Michael Snyder’s Substack: The Truth About What Is Happening To the Petrodollar

The past few weeks have seen a number of stories about the death of the petrodollar. Essentially, the petrodollar is a deal struck between the U.S. and Saudi Arabia in 1974.

In exchange for military protection, the Saudis agreed to price oil sales in the U.S. dollar. And to invest excess cash into assets such as U.S. Treasury bonds. This deal has held up for the past 50 years. But the world is changing.

While the petrodollar isn’t officially dead, it is shifting. Most oil continues to be sold in dollars globally. But other currencies, such as the Euro, are also used to facilitate deals.

And emerging market countries, led by the BRIC nations, are working on a new currency and trading agreement. That could further weaken the use of the dollar as the standard for international trade.

As this trend shifts, so too will demand for U.S. dollars in international trade.

If the U.S. is unable to continue enjoying a massive global market for the dollar, there could be trouble. That’s because spreading the dollar globally makes it easier to print money and fund debt. With a smaller circulation, it would make it more likely to produce inflation.

With U.S. debt soaring, the dollar’s decline in world trade could prove a long-term danger. But the petrodollar isn’t quite dead yet.

To read the full analysis, click here.