Myth Of The 20th Century – Episode 10: Petrodollar – American Political Economy

Welcome to the Myth of the 20th Century. The podcast airs on Fridays.

— Brought to you by —

Adam Smith, Alex Nicholson (and Ryan Landry)

Notes:

The United States dollar is undisputed as the world’s most dominant reserve currency. What is disputed, however, is to what degree this is good for the world, let alone the United States. Also disputed is how sustainable this arrangement is, given perennial trade and US government budget deficits that call into question the strength of the underlying economic system. Originally backed by the gold standard in the 1947 Bretton Woods arrangement, countries like De Gaul’s France began calling for a break from the US dollar reserve system after years of budget and trade deficits caused by social spending, wars, and an oil shock led to the drawdown of American gold reserves by nearly half until President Nixon closed the gold window in 1974. To replace this, the Petrodollar system was setup to guarantee the demand for US dollars would remain in the world markets by having Saudi Arabia, by then the world’s largest swing producer, only sell oil in American greenbacks. They also then agreed to invest their surpluses into US Treasuries, enabling the US government nominally lower yields on its deficit financing. As America’s national debt approaches $20 trillion, however, and over 40 years of trade deficits have left Middle America’s manufacturing jobs moved overseas and the traditional pathway for millions of Americans into the middle class stripped away, America and the world once again questions its ability to maintain a world reserve currency, and the costs of attempting to sustain it.

Today we’re joined by special guest Ryan Landry to discuss his recent article The Modern Economy and the Consequences of the Petrodollar.

Timeline:

1950- Saudi-ARAMCO agreement signed giving 50/50 revenue split
1960- OPEC formed
1965- France’s De Gaulle voices concern about the viability of the US-backed gold standard
1967- London Gold Pool collapses after French withdraw
1970- The United States hits peak domestic oil production and begins era of massive oil imports
1971- Nixon closes the United States gold window
1973- Yom Kippur War
1973-74- Arab Oil Embargo
1974- Kissinger arranges for Petrodollar in the Technical Cooperation Agreement
1980-1988- Iran-Iraq War
1986- Saudi Arabia increases oil production, cratering global oil prices
1990- Iraq invades Kuwait
1991- US-led coalition in Operation Desert Storm repels Iraqi forces from Kuwait
2001- Osama bin Laden claims responsibility for attacks in New York, Washington D.C. citing US military presence in Saudi Arabia
2003- US invades Iraq
2003- US Combat Air Operations moved from Prince Sultan Airbase in Saudi Arabia to Al Udeid Air Base built in Qatar
2006- Israel-Lebanon War
2010- Arab Spring spreads from Tunisia to Egypt, Libya, Yemen, Syria, and Bahrain
2012-Present- Syrian Civil War
2014-Present- Libyan Civil War
2015-Present- European migrant crisis

References:

– The Kingdom of Oil, Vicker (1974)
– The Prize, Yergin (1990)
– In an Uncertain World, Rubin (2003)
– Confessions of an Economic Hit Man, Perkins (2004)
– Petrodollar Warfare, Clark (2005)
– Nine Charts about Wealth Inequality in America (2013) – http://apps.urban.org/features/wealth-inequality-charts/
– Kissinger, Saudis and Birthing the Petrodollar, 28Sherman (2013) – https://28sherman.blogspot.co.uk/2013/10/kissinger-saudis-and-birthing.html
– The Corporate Illogic of Outsourcing and Offshoring, Smith (2014) – http://www.nakedcapitalism.com/2014/07/corporate-illogic-outsourcing-offshoring.html
– The Structure and Genius of ISIS, Landry (2015) – http://www.socialmatter.net/2015/08/02/the-structure-and-genius-of-isis/
– Expert: Oil Price Wars Fatally Wounded the Petrodollar, Russia Insider (2015) – http://russia-insider.com/en/2015/02/04/3126
– Manufacturing Job Loss – Trade, Not Productivity, Is the Culprit, Scott (2015) – http://www.epi.org/publication/manufacturing-job-loss-trade-not-productivity-is-the-culprit/
– WikiLeaks Shows a Saudi Obsession With Iran, Hubbard and Sheikh (2015) – https://www.nytimes.com/2015/07/17/world/middleeast/wikileaks-saudi-arabia-iran.html
– The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt Secret, Bloomberg (2016) – https://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret
– End Of An Era: The Rise And Fall Of The Petrodollar System, Zerohedge (2016) – http://www.zerohedge.com/news/2016-07-22/end-era-rise-and-fall-petrodollar-system
– Not All Geopolitical Problems Are America’s Fault, Landry (2016) – http://www.socialmatter.net/2016/01/31/not-all-geopolitical-pro
– Dark Alliance – The CIA, Contras, and the Crack-Cocaine Epidemic, Smith (2016) – https://myth20c.wordpress.com/2016/10/03/dark-alliance-the-cia-contras-and-the-crack-cocaine-epidemic/
– The CIA – Wilderness of Mirrors, Myth of the 20th Century (2017) – http://www.socialmatter.net/2017/02/17/myth-20th-century-episode-7-cia-wilderness-mirrors/
– Here’s How The Trump Presidency Will Play Out, Escobar (2017) – http://www.zerohedge.com/news/2017-01-21/pepe-escobar-heres-how-trump-presidency-will-play-out
– The Modern Economy and the Consequences of the Petrodollar, Landry (2017) – http://www.socialmatter.net/2017/02/12/the-petrodollar-and-its-consequences/
– Petrodollar Recycling, Wikipedia – https://en.wikipedia.org/wiki/Petrodollar_recycling
– Price to Rent Ratios in the United States, Zillow – http://zillow.com/research/data
– Petrodollar, Wikispooks – https://wikispooks.com/wiki/Petrodollar
– Oil Sankey Diagrams – http://www.sankey-diagrams.com/tag/oil/
– Triffin’s Dilemma – https://en.wikipedia.org/wiki/Triffin_dilemma
– Yinon Plan – https://en.wikipedia.org/wiki/Yinon_Plan

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2 Comments

  1. Minor typo:

    France’s Deb Gaulle -> De Gaulle

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