Comment by detourdog
2 months ago
My understanding is that it has happened. The oil market was tied to the USD. The BRICS have now implemented a payment system as robust as SWIFT system. Oil is now being paid for using that system.
2 months ago
My understanding is that it has happened. The oil market was tied to the USD. The BRICS have now implemented a payment system as robust as SWIFT system. Oil is now being paid for using that system.
Panics about how oil is being traded in non-USD terms are as old as the internet and, in all likelihood, even older than that. You can find usenet slop from 20-30 years ago about the petro-euro and the "tehran oil bourse". Here's an old site that is/was daily panics about the fall of the dollar, from 15-25 years ago. http://www.engdahl.oilgeopolitics.net/
Nobody is panicking. BRICS has gotten steadily larger and is gaining as an alternative banking system. This is competition. This just requires more thoughtful strategies.
The steady building up of alternatives will happen until one day the reserve currency status will change hands all of a sudden.
I think the Fed could stem the whole thing by just issuing a stable coin itself pegged to the dollar and re-assert itself as the dominant currency/arbiter... but who knows. Maybe then it'd have insight into every transaction and be able to stem things with even more power than it can now.
Nobody stays king forever. Maybe it's time the US is forced to balance its books and stop riding on cheap credit. Losing the power of the reserve currency and the power that that gives to SWIFT and things will take a lot of soft power away from the US. Without allies the US couldn't stop a united China, Russia, insert-other-would-be-ally-of-theirs in a world conflict.
As another commenter said there's no leadership at teh top just chaos. People, countries, banks don't invest in chaos.
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> This just requires more thoughtful strategies.
US not in a good place then?
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> Oil is now being paid for using that system
The petrodollar hypothesis has been a myth since the 1990s. With America a net oil exporter, it’s an entirely stupid model to keep running.
I wish you would elaborate how being a net exporter relates to it being a myth. I don't see the connection. My point is that global trade of which oil is a major component needs to settle the books nightly. If the books aren't reconciled in an efficient manner trade has to slow down.
> how being a net exporter relates to it being a myth. I don't see the connection
Petrodollar a U.S. policy comes from the 1970s, when the U.S. guaranteed the House of Saud’s security in exchange for them selling their oil in dollars. The reason wasn’t to do some currency scheme, but to ensure the U.S. could always buy Saudi oil in a currency we controlled. Saudi Arabia then invested its profits in Treasuries, which closed the loop on Wall Street [1].
When America imported oil, keeping oil exporters close was strategically vital. Petrodollar recycling helped with that. Now that we don’t, it doesn’t.
> global trade of which oil is a major component
Like 4% [2][3].
[1] https://en.wikipedia.org/wiki/Petrodollar_recycling
[2] https://oilprice.com/Energy/Crude-Oil/Oil-Dominates-the-5-Tr... ~$1.5tn in 2021
[3] https://unctad.org/publication/global-trade-update-december-... 35tn in 2025
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By forcing oil to be bought with dollars, the USD was pegged to oil demand, especially from developing nations whose consumption was growing.
Also SWIFT being a means of control of movement of funds.
> forcing oil to be bought with dollars, the USD was pegged to oil demand, especially from developing nations whose consumption was growing
If you give me one source, I'll break down why this is wrong.
(In case there isn't one, the U.S. dollar was never pegged to oil demand [whatever that means]. And nothing about petrodollar recycling thought about developing nations for one second.)
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