2022/04: The U.S. dollar tale: entering the “PETRODOLLAR” system

Introduction to Part Two

The Petrodollar system 101

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”

― Henry Ford

The rise of the Petrodollar

Illustration by Daryl Cagle — Cagle Cartoons, Inc.

Approaching the end of the 1970s, it was clear that Bretton Woods was close to its end; in this climate of tension and concerns, Henry Kissinger the U.S. Secretary of State under Nixon presidency — knew for a fact that a collapse of Bretton Woods agreement would have caused a DECLINE in the demand of U.S. dollars, causing the loss of Washington global trade and influence hegemony.

replacing the gold standard with a ‘promise’ of America ‘to back up, support and intervene in aid to the Saudis in exchange for their oil fields.’

President Nixon received by King Faisal bin Abdulaziz Al Saud
The Saudi royals knew a good deal when they saw one: they were more than willing to accept weapons and basically the ‘guarantee’ that the giant U.S. military machine will restrain any attacks on the Kingdom, especially from the neighboring ISRAEL — an enemy with which the Kingdom has been at war since the late 1950s.

Arab-Israeli War (disambiguation) – Wikipedia

The Arab-Israeli war normally refers to the conflict between Arab countries and Israel.


What exactly did the United States want in exchange for their weapons and military protection?

  1. the Saudis must agree to price ALL of their oil sales in U.S. dollar ONLY (de facto refusing all other currencies except the dollar as payment);
  2. the Saudis would be open to investing their SURPLUS OIL PROCEEDS in U.S. DEBT SECURITIES.

The agreement was officialized on June 8th, 1974; the Americans did clever calculations, as the following years saw a multitude of other oil-producing nations wanting in on the deal.


OPEC (Organization of the Petroleum Exporting Countries) is an intergovernmental organization oil demand supply market…


Without the constraints imposed by a rigid gold standard, the U.S. monetary base could be grown at exponential rates.

“I hereby find that the defense of Saudi Arabia is vital to the defense of the United States”
– President Franklin D. Roosevelt

The benefits of the new Petrodollar system

an increase in the supply of money causes the value of money to decrease over time

The Spectre of Inflation

The ‘creeping’ enemy of wealth — Financial Literacy 101


 The key takeaway:

What You Should Know About Petrodollars

Petrodollars are U.S. dollars paid to an oil-exporting country for the sale of the commodity. Put simply, the…


Through their exclusive use of dollars for oil transactions and then depositing their excess profits into American debt securities, the petrodollar system allowed the United States to go on a ‘shopping spree’ with virtually no limitation in their spending capability, a kind of an infinite money glitch.
  • the U.S. needs to run account deficits to maintain liquidity in a continuously expanding global economy: stopping these deficits will slow down the global economy with potentially devastating drawbacks, especially for undeveloped nations and emerging economies;
  • continuing the deficits may cause other countries to downgrade the value of the dollar.

Foreign Policies: the slump of U.S. relationships with foreign countries

Foreign Policy: The Middle East – The Policy Circle

The United States has long been referred to as the „indispensable nation“ or the “ world’s policeman .“ Since World War…


 A wearisome series of conflicts, culminating in millions of deaths and as many as displaced and forced to migrate.

End of Part 2