


And I see from what you're saying, we are sadly too linked to Saudi and the Brits, to name two

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thing is, I just don't see how that's possible


care to break that down?

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Nothing is forever, especially when it's being taken for granted.

First off, some of the largest impacts on the value of the USD are the sheer amount of them and the desirability of US debt as a safe haven. A third is its role as the premiere reserve currency for international trade (especially petroleum as that's something almost every country buys and/or sells).

BRICS (Brazil, Russia, India, China and South Africa) have discussed trying to create their own petro currency. India and China are two of the largest oil importers while Russia is the 2nd largest exporter (depending on year) and Brazil is a solid exporter as well.

Along with some other countries (who are mainly inconsequential on their own), UAE has shown an interest in possibly joining. China has been using their Belt and Road Initiative to make inroads in trying to sway many. The more infrastructure projects they do for these countries, the more likely they may be to join BRICS. One which needs special watching is Saudi as their relationship with China has grown closer over recent years. Were they and the UAE to join BRICS, that would have 3 of the top 5 oil exporting countries no longer trading oil in USD.

All that said, creating a new petro-currency is a tall order considering they'll first have to establish how it's valued, much less anything else.

But... IF this were to happen (and it's still a big "if" although not as big as it was a decade ago) - with so many countries using the BRICS currency to trade oil - that move from the USD would weaken its status as the premiere world reserve currency. This would mean the USD losing value, thus inflation.

This inflation from the international stage would be pretty much impossible to tame through domestic policy, thus "the way of life we have now is over" at that point.

One thing we could do would be for the federal government to start paying down the debt as well as introduce our own sort of Belt and Road Initiative (building things for allied countries instead of just providing defense by having US bases there). Neither seems likely to happen any time soon.

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If the U.S. dollar were to lose its link to the oil trade and wasn't backed by gold, the way of life we have now is over.

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This is precisely why we invaded Iraq the 2nd time and are now have our “leaders” talking about how we have to save Ukraine.
All while we tucked in run in Afghanistan.
You have to ask yourself…. Why do the big whigs want us involved and what do they have to gain?

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It provides the U.S. with the unique ability to export inflation.

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I think this is really at the core of my concern.

Think of it this way. Currently, there are an obscene number of US dollars circulating in the international economy which the holders do not ever intend to use to buy US goods and services. The dollars are simply traded back and forth internationally to do things like purchase oil from each other.

Let’s imagine a world where that instantly all goes away. Obviously that’s an unlikely change to occur, but for the story, let’s start at that extreme. Suddenly, all those huge, untold sums of dollars are now no longer useful in this international trading scheme. So if the holders don’t intend to use them there, where will they use them? Well, they’d rather get something over nothing for those dollars, so they turn to US markets and buy whatever it is we have that they desire most. Maybe it’s goods and services, maybe houses, maybe financial assets. Whatever it is, it will be tsunami of new spending flooding the US market simultaneously, in such quantities that it would necessarily trigger an inflationary period unlike we’ve ever seen before. The only way the fed could even hope to get a handle on this new flood of activated cash would be massive interest rate spikes, potentially even into the triple digits. The high rates on fed borrowing would force companies to follow suit. Most, unable to justify triple digit rates on borrowed cash, scrap all investment projects which would require raising new capital, crashing the US economy down to a sudden, brutal halt.

Functionally, the reason the fed’s obscene over printing of dollars over the last 4 decades hasn’t led to large scale inflationary pressure is that a huge portion of those new dollars make their way into these international systems, functionally pumping the breaks on the domestic velocity of money. If those international systems break down, all that money comes flooding back into the US at once and we are left to simultaneously absorb 4 decades worth of inflationary pressure. It would dwarf any inflation this country had ever seen before and almost certainly lead to a deep, painful recession. I won’t go as far as saying the American way of life is over. But certainly, our economy would take an absolute brutal beating, with no guarantee that we develop a pathway to dig out of the issue.



Disclaimer: I’m just some a-hole who reads stuff online, so don’t take my word on any of this. But at least for me, that’s my biggest concern.

the petro dollar is the least of our problems. judgement is coming.

No … it is estimated that American’s standard of living is improved by 10% just by having King Dollar as the world’s Reserve Currency. Just as it has enriched the citizens of other countries whose currency previously held the standard.

The average American takes a lot for granted ….