As he explains, once the dollar was no longer backed by gold:
. . . elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence “backed” the dollar with oil. In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite the radical Islamic movement among those who resented our influence in the region.Even worse, like any desperate junkie, the people who make their fortunes on this fundamentally unsound practice will sink to any depth to feed their addiction:
Protectionism, fixing exchange rates, punitive tariffs, politically motivated sanctions, corporate subsidies, international trade management, price controls, interest rate and wage controls, super-nationalist sentiments, threats of force, and even war are resorted to – all to solve the problems artificially created by deeply flawed monetary and economic systems.Like deficit spending and propping up dictators, issuing unbacked currency is a very attractive option to politicians/investors too myopic to see past the next four or eight years, but these policies all have consequences down the road for all Americans:
It sounds like a great deal for everyone, except the time will come when our dollars – due to their depreciation – will be received less enthusiastically or even be rejected by foreign countries. That could create a whole new ballgame and force us to pay a price for living beyond our means and our production. The shift in sentiment regarding the dollar has already started, but the worst is yet to come.Indeed, as Europe grows and our international reputation spirals into the toilet, the relevance of the petrodollar, while still high, will only decline in relation to the burgeoning petroeuro. And, more and more like the proverbial fiending junkie with every country that opts to stop trading oil exclusively in dollars, the oil-and-investment cartel will only become more vicious in its defense of the house of cards it calls home:
In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O’Neill, the major topic was how we would get rid of Saddam Hussein – though there was no evidence whatsoever he posed a threat to us. This deep concern for Saddam Hussein surprised and shocked O’Neill.Representative Paul expresses doubt that this was the sole motivation for attacking Iraq, and I agree. However, having a military and economic foothold in Iraq will also go a long way toward opposing the petroeuro threat in the rest of the region, in addition to all the usual benefits of neocolonialism.
He goes on:
In 2001, Venezuela’s ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA.Indeed, many Americans become indignant and outraged at any suggestion that the US is capable of the kind of foreign policy that ruling factions have carried out for the better part of a century now.
After these attempts to nudge the Euro toward replacing the dollar as the world’s reserve currency were met with resistance, the sharp fall of the dollar against the Euro was reversed. These events may well have played a significant role in maintaining dollar dominance.
It’s become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez, and was embarrassed by its failure. The fact that Chavez was democratically elected had little influence on which side we supported.
Now, a new attempt is being made against the petrodollar system. Iran, another member of the “axis of evil,” has announced her plans to initiate an oil bourse in March of this year. Guess what, the oil sales will be priced Euros, not dollars.
Most Americans forget how our policies have systematically and needlessly antagonized the Iranians over the years.