The U.S. Dollar Is Dead--And Biden Killed It

 A video from Stoic Finance on the destruction of the U.S. dollar as the world's reserve currency, a direct consequence of the decision to go to war with Russia over Ukraine. It has impelled the BRICS nations (Brazil, Russia, India, China, and South Africa) and others to stop using U.S. dollars for international trade, facilitated by Saudi Arabia allowing its agreement to denominate oil sales in dollars to lapse.

VIDEO: "Russia And China Just Declared WAR Against The US Dollar In A HUGE Way!"

Stoic Finance (8 min.)

I've mentioned before that while the U.S. dollar was not backed by gold, it has been backed with oil since 1972 saw the introduction of the Petrodollar, formally recognized in a 1974 agreement between Saudi Arabia and the United States. Under the deal, Saudi Arabia committed to only selling oil for U.S. dollars in exchange for, among other things, a security guarantee from the United States. But that agreement has expired and Saudi Arabia has exited the Petrodollar deal. As Newsmax explains:

    The financial markets are bracing for disruption now that Saudi Arabia decided not to renew its 50-year petrodollar partnership with the United States, MSN reported.

    This opens the door for Saudi Arabia to sell oil and other goods — instead of exclusively in the U.S. dollar — in multiple other currencies, including the Chinese renminbi, and in euros, yen, and digital currencies such as bitcoin.

    Saudi Arabia’s shift to other currencies is expected to hasten the global movement away from the dollar.

Saudi Arabia will instead join Project mBridge "to explore a multicentral bank digital currency (CBDC) platform involving central and commercial banks. The CBDC is built on a distributed ledger technology for instant cross-border payment settlements and foreign exchange transactions." 

More than 26 nations [sic: central banks] are mBridge members, including Federal Reserve Bank of New York, International Monetary Fund, World Bank, European Central Bank, Reserve Bank of Australia, Bank of Israel, Bank of France, Central Bank of Bahrain, Central Bank of Egypt, Central Bank of Jordan, Bank of Namibia, and South African Reserve Bank.

• See also: "So Long, Petrodollar: US-Saudi Arabian Agreement Ends After Fifty Years"--Red State.

    So does this mean that the U.S. is no longer required to provide a security guarantee to Saudi Arabia? No. Our traitorous Deep State is going to continue to offer the security guarantee. Not in exchange for strengthening the American dollar or the economic wellbeing of American citizens, mind you, but in order to benefit Israel.

    The Wall Street Journal reports (via MSN): "U.S. to Offer Landmark Defense Treaty to Saudi Arabia in Effort to Spur Israel Normalization Deal." The article relates that "[t]he Biden administration is close to finalizing a treaty with Saudi Arabia that would commit the U.S. to help defend the Gulf nation as part of a long-shot deal to encourage diplomatic ties between Riyadh and Israel, U.S. and Saudi officials said." It adds:

    The diplomatic push for a defense pact with Riyadh marks a remarkable turnaround for President Biden, who as a candidate vowed to treat Saudi Arabia as a pariah and make it pay a price for the assassination of journalist Jamal Khashoggi, a U.S. resident. Biden is now on the cusp of making a formal commitment to protect the oil-rich monarchy, which is charting an ambitious path of economic and social development while still suppressing dissent.

    “It would be the first time the U.S. concluded a mutual defense pact that would carry the force of law since the 1960 revision of the U.S.-Japan treaty, and the first time it concluded such an agreement with an authoritarian country,” said Aaron David Miller, a former U.S. peace negotiator now with the Carnegie Endowment for International Peace, a Washington-based think tank.

    A security alliance would elevate Saudi Arabia’s regional standing and entrench the U.S. military role in the Middle East as it convulses from the Oct. 7 attack led by Hamas against Israel and ensuing war in Gaza. A deal would also buttress Saudi Arabia’s security, while risking increased tensions with Iran, which competes for regional supremacy with Saudi Arabia and has been deepening its ties with Russia.

The article suggests that the success of the treaty depends on Israel ending the war in Gaza and working toward a two-state solution with the Palestinian. But this is not because Israel is a party, but because "[t]he treaty—known as the Strategic Alliance Agreement—must obtain a two-thirds majority vote in the Senate as required by the Constitution. It is unlikely to gain support from enough lawmakers without being linked to a Saudi commitment to normalize ties with Israel." 

The draft treaty is modeled loosely on Washington’s mutual security pact with Japan, according to the U.S. and Saudi officials. In exchange for the U.S. commitment to help defend Saudi Arabia if it were attacked, it would grant Washington access to Saudi territory and airspace to protect U.S. interests and regional partners. It is also intended to bind Riyadh closer to Washington by prohibiting China from building bases in the kingdom or pursuing security cooperation with Riyadh, the officials said.

And:

    A megadeal that includes a U.S.-Saudi security alliance and Saudi-Israeli normalization would represent a geostrategic victory for Washington, said Jonathan Panikoff, a former senior U.S. intelligence official now at the Atlantic Council think tank, with potential to shift historic alliances in the Middle East.

    “By ensuring that Saudi Arabia is more fulsomely tied to the U.S. when it comes to security, technology, and long-term economic and commercial efforts,” he said, it would also “disrupt efforts by Beijing to make progress in the region and find additional allies willing to support its efforts to shift away from the U.S.-led liberal international order.”

But note well this part:

The broader deal—but not the treaty—is expected to include U.S. support to develop a Saudi civilian nuclear program with uranium enrichment, another extremely sensitive issue that needs to be finalized. 

A majority of Americans do not believe such a deal would be in the best interests of the United States, or are unsure if it would be so. But when has that mattered to the ruling class?

• See also: "Saudi Arabia is seeking a defense pact requiring the US to defend the Islamic kingdom if it is attacked"--Daily Mail (Sep. 29, 2023).

    In short, the Petrodollar deal with Saudi Arabia that virtually ensured that the U.S. dollar would be the world's reserve currency has expired. The U.S. probably could have forced a renewal by threatening to no longer guarantee Saudi Arabia's security, but instead is offering a security guarantee in exchange for what? Saudi Arabia keeping China out and inviting Israel in. But this whole arrangement has the backing of the major central banks, so it must be good for the common person. Right?

    The primary consequence for Americans will be inflation and the declining value of the U.S. dollar--just like we saw in the 1970s under Carter. (I remember a political cartoon from that era showing a Parisian pick-pocket returning a wallet to an American couple, apologizing that he didn't realize it was only filled with U.S. dollars). So prices of goods imported from overseas (e.g., China or other countries where manufacturing is parked) will increase--probably quite substantially.

    In fact, the result of all of this is that foreign countries will no longer need to horde U.S. dollars to use in international trade, the demand for dollars will decline--probably precipitously once other options become available--which will mean that these countries will no longer be willing to buy as much U.S. debt. Don't expect Congress to change its spending habits--at least, not quickly--which means that we will still run deficits; only these foreign countries will not be willing to buy up American debt unless the U.S. offers high interest rates. So the declining value of the U.S. dollar will be matched with a jump in costs of servicing the debt. Hyperinflation? Possibly. Or economic austerity programs such as we have seen in other countries trying to get debt paid off. Either way, the standard of living will decline.

    Now it might be argued that a dollar declining in value might make the U.S. more competitive in international markets. That might be true as well, although I question whether most Americans will be willing to work for what workers receive in China or Vietnam. In any event, even if it resulted in a boost to manufacturing in the United States, we can look at employment numbers over the past several years and see that the vast majority of new jobs will go to POCs and not white Americans; and most of those jobs will actually be going to immigrants. 

    We destroyed Libya and Iraq because their leaders threatened to shift oil sales from being denominated in U.S. dollars, threatening the dollar's reserve currency status; and now Biden and the Democrats and the central bankers have just given away our reserve currency status for a mess of pottage.