What is the petrodollar system?

countitjoy5

Rookie
Joined
Sep 25, 2011
Messages
7
Reaction score
2
Points
1
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
 

expat_panama

Gold Member
Joined
Apr 12, 2011
Messages
2,948
Reaction score
356
Points
130
...What is the petrodollar system and how is it related to the U.S. dollar being the world reserve currency?
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.
...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?
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.
 
OP
C

countitjoy5

Rookie
Joined
Sep 25, 2011
Messages
7
Reaction score
2
Points
1
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.
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?
 

Mad Scientist

Feels Good!
Joined
Sep 15, 2008
Messages
24,196
Reaction score
5,424
Points
270
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.
Until dollars are de-valued to the point they're worthless.
 
OP
C

countitjoy5

Rookie
Joined
Sep 25, 2011
Messages
7
Reaction score
2
Points
1
Until dollars are de-valued to the point they're worthless.
Won't the nations that are under this system begin to revolt before the U.S. government debases the currency to nothing?
 
OP
C

countitjoy5

Rookie
Joined
Sep 25, 2011
Messages
7
Reaction score
2
Points
1
That's a mathematical impossibility as long as the U.S. government continues to exist and to issue dollars.
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.
 
OP
C

countitjoy5

Rookie
Joined
Sep 25, 2011
Messages
7
Reaction score
2
Points
1
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.
 

expat_panama

Gold Member
Joined
Apr 12, 2011
Messages
2,948
Reaction score
356
Points
130
Until dollars are de-valued to the point they're worthless.
That's a mathematical impossibility as long as the U.S. government continues to exist and to issue dollars.
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?
 

Paulie

Diamond Member
Joined
May 19, 2007
Messages
40,411
Reaction score
5,960
Points
1,830
Until dollars are de-valued to the point they're worthless.
That's a mathematical impossibility as long as the U.S. government continues to exist and to issue dollars.
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?
You obviously don't understand what "petrodollar" is. Petrodollar simply refers to the trading of oil in US Dollars. It's got nothing to do with banking.

The fact that oil is traded in USD is what keeps the USD relevant. There's no bigger threat to the USD than OPEC trading oil in other currencies.

So it's no surprise that we strong arm the oil nations who don't play ball.
 

expat_panama

Gold Member
Joined
Apr 12, 2011
Messages
2,948
Reaction score
356
Points
130
...You obviously don't understand what "petrodollar" is. Petrodollar simply refers to the trading of oil in US Dollars. It's got nothing to do with banking.....
We're talking about issuing petrodollars, and you're more than welcome to join us but you need to understand how money is created. People like to think of money as government printed currency, but virtually all money is just numbers in banks and with petrodollars it happens in foreign banks.

More info at Do Foreigners Control the U.S. Money Supply?
 

Paulie

Diamond Member
Joined
May 19, 2007
Messages
40,411
Reaction score
5,960
Points
1,830
...You obviously don't understand what "petrodollar" is. Petrodollar simply refers to the trading of oil in US Dollars. It's got nothing to do with banking.....
We're talking about issuing petrodollars, and you're more than welcome to join us but you need to understand how money is created. People like to think of money as government printed currency, but virtually all money is just numbers in banks and with petrodollars it happens in foreign banks.

More info at Do Foreigners Control the U.S. Money Supply?
No, I don't see anyone talking about "issuing" anything except you. The OP asked what could happen to the USD if the petrodollar system were to fail. What he's asking is what would happen to the value of the dollar, including its reserve distinction, if the oil market switched to a different currency.
 

expat_panama

Gold Member
Joined
Apr 12, 2011
Messages
2,948
Reaction score
356
Points
130
...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.
...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?...
Communication problem. Please note: petrodollars are created outside the US in foreign banks over which the Fed has no say. Let me know if you got that.

If these foreign banks wanted they could over inflate their petrodollars and use them to buy US goods but they haven't and probably won't. Likewise, the Fed could over inflate their US dollars and use them to buy oil, but it hasn't and probably won't.
 

expat_panama

Gold Member
Joined
Apr 12, 2011
Messages
2,948
Reaction score
356
Points
130
...I don't see anyone talking about "issuing" anything except you...
Ah. You posted it and missed how this all started when Dragon was concerned about how the dollars were being issued. I'll circle it for you---

--and the point being that while US dollars are created (issued) by US banks under the control of the US gov't, petrodollars are created by foreign banks not under US gov't control.
 

New Topics

Most reactions - Past 7 days

Forum List

Top