COMMENTARY FROM jeffmoskin

thelivyjr
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Petrodollars

By James Chen

Reviewed By Gordon Scott

Updated Jul 30, 2020

What Are Petrodollars?

Petrodollars are U.S. dollars paid to an oil exporting country for the sale of the commodity.

Put simply, the petrodollar system is an exchange of oil for U.S. dollars between countries that buy oil and those that produce it.

The petrodollar was the result of the oil crisis in the mid-1970s when prices spiked to record levels.

It helped increase the stability of oil prices denominated in U.S. dollars.

The term regained notoriety in the early part of the 2000s when oil prices rose once again.

Although petrodollars initially referred primarily to money that Middle Eastern countries and members of the Organization of the Petroleum Exporting Countries (OPEC) received, the definition has broadened to include other countries in recent years.

Understanding Petrodollars

Petrodollars are oil revenues denominated in U.S. dollars.

They are the primary source of revenue for many oil-exporting members of OPEC, as well as other oil exporters in the Middle East, Norway, and Russia.

Because petrodollars are denominated in U.S. dollars — or greenbacks — their true purchasing power relies on both the core rate of U.S. inflation and the value of the U.S. dollar.

This means petrodollars will be affected by economic factors the same way the U.S. dollar is affected.

So if the value of the dollar falls, so does the value of petrodollars, and thus the government's revenue.

History of the Petrodollar System

The origins of the petrodollar system go back to the Bretton Woods Agreement, which replaced the gold standard with the U.S. dollar as the reserve currency.

Under the agreement, the U.S. dollar was pegged to gold, while other global currencies were pegged to the U.S. dollar.

But because of massive stagflation, President Nixon announced in 1971 that the greenback would no longer be exchanged for gold to boost economic growth for the U.S.

That led to the creation of the petrodollar system, where the U.S. and Saudi Arabia agreed to set oil prices in U.S. dollars.

That meant any other country that purchased oil from the Saudi government would have to exchange its currency into U.S. dollars before completing the sale.

That led the remaining OPEC countries to follow suit and price their oil in U.S. currency.

The Collapse of the Petrodollar System?

With the decline in the purchasing power of the greenback, some nations started to debate the benefits of the petrodollar system.

Countries like Iran, Russia, and India have considered shifting the base value of their exports in their own currency rather than the U.S. dollar.

In late 2017, China announced that it considered moving to price oil in the yuan.

Because it is the world's biggest importer of oil, China saw it as a logical shift to price the world's most important commodity.

[Important: Venezuela dropped the petrodollar in 2017 and began pricing oil in euros and the yuan.]

https://www.investopedia.com/terms/p/petrodollars.asp
thelivyjr
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Re: COMMENTARY FROM jeffmoskin

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thelivyjr wrote: Thu Mar 04, 2021 1:40 p Petrodollars

By James Chen

Reviewed By Gordon Scott

Updated Jul 30, 2020

Important: Venezuela dropped the petrodollar in 2017 and began pricing oil in euros and the yuan.


https://www.investopedia.com/terms/p/petrodollars.asp
The U.S. put the chop on Saddam, and then, having spent all of its energy, it isn't able to do anything about a third-world country like Venezuela, which sends out a message to the rest of the world that the U.S. is a lot of bark and bluster, but nothing else ...

Way back when, on the John Kerry forum, you and I talked about the rest of the world getting together to squeeze the US out into the cold and we wouldn't be able to prevent it, since it is economic warfare that is waged against us, not armed conflict ...

Venezuela has proved that you don't have to be on the petrodollar system to sell oil ...
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Re: COMMENTARY FROM jeffmoskin

Post by jeffmoskin »

More important than SELLING oil for USD is PRICING and TRADING oil futures for USD. That is where there is big money to be made, and that is why as long as oil it priced in USD the USD will be in high demand around the globe.
thelivyjr
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Re: COMMENTARY FROM jeffmoskin

Post by thelivyjr »

A good point!
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Re: COMMENTARY FROM jeffmoskin

Post by jeffmoskin »

More money to be made gambling on the price of oil than selling it. That's what Enron found out. They made a lot of money right up until they went broke.
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Re: COMMENTARY FROM jeffmoskin

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An interesting perspective, jeffmoskin!
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Re: COMMENTARY FROM jeffmoskin

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"Lenin was the greatest man, second only to Hitler, and that the difference between communism and the Hitler faith was very slight."

- The New York Times, “HITLERITE RIOT IN BERLIN: Beer Glasses Fly When Speaker Compares Hitler and Lenin,” (Nov. 28, 1925) p. 4.

History is a fascinating subject ...
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Re: COMMENTARY FROM jeffmoskin

Post by jeffmoskin »

The difference between Fascism and Communism is very slight?
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Re: COMMENTARY FROM jeffmoskin

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"Stock-exchange capital is not productive but parasitically hoarded capital."

"It is no longer tied to the soil but rootless and internationalist; it does not produce but has infiltrated the normal production process in order to drain profits from it."

- Joesph Paul Goebbels as quoted in Ralf Georg Reuth, Goebbels, Harcourt Brace & Company, 1993, p. 68, “Little National Socialist’s ABC,” Goebbels’ draft presented on January, 24, 1926 meeting in Hanover

So said Joseph Paul Goebbels, anyway ...

He would know more about the actual mechanics of it than me ...

But in the meantime, I take him at his word ...

I think it is an interesting quote, and it comes from the world history that was swirling violently when you were young ...

Goebbels was in reality a Communist ...

That's something we learned when I was in kindergarten right after WWII and we young Americans were being taught about the world that we were going to be confronted with, which is how we got to here where we are today ...
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Re: COMMENTARY FROM jeffmoskin

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We will never get anywhere, if we lean on the interests of the cultured and propertied classes.

Everything will come to us if we appeal to the hunger and despair of the masses.

- Joseph Paul Goebbels as quoted in Curt Riess, Joseph Goebbels: A Biography, Abridged, Ballatine Books, New York (1960) p. 21 (mid-1920s)

That is why we place ourselves alongside Russia as equal partners in the struggle for this freedom which means everything to us.

- Joseph Paul Goebbels as quoted in “Orientation: West or East,” Nationalsozialistische Briefe, (National Socialist Letters) (15 January 1926), as quoted in Goebbels: A Biography, Peter Longerich , Random House, 2015, p. 65

Fascism is a system of enforcing a political ideology whereas Communism is the ideology to be enforced by Fascist methods ...

Stalin is deemed a Fascist because of his brutal methods to enforce Communism ...

And Goebbels comes to mind from listening to NPR radio news, which was Goebbels', favorite propaganda tool and when you listen to NPR (National Propaganda Radio) which is funded by FACEBOOK, you understand why, although I would say anyone who grew up as I did with only the radio, and some of those series they had on where the announcer was telling a story and there was some rudimentary sound effects knows well what fascinated Goebbels about the radio as the best propaganda tool ...
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