From Petrodollar to Cryptocurrency

This analysis is evolving, and is intended as a dialogue and investigation more than a hypothesis or opinion piece. Please submit any recommended changes or factual corrections and engage in this dialogue to produce the most thorough overall analysis. Perhaps, through the power of crowd-sourced verification of news and analysis, we can come to a more thorough conclusion and recommended course of action together!

United States foreign policy is highly influenced by the instability of the U.S. Dollar and its dependency on ties to foreign oil. This has lead to seemingly endless wars and a climate of political uncertainty that no one seems to fully grasp. I hope to begin a dialogue here by pointing out the history of our current monetary system and stating what, I believe, is happening to the United States because of the petrodollar; and how cryptocurrency may offer a promising solution to this enormous problem.

The Bretton Woods Agreement, established in 1944, was an agreement to stabilize global currencies by pegging the price of several currencies to gold, and using the U.S. Dollar as a reserve currency for others to exchange for gold[2]. This greatly helped to standardize exchange rates and improved trade and cooperation among nations. The problem, however, was that U.S. Dollars were now used all over the world with an exchangeable value for gold. They were, therefore, globally traded "gold coupons" which were guaranteed by United States gold reserves. This became a problem because the United States was then expected to have enough gold to back up all of the "gold coupons" circulating the globe. The U.S. did, in fact, have significant gold reserves at the time and the system remained very stable for decades, but eventually nations began asking for their gold and trading their gold coupons (U.S. Dollars) in for gold. The gold reserves of the United States then began to shrink at a rate which alarmed many politicians and bankers, at the very time when the U.S. had begun overspending and accumulating a great deal of national debt. This was an unsettling mix.

During this same time period, the demand for oil had been growing massively and the great oil reserves of the Middle East became the top geopolitical contention. Saudi Arabia became very wealthy and quickly became one of the most influential nations on Earth. This is when President Richard Nixon shocked the world by announcing that the U.S. Dollar would be removed from the gold standard and become a Fiat Currency, backed by nothing more than trust in the U.S. Government.

How was this possible after Bretton Woods? Why did the world simply allow the United States to cancel their "gold coupons" with a simple statement of trust? It is because, behind closed doors, the Nixon administration had been brokering a deal with Saudi Arabia to back the U.S. Dollar with oil instead of gold. Agreements were made for the U.S. Dollar to become the ONLY currency usable for the trade of Saudi oil, in exchange for U.S. debt and a promise to provide military support[1]. This is how the U.S. became indebted to Saudi Arabia, both financially and geopolitically as a close military ally. The U.S. Dollar had been cancelled as the global "gold coupon" and reinstated as a mandatory global "oil coupon." It was a massively beneficial scheme to reign in the entire global oil market to prop up the U.S. Dollar. This is what many call "The Global Petrodollar."

This understanding is important because now the entire United States monetary system is based on the Saudi oil trade. If the world stops buying oil, the U.S. Dollar becomes worthless. The significance of this cannot be understated as a national security threat. If the U.S. Dollar devalued, the entire nation would be thrust into poverty and the economy would come to a screeching halt. This is an unimaginable bad scenario, leading to widespread looting and riots as well as the inability of the United States to pay foreign debts. It would lead to the wholesale selloff of land and resources to large debtors such as China. So the support of the U.S. Dollar wholly drives policy in Homeland Security, Defense, and Foreign Affairs.

Consider a scenario where a nation like China was able to transition entirely away from fossil fuels. This would dramatically decrease demand for Middle Eastern oil, and cause the value of U.S. Dollars ("oil coupons" or The Global Petrodollar) to drop to near-zero against the Chinese Yuan. This is why alternative energy sources are often de-funded or discouraged, because they represent a threat to The Global Petrodollar - which would not only harm the United States significantly, but would depress the entire interdependent global economy. Thus, this is a global economic concern, not simply a U.S. national security concern. This is why many nations fight together to support the trade of fossil fuels and also work to slow the growth of alternative energies.

Consider another scenario where an oil rich nation, such as Iraq decides to start trading their oil with currencies other than the US Dollar. This is exactly what happened in the year 2000, when Saddam Hussein stated that Iraq was going to switch from U.S. Dollars to Euros for their oil trade, openly stating that he did not want to continue trading with "the currency of the enemy"[3]. Many have speculated that this was the real reason for the continued U.S. posturing against Iraq following the seemingly unrelated events of 9/11. It certainly would be more understandable that we were protecting the U.S. Dollar (and the global economy) from collapse rather than going to war only because of Weapons of Mass Destruction (WMD). Additionally, Iraq was not the only nation to propose a similar shift away from The Global Petrodollar and face a similar end. Around the same time, Libyan leader Muammar al-Gaddafi was holding conferences and speaking openly to the African Union about his grand vision for a United Africa economically supported by a new monetary system with gold-backed dinar [4]. This would have pulled the entire African continent away from The Global Petrodollar. In 2011, Gaddafi was bombed and then brutally killed by NATO-backed rebels with, according to leaked emails, direction and support from the Hillary Clinton State Department [5]. This analysis does not hypothesize that these wars were ONLY a result of economic defense, but the facts and consequences of global economic collapse certainly support the notion that global allies would cooperate in preserving The Global Petrodollar from those who openly threaten it. This aligns with the priorities of global security, and may even be justified in the eyes of many, so it is important to separate this analysis from any definite conspiracy to topple any state leader who threatens the global economy. However, it is equally important to consider these details within that loose context.

...to be continued.

Preservation of United States Currency and Economy by Systematic Transition from Fiat Petrodollar to Cryptocurrency

REFERENCES

1. Wong, Andrea. 2016. The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt Secret. Bloomberg
   https://www.bloomberg.com/news/features/2016-05-30/the-untold-story-behind-saudi-arabia-s-41-year-u-s-debt-secret

2. Bretton Woods Agreement. Investopedia
   http://www.investopedia.com/terms/b/brettonwoodsagreement.asp

3. Dowell, William. 2000. Foreign Exchange: Saddam Turns His Back on Greenbacks
   http://content.time.com/time/magazine/article/0,9171,998512,00.html

4. RT. 2011. Saving the world economy from Gaddafi
   https://www.rt.com/news/economy-oil-gold-libya/

5. Wight, John. 2016. Hillary Clinton and the Brutal Murder of Gaddafi.
   http://www.counterpunch.org/2016/10/21/hillary-clinton-and-the-brutal-murder-of-qaddafi/