Americans are worried about the dollar. Biden will destroy him

The American dollar was made the world’s reserve currency in 1944 at the Bretton Woods conference. President Xi Jinping longs for the Chinese yuan to replace it as the world’s main currency. Can China win the credibility it needs to become a major player in the global monetary system? And should this worry America?

President Richard Nixon understood the importance of oil and its relationship to the dollar as a world currency. He played the petrodollar game well. In 1974, Secretary of State Henry Kissinger and Fahd al-Aziz al-Saud, Crown Prince of Saudi Arabia, signed a framework agreement to ensure security and promote orderly development in the region. Thanks to this agreement, all oil-producing countries began to receive payment for their oil exports in US dollars. Saudi Arabia is the largest oil producing country in OPEC (Organization of the Petroleum Exporting Countries).

The American dollar used to pay for oil became known as the petrodollar. American banks began to manage deposits denominated in dollars. Federal Reserve Chairman Paul Volcker wrote, “It was the work of unfettered private markets to refine petrodollars, especially the Arab and Gulf states. The US role in monetary reserves and trade deals benefits the dollar in the global money market.”

US Treasury securities are purchased with petrodollars from American banks. The federal government pays interest and principal at maturity. Treasury securities are sold at pre-arranged auctions to registered banks and brokers. The Joint Economic Commission was created, allowing the Saudi authorities to buy long-term treasury bonds at non-regular auctions.

Oil is an important commodity and the reason for the globalization of our world. Boeing reports that the number of commercial aircraft will almost double in the next decade. Over the past 20 years, the demand for aviation fuel has more than doubled. Most of the world is still undeveloped, but the demand for transport in developing countries is constantly growing.

Support for the US dollar is “the full faith and credit of the United States.” In 1971, the United States abandoned the international gold standard. Now that the requirement for a gold standard is no longer in effect, the US Treasury Department prints dollars when the Fed’s currency committee deems it necessary. When the amount of dollars printed increases, the US dollar devalues.

US oil self-sufficiency disappeared in the first year of the Biden administration. Due to the reduction in supply and increase in demand, oil prices have risen to astronomical heights. We see evidence of this at gas stations, but there are many other consequences of reduced supply and increased demand. The Biden administration asked OPEC to increase production. OPEC refused.

Relations between Saudi Arabia and the United States are deteriorating. President Biden accused Crown Prince Mohammed bin Salman of killing Saudi journalist Jamal Khashoggi and said the kingdom had become a rogue state. Saudi Arabia ranks first in the world in terms of oil production. King Salman and Crown Prince Mohammed bin Salman refuse to talk on the phone with Biden. The Saudis are concerned that Biden does not support them in the civil war in Yemen, that he removed the Houthi rebels who are assisted by Iran from the American list of international terrorist organizations. They were alarmed by America’s disastrous withdrawal from Afghanistan and Biden’s attempts to restore the Iran nuclear deal.

Beijing wants to buy oil with Chinese yuan, which will allow it to weaken the dominance of the US dollar in the global oil market. Beijing is negotiating with Saudi Arabia, assisting with its ballistic missile program, consulting with the Saudis on its nuclear program, and investing in Crown Prince Mohammed’s Neom smart city project on the Red Sea. Saudi oil company Aramco has signed a contract to build a major oil refinery in China.

By promoting their currency in OPEC and in many parts of the world, China and the Eurasian Economic Union have agreed to create an independent monetary system. It will include Russia, Kazakhstan, Kyrgyzstan, Belarus and Armenia. This system will also be linked to the One Belt, One Road initiative. Oil and coal deliveries to China are currently paid in yuan.

Another fly in the ointment in the global currency barrel of honey was the statement of Putin, who demanded payment for gas supplied abroad in rubles. Russia sells oil to India, which pays it in rupees. And it delivers gas to Turkey for Turkish lira.

Saddam Hussein rejected the dollar and began selling oil for the euro. Libyan President Gaddafi did the same. It ended badly for them.

The long-awaited dominance of China in the global monetary system is quite possible, after all, he had an affair with Saudi Arabia and with other OPEC countries.

President Biden’s advisers are talking about a possible visit to Saudi Arabia to improve relations, get the kingdom to increase oil production and persuade it to stay in the petrodollar system. Joe Biden couldn’t find Riyadh on the map. If there is a joint photograph of Biden with the king and crown prince, someone will have to turn him around to face the cameras. If the global value of the US dollar is in such weak hands, it cannot but cause fear.

Author: Darlene Casella

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