America has had one heck of a leg up on other countries for many reasons. One of the biggest being the petrodollar. A petrodollar is a United States dollar earned by a country through the sale of its petroleum to another country. Since the 1970s the United States dollar has been the currency the world has used to trade oil all over the globe. With this obviously comes a great demand for not only US Dollars but also US debt. So what do you think would happen if the rest of the world started rejecting the almost-dead US dollar while also realizing that gold can be used as actual currency again in international trade?
Its pretty simple really. All demand for the US dollar and its debt would cease to exist and there would be a rush for gold like none other since the days of the American gold rush. Wait… I am pretty sure Russia and China have already denounced our currency. I am also pretty sure that Russia and China are gobbling up as much gold as they can possibly get their hands on and at record paces. Is it far fetched to think that they are planning on smashing the petrodollar with Petrogold? At any rate they have already said good bye to our currency and I cant see them trading US dollars for fuel much longer.
To explain the PetroDollar in greater detail I defer to a recent article by Christopher Doran…
In a nutshell, any country that wants to purchase oil from an oil producing country has to do so in U.S. dollars. This is a long standing agreement within all oil exporting nations, aka OPEC, the Organization of Petroleum Exporting Countries. The UK for example, cannot simply buy oil from Saudi Arabia by exchanging British pounds. Instead, the UK must exchange its pounds for U.S. dollars. The major exception at present is, of course, Iran.
This means that every country in the world that imports oil—which is the vast majority of the world’s nations—has to have immense quantities of dollars in reserve. These dollars of course are not hidden under the proverbial national mattress. They are invested. And because they are U.S. dollars, they are invested in U.S. Treasury bills and other interest bearing securities that can be easily converted to purchase dollar-priced commodities like oil. This is what has allowed the U.S. to run up trillions of dollars of debt: the rest of the world simply buys up that debt in the form of U.S. interest bearing securities.
Also Here is a Comment from Lindsey Williams:
This has never happened in the history of crude oil. Since crude oil became the motivating force behind our (U.S.) entire economy, and everything in our lives revolves around crude oil. And since crude oil became the motivating factor behind our economy… never, ever has crude oil been sold, bought, traded, in any country in the world, without using the American dollar. Crude oil is the standard currency of the world. Not the Yen, not the Pound, not the Dollar. More money is transferred around the world in crude oil than in any other product.
And its traded with our dollar. So do you understand how important this petrodollar is now?
So are Russia and China acquiring all of this gold because they eventually plan on ending the petrodollar? They have the power to do so. With all of the gold they own they sure would prosper from a move like this.They already do bilateral trades with out our US currency. Its hard to say what they are up to exactly. We cant really get upset over a nation looking to get into gold right now as they both are clearly doing. Many nations with the US included are in the middle of a currency war and it appears central banks all over the globe are rushing to devalue their currencies.
Speaking of devaluing currencies lets not forget about the Federal Reserve, the biggest offender of all in currency devaluation. They have been printing money like there is no tomorrow and not only do they show no signs of stopping but no one really seems concerned with the issue. Not the Fed or our Government. They must realize all of this money printing (currency devaluation) is endangering the petrodollar. While we throw money away at a record pace and devalue our currency other countries laugh and mock us… and soon enough they will turn their backs on our currency and push for something else, and could you blame them? It will happen, and many believe Russia and China mean to make it a reality and its why they are stacking gold.
Just take a look at a recent Bloomberg article and see how much gold Russia has been hoarding.
When Vladimir Putin says the U.S. is endangering the global economy by abusing its dollar monopoly, he’s not just talking. He’s betting on it.
Not only has Putin made Russia the world’s largest oil producer, he’s also made it the biggest gold buyer. His central bank has added 570 metric tons of the metal in the past decade, a quarter more than runner-up China, according to IMF data compiled by Bloomberg. The added gold is also almost triple the weight of the Statue of Liberty.
The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency, Evgeny Fedorov, a lawmaker for Putin’s United Russia party in the lower house of parliament, said in a telephone interview in Moscow.
There also seems to be to signs to Russia’s gold obsession slowing down any time soon. According to another report Russia added 3.2 million OZ of gold to its reserve in the year 2012 alone. But what scares me more is China. No one knows how much gold they have because they simply do not tell anyone. All we know is no one produces or imports more gold than China. No where close. many sources believe they have over 700 tons or more.
So what they heck are Russia and China up to? For starters they both hate the fact that the US dollar is the world currency and they mention it publicly and often through the suggestion of adopting a new global reserve currency. But no real contenders have been able to top the US dollar yet.
This works out great for the US because not only is there a demand for our dollar but also our debt. But what would happen if the rest of the world started to reject our dollar and its petrodollar? For starters Russia and China would benefit immensely. Believe it or not Russia is the #1 oil exporter in the world and China the #2 oil Consumer. Why would they want to be locked into a system that forces them to use US dollars on all of its oil transactions?
They don’t want to.. they want to not only break away but end the cycle. And if this happens our economy would collapse. We would no longer export our inflation to the rest of the world and prices would go up and up. The demand for our government debt would falter and the interest rates on it and everything else in our economy would raise through the roof. Our economy would stop to a screeching halt and all financial institutes would collapse. And that is just the beginning. The beginning of a total economic collapse.