The Fascinating Story Of How The Petrodollar Was Born And Lived In Secrecy For Over 40 Years

Tyler Durden's picture

For decades, the story of Saudi Arabia recycling petrodollars, i.e., funding the US deficit by buying US Treasuries with proceeds of its crude oil sales (mostly to the US), while the US sweetened the deal by providing the Saudis with military equipment and supplies, remained entirely in the conspiracy realm, with no confirmation or official statement from the US Treasury department.

Now, that particular "theory" becomes the latest fact, thanks to a fascinating story by Bloomberg which gives the background and details of secret meeting between then-US Treasury secretary William Simon and his deputy, Gerry Parsky, and members of the Saudi ruling elite, and lays out the history of how the petrodollar was born.

Here is the background:

It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin.

 

Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets. But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia.

 

The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world.

 

It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks

As noted above, the framework of the required deal was simple: the U.S. would buy oil from Saudi Arabia and provide the kingdom military aid and equipment. In return, the Saudis would plow billions of their petrodollar revenue back into Treasuries and finance America’s spending.

The man leading the US negotiation, US Treasury Secretary William Simon, had just done a stint as Nixon’s energy czar, and "seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.”

But Simon, better than anyone else, understood the appeal of U.S. government debt and how to sell the Saudis on the idea that America was the safest place to park their petrodollars. With that knowledge, the administration hatched an unprecedented do-or-die plan that would come to influence just about every aspect of U.S.-Saudi relations over the next four decades (Simon died in 2000 at the age of 72).

In the beginning it wasn't easy: "it took several discreet follow-up meetings to iron out all the details, Parsky said."

But at the end of months of negotiations, Bloomberg writes, there remained one small, yet crucial, catch: King Faisal bin Abdulaziz Al Saud demanded the country’s Treasury purchases stay “strictly secret,” according to a diplomatic cable obtained by Bloomberg from the National Archives database."

The secret remains... until May 16 when the US Treasury for the first time ever revealed the full extent of Saudi TSY holdings.

 

Bloomberg adds that with a handful of Treasury and Federal Reserve officials, the secret was kept for more than four decades—until now. "In response to a Freedom-of-Information-Act request submitted by Bloomberg News, the Treasury broke out Saudi Arabia’s holdings for the first time this month after “concluding that it was consistent with transparency and the law to disclose the data,” according to spokeswoman Whitney Smith. The $117 billion trove makes the kingdom one of America’s largest foreign creditors."

The TIC data released later that day confirmed the FOIA response.

To be sure, as we commented in mid-May, it is very likely that the Treasury report is incomplete, and that the Saudis also own hundreds of billions in Treasurys held in custody with offshore trading centers such as Euroclear. After all, the current tally represents just 20 percent of its $587 billion of foreign reserves, well below the two-thirds that central banks typically keep in dollar assets

What’s more, the commitment to the decades-old policy of “interdependence” between the U.S. and Saudi Arabia, which arose from Simon’s debt deal and ultimately bound together two nations that share few common values, is showing signs of fraying. America has taken tentative steps toward a rapprochement with Iran, highlighted by President Barack Obama’s landmark nuclear deal last year. The U.S. shale boom has also made America far less reliant on Saudi oil.

Needless to say, the real total notional amount of Saudi holdings will eventually become known, especially if the middle-eastern nation follows through with its threat of liquidating some or all of them.  What is more notable, however, is that with the first disclosure of this data since the birth of the petrodollar, something appears to have changed:

What’s more, the commitment to the decades-old policy of “interdependence” between the U.S. and Saudi Arabia, which arose from Simon’s debt deal and ultimately bound together two nations that share few common values, is showing signs of fraying. America has taken tentative steps toward a rapprochement with Iran, highlighted by President Barack Obama’s landmark nuclear deal last year. The U.S. shale boom has also made America far less reliant on Saudi oil.

 

“Buying bonds and all that was a strategy to recycle petrodollars back into the U.S.,” said David Ottaway, a Middle East fellow at the Woodrow Wilson International Center in Washington. But politically, “it’s always been an ambiguous, constrained relationship.”

One thing that certainly changed is that in a world where central banks are ravenously buying up each others' (and their own) debt, the need for Petrodollar recyclers such as Saudi Arabia is no longer there. But that was not always the case:

[B]ack in 1974, forging that relationship (and the secrecy that it required) was a no-brainer, according to Parsky, who is now chairman of Aurora Capital Group, a private equity firm in Los Angeles. Many of America’s allies, including the U.K. and Japan, were also deeply dependent on Saudi oil and quietly vying to get the kingdom to reinvest money back into their own economies.

 

"Everyone—in the U.S., France, Britain, Japan—was trying to get their fingers in the Saudis’ pockets,” said Gordon S. Brown, an economic officer with the State Department at the U.S. embassy in Riyadh from 1976 to 1978. For the Saudis, politics played a big role in their insistence that all Treasury investments remain anonymous.

America's reliance on Saudi Arabia to fund its deficit - and obtain a cheap price for oil - meant that the kingdom would be granted Platinum status in every form of interaction with the US.

Tensions still flared 10 months after the Yom Kippur War, and throughout the Arab world, there was plenty of animosity toward the U.S. for its support of Israel. According to diplomatic cables, King Faisal’s biggest fear was the perception Saudi oil money would, “directly or indirectly,” end up in the hands of its biggest enemy in the form of additional U.S. assistance.

 

Treasury officials solved the dilemma by letting the Saudis in through the back door. In the first of many special arrangements, the U.S. allowed Saudi Arabia to bypass the normal competitive bidding process for buying Treasuries by creating “add-ons.” Those sales, which were excluded from the official auction totals, hid all traces of Saudi Arabia’s presence in the U.S. government debt market.

 

“When I arrived at the embassy, I was told by people there that this is Treasury’s business,” Brown said. “It was all handled very privately.”

 

* * *

Another exception was carved out for Saudi Arabia when the Treasury started releasing monthly country-by-country breakdowns of U.S. debt ownership. Instead of disclosing Saudi Arabia’s holdings, the Treasury grouped them with 14 other nations, such as Kuwait, the United Arab Emirates and Nigeria, under the generic heading “oil exporters”—a practice that continued for 41 years.

Meanwhile, Saudi Arabia continued buying: by 1977, Saudi Arabia had accumulated about 20 percent of all Treasuries held abroad, according to The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets by Columbia University’s David Spiro.

The deal led to assorted headaches: "an internal memo, dated October 1976, detailed how the U.S. inadvertently raised far more than the $800 million it intended to borrow at auction. At the time, two unidentified central banks used add-ons to buy an additional $400 million of Treasuries each. In the end, one bank was awarded its portion a day late to keep the U.S. from exceeding the limit.

Most of these maneuvers and hiccups were swept under the rug, and top Treasury officials went to great lengths to preserve the status quo and protect their Middle East allies as scrutiny of America’s biggest creditors increased.

 

Over the years, the Treasury repeatedly turned to the International Investment and Trade in Services Survey Act of 1976—which shields individuals in countries where Treasuries are narrowly held—as its first line of defense.

 

The strategy continued even after the Government Accountability Office, in a 1979 investigation, found “no statistical or legal basis” for the blackout. The GAO didn’t have power to force the Treasury to turn over the data, but it concluded the U.S. “made special commitments of financial confidentiality to Saudi Arabia” and possibly other OPEC nations.

 

Simon, who had by then returned to Wall Street, acknowledged in congressional testimony that “regional reporting was the only way in which Saudi Arabia would agree” to invest using the add-on system.

Ultimately, Saudi dominance in the US Treasury market meant they were untouchable. "It was clear the Treasury people weren’t going to cooperate at all,” said Stephen McSpadden, a former counsel to the congressional subcommittee that pressed for the GAO inquiries. “I’d been at the subcommittee for 17 years, and I’d never seen anything like that."

Today, Parsky says the secret arrangement with the Saudis should have been dismantled years ago and was surprised the Treasury kept it in place for so long. But even so, he has no regrets. Doing the deal “was a positive for America”, he says cited by Bloomberg.

And with that the story of how the Petrodollar was born is now public information, something which Saudi Arabia may not be too happy with. For the sake of the US, it better have its ducks in order because the release of this story simply means that the US Treasury is confident it will no longer have a strategic need for its long-time Saudi partner. The Fed, which has implicitly stepped into the Saudi role, better not disappoint.

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Hannibal's picture

Britain exposed to 'terrorists' crossing English Channel in migrant boats – top cop

https://www.rt.com/uk/344923-migrant-boats-terrorists-channel/

TeamDepends's picture

We are generally against the guillotine as a means of execution, but in Kissinger's case....

A Pimp's love is different's picture

"We are generally against the guillotine"

 

Just the tip! Oh Wait!

NoDebt's picture

I guess given 4 decades the conspiracy theorists will eventually get pretty close to the truth.  I find myself not really shocked by anything in the article, the blow softened by the fact it's been a bit of an open secret for years, available to anyone who bothered to read about it.

 

wildbad's picture

john perkins in "confessions of an economic hitman" draws great comparisons between the cooperative saudi sate and the uncooperative iraqui state.  play ball or die arab scum!

zeronetwork's picture

But how this ends will not be a secret.

MalteseFalcon's picture

The concept was introduced to me in the spring of 1978. 

I was attending class at a large state university in New England that it is famous for an over-hyped football team, binge drugging, bizarre, strident leftist politics and contented grazing by most of the student population.

A lecturer, almost certainly CIA, extolled the virtues of the scheme.

While the sheep grazed and worried about whether there would free contraception available at the infirmary, I spoke up and poked holes in the concept.

"The Arabs will only take the money, buy arms and turn the middle east into a cesspool."

Mr CIA just smiled.

The student sitting next to me turned to me and said "Baaaa".

MalteseFalcon's picture

Did I mention that this "university" was academically mediocre with a capital 'M' and that it's sole purpose is to pump out political cadre?

Farqued Up's picture

I'm worried that it exacerbates the Fed's further stranglehold on we the people.

steelhead23's picture

Seriously?  You would rather the kings of Arabia hold U.S. debt?  The Fed may be committed to protecting elite banksters, but as far as I know, none of these has ever flown a plane into a building.  The Saudis have and are continuing to support terrorism through its unabashed support of Wahabbism.  We should view SA with suspicion.  They do not share our interests.

 

Canadian Dirtlump's picture

The Saudis are only eclipsed by the shadow government who rule and finance us all. The shadow government is more responsible for 911 than any saudi is or was, no matter WHAT the real story is.

The Saudis are a TOOL of the elite, not the puppetmasters. Just as we installed the house of Saud for our own reasons, recall that Mohammed bin SAUD relied on a certain partner for support. That partner was Mohammed Ibn Abd al-Wahhab. Unabashed support is true, but an understatement. They have been joined at the hip since before Saudi Arabia was Saudi Arabia. I've said now for years, expect more radicalization to come from the West, as the Saudis have poured their wealth into islamic centers and mosques near OUR homes more than they have in many middle eastern and african countries.

At the end of the day though, a small group of men richer than even them have watched it and let it happen. They also control it. However, we need to see the house of Saud fall, because they have been a primary control mechanism. How far can we get after that to stopping the dark forces? Who knows.

Billy the Poet's picture

 

 

From Network, 1978

    JENSEN
    You have meddled with the primal
    forces of nature, Mr. Beale, and I
    won't have it, is that clear?!  You
    think you have merely stopped a
    business deal -- that is not the
    case!  The Arabs have taken billions
    of dollars out of this country, and
    now they must put it back.  It is
    ebb and flow, tidal gravity, it is
    ecological balance!  You are an old
    man who thinks in terms of nations
    and peoples.  There are no nations!
    There are no peoples!  There are no
    Russians.  There are no Arabs!
    There are no third worlds!  There is
    no West!  There is only one holistic
    system of systems, one vast and
    immane, interwoven, interacting,
    multi-variate, multi-national
    dominion of dollars! petro-dollars,
    electro-dollars, multi-dollars!,
    Reichmarks, rubles, rin, pounds and
    shekels!  It is the international
    system of currency that determines
    the totality of life on this planet!
    That is the natural order of things
    today!  That is the atomic,
    subatomic and galactic structure of
    things today!  And you have meddled
    with the primal forces of nature,
    and you will atone!  Am I getting
    through to you, Mr. Beale?

 

    You get up on your little twenty-
    one inch screen, and howl about
    America and democracy.  There is no
    America.  There is no democracy.
    There is only IBM and ITT and A T
    and T and Dupont, Dow, Union Carbide
    and Exxon.  Those are the nations of
    the world today.  What do you think
    the Russians talk about in their
    councils of state -- Karl Marx?
    They pull out their linear
    programming charts, statistical
    decision theories and minimax
    solutions and compute the price-cost
    probabilities of their transactions
    and investments just like we do.  We
    no longer live in a world of nations
    and ideologies, Mr. Beale.  The
    world is a college of corporations,
    inexorably deter- mined by the
    immutable by-laws of business.  The
    world is a business, Mr. Beale!  It
    has been since man crawled out of
    the slime, and our children, Mr.
    Beale, will live to see that perfect
    world in which there is no war and
    famine, oppression and brutality --
    one vast and ecumenical holding
    company, for whom all men will work
    to serve a common profit, in which
    all men will hold a share of stock,
    all necessities provided, all
    anxieties tranquilized, all boredom
    amused.  And I have chosen you to
    preach this evangel, Mr. Beale.

LA_Goldbug's picture

How did you manage to catch this one Bill ?

Brilliant !!!  +100

tarsubil's picture

Does anyone else notice the sudden shift with Saudi Arabia (the 28 pages, deals with Iran, now this exposure of their treasury position acknowledging they are no longer needed)? DC doesn't feel they are needed anymore. If I were in Saudi Arabia, I'd be making plans on escaping before America invades its next country.

BigJim's picture

It may be that TPTB are beginning to think Saudi-sponsored Wahabism is no longer a useful tool to create MIC-spending boondoggles; ie, is beginning to get out of hand and could become a genuine threat to their wellbeing.

I think all these recent revelations could be "shots across the bow" type stuff. If the Sauds announce major crackdowns on the Wahabists, I'll bet the US starts easing off the pressure on them.

Canadian Dirtlump's picture

Saudi Arabia can't and won't announce a crackdown ( outside of their normal FAKE overtures of "battling terrorism" ) on wahhabism, because the house of Saud and the man for whom the Wahhabi movement are named were inexorably linked a couple hundred years ago. They are intertwined parts of a single machine.

I do agree that this apparent change in tone is intriguing. I have no doubt that the elite have their next plans of attack in the event of a fall of the petro dollar in place. I've said it before, that I only hope we don't see Russia or China cozy up to them before or after the split with the US, but I expect that WILL be the cae.

beemasters's picture

It's been an open secret. The question is: why are the "then-US Treasury secretary William Simon and his deputy, Gerry Parsky" allowed [ie. instructed] to openly admit it now? This is no different from official disclosure - another way of breaching their agreement. What's the main intention? While SA is trapped, is it really just a statement to the Sauds, 'hey, we don't need you now'? Or is there something else?

OpenThePodBayDoorHAL's picture

LOL "crack down on the Wahabbists" LOL

As if that's what either side wants.

The Saudi royals are Wahhabist through and through, and DC needs Wahhabism to continue to sow chaos.

Pepe nails it: we're "The Empire of Chaos", so long as the shit is hitting the fan everywhere then the US will continue to be the best destination for the spice to flow.

Look at what we were able to do to Europe: convince them to help bomb the shit out of the ME. Anyone with a map of the world can see there's no ocean separating Europe from the tidal wave of refugees that were the result.

And then Russia: poking the bear with sanctions did nothing to hurt the US but lots to hurt Europe.

Rinse and repeat, Brazil, Argentina, Venezuela. We're only a few headlines away from boots on the ground in Venezuela, their oil gives DC a giant woody.

"Global Hegemon" is a winner-takes-all game in their minds. Anything and anyone is tossed under the bus on the way.

Trump is pals with John Bolton, and Hilary is pals with Kissinger, so either way we're gonna turn the dial up to 11. Obama went to Hiroshima and tossed out the usual lies but you'll notice he also signed off on a cool trillion $ for small nukes like the B-61. Wait'll we start lobbing those around the globe to anyone who dares to resist: "Oh, oh, shock horror at the UN!", millions in the streets to protest after somebody lights the fuse on the first one of them. LOL again, shut up serfs or you're next.

Ink Pusher's picture

I see a showdown between The House of Saud and Iran. As soon as the Saudis  get done turning Yemen into a parking lot for all the new LAVs they just bought from us. It's a good bet Iran is next. especially if they intend to bait and taunt the Saudis with an oil price war preamble by year end.

 

Reichstag Fire Dept.'s picture

Same business model for China! Oil was bought for US$ which were recycled into Treasuries, then later manufacturing was transfered offshore so they could buy it back with US$ to be recycled into Treasuries. Here's your "Trade Deal".

DownWithYogaPants's picture

Taking the easy way out.  The expediant.  This always leads to rot.

giovanni_f's picture

"We are generally against the guillotine as a means of execution, but in Kissinger's case...."

with a dull, rusty blade. And move it slowly.

zeronetwork's picture

Why not cut half the neck and leave it dangling forward.

Life of Illusion's picture

 

USa went off gold standard and on to military standard.

I would redate the start with this picture....

 

https://en.wikipedia.org/wiki/File:FDR_on_quincy.jpg

 

President Roosevelt with Abdel Aziz Ibn Saud 

Joe Cool's picture

Definitely a very influencial man...He's capable of anything...Nothing is off the table

Canadian Dirtlump's picture

Imagine watching that roly poly satanist get wheeled up and manipulated into the first place position in a guillotine. Immensley satisfying and cringeworthy at the same time.

HowdyDoody's picture

UK cop joins Turdogan in exploiting the 'migrant crisis' false flag to get more power and money.

 

Ghordius's picture

"[B]ack in 1974, forging that relationship (and the secrecy that it required) was a no-brainer, according to Parsky, who is now chairman of Aurora Capital Group, a private equity firm in Los Angeles. Many of America’s allies, including the U.K. and Japan, were also deeply dependent on Saudi oil and quietly vying to get the kingdom to reinvest money back into their own economies. "Everyone—in the U.S., France, Britain, Japan—was trying to get their fingers in the Saudis’ pockets,” said Gordon S. Brown, an economic officer with the State Department at the U.S. embassy in Riyadh from 1976 to 1978. For the Saudis, politics played a big role in their insistence that all Treasury investments remain anonymous."

as a reminder, the timeframe: 1971 Nixon shocks the world with the closing of the "gold window". 1974 Americans are allowed again (after 40y) to own and trade gold, with a "spike" in price towards the end of the decade

Saudis wanted gold. it became extremely difficult to satisfy that trade. So Saudis got paper... and an alliance offered instead

and now this alliance looks... frayed

Bytor325's picture

So our economy has been artificially propped up since we left the gold standard.........I'm going to need some time to process this conspiracy

cat writer's picture

Can we connect this to 9/11?

OpenThePodBayDoorHAL's picture

Gold and 9/11:

http://911research.wtc7.net/wtc/evidence/gold.html

You might also look into a gentleman named Silverstein. He made a $4.5 B profit from 9/11.

McCormick No. 9's picture

Fascinating. The seeds of Al Quaeda and ISIS sown here. Sykes and Picot could not have fucked things up any better.

Ghordius's picture

"Sykes and Picot could not have fucked things up any better"

did they? compared to... what? the modern "we are not colonizers" method? old Colonial Powers did lots of horrific things. but they also "owned their shit", in a fashion. yes, exploitation. but also roads, admin, railways, systems of all kinds. of course all "statist" stuff, so if you are one of those "state is bad" guys, horrific, too. and yet, I have to ask again: compared to what? the current way of "doing this stuff"? with dozens of millions of war refugees, for starters?

HowdyDoody's picture

OT but a comprehensive report from John Helmer on Putin's speech in reaction to the placement of Aegis ABM systems in Poland and Romania.

“What is the impact of security-related issues on economic cooperation, in particular, the commissioning of the US anti-missile defence deployment area in Romania? What is the impact? The impact is negative, and it cannot be otherwise. Because some time ago the United States unilaterally withdrew from the Anti-Missile Defence Treaty and started what amounts to undermining the fundamentals of international security. Yet another step has been made now.

“Since the early 2000s, we have been persistently repeating the same thing, like a mantra: we will have to respond to it in some way. Nobody listens to us, nobody is willing to have talks with us, we do not hear anything but platitudes, and those platitudes mainly boil down to the fact that this is not directed against Russia and does not threaten Russia’s security.

“Let me remind you that initially there was talk about thwarting a threat from Iran, it was all about the Iranian nuclear programme. Where is the Iranian nuclear programme now? It no longer exists. The Unites States themselves initiated the signing of the treaty with Iran. The Iranian nuclear threat does not exist, while the US anti-missile deployment area is being created and was commissioned in Romania.

“What is this? These are launch pads and radar stations. Today, 500-kilometre range Iskander land-based missiles are being deployed; in a few years they will be 1000-kilometre range missiles. We even know the approximate date when such missiles will be deployed. How can this not be a threat to us? It is a clear threat to our nuclear forces.

“However, there is something else that is even worse: these compact launch pads can accommodate assault missiles with a 2,400-kilometre range, and replacing the missiles is no problem, one only has to change the software, and nobody is going to notice anything, even the Romanians. Isn’t it a threat to us? It certainly is.

“That is the reason we have to respond now, and if yesterday some areas in Romania did not know what it is like to be a target, today we will have to take action to ensure our security. Let me repeat, these are response measures, a response only. We were not the first to take such steps.

“The same will be done with regard to Poland. We will wait for certain actions to be taken in Poland. We are not going to do anything until we see missiles on the neighbouring territory. And we have the necessary resources. You saw, the whole world saw our capabilities in terms of medium-range sea and air based missiles. We are not violating anything, but the Iskander land-based missile systems have a brilliant record.

“Incidentally, the fact that launch pads are deployed that may be charged with medium-range missiles is nothing short of erosion of the medium and short range missile treaty by our American partners. I think it is an obvious matter that requires the most careful consideration, and undoubtedly, the involvement of the parties concerned in detailed and substantial talks on these issues.”

Look out for an October Surprise when weak Obama tries to get weak Clinton elected.

http://johnhelmer.net/?p=15751

 

 

 

wildbad's picture

a little off topic howdy doody but your post is perhaps the most burning issue on the planet right now and one hears NADA in the lamestream media about it or just spun as some little backwater sideshow.

 

this coldwar hawkism being played out by obama and his merry band of euopean acolyte puppets is demonstrative of how far from human thinking these insane radical globalists and neocons are.

OpenThePodBayDoorHAL's picture

Thank you, wild. The world's sheeple are fast asleep, even the first detonations won't wake them up...we'll be told "credible evidence was assembled that Russia was planning something big".

illuminatus's picture

I wonder if MAD will really happen this time around? It seems like TPTB are going for it.

BorisTheBlade's picture

Sanctions, creeping expansion of NATO towards Russian borders, moving first strike divisions in the same direction, missile 'defence' (only in name, since anti-rockets can easily be replaced by nuclear-armed ones), propaganda war and demonization. What else if not all those signs that signal full scale preparations for a direct conflict? And this one certainly has all the potential of going all the way to DEFCON 1. Somehow I don't think that good old game theorists who would slap at least some sense in war planners are in demand these days. So yes, it is becoming increasingly likely.

gcjohns1971's picture

Geopolitically, as well as technically, it would be wise to have non homogenous anti-missile defenses.

They should also buy SA20 systems from Russia. No favorites here.  Just ABM Defense.

. . . _ _ _ . . .'s picture

So Saudi threats to sell usd denominated assets are defeated. Now, will Saudi Aramco have to go public?

_ConanTheLibertarian_'s picture

I don't agree that this was a secret really.

BandGap's picture

It wasn't an easy concept to grasp. And as long as the US came out ahead the MSM probably didn't care.

Son of Captain Nemo's picture

Lived in "secrecy"?....

For those of us old enough to remember that date and Nixon's announcement we never had to hear the "S" word with Petrodollar to understand where it was headed!

 

snodgrass's picture

The petrodollar is old news. John Perkins has talked about it as have many others. The Saudis only started talking about dumping their treasuries after Congress passed a bill supposedly allowing 911 families to sue SA for its role in 911 that has brought it out into the open the amount of treasuries SA holds.

RaceToTheBottom's picture

It would have been interesting to watch how Kissinger's ego clashed with Somon's ego.

Even thought they both served WS, tactically they would have fought, I would guess.

Lucky Leprachaun's picture

Yes but I' say they kept it within the Tribe.  Just as Henry would have done with Mike Blumenthal, Simon's successor.

BandGap's picture

Actually, this was pretty brilliant despite the current outcomes.

Sizzurp's picture

I have a feeling the Fed is going to end up owning a lot of the US debt from both SA and China as tensions go from bad to worse.  It will be like a new brand of QE. The only question is where will all those dollars go? That's where you want your own money to be.

illuminatus's picture

Those dollars go to buy up every thing real for the producers of those dollars.