by Daniel Carter
Ever since the British Empire relinquished its empire status to the US in the early 20th century, the US dollar has thrived as the Global Reserve Currency. This means that the US dollar is currently the most commonly used currency in the world by far. Because the US dollar is trusted and accepted throughout the world, the US has been able to print massive amounts of its own currency to fund the extravagancies of its empire.
In 1971, the US made a grave economic mistake by ending the US dollar gold standard. The policy decision, referred to as the Nixon Shock, officially ended the convertibility of US dollars into gold. Because a supply of gold was no longer required to back US currency, the government became free to expand their monetary base at the drop of a hat. However, to keep the easy money party going, the US needed to create demand for its currency.
In 1974, shortly after the Nixon Shock, the US figured out how to keep the demand for US dollars strong. In one of the most significant economic deals of the 20th century, the Nixon administration came to a deal with Saudi Arabia that required them to sell their oil in US dollars in exchange for US military aid and equipment. The deal also required the Saudis to take the money they received in oil sales and plow it into US Treasuries. The Saudis would make a nice return by investing in Treasuries and receive military help, while the US would be able to keep demand for US dollars and US government debt high. This was the birth of the Petrodollar system that still exists today.
With the ability to create a highly demanded currency out of thin air, the US empire has been able to fund numerous wars, a huge welfare system and anything else that an empire needs to help it dominate the world. Unfortunately for the US, their ability to rapidly expand its monetary base through the Petrodollar system may be coming to an end.
Other nations have begun to challenge the US’s Petrodollar system by buying and selling oil in currencies other than the US dollar. China, Russia, Iran, Iraq, Syria, Libya and others have challenged/are challenging the Petrodollar system. Some have been decimated by the US military for their insubordination, but the most powerful nations (China, Russia and Iran) are still determined to undermine the Petrodollar system.
Global reserve currency status does not last forever, and with it goes empire status as well. History tells us that empires always expand to a point in which they can’t expand any further. With debt at astronomical levels, a dwindling middle-class and major political issues at home, the US seems to be fast approaching the end of its empire.
The US has gone to great military lengths to ensure the survival of the Petrodollar. Millions of lives have been lost. It is in the world’s best interest if the US accepts their reality of diminishing power and gives up its brutal military pursuits. The American people will be better off if those resources are used at home rather than overseas. Peace in the world largely depends on how far the US will go to protect the Petrodollar. We should all hope they give up this pursuit soon.
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