The End Of The (Petro)Dollar: What The Fed Doesn't Want You To Know

Authored by Shaun Bradley via,

The United States’ ability to maintain its influence over the rest of the world has been slowly diminishing. Since the petrodollar was established in 1971, U.S. currency has monopolized international trade through oil deals with the Organization of the Petroleum Exporting Countries (OPEC) and continuous military interventions. There is, however, growing opposition to the American standard, and it gained more support recently when several Gulf states suddenly blockaded Qatar, which they accused of funding terrorism.

Despite the mainstream narrative, there are several other reasons why Qatar is in the crosshairs. Over the past two years, it conducted over $86 billion worth of transactions in Chinese yuan and has signed other agreements with China that encourage further economic cooperation. Qatar also shares the world’s largest natural gas field with Iran, giving the two countries significant regional influence to expand their own trade deals.

Meanwhile, uncontrollable debt and political divisions in the United States are clear signs of vulnerability. The Chinese and Russians proactively set up alternative financial systems for countries looking to distance themselves from the Federal Reserve.  After the IMF accepted the yuan into its basket of reserve currencies in October of last year, investors and economists finally started to pay attention. The economic power held by the Federal Reserve has been key in financing the American empire, but geopolitical changes are happening fast. The United States’ reputation has been tarnished by decades of undeclared wars, mass surveillance, and catastrophic foreign policy.

One of America’s best remaining assets is its military strength, but it’s useless without a strong economy to fund it. Rival coalitions like the BRICS nations aren’t challenging the established order head on and are instead opting to undermine its financial support. Qatar is just the latest country to take steps to bypass the U.S. dollar. Russia made headlines in 2016 when they started accepting payments in yuan and took over as China’s largest oil partner, stealing a huge market share from Saudi Arabia in the process. Iran also dropped the dollar earlier this year in response to President Trump’s travel ban. As the tide continues to turn against the petrodollar, eventually even our allies will start to question what best serves their own interests.

Many E.U. member states are clashing with the unelected leadership in Brussels over immigration, terrorism, and austerity measures. If no solutions are found and things deteriorate, other countries could potentially follow the U.K.’s lead and vote to leave, as well. It is starting to become obvious that countries in Eastern Europe will look to the East to get the resources their economies need.

China, Russia, and India are all ahead of the curve and started stockpiling gold years ago. They recognize that hard assets will be the measure of true wealth in the near future — not fiat money. The historic hyperinflation that has occurred in these countries solidified the importance of precious metals in their monetary systems. Unfortunately, most Americans are ignorant of the past and will likely embrace more government bailouts and money printing when faced with the next recession. Even Fed officials have admitted that more quantitative easing is likely the only path going forward.

Several renowned investors have warned about this ongoing shift of economic power from West to East, but bureaucrats and central bankers refuse to admit how serious things could get. The impact on the average person could be devastating if they are not properly educated and prepared for the fallout.

Economist and author James Rickards summarized why China and Russia are so interested in acquiring precious metals:

“They are stuck with their dollars. They fear, rightly, that the US will inflate its way out of its $19 trillion mountain of debt. China’s solution is to buy gold. If dollar inflation emerges, China’s Treasury holdings will devalue, but the dollar price of its gold will soar. A large gold reserve is a prudent diversification.  Russia’s motives are geopolitical. Gold is the model 21st century weapon for financial wars.The US controls dollar payments systems and, with help from European allies, can eject adversaries from the international payments system called Swift. Gold is immune to such assaults. Physical gold in your custody cannot be hacked, erased, or frozen. Moving gold is a simple way for Russia to settle accounts without US interference.”

Mainstream pundits will continue to distract the public with the same optimistic talking points, but taking advantage of this calm before the storm is important. As this transition takes place, central bankers will sacrifice anything and everything to keep their Ponzi scheme going. Only individuals can take the initiative to protect themselves and be able to help others who won’t be as lucky. Those who embrace sound money and cryptocurrencies will thrive in this new competitive global economy, but if America fails to adapt, the same fiat system that gave it power will drag it into poverty.


aminorex Silver Savior Wed, 06/28/2017 - 03:10 Permalink

The difficulty with crypto is that most of it is snake oil and Ponzi schemes.  Global digital liquidity tends to be a natural monopoly, because liquidity abhors frictions such as slippages, fees, taxes.  In order to make clear decisions about winners and losers in this space, expertise is required which spans cryptography, software engineering, political psychology, macro economics, financial market microstructures, legal risk analysis, and the social dynamics of technological innovation.While I am master of only a few of these skills, I have fair exposure to all of them, or in some cases transferrable skills which I deem adequate.  As a result I have become wealthy through speculation and market making in cryptocurrency over the past 5 years.  I recommend to friends and family that they do dollar cost averaging to establish positions in a very select few cryptocurrencies, weighted heavily towards expected winners in three main categories: Transparent block chain ledger, opaque block chain ledger, and digital contract platforms.  Beyond those categories, I personally invest only on a small scale in application tokens for applications which I understand well, and sometimes in more speculative novel niches when the asymmetry is extraordinarily appealling.Transparent ledger: Bitcoin is the leader, and will not be displaced except by the incompetence of core technical governance.  This leading position is fully priced in, so I urge no bold moves, but dollar cost averaging is a conservative approach for new market entrants.Opaque ledger: This category offers much more opportunity, as fungible  anonymous liquidity will displace the open traceable record for most cash-like applications.  Monero is the only credible leader in this area, and bold moves are possible.Digital contract platforms: Ethereum is the leader, but price discovery has not happened yet, while hysterical hype has.  I see more asymmetry  of  opportunity in the emerging Tezos platform, which offers correctness proofs for contracts, which may allow it to avoid the debacles that have plagued Ethereum.Cloud storage app coin: Siacoin.Network service broker app coin: Namecoin.Potential new niche: Decred. Everything else is assumed to be a scam or an illegal securities offering (most likely both) unless proven otherwise. 

In reply to by Silver Savior

Thought Processor aminorex Wed, 06/28/2017 - 09:22 Permalink

  Bitcoin has some serious issues.  Some which present questions that go to the very foundation of what it was created to be (immutable etc.).  In essence the stakeholders of Bitcoin need to decide collectively what Bitcoin is, and perhaps decide that it can't be everything to everyone. Dash is also interesting as a Monero type Opaque legder.  Bitshares / Steemit / and EOS are interesting also.  NEM seems quite well thought out as far as being a scaleable platform for high volume blockchain based service systems to be built on. EOS and Radix will be worth looking at perhaps as more info comes out about each.  Kind of like the 3rd and 4th wave of innovation in this realm (Bitcoin being the 1st wave).  They do all solve different problems though and therefor should be eveluated as such.  Not apples to apples. Early days still.    

In reply to by aminorex

Michigander Silver Savior Wed, 06/28/2017 - 08:05 Permalink

Why not just be safe as hell and get both? Because that doesnt fit the narrative for the naysayers (which are most, it seems) on ZH.Just iike there is only "one way" (sic) to "heaven" (sic) there is only one way to financial salvation to them. They have drank the kool-aid". They are the followers of the Bo Polny.I, on the other hand consider myself enlightened. I don't know which god (sic) is going to win out, so I belong to the Universal Unitarianist financial faith.  i hold, in descending orderSilverGoldReal Estate (modest single family homes)Crypto (BTC, ETH, ETC, ANS, FCT, etc)CashLet the down voting begin!

In reply to by Silver Savior

myopinion Horseless Headsman Wed, 06/28/2017 - 12:00 Permalink

Useage:  It's happening...these Debit cards are helping to improve fungibility:
/* Style Definitions */
{mso-style-name:"Table Normal";
mso-padding-alt:0in 5.4pt 0in 5.4pt;
mso-fareast-font-family:"Times New Roman";

In reply to by Horseless Headsman

Abbie Normal jerry_theking_lawler Thu, 06/29/2017 - 16:47 Permalink

A few years ago, there was a TV show called Revolution -- about a world plunged into darkness after all electrical systems and electronic devices failed.  Of course, the obvious setbacks had to do with travel and basic needs however what stood out in my memory was one character that kept her cellphone around, even though it hadn't worked in years.  Stored in it were her precious photos and other memories that couldn't be accessed without electricity.  Won't cryptocurrency be in the same boat?

In reply to by jerry_theking_lawler

45North1 Wed, 06/28/2017 - 01:12 Permalink

In additiion to trying to save the shale drillers (and the banks that hold their debt), the US push for sanctions on Russian gas in the EU is also to ensure that the USD will be the currency of exchange for that gas.  It won't stop the fall, but slow it.

Byte Me Wed, 06/28/2017 - 01:18 Permalink

If it's tangible, tradeable, desireable and has good immunity to outside context events (EMPs, web-outages) and is easily portable - I stockpile it. Cryptos don't fulfil all of those conditions just yet.

Mycroft Holmes IV Wed, 06/28/2017 - 01:22 Permalink

Toppling the Iraqi & Libyan governments was also to support the petrodollar.It is all about controlling energy, its supply chain, and how it's purchased.Zero-point energy would destroy such control, which is why they will never release such technology.All of our ginned-up conflicts would be moot (Syria and Ukraine are the most recent that come to mind - no need for a pipeline).

Silver Savior Wed, 06/28/2017 - 01:44 Permalink

The biggest thing I like about crypto currencies is you can trade them for other crypto currency or to any currency your exchange supports. This can happen ironically at the same time the dollar is on fire in a crash and burn. Then you also have physical gold and silver which I highly value even more. A crash of the dollar is not really a big deal to the average person who has these things. 

Silver Savior cognitive dissident Wed, 06/28/2017 - 02:27 Permalink

There are really three kinds of people. Those who have crypto, those that don't and those who have an open mind but can't really afford it. And to that I would ask them how they could afford not to. Of course I used to be in that boat of people who hated crypto. It was unfamillar to me and was percieved as a threat to physical metal holdings. After much debate, it was no longer a threat but a compliment to gold and silver. I could and did make money to aquire more metal also as I got comfortable with it, the currencies were no longer the economic boogeyman.

In reply to by cognitive dissident

cognitive dissident Silver Savior Wed, 06/28/2017 - 02:43 Permalink

Good points. Thanks for the objectivity. I've not visited here for 6 months until last week, been traveling - all I will add is that the reason cryptos like btc or eth are so damned volatile is because they trade in a real market, subject to the genuine mkt forces of supply, demand, and price discovery. I was under the impression that those were healthy attributes... 

In reply to by Silver Savior

Global Douche cognitive dissident Wed, 06/28/2017 - 07:11 Permalink

You are absolutely correct! Other cryptopundits agree strongly that crypto doesn't yet have the naked-short nonsense which CRIMEX and LIEBOR employ without shame. Those fuckers including GS & JPM/Chase will eventually have their asses handed to them on gold and silver platters, and I thank Shanghai for their arrival, although I "get" why the Chinese want to load up on the cheap! I'll save my voice for a Rebel Yell not to be forgotten when phyzz epic fail finally happens.

In reply to by cognitive dissident

Keyser Wed, 06/28/2017 - 02:03 Permalink

SSDD, same shit different day... The fed keeps the musical monetary merry go round going while monkey hammering PMs... What the fuck else is new?

gregga777 Wed, 06/28/2017 - 02:14 Permalink

It's already too late. Every American public and private pension plan is woefully underfunded, that is, insolvent. Over the next decade American retirees will find their retirement incomes vanishing like fog in the sunshine. And by the way, it's all the fault of the Goldman Sachs Feral Reserve System's debt-based fiat currency.

uhland62 gregga777 Wed, 06/28/2017 - 02:56 Permalink

You cannot expect to spend gazillions on wars and then have money over for your own people. For a while you paper over with money printing but a house built from credit cards never holds.  This text part is a bit off"stealing a huge market share" - it wasn't their property that market share, so no stealing. There was a better offer, as American as apple pie. When the first Russian sanctions were discussed people warned that they would create an Eastern Axis. Now Poland is asked to fund asylum seekers who fled from American destruction, and the reactions to that. They might soon conclude that they have more in common with the East than with the West who engages in these disastrous schemes. 

In reply to by gregga777

MrNoItAll Wed, 06/28/2017 - 02:35 Permalink

The petrodollar regime is very near the end of the road. Just like the entire global oil industry. Massive amounts of high quality oil backed the petrodollar during its heyday, but those days are over. The oil industry is in trouble, burdened with debt and not enough new discoveries to keep production ramped up. Oil price is on a long trend downward and unbearable debt is depressing consumption around the world. Oil price has nowhere else to go but down. This downward trend has ZERO chance of reversing itself. The energy required to support not just the petrodollar system but the entire global economy has become unbearable. They're faking it with debt and have been for quite a while, but that trick doesn't work as good as it used to. Big changes on the way.

mosfet Wed, 06/28/2017 - 02:54 Permalink

It's time for the the tail to wag the dog...Here's hoping that China lets Gold & Silver in the SGE rise to it's real supply/demand ratio.  Once it's $700+/oz above the fradulant Comex/LBMA spot, they'll find out that arbitaage's a bitch that's pregnant with puppies.

gespiri Wed, 06/28/2017 - 03:02 Permalink

I've been long gold and silver, short the Dow in my accounts.  It's only a matter of time and I can't wait for this to happen.  At some point, the POTUS has 2 real options: 1) re-negotiate the $20trillion debt which will crash the market, or 2) keep printing and wait for hyper-inflation to come after.  Both will result in the devaluation of USD and precious metals will soar.  Just think of what happened to Argentina and Venezuela....or Germany after they signed the Versailles treaty.

Batman11 Wed, 06/28/2017 - 03:23 Permalink

The Asian Century, sponsored by US capital and businessmen.Let's offshore everything for higher profits.Let's invest in Asia for higher returns.The US was starved of investment and went into decline.Adios America, hello Asia.In the US they use the left hand side of the brain to get the best return on their investments and the right hand side of the brain to worry about the new multi polar world.Never the twain shall meet.

Victor999 Wed, 06/28/2017 - 03:26 Permalink

As long as the government controls access to and egress from cryptocurrencies in the form of regulations and controls on the purchase of such currencies and its sale, then at any point the cryptocurrency market can be squeezed.  The same holds true to gold.  When fiat currencies are threatened by hyperinflation, it will be deemed unlawful to possess or trade gold - only the government will be able to possess it. So if you are buying into cryptocurrencies or gold, be aware.

DIGrif Wed, 06/28/2017 - 06:12 Permalink

"Those who embrace sound money and cryptocurrencies will thrive in this new competitive global economy" Right there an otherwise well written and accurate article went to SHIT. central bankers will sacrifice anything and everything to keep their Ponzi scheme goingAnd you can damed well be assured that "ANYTHING" will include getting RID of cryptos. Can't be having competition to our scam (USD) now can we? Funny thing is these two lines were seperated by ONE sentence.

Wild tree DIGrif Wed, 06/28/2017 - 07:44 Permalink

DIGrif, the central bankers are already adopting crypto currency, soon to show up as FEDcoin, backed by the full faith, blah,  blah, blah.You are right that the central banks will do anything to keep their Ponzi scheme, so they will make sure the government will outlaw everything else EXCEPT their FEDcoin. Can't have anyone leaving the reservation dontcha know.

In reply to by DIGrif