the other mike
Diamond Member
Here is a snip from the article* ...
In 2018, China launched yuan-denominated oil futures contracts in Shanghai, known as the petroyuan, with the aim of internationalising its currency and competing with US petrodollars, which have underpinned the existing system of oil valuation for decades.
The petrodollar dates back to the Bretton Woods Conference in 1944, where the US dollar was agreed upon to become the new global currency in the post-war monetary system.
In the early 1970s, the Bretton Woods system collapsed when former president Richard Nixon ended the gold standard and introduced a fiat US dollar-based system. Nixon subsequently struck a deal with Saudi Arabia, the world's biggest oil exporter, to buy oil and provide the kingdom military aid and equipment.
In return, the Saudis would "recycle" billions of dollars in revenue back into US treasuries, financing American spending.
The deal established the petrodollar system, creating a lifetime of demand for dollars from wealthy Middle Eastern countries based on demand for their crude oil.
Petrodollar hegemony allowed the US to maintain influence over the rest of the world and perpetually finance its current account deficit by issuing dollar-denominated assets at low interest rates.
As the world's largest buyer of oil from Saudi Arabia, China could duplicate the strategy to dictate oil pricing terms, analysts said.
www.yahoo.com
*For the record, this article originally appeared in the South China Morning Post (SCMP).
Also there's apparently a misprint in one of the last paragraphs;
Global trade in 2018 was worth about US$20 billion, but yuan transactions accounted for only about 1.8 per cent. If they doubled to 3.6 per cent, that would mean an extra US$360 billion taken out of the system, Dooley said.
I believe they meant to say $20 Trillion.
In 2018, China launched yuan-denominated oil futures contracts in Shanghai, known as the petroyuan, with the aim of internationalising its currency and competing with US petrodollars, which have underpinned the existing system of oil valuation for decades.
The petrodollar dates back to the Bretton Woods Conference in 1944, where the US dollar was agreed upon to become the new global currency in the post-war monetary system.
In the early 1970s, the Bretton Woods system collapsed when former president Richard Nixon ended the gold standard and introduced a fiat US dollar-based system. Nixon subsequently struck a deal with Saudi Arabia, the world's biggest oil exporter, to buy oil and provide the kingdom military aid and equipment.
In return, the Saudis would "recycle" billions of dollars in revenue back into US treasuries, financing American spending.
The deal established the petrodollar system, creating a lifetime of demand for dollars from wealthy Middle Eastern countries based on demand for their crude oil.
Petrodollar hegemony allowed the US to maintain influence over the rest of the world and perpetually finance its current account deficit by issuing dollar-denominated assets at low interest rates.
As the world's largest buyer of oil from Saudi Arabia, China could duplicate the strategy to dictate oil pricing terms, analysts said.
Could US sanctions and closer Middle East ties fuel the rise of China's petroyuan?
A string of energy-rich economies appear to be moving closer into China's orbit, expanding economic ties and potentially fuelling the rise of the petroyuan, analysts say. Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new...
*For the record, this article originally appeared in the South China Morning Post (SCMP).
Also there's apparently a misprint in one of the last paragraphs;
Global trade in 2018 was worth about US$20 billion, but yuan transactions accounted for only about 1.8 per cent. If they doubled to 3.6 per cent, that would mean an extra US$360 billion taken out of the system, Dooley said.
I believe they meant to say $20 Trillion.
