What is the petrodollar system?

Discussion in 'Economy' started by countitjoy5, Sep 26, 2011.

  1. countitjoy5
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    countitjoy5 Rookie

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    Question:

    What is the petrodollar system and how is it related to the U.S. dollar being the world reserve currency? What will end first, the U.S. dollar as a reserve currency or the petrodollar system? Or will they both collapse at the same time? What will happen to the global supply of dollars and dollar denominated assets if this monetary arrangement fails?

    CIJ
     
  2. expat_panama
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    expat_panama Silver Member

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    It's actually not 'petrodollars' or 'eurodollars', it's the fact that most dollars are created outside the US and stay there. It's just like most dollars in the US are created in private banks for loans, the same happens overseas with international dollar account banks making loans.
    OK, so some day nobody will be using dollars but that might not happen for thousands of years after all other currencies are dropped. Let's face it, just as most speakers of English are foreigners that speak it as a second language, most dollars are used by foreigners doing business elsewhere. English and dollars are international standards.
     
  3. countitjoy5
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    countitjoy5 Rookie

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    Hmm... I don't feel like you answered the question. The petrodollar system is the arrangement where nations have to exchange their currency for ours in order to acquire oil.

    How is it in the best interests of central banks and investors around the world to hold our currency if the Federal Reserve is going to inflate it in their hands? Isn't that a nifty tribute system?

    When an international bank zaps million dollars into someones account, where does that person go when they need paper dollars?
     
  4. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    Until dollars are de-valued to the point they're worthless.
     
  5. Dragon
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    Dragon Senior Member

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    That's a mathematical impossibility as long as the U.S. government continues to exist and to issue dollars.
     
  6. countitjoy5
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    countitjoy5 Rookie

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    Won't the nations that are under this system begin to revolt before the U.S. government debases the currency to nothing?
     
  7. countitjoy5
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    countitjoy5 Rookie

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    Once again, if you were under a tribute system would you not begin to revolt against it if it became too oppressive? Because all the dollars that are around the world are being inflated when the FED prints a lot of fiat money -- the value of the new money steals from the value of dollars in circulation overseas as well - it transfers wealth to the issuers of U.S. dollars. It's brilliant and it works for now, but dread the day when the nations rise up against it.
     
  8. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    Oh Lord have mercy! Ever hear of the Weimar Republic?
     
  9. countitjoy5
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    countitjoy5 Rookie

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    I guess it all boils down to how quickly you can print money -- if you have the technology to print the money faster than it takes the merchants to change the price tags in the stores then you have a recipe for tremendous prosperity.
     
  10. expat_panama
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    expat_panama Silver Member

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    Fantasyland is fun for a visit but it's time to come back to the real world.

    Petrodollars are not issued by the US gov't. They're issued by foreign banks. Are we on the same page now?
     

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