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.
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.
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.
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.