‘Petrodollar’ Exposed: The Root of Special US-Saudi Relationship

In a special segment, Anya Parampil speaks with In Question producer Kei Pritsker to examine the roots of the special relationship between Saudi Arabia and the United States. Kei explains how the alliance is based on Saudi’s ability to manipulate global oil markets through its petrol production, as well as the fact that Riyadh saved the US dollar following the collapse of the gold standard in 1971. Saudi’s decision to only accept the dollar for oil purchases in 1974 breathed new life into the US currency, the viability of which was in question following the Nixon Gold Shock.

Straw admits oil is key priority (in Iraq War)

The foreign secretary, Jack Straw, yesterday pinpointed for the first time security of energy sources as a key priority of British foreign policy.

Mr Straw listed energy as one of seven foreign policy priorities when he addressed a meeting of 150 British ambassadors in London.

The US and British governments officially deny that oil is a factor in the looming war with Iraq, but some ministers and officials in Whitehall say privately that oil is more important in the calculation than weapons of mass destruction.

These ministers and officials have pointed to the instability of current oil sources – the Middle East, Caspian region and Algeria – and the need for secure alternatives. Iraq has the second biggest known oil reserves in the world.

Mr Straw told ambassadors that, following a review he ordered last year, the Foreign Office drew up a list of seven medium to long-term strategic priorities, including “to bolster the security of British and global energy supplies“.

A Foreign Office source said: “I can’t say that energy is irrelevant (to the Iraq conflict) but the issue is one we would have to deal with even if Saddam was a cuddly individual.”

The Foreign Office insists that the main motivation in the confrontation is fear that Iraq has, or intends to develop, biological, chemical and nuclear weapons. Mr Straw put the proliferation of weapons of mass destruction and terrorism at the top of his list of priorities. The others are:

· To minimise threats to the UK such as uncontrolled migration, transnational crime and Islamic extremism;

· To maintain a stable international system based on the UN, the rule of law and multilateral cooperation;

· To promote UK economic interests in an open and expanding global economy;

· To promote democracy, good governance and development, citing as an example involvement of the G7 developed countries in helping Africa;

· To build a strong EU in a secure neighbourhood.

Operation Cyclone (Afghanistan)

In the West, the Soviet invasion of Afghanistan was considered a threat to global security and the oil supplies of the Persian Gulf.[10] Moreover, the failure to accurately predict Soviet intentions caused American officials to reappraise the Soviet threat to both Iran and Pakistan, although it is now known that those fears were overblown. For example, U.S. intelligence closely followed Soviet exercises for an invasion of Iran throughout 1980, while an earlier warning from Brzezinski that “if the Soviets came to dominate Afghanistan, they could promote a separate Baluchistan … [thus] dismembering Pakistan and Iran” took on new urgency.[11][5]

 

.. Of the seven mujahideen groups supported by Zia’s government, four espoused Islamic fundamentalist beliefs—and these fundamentalists received most of the funding.[10] Despite this, Carter has expressed no regrets over his decision to support what he still considers the “freedom fighters” in Afghanistan.[5]

 

.. Key proponents of the initial program were Texas Congressman Charlie WilsonMichael G. Vickers, a young CIA paramilitary officer; and Gust Avrakotos, the CIA’s regional head, who developed a close relationship with Wilson. Their strategy was to provide a broad mix of weapons, tactics, and logistics, along with training programs, to enhance the rebels’ ability to fight a guerilla war against the Soviets. Initially, to avoid detection of U.S. involvement, the program supplied the rebels only with Soviet-made weaponry. This plan was enabled by the tacit support of Israel, which had captured large stockpiles of Soviet-made weaponry during the Yom Kippur War and agreed to sell them to the CIA clandestinely, as well as Egypt, which had recently modernized its army with weapons purchased from Western nations, funneling the older Soviet-made arms to the mujahideen.[30][31] After 1985, as the Reagan administration announced that it would support anti-Soviet resistance movements globally (in what is now known as the Reagan Doctrine), there was no longer a need to obfuscate the origin of the weaponry; Pentagon senior official, Michael Pillsbury, successfully advocated providing U.S.-made weaponry, including large numbers of Stinger missiles, to the Afghan resistance.[32]

 

.. Reports show civilian personnel from the U.S. Department of State and the CIA frequently visited the Afghanistan-Pakistan border area during this time, and the US contributed generously to aiding Afghan refugees. CIA director William Casey secretly visited Pakistan numerous times to meet with the ISI officers managing the mujahideen,[39] and personally observed the guerrillas training on at least one occasion.[40] Coll reports that

Casey startled his Pakistani hosts by proposing that they take the Afghan war into enemy territory — into the Soviet Union itself. Casey wanted to ship subversive propaganda through Afghanistan to the Soviet Union’s predominantly Muslim southern republics. The Pakistanis agreed, and the CIA soon supplied thousands of Korans, as well as books on Soviet atrocities in Uzbekistan and tracts on historical heroes of Uzbek nationalism, according to Pakistani and Western officials.[40]

.. The U.S.-built Stinger antiaircraft missile, supplied to the mujahideen in very large numbers beginning in 1986, struck a decisive blow to the Soviet war effort as it allowed the lightly armed Afghans to effectively defend against Soviet helicopter landings in strategic areas. The Stingers were so renowned and deadly that, in the 1990s, the U.S. conducted a “buy-back” program to keep unused missiles from falling into the hands of anti-American terrorists. This program may have been covertly renewed following the U.S. intervention in Afghanistan in late 2001, out of fear that remaining Stingers could be used against U.S. forces in the country.[49]

.. The Stinger missiles supplied by the United States gave Afghan guerrillas, generally known as the Mujahideen, the ability to destroy the dreaded Mi-24D helicopter gunships deployed by the Soviets to enforce their control over Afghanistan. Three of the first four Stingers fired each took down a gunship. The guerrillas were now able to challenge Soviet control of the airspace above the battlefield.[50]

— CIA – Central Intelligence Agency

Reagan’s program assisted in ending the Soviet occupation in Afghanistan,[51][52] with the Soviets unable to quell the insurgency. On 20 July 1987, the withdrawal of Soviet troops from the country was announced pursuant to the negotiations that led to the Geneva Accords of 1988,[53] with the last Soviets leaving on 15 February 1989. Soviet forces suffered over 14,000 killed and missing, and over 50,000 wounded.[citation needed] The withdrawal helped precipitate the dissolution of the Soviet Union itself.[5]

 

.. The U.S. offered two packages of economic assistance and military sales to support Pakistan’s role in the war against the Soviet troops in Afghanistan. The first six-year assistance package (1981–87) amounted to US$3.2 billion, equally divided between economic assistance and military sales. The U.S. also sold 40 F-16 aircraft to Pakistan during 1983–87 at a cost of $1.2 billion outside the assistance package. The second six-year assistance package (1987–93) amounted to $4.2 billion. Out of this, $2.28 billion were allocated for economic assistance in the form of grants or loan that carried the interest rate of 2–3 per cent. The rest of the allocation ($1.74 billion) was in the form of credit for military purchases. More than $20 billion in U.S. funds were funneled into the country to train and arm the Afghan resistance groups.[54]

The program funding was increased yearly due to lobbying by prominent U.S. politicians and government officials, such as Charles WilsonGordon HumphreyFred Ikle, and William Casey. Under the Reagan administration, U.S. support for the Afghan mujahideen evolved into a centerpiece of U.S. foreign policy, called the Reagan Doctrine, in which the U.S. provided military and other support to anti-communist resistance movements in Afghanistan, Angola, and Nicaragua.[citation needed]

The mujahideen benefited from expanded foreign military support from the United StatesSaudi ArabiaPakistan, United Kingdom and other Muslim nations. Saudi Arabia in particular agreed to match dollar for dollar the money the CIA was sending to the Mujahideen. When Saudi payments were late, Wilson and Avrakotos would fly to Saudi Arabia to persuade the monarchy to fulfil its commitments.[55]

Levels of support to the various Afghan factions varied. The ISI tended to favor vigorous Islamists like Hekmatyar’s Hezb-i-Islami and Haqqani. Some Americans agreed.[55][56] However others favored the relative moderates like Ahmed Shah Massoud. These included two Heritage Foundation foreign policy analysts, Michael Johns and James A. Phillips, both of whom championed Massoud as the Afghan resistance leader most worthy of US support under the Reagan Doctrine.[57][58][59]

After the withdrawal of Soviet troops, the U.S. shifted its interest from Afghanistan. American funding of Hekmatyar and his Hezb-i-Islami party was cut off immediately.[60] The U.S. also reduced its assistance for Afghan refugees in Pakistan.[citation needed]

In October 1990, U.S. President George H. W. Bush refused to certify that Pakistan did not possess a nuclear explosive device, triggering the imposition of sanctions against Pakistan under the Pressler Amendment (1985) to the Foreign Assistance Act (1961). This disrupted the second assistance package offered in 1987 and discontinued economic assistance and military sales to Pakistan with the exception of the economic assistance already on its way to Pakistan. Military sales and training programs were abandoned as well and some of the Pakistani military officers under training in the U.S. were asked to return home.[33]

As late as 1991 Charlie Wilson persuaded the House Intelligence Committee to continue the funding of the Mujahideen, providing them with $200 million for fiscal year 1992. With the matching funds from Saudi Arabia, this amounted to $400 million for that year. Afghan tribes were also delivered weapons which the United States captured from Iraq during the Gulf War.[61]

 

The U.S. government has been criticized for allowing Pakistan to channel a disproportionate amount of its funding to the controversial Hekmatyar,[62] whom Pakistani officials believed was “their man”.[63] Hekmatyar has been criticized for killing other mujahideen and attacking civilian populations, including shelling Kabul with American-supplied weapons, causing 2,000 casualties. Hekmatyar was said to be friendly with Osama bin Laden, founder of al-Qaeda, who was running an operation for assisting “Afghan Arab” volunteers fighting in Afghanistan, called Maktab al-Khadamat. Alarmed by his behavior, Pakistan leader General Zia warned Hekmatyar, “It was Pakistan that made him an Afghan leader and it is Pakistan who can equally destroy him if he continues to misbehave.”[64] The CIA and State Department have been criticized for publishing textbooks intended to indoctrinate children with racism and hatred towards foreigners and towards non-muslim Afghans.[62] The CIA and State Department have been criticized for their direct relationship with Hekmatyar, beyond ISI contact,[41][42] in spite of his being one of the leading heroin smugglers in the region.[65]

In the late 1980s, Pakistani prime minister Benazir Bhutto, concerned about the growing strength of the Islamist movement, told President George H. W. Bush, “You are creating a Frankenstein.”[66]

Others have asserted funding the mujahideen may have played a role in causing the September 11 attacks. A number of political commentators have described Al-Qaeda attacks as “blowback” or an unintended consequence of American aid to the mujahideen.[67]

Alleged connections of CIA assistance to Bin Laden[edit]

Some have alleged that bin Laden and al Qaeda were beneficiaries of CIA assistance. This is challenged by experts such as Coll—who notes that declassified CIA records and interviews with CIA officers do not support such claims—and Peter Bergen, who argues: “The theory that bin Laden was created by the CIA is invariably advanced as an axiom with no supporting evidence.”[68][69] Bergen insists that U.S. funding went to the Afghan mujahideen, not the Arab volunteers who arrived to assist them.[69]

However, Sir Martin Ewans noted that the Afghan Arabs “benefited indirectly from the CIA’s funding, through the ISI and resistance organizations,”[70] and that “it has been reckoned that as many as 35,000 ‘Arab-Afghans’ may have received military training in Pakistan at an estimated cost of $800 million in the years up to and including 1988.”[71] Some of the CIA’s greatest Afghan beneficiaries were Arabist commanders such as Haqqani and Hekmatyar who were key allies of bin Laden over many years.[72][73] Haqqani—one of bin Laden’s closest associates in the 1980s—received direct cash payments from CIA agents, without the mediation of the ISI. This independent source of funding gave Haqqani disproportionate influence over the mujahideen.[48] Haqqani and his network played an important role in the formation and growth of al Qaeda, with Jalalhuddin Haqqani allowing bin Laden to train mujahideen volunteers in Haqqani territory and build extensive infrastructure there.[74]

 

Follow the Money: Preparing for the Collapse of the Petrodollar System

In the final days of World War II, 44 leaders from all of the Allied nations met in Bretton Woods, New Hampshire in an effort to create a new global economic order. With much of the global economy decimated by the war, the United States emerged as the world’s new economic leader. The relatively young and economically nimble U.S. served as a refreshing replacement to the globe’s former hegemon: a debt-ridden and war-torn Great Britain.

In addition to introducing a number of global financial agencies, the historic meeting also created an international gold-backed monetary standard which relied heavily upon the U.S. Dollar.

Initially, this dollar system worked well. However, by the 1960’s, the weight of the system upon the United States became unbearable. On August 15, 1971President Richard M. Nixon shocked the global economy when he officially ended the international convertibility from U.S. dollars into gold, thereby bringing an official end to the Bretton Woods arrangement.

Two years later, in an effort to maintain global demand for U.S. dollars, another system was created called the petrodollar system. In 1973, a deal was struck between Saudi Arabia and the United States in which every barrel of oil purchased from the Saudis would be denominated in U.S. dollars. Under this new arrangement, any country that sought to purchase oil from Saudi Arabia would be required to first exchange their own national currency for U.S. dollars. In exchange for Saudi Arabia’s willingness to denominate their oil sales exclusively in U.S. dollars, the United States offered weapons and protection of their oil fields from neighboring nations, including Israel.

By 1975, all of the OPEC nations had agreed to price their own oil supplies exclusively in U.S. dollars in exchange for weapons and military protection.

This petrodollar system, or more simply known as an “oil for dollars” system, created an immediate artificial demand for U.S. dollars around the globe. And of course, as global oil demand increased, so did the demand for U.S. dollars.

As the U.S. dollar continued to lose purchasing power, several oil-producing countries began to question the wisdom of accepting increasingly worthless paper currency for their oil supplies. Today, several countries have attempted to move away, or already have moved away, from the petrodollar system. Examples include IranSyriaVenezuela, and North Korea… or the “axis of evil,” if you prefer. (What is happening in our world today makes a whole lot of sense if you simply read between the lines and ignore the “official” reasons that are given in the mainstream media.) Additionally, other nations are choosing to use their own currencies for oil like China, Russia, and India, among others.

As more countries continue to move away from the petrodollar system which uses the U.S. dollar as payment for oil, we expect massive inflationary pressures to strike the U.S. economy. In this article, we will explain how this could be possible.

Alan Greenspan Talks About the Petrodollar System
PETRODOLLAR DEFINITION | The money that oil exporting nations receive from selling their oil which is then deposited into Western banks.

The Coming Collapse of the Petrodollar System

When historians write about the year 1944, it is often dominated with references to the tragedies and triumphs of World War II. And while 1944 was truly a pivotal year in one of history’s most devastating conflicts of all time, it was also a significant year for the international economic system. In July of that same year, the United Nations Monetary and Financial Conference (more commonly known as the Bretton Woods conference) was held in the Mount Washington hotel in Bretton Woods, New Hampshire. The historic gathering included 730 delegates from 44 Allied nations. The aim of the meeting was to regulate the war-torn international economic system.

During the three-week conference, two new international bodies were established.

These included:

In addition, the delegates introduced the General Agreement on Tariffs and Trade (GATT, later known as the World Trade Organization, or WTO.)

More importantly, for our purposes here, another development that emerged from the conference was a new fixed exchange rate regime with the U.S. Dollar playing a central role. In essence, all global currencies were pegged to the U.S. Dollar.

At this point, an appropriate question to be asking yourself is: ”Why would all of the nations be willing to allow the value of their currencies to be dependent upon the U.S. Dollar?

The answer is quite simple.

From Bretton Woods to the Petrodollar System

The U.S. Dollar would be pegged at a fixed rate to gold. This made the U.S. dollar completely convertible into gold at a fixed rate of $35 per ounce within the global economic community. This international convertibility into gold allayed concerns about the fixed rate regime and created a sense of financial security among nations in pegging their currency’s value to the dollar. After all, the Bretton Woods arrangement provided an escape hatch: if a particular nation no longer felt comfortable with the dollar, they could easily convert their dollars holdings into gold. This arrangement helped restore a much-needed stability in the financial system. But it also accomplished one other very important thing. The Bretton Woods agreement instantly created a strong global demand for U.S. dollars as the preferred medium of exchange.

And along with this growing demand for U.S. Dollars came the need for… a larger supply of dollars.

Now, before we continue this discussion, stop for a moment and ask yourself this question: Are there any obvious benefits from creating more dollars? And if so, who benefits?

First, the creation of more dollars allows for the inflation of asset prices. In other words, more dollars in existence allows for a rise in overall prices.

For example, imagine for a moment if the U.S. economy had a total money supply of only $1 million dollars. What if, in this imaginary economy, I attempted to sell you my home for $2 million dollars? While you may like my home, and may even want to buy it, it would be physically impossible for you to do so. And it would be completely absurd for me to ask for $2 million because, in our imaginary economy, there is only $1 million in existence.

So an increase in the overall money supply allows asset prices to rise.

But that’s not all.

The Petrodollar System creates an artificial demand for U.S. Dollars which allows asset prices to rise

The United States government benefits from a global demand for U.S. dollars. How? It’s because a global demand for dollars gives the Federal government a “permission slip” to print more. After all, we can’t let our global friends down, can we? If they “need” dollars, then let’s print some more dollars for them.

Is it a coincidence that printing dollars is the U.S. government’s preferred method of dealing with our nation’s economic problems?

Remember, Washington only has four basic ways to solve its economic problems:

1. Increase income by raising taxes on the citizens

2. Cut spending by reducing benefits

3. Borrow money through the issuance of government bonds

4. Print money

Raising taxes and making meaningful spending cuts can be political suicide. Borrowing money is a politically convenient option, but you can only borrow so much. That leaves the final option of printing money. Printing money requires no immediate sacrifice and no spending cuts. It’s a perfect solution for a growing country that wants to avoid making any sacrifices. However, printing more money than is needed can lead to inflation. Therefore, if a country can somehow generate a global demand for its currency, it has a “permission slip” to print more money. Understanding this “permission slip” concept will be important as we continue.

Finally, the primary beneficiary of an increased global demand for the U.S. Dollar is America’s central bank, the Federal Reserve. If this does not make immediate sense, then pull out a dollar bill from your wallet or purse and notice whose name is plastered right on the top of it.

Have you ever asked yourself why the U.S. Dollar is called a Federal Reserve Note?

Once again, the answer is simple.

The U.S. Dollar is issued and loaned to the United States government by the Federal Reserve.

Because our dollars are loaned to our government by the Federal Reserve, which is a private central banking cartel, the dollars must be paid back. And not only must the dollars be paid back to the Federal Reserve. They must be paid back with interest!

And who sets the interest rate targets on the loaned dollars? It’s the Federal Reserve, of course.

Federal Reserve Note - Money is Debt and Debt is Money

To put it simply, the Federal Reserve has a clear vested interest in maintaining a stable and growing global demand for U.S. Dollars because they create them and then earn profit from them with interest rates which they set themselves. What a great system the Federal Reserve has for itself. No wonder it hates oversight and intervention. No wonder the private banking cartel that runs the Federal Reserve despises all attempts to actually audit its books.

In summary, the American consumer, the Federal government, and Federal Reserve all benefit to varying degrees from a global demand for U.S. Dollars.

The Bretton Woods Breakdown: Vietnam, The Great Society, and Deficit Spending

There is an old saying that goes, “He who holds the gold makes the rules.” This statement has never been truer than in the case of America in the post-World War II era. By the end of the war, nearly 80 percent of the world’s gold was sitting in U.S. vaults, and the U.S. Dollar had officially become the world’s undisputed reserve currency.

As a result of the Bretton Woods arrangement, the dollar was considered to be “as safe as gold.”

A study of the United States economy in the post-World War II era demonstrates that this was a time of dramatic economic growth and expansion. This era gave rise to the baby boomer generation. By the late 1960’s, however, the American economy was under major pressure. Deficit spending in Washington was uncontrollable as President Lyndon B. Johnson began to realize his dream of a “Great Society.”With the creation of Medicare and Medicaid, American citizens could now, for the first time, earn a living from their government.

The Breakdown of the Bretton Woods Arrangement - Lyndon B. Johnson - Vietnam, The Great Society, and Massive Deficit Spending

Meanwhile, an expensive and unpopular war in Vietnam funded by record deficit spending led some nations to question the economic underpinnings of America.

After all, the entire global economic order had become dependent upon a sound U.S. economy. Countries like Japan, Germany, and France, while fully on the mend from the devastation of World War II, were still largely dependent upon a financially stable American economy to maintain their economic growth.

By 1971, as America’s trade deficits increased and its domestic spending soared, the perceived economic stability of Washington was being publicly challenged by many nations around the globe. Foreign nations could sense the severe economic difficulties mounting in Washington as the United States was under financial pressure at home and abroad. According to most estimates, the Vietnam War had a price tag in excess of $200 billion. This mounting debt, plus other debts incurred through a series of poor fiscal and monetary policies, was highly problematic given America’s global monetary role.

But it was not America’s financial issues that most concerned the international economic community. Instead, it was the growing imbalance of U.S. gold reserves to debt levels that was most alarming.

The United States had accumulated large amounts of new debt but did not have the money to pay for them. Making matters worse, U.S. gold reserves were at all-time lows as nation after nation began requesting gold in exchange for their dollar holdings. It was almost as if foreign nations could see the writing on the wall for the end of the Bretton Woods arrangement.

As 1971 progressed, so did foreign demand for U.S. gold. Foreign central banks began cashing in their excess dollars in exchange for the safety of gold. As nations lined up to exchange their dollar holdings for Washington’s gold, the United States realized that the game was over. Clearly, America had never intended to be the globe’s gold warehouse. Instead, the convertibility of the dollar into gold was meant to generate a global trust in U.S. paper money. Simply knowing that the U.S. dollar could be converted into gold if necessary was good enough for some — but not for everyone. The nations which began to doubt America’s ability to manage their own finances decided to opt for the recognized safety of gold. (Historically, gold has been, and will likely remain, the beneficiary of poor fiscal and monetary policies, and 1971 was no different.)

One would have expected that the large and growing demand by foreign nations for gold instead of dollars would have been a strong indicator to the United States to get its fiscal house in order. Instead, America did exactly the opposite. As Washington continued racking up enormous debts to fund its imperial pursuits and its over-consumption, foreign nations sped up their demand for more U.S. gold and fewer U.S. dollars. Washington was caught in its own trap and was required to supply real money (gold) in return for the inflows of their fake paper money (U.S. dollars).

They had been hamstrung by their own imperialistic policies.

Soon the United States was bleeding gold. Washington knew that the system was no longer viable, and certainly not sustainable. But what could they do to stem the crisis? There were only two options.

The first option would require that Washington immediately reduce its massive spending and dramatically reduce its existing debts. This option could possibly restore confidence in the long-term viability of the U.S. economy. The second option would be to increase the dollar price of gold to accurately reflect the new economic realities. There was an inherent flaw in both of these options that made them unacceptable to the United States at the time… they both required fiscal restraint and economic responsibility. Then, as now, there was very little appetite for reducing consumption in the beleaguered name of “sacrifice” or “responsibility.”

Goodbye, Yellow Brick Road

The Bretton Woods system created an international gold standard with the U.S. dollar as the ultimate beneficiary. But in an ironic twist of fate, the system that was designed to bring stability to a war-torn global economy was threatening to plunge the world back into financial chaos. The gold standard created by Bretton Woods simply could not bear the financial excesses, coupled with the imperialistic pursuits, of the American economic empire.

On August 15, 1971, under the leadership of President Richard M. Nixon, Washington chose to maintain its reckless consumption and debt patterns by detaching the U.S. Dollar from its convertibility into gold. By “closing the gold window,” Nixon destroyed the final vestiges of the international gold standard. Nixon’s decision effectively ended the practice of exchanging dollars for gold, as directed under the Bretton Woods agreement. It was in this year, 1971, that the U.S. dollar officially abandoned the gold standard and was declared a purely “fiat” currency. (A “fiat” currency is one that derives it value from its sponsoring government. It is a currency issued and accepted by decree.)

Here’s a brief 2-minute excerpt of the actual televised speech delivered by President Nixon on August 15, 1971 in which he ended the U.S. Dollar’s convertibility into gold.

As all other fiat empires before it, Washington had come to view gold as a constraint to their colossal spending urges. A gold standard, as provided by the Bretton Woods system, meant that America had to attempt to publicly demonstrate fiscal restraint by maintaining holistic economic balance.

By “closing the gold window,” Washington had affected not only American economic policy — it also affected global economic policy. Under the international gold standard of Bretton Woods, all currencies derived their value from the value of the dollarAnd the dollar derived its value from the fixed price of its gold reserves. But when the dollar’s value was detached from gold, it became what economists call a “floating” currency. (By “floating,” it is meant that the currency is not attached, nor does it derive its value, from anything externally.) Put simply, a “floating” currency is a currency that is not fixed in value.

Like any commodity, the dollar could be affected by the market forces of supply and demand. When the dollar became a “floating” currency, the rest of the world’s currencies, which had been previously fixed to the dollar, suddenly became “floating” currencies as well. (Note: It did not take long for this new system of floating currencies with floating exchange rates to attract manipulation by speculators and hedge funds. Currency speculation is, and remains, a threat to floating currencies. Proponents of a single global currency use the current manipulation of currency speculators to promote their agenda.)

Petrodollar System

In this new era of floating currencies, the U.S. Federal Reserve, America’s central bank, had finally freed itself from the constraint of a gold standard. Now, the U.S. dollar could be printed at will — without the fear of not having enough gold reserves to back up new currency production. And while this new-found monetary freedom would alleviate pressure on America’s gold reserves, there were other concerns.

One major concern that Washington had was regarding the potential shift in global demand for the U.S. dollarWith the dollar no longer convertible into gold, would demand for the dollar by foreign nations remain the same, or would it fall?

The second concern had to do with America’s extravagant spending habits. Under the international gold standard of Bretton Woods, foreign nations gladly held U.S. debt securities, as they were denominated in gold-backed U.S. dollars. Would foreign nations still be eager to hold America’s debts despite the fact that these debts were denominated in a fiat debt-based currency that was backed by nothing?

 

The Iraq and Afghanistan wars were both “resource wars” sold to the American public under false pretenses. America’s empire of 700+ military bases in 130+ nations serves as a global oil protection service, not a national military seeking to protect American citizens. Instead of protecting our nation’s borders, the U.S. military is used by the Washington elites to protect the petrodollar system. The foundations of the American empire are now crumbling as emerging nations are no longer willing to spend their lives and their new found wealth propping up the U.S. consumer. Nor do they have any desire to tolerate the belligerence of the U.S. war machine.

Like all failing empires, America will fall under its own weight as more nimble economies arise in its wake. America’s attempts at regional dominance of Central Asia will lead to further friction with Russia and/or China. This friction will provide the spark for yet another war