The End of the Petrodollar? Andy Schectman Warns of Potential Total Financial Collapse in the U.S.

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As a researcher with experience in global finance, I have closely followed the development and implications of the petrodollar system since its inception in the 1970s. The petrodollar agreement between the U.S. and Saudi Arabia has played a crucial role in maintaining the dollar’s dominant position in international finance, ensuring consistent demand for the currency and providing the U.S. with significant economic and geopolitical leverage.

As a researcher investigating the concept of oil pricing and currencies, I’ve come across the term “petrodollar,” which refers to the practice of transacting oil deals in U.S. dollars. This system took shape in the 1970s when the U.S. struck an arrangement with Saudi Arabia for their oil sales to be denominated in U.S. currency. In exchange, the U.S. offered military and economic assistance to Saudi Arabia. By establishing this practice, global oil trade was secured to occur in dollars, thereby bolstering the dollar’s influential role within international finance.

Importance of the Petrodollar

The petrodollar system has significant implications for the U.S. economy:

  • Global Demand for the Dollar: Since oil is priced in dollars, countries need to hold large reserves of U.S. dollars to purchase oil. This consistent demand helps maintain the dollar’s value and stability.
  • Economic Influence: The U.S. retains substantial influence over the global financial system because oil transactions are conducted in dollars. This supports the dollar’s status as the world’s primary reserve currency, providing the U.S. with economic and geopolitical leverage.
  • Inflation Control: Global demand for dollars helps keep U.S. inflation rates lower. When other countries hold and use dollars, it reduces the amount of currency circulating within the U.S., aiding in inflation control.
  • Financing Deficits: The demand for dollars allows the U.S. to finance its trade and budget deficits more easily, as other countries are more likely to purchase U.S. debt, enabling the country to borrow at lower interest rates.

Recent Media Reports on Saudi Arabia and the Petrodollar

Reports indicate that Saudi Arabia is considering shifting away from selling oil only in U.S. dollars, potentially disrupting the long-standing petrodollar system.

As an analyst, I’d rephrase it this way: The petrodollar agreement between Saudi Arabia and the U.S., which has been in place for five decades, reached its expiration date on June 9, 2024. This means that Saudi Arabia now has the freedom to sell oil using currencies other than the dollar. Such a move could potentially diminish the dollar’s global dominance.

As a researcher, I’ve discovered that Saudi Arabia has decided against renewing the petrodollar agreement, enabling oil transactions to be conducted in currencies other than the US dollar. This shift could potentially reshape the global financial landscape and perhaps even challenge the US dollar’s dominant role.

PolitiFact examined claims that Saudi Arabia would let the petrodollar agreement expire. Experts indicated that no formal agreement between the U.S. and Saudi Arabia was known to exist, suggesting that the petrodollar concept might be more informal. Read more

In a recent discourse, Radio Free Asia addressed rumors circulating on Chinese social platforms about the alleged termination of the petrodollar agreement. However, these speculations were devoid of solid proof.

According to Global Law Today’s report, numerous news sources have raised doubts about the continuation of the petrodollar system, with some questioning if a binding agreement truly exists. For further information, please refer to the article.

Andy Schectman’s Insights on the Petrodollar and Global Finance

Michelle Makori, the Lead Anchor and Editor-in-Chief at Kitco News, recently held an interview with Andy Schectman, the President and Owner of Miles Franklin Precious Metals. During the conversation, Schectman expressed his viewpoint that the rumored expiration of the petrodollar agreement could signify the end of fiat currency’s dominance, paving the way for a resurgence of commodity-backed money.

Schectman highlighted the potential implications of this transition, suggesting that it could bring about substantial shifts in the international financial landscape. Specifically, he foresaw a scenario where countries no longer required US dollars to buy oil, leading to an influx of these dollars back into the United States. The consequences of such a development could include elevated inflation rates and potentially increased interest costs.

“According to Schectman, there are significantly more US dollars in existence outside the country than within due to the hoarding of greenbacks for oil purchases over the past 50 years. When these dollars return to the United States and are exchanged back, leading to a decrease in demand, inflation rates may surge as a result. The addition of these currency units to the monetary base could also trigger an increase in interest rates.”

In simple terms, if the dollar were to fail, so too would the stock market, bond market, banking system, and insurance companies. Essentially, a catastrophic event would ensue, marking the beginning of a major financial overhaul.

I’d note that he delved into the wider geopolitical landscape, touching upon the implications of sanctions against China and Russia, the use of the U.S. dollar as a weapon, and the growing trend toward de-dollarization. He emphasized that BRICS nations’ meetings symbolize shifting global dynamics and hinted at the possibility of introducing a new BRICS currency, while Saudi Arabia’s involvement adds to the dollar’s diminishing influence.

In the emerging financial terrain, Schectman emphasized the significance of gold, implying a shift toward a system characterized by commodities and transparency. He posited that the trend away from the U.S. dollar would persist due to geopolitical and economic influences. Central banks have been amassing gold at unprecedented rates while decreasing their U.S. dollar holdings.

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2024-07-13 00:28