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Old 03-22-2012, 09:21 PM
 
4,538 posts, read 4,816,145 times
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All of the CEO's that have outsourced plants and jobs and have built China and India into superpowers - will now get America bitten in the ass big time.

"If you are not familiar with the petrodollar system, it really is not that complicated. Basically, almost all of the oil in the world is traded in U.S. dollars. The origin of the petrodollar system was detailed in a recent article by Jerry Robinson....

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.

Once you understand the petrodollar system, it becomes much easier to understand why our politicians treat Saudi leaders with kid gloves. The U.S. government does not want to see anything happen that would jeopardize the status quo.

A recent article by Marin Katusa described some more of the benefits that the petrodollar system has had for the U.S. economy....

The "petrodollar" system was a brilliant political and economic move. It forced the world's oil money to flow through the US Federal Reserve, creating ever-growing international demand for both US dollars and US debt, while essentially letting the US pretty much own the world's oil for free, since oil's value is denominated in a currency that America controls and prints. The petrodollar system spread beyond oil: the majority of international trade is done in US dollars. That means that from Russia to China, Brazil to South Korea, every country aims to maximize the US-dollar surplus garnered from its export trade to buy oil.

The US has reaped many rewards. As oil usage increased in the 1980s, demand for the US dollar rose with it, lifting the US economy to new heights.

But even without economic success at home the US dollar would have soared, because the petrodollar system created consistent international demand for US dollars, which in turn gained in value. A strong US dollar allowed Americans to buy imported goods at a massive discount – the petrodollar system essentially creating a subsidy for US consumers at the expense of the rest of the world. Here, finally, the US hit on a downside: The availability of cheap imports hit the US manufacturing industry hard, and the disappearance of manufacturing jobs remains one of the biggest challenges in resurrecting the US economy today.

So what happens if the petrodollar system collapses?

Well, for one thing the value of the U.S. dollar would plummet big time.

U.S. consumers would suddenly find that all of those "cheap imported goods" would rise in price dramatically as would the price of gasoline.

If you think the price of gas is high now, you just wait until the petrodollar system collapses.

In addition, there would be much less of a demand for U.S. government debt since countries would not have so many excess U.S. dollars lying around."

Saudi Arabia And China Team Up To Build A Gigantic New Oil Refinery – Is This The Beginning Of The End For The Petrodollar?
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Old 03-22-2012, 10:17 PM
 
Location: Vancouver, B.C., Canada
11,155 posts, read 29,341,529 times
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Well As a Canadian I say the U.S. and Canada should go in on the cost 50/50 and Team up and build TWO Gigantic New Oil Refineries and tell OPEC to get lost and that we got or own supply and don't need em no more...

I mean China still needs us for every other Resource so we got them right where we want them in a sense.
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Old 03-22-2012, 10:34 PM
 
Location: Beautiful Niagara Falls ON.
10,016 posts, read 12,589,326 times
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The days of the USD being the world's reserve currency are numbered. However and this is a big however, China will do everything in it's power to keep the USD as the reserve currency. The reason for this is quite elementary to say the least. The OP states the value of the USD will plummet and this is probably so. China holds trillions in USD and has up to now done everything to hold up the value of the currency. When the USD declines, China buys massive USD just to hold it up. Every cent it declines costs China billions.
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Old 03-22-2012, 10:36 PM
 
29,407 posts, read 22,028,424 times
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Quote:
Originally Posted by GTOlover View Post
Well As a Canadian I say the U.S. and Canada should go in on the cost 50/50 and Team up and build TWO Gigantic New Oil Refineries and tell OPEC to get lost and that we got or own supply and don't need em no more...

I mean China still needs us for every other Resource so we got them right where we want them in a sense.
Too many moose and beetles running around to get our own oil. Of course when the sheet hits the fan like many of us have been saying for some time and oil begins to be traded in basket currencies instead of US dollars we'll see how much folks really care about those beetles.
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Old 03-22-2012, 10:38 PM
 
29,407 posts, read 22,028,424 times
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Quote:
Originally Posted by lucknow View Post
The days of the USD being the world's reserve currency are numbered. However and this is a big however, China will do everything in it's power to keep the USD as the reserve currency. The reason for this is quite elementary to say the least. The OP states the value of the USD will plummet and this is probably so. China holds trillions in USD and has up to now done everything to hold up the value of the currency. When the USD declines, China buys massive USD just to hold it up. Every cent it declines costs China billions.
Pay attention lucky one. China has been divesting itself of us treasury notes and hoarding gold for the last year or so.
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Old 03-22-2012, 10:41 PM
 
Location: Beautiful Niagara Falls ON.
10,016 posts, read 12,589,326 times
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Quote:
Originally Posted by GTOlover View Post
Well As a Canadian I say the U.S. and Canada should go in on the cost 50/50 and Team up and build TWO Gigantic New Oil Refineries and tell OPEC to get lost and that we got or own supply and don't need em no more...

I mean China still needs us for every other Resource so we got them right where we want them in a sense.
Contrary to what you think, Canada needs to free itself from dependence on the USA for our economic lifeblood. Thankfully our political leaders also see things this way. While exports to the USA have stagnated over the last few years Canada's trade with other nations, especially Asia have grown greatly. It's totally against the best interests of Canada not to become the global player we WILL become and consign ourselves as a secondary vassel to the USA.
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Old 03-23-2012, 12:35 AM
 
Location: Limbo
6,512 posts, read 7,557,408 times
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The US will go to the ends of the earth to make sure oil is traded in Dollars. For better or for worse.
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Old 03-23-2012, 01:22 AM
 
29,407 posts, read 22,028,424 times
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Originally Posted by emcee squared View Post
The US will go to the ends of the earth to make sure oil is traded in Dollars. For better or for worse.
That appears to be the path we are on until the US does something about it's monetary policy. Ron Paul is the only one who even talks about this issue and he is considered a quack or a flake by the Dem and Repub candidates. I wonder why that is? Of course the sheep follow suit so there is no chance of anything changing. I guess we are along for the ride until it all collapses like the house of cards it is.
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Old 03-23-2012, 01:27 AM
 
323 posts, read 321,919 times
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No the end of America unless we act quickly!
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Old 03-23-2012, 02:55 AM
 
Location: Texas
14,076 posts, read 20,544,740 times
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I see nothing in that link to support the conclusion that a new refinery will lead to the end of the petrodollar. The author speculates some, but never quite shows how that will happen because of this new refinery.

In any case, so long as Saudi Arabia depend on us to defend them against Iran, they're not going to do anything to tick us off.
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