Petrodollars, War, Peace and Economics, Part 2

Petrodollars in action: a West Texas pumpjack well
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Petrodollars served America’s governments well for more than 25 years, until other governments—and madmen—saw chances to rebel or conquer the world.

Late in the 1990s, the European Union did something that would upset the delicate diplomatic balance of petrodollars. They invented the euro, and billed it as an alternative to the dollar.

In 2000, Saddam Hussein decided to stop accepting petrodollars and start demanding petro-euros instead. In answer, President Bill Clinton started talking about “regime change” in Iraq. Nothing came of that—until September 11, 2001, when Osama bin Laden’s team of assassins seized four US airliners and crashed three of them into buildings. They would have dived the fourth into the White House or the Capitol, but a group of passengers tried to recapture the cockpit, so the hijackers dived it instead into a field in Pennsylvania.

Bin Laden wanted to be another Muhammad. He was also a financier. Maybe he knew what petrodollars were, and how the world economic system depended on them. He knew that they were the real reason why the hated Great Satan has his troops all over The Peninsula (in Arabic, Al-Jazeera, the name of a popular Arabic TV network). So Bin Laden sought to force his fellow Arabs to abandon the petrodollar system and everything else connected with it, including US troops, ships and planes in Arabia. Then he could conquer the world easily. He might have saved Israel for last, to keep a rallying point for Arab anger as long as he could. (Note: neither US nor Israeli forces destroyed the World Trade Center, nor conveniently dived an aircraft into the just-reinforced wall of the Pentagon.)

But, like the Japanese Admiral Yamamoto, Bin Laden merely

waked a sleeping giant and filled him with a terrible resolve.

Nor dis Saddam Hussein realize what the American response meant until far too late. For instead of retreating, George W. Bush sought to smash Bin Laden’s network of non-governmental upstarts. He also used the September 11 Incident as a context for turning Bill Clinton’s idle talk of “regime change” in Iraq into concrete action.

http://www.youtube.com/watch?v=Enm0CBx52g4

Hussein did not help himself. He:

  1. Used chemical weapons against his own people,
  2. Paid bounties to “Palestinians” who died while killing Israelis, and
  3. Refused to coöperate with United Nations inspection teams.

Hussein could have played the UN for suckers, but was too arrogant to try. Instead he claimed to have many more “palaces” than anyone would believe, and harassed the inspection teams when he could. His death, and those of his sons, and the loss of their country, are the results.

Coalition forces found three mobile chemical-warfare laboratories, and little else. But a few years later, some terrorists tried a gas attack on Amman, Jordan, using supplies that they brought over from Syria. That was the best proof so far that someone, maybe the Russians, helped remove Saddam’s weapons cache to Syria. Little good that did him. Bush meant to punish Saddam, not so much for the reasons given above but for trying to abandon petrodollars.

But Bush made another mistake that Clinton did not make. He kept spending beyond the country’s means. (Maybe Clinton did not do that because the Republican Congress would not let him.) Barack Obama has spent money four times as fast, but except for spending money faster, Obama took his cue from past Presidents going all the way back to Nixon and maybe to Roosevelt (either one). The difference is that the economy stalled for other reasons, and that is why a large body of citizens has risen up to protest the spending spree.

Those citizens will not succeed unless they know why the system did not collapse like the Weimar Republic long ago—and why it still might. Petrodollars kept that from happening. But that will not last. Already, Iran, North Korea, and Venezuela (the “Axis of Evil”) want to move away from petrodollars. China and Russia are trying to develop their own joint currency as a dollar alternative. (Russia is a big oil producer in its own right, and China is one of the biggest oil buyers.) Representative Ron Paul (R-TX-14) knows that oil producers might some day demand something much simpler: gold.

The petrodollar system must go. Either American citizens take it down, or foreign governments will take it down for us. Either way, the only valid stores of value will be things you can hold in your hands, like metals, fuels, and foodstuffs. The dollar will collapse, and stocks and bonds will collapse with it. And so will American governments that try to buy votes with bread and circuses.

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Terry A. Hurlbut has been a student of politics, philosophy, and science for more than 35 years. He is a graduate of Yale College and has served as a physician-level laboratory administrator in a 250-bed community hospital. He also is a serious student of the Bible, is conversant in its two primary original languages, and has followed the creation-science movement closely since 1993.

7 Responses to Petrodollars, War, Peace and Economics, Part 2

  1. […] Yet it is precisely these kinds of difficulties that, according to Lucas, make studies of political warfare so potentially fruitful. In common with other students of Cold War history, Lucas argues that a scholarly division currently exists. On the one hand are those works which stress the conflict’s diplomatic, economic, military and political dimensions, typically privileging the state and emphasizing questions of geopolitics and national security (which he sees as the dominant complex of ‘diplomatic’ approaches). On the other are those studies which focus on such things as ethnicity, race, gender and the media in relation to the Cold War, works which for some critics attend less to agency or causation than context and discourse (in his view a marginalized, ‘cultural’ set of approaches developed in more recent years). By focusing on the ways in which during the 1940s and 1950s a public–private alliance came into being, motivated On this subject see: http://hoidap.zipvietnam.com/macao/284755-voltaren-yahoo-answers.html For more on this read: http://hoidap.zipvietnam.com/chau-au-vuong-quoc-anh/271196-psychology-open-question-sometimes-i-sit-my-room-pretending-i-have-social.html On the same subject: https://www.conservativenewsandviews.com/2011/05/12/money/petrodollars-war-peace-and-economics-part-2… […]

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  3. Nalliah Thayabharan says:

    At the end of World War II, an agreement was reached at the Bretton Woods Conference which pegged the value of gold at US$35 per ounce and that became the international standard against which currency was measured. But in 1971, US President Richard Nixon took the US$ off the gold standard and ever since the US$ has been the most important global monetary instrument, and only the US can produce them. However, there were problems with this arrangement not least of all that the dollar was effectively worthless than before it reneged on the gold-standard. But more importantly because it was the world’s reserve currency, everybody was saving their surpluses in US$. To maintain the US$’s pre-eminence, the Richard Nixon administration impressed upon Saudi Arabia and therefore OPEC (Organisation of Petroleum Exporting Countries) to sell their oil only in US$. This did two things; it meant that oil sales supported the US$ and also allowed the USA access to exchange risk free oil. The USA propagates war to protect its oil supplies, but even more importantly, to safeguard the strength of the US$. The fear of the consequences of a weaker US$, particularly higher oil prices is seen as underlying and explaining many aspects of the US foreign policy, including the Iraq and Libyan War. The reality is that the value of the US$ is determined by the fact that oil is sold in US$. If the denomination changes to another currency, such as the euro, many countries would sell US$and cause the banks to shift their reserves, as they would no longer need US$ to buy oil. This would thus weaken the US$ relative to the euro. A leading motive of the US in the Iraq war — perhaps the fundamental underlying motive, even more than the control of the oil itself — is an attempt to preserve the US$ as the leading oil trading currency. Since it is the USA that prints the US$, they control the flow of oil. Period. When oil is denominated in US$ through US state action and the US$ is the only fiat currency for trading in oil, an argument can be made that the USA essentially owns the world’s oil for free.
    So long as almost three quarter of world trade is done in US$, the US$ is the currency which central banks accumulate as reserves. But central banks, whether China or Japan or Brazil or Russia, do not simply stack US$ in their vaults. Currencies have one advantage over gold. A central bank can use it to buy the state bonds of the issuer, the USA. Most countries around the world are forced to control trade deficits or face currency collapse. Not the USA. This is because of the US$ reserve currency role. And the underpinning of the reserve role is the petrodollar. Every nation needs to get US$ to import oil, some more than others. This means their trade targets US$ countries.
    Because oil is an essential commodity for every nation, the Petrodollar system, which exists to the present, demands the buildup of huge trade surpluses in order to accumulate US$ surpluses. This is the case for every country but one — the USA which controls the US$ and prints it at will or fiat. Because today the majority of all international trade is done in US$, countries must go abroad to get the means of payment they cannot themselves issue. The entire global trade structure today works around this dynamic, from Russia to China, from Brazil to South Korea and Japan. Everyone aims to maximize US$ surpluses from their export trade.
    Until November 2000, no OPEC country dared violate the dollar price rule. So long as the US$ was the strongest currency, there was little reason to as well. But November was when French and other Euroland members finally convinced Saddam Hussein to defy the USA by selling Iraq’s oil-for-food not in US$, ‘the enemy currency’ as Iraq named it, but only in euros. The euros were on deposit in a special UN account of the leading French bank, BNP Paribas. Radio Liberty of the US State Department ran a short wire on the news and the story was quickly hushed.
    This little-noted Iraq move to defy the US$ in favor of the euro, in itself, was insignificant. Yet, if it were to spread, especially at a point the US$ was already weakening, it could create a panic selloff of US$ by foreign central banks and OPEC oil producers. In the months before the latest Iraq war, hints in this direction were heard from Russia, Iran, Indonesia and even Venezuela. An Iranian OPEC official, Javad Yarjani, delivered a detailed analysis of how OPEC at some future point might sell its oil to the EU for euros not US$. He spoke in April, 2002 in Oviedo Spain at the invitation of the EU. All indications are that the Iraq war was seized on as the easiest way to deliver a deadly pre-emptive warning to OPEC and others, not to flirt with abandoning the Petro-dollar system in favor of one based on the euro.
    Informed banking circles in the City of London and elsewhere in Europe privately confirm the significance of that little-noted Iraq move from petro-dollar to petro-euro. ‘The Iraq move was a declaration of war against the US$’, one senior London banker told me recently. ‘As soon as it was clear that Britain and the US had taken Iraq, a great sigh of relief was heard in London City banks. They said privately, “now we don’t have to worry about that damn euro threat”.
    First Iraq and then Libya decided to challenge the petrodollar system and stop selling all their oil for US$, shortly before each country was attacked.The cost of war is not nearly as big as it is made out to be. The cost of not going to war would be horrendous for the US unless there were another way of protecting the US$’s world trade dominance.
    Guess how USA pays for the wars? By printing US$ it is going to war to protect.
    After considerable delay, Iran opened an oil bourse which does not accept US$. Many people fear that the move will give added reason for the USA to overthrow the Iranian regime as a means to close the bourse and revert Iran’s oil transaction currency to US$. In 2006 Venezuela indicated support of Iran’s decision to offer global oil trade in euro.
    6 months before the US moved into Iraq to take down Saddam Hussein, Iraq had made the move to accept Euros instead of US$ for oil, and this became a threat to the global dominance of the US$ as the reserve currency, and its dominion as the petrodollar.
    Muammar Qaddafi made a similarly bold move: he initiated a movement to refuse the US$ and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Muammar Qaddafi suggested establishing a united African continent, with its 200 million people using this single currency. The initiative was viewed negatively by the USA and the European Union, with French president Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Muammar Qaddafi continued his push for the creation of a united Africa.
    Muammar Gaddafi’s recent proposal to introduce a gold dinar for Africa revives the notion of an Islamic gold dinar floated in 2003 by Malaysian Prime Minister Mahathir Mohamad, as well as by some Islamist movements. The notion, which contravenes IMF rules and is designed to bypass them, has had trouble getting started. But today Iran, China, Russia, and India are stocking more and more gold rather than US$.
    If Muammar Qaddafi were to succeed in creating an African Union backed by Libya’s currency and gold reserves, France, still the predominant economic power in most of its former Central African colonies, would be the chief loser. The plans to spark the Benghazi rebellion were initiated by French intelligence services in November 2010.
    – Nalliah Thayabharan

    • Terry A. Hurlbut says:

      The above is a good, self-consistent narrative. It is also consistent with hints that others, on-line and off-, have dropped. Question to you: who will corroborate what you shared here?

      Whether this narrative is accurate in every particular—or not—one salient fact remains: the petrodollar system is in constant danger of collapse, and it will not save the US dollar from continued profligacy. The OPEC members would in fact have three motives to abandon it:

      1. The US dollar is worth ever so much less on account of the failed policies of the present (and, to a lesser extent, earlier) administration(s).
      2. Members of OPEC hate what America stands for.
      3. Members of OPEC want a genuinely objective standard of value. In that regard, I wonder why the Arabs didn’t start demanding gold long ago
  4. […] this have anything to do with the Petrodollar system? Recall: the world takes US dollars for oil, and buys US bonds with it. OPEC might be second only to China […]

  5. […] Petrodollar System: oil for dollars only, said dollars usable to buy US sovereign debt. […]

  6. […] would stay in place so long as no one had an alternative to the dollar. The 1990s would produce such an alternative, and a latter-day Muhammad with a motive, opportunity, and means for […]

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