The Death Of The U.S. Petrodollar and What Comes After

The Death Of The U.S. Petrodollar and What Comes After | Collapse-petrodollar | Economy & Business

By: The Voice of Reason |


In the following interview, Turd Ferguson of TF Metals Report interviews the one and only Dr. Jim Willie, in what is undoubtedly one of the best Dr. Willie interviews I’ve ever heard. The article that follows the interview is also from TF Metals Report, and it’s written by Grant Williams, who is a Singapore-based hedge fund manager.

First, the interview covers three main areas of discussion. First, Ferguson and Dr. Willie review the generally accepted narrative that has been coming from the mainstream media more or less since Donald Trump won the election. We keep hearing how bonds are selling off, which is sending interest rates higher, and making the stronger Dollar. There’s nothing to worry about, and the Dow will be at 25,000 in no time, right?

Wrong. The first topic covered in the interview deals with the changes currently taking place in the bond market right now, and what the overall effect of those changes will be on the global financial system. In short, the generally accepted narrative coming from Washington and the mainstream media couldn’t be more wrong. This isn’t a time for wishful thinking. It’s a time for preparation.

Unlike other interviews you may have heard with Dr. Willie, in this one Dr. Willie goes off on very few tangents. One thing is certain, he definitely brought his “A game” to this interview, and the predictions he makes about the future of the U.S. Dollar, aka the PetroDollar are both bold, and they’re specific.  At one point,Dr. Willie goes as far as to predict the U.S. will likely attempt to assassinate members of the Saudi royal family, and he explains why. When you consider that Dr. Willie predicted the coup that took place in Turkey 8 months prior to when it happened, I suggest you pay attention to what he says.

Next, the nationalizing of Europe’s oldest bank in Italy is discussed, but the problem in Europe goes beyond just any one bank. The two men discuss how the problems Dr. Willie predicted Italian banks were going to have well over 1.5 years ago, are having a ripple effect, and causing other banking failures across the Eurozone. Finally, in the last portion of the interview, Dr. Willie and Turd Ferguson discuss the obstacles facing Donald Trump, Washington D.C., and what to expect from Trump’s efforts to “drain the swamp.”

After the interview, be sure not to miss the report written by Grant Williams, a Singapore-based hedge fund manager, which goes into excruciating detail about the death of the PetroDollar.



“The Death Of The Petrodollar and What Comes After”

The Death Of The U.S. Petrodollar and What Comes After | 1 | Economy & Business

Grant Williams writes:

The story begins in the 1970s when Henry Kissinger and Richard Nixon struck a deal with the House of Saud — a deal which gave birth to the petrodollar system.

The terms were simple The Saudis agreed to ONLY accept U.S. Dollars in return for their oil and that they would reinvest their surplus dollars into U.S. treasuries.

In return, the U.S. would provide arms and a security guarantee to the Saudis who, it has to be said, were living in a pretty rough neighbourhood. As you can see, things went swimmingly (chart below)

The Death Of The U.S. Petrodollar and What Comes After | 2 | Economy & Business

Saudi purchases of treasuries grew along with the oil price and everyone was happy.  (We’ll come back to that blue box on the right shortly)

The inverse correlation between the dollar and crude is just about as perfect as one could expect (until recently that is… but again, we’ll be back to that).

The Death Of The U.S. Petrodollar and What Comes After | 3 | Economy & Business

And, as you can see here, beginning when Nixon slammed the gold window shut on French fingers and picking up speed once the petrodollar system was ensconced, foreign buyers of U.S. debt grew  exponentially.

Having the world’s most vital commodity exclusively priced in U.S. dollars meant everybody needed to hold large dollar reserves to pay for it and that meant a yuuuge bid for treasuries. It’s good to be the king.

The Death Of The U.S. Petrodollar and What Comes After | 4 | Economy & Business

By 2015, as the chart on the next page shows quite clearly, there were treasuries to the value of around 6 years of total global oil supply in the hands of foreigners (if we assume a constant 97 million bpd supply which I think is a pretty reasonable estimate).

Now… with that brief background on the petrodollar system, here’s where I need you to stick with me. I promise you it’ll be worth the mental effort


Ready? Here we go.

Now, back in 2010, then-World Bank President Robert Zoellick caused something of a commotion when he suggested that an entirely new global monetary system maybe wasn’t such a bad idea.

The system he had in mind involved a freely-convertible Yuan and, controversially was constructed around gold as its central reference point:

(Robert Zoellick, November 8, 2010): …the G20 should complement this growth recovery programme with a plan to build a co-operative monetary system that reflects emerging economic conditions. This new system is likely to need to involve the dollar, the euro, the yen, the pound and a renminbi that moves towards internationalisation and then an open capital account.

The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old  money, markets are using gold as an alternative monetary asset today.

In seemingly unrelated news, two years later, Iran began accepting Yuan in payment for its oil amid US sanctions. The transactions were conducted through Russian banks:

(Financial Times, May 2012): Iran is accepting renminbi for some of the crude oil it supplies to China…

…Tehran is spending the currency, which is not freely convertible, on goods and services imported from China…

The trade is worth as much as $20bn-$30bn annually according to industry estimates…

The renminbi purchases began some months ago…much of the money is transferred to Tehran through Russian banks, which take large commissions on the transactions…

Beijing has been trying to get its trading partners to use the renminbi, in effect transferring the exchange rate risk to its counterparties, since the price of crude is set in US dollars. It also frees Beijing of the need to hold as many dollars in its reserves.

The crucial part of this deal was that, by diversifying their purchases in this way, the Chinese had found a path towards not only needing to hold fewer U.S. dollar reserves, but to circumventing the petrodollar system altogether.


THE VOICE OF REASON is the pen name of Michael DePinto, a graduate of Capital University Law School, and an attorney in Florida. Having worked in the World Trade Center, along with other family and friends, Michael was baptized by fire into the world of politics on September 11, 2001. Michael’s political journey began with tuning in religiously to whatever the talking heads on television had to say, then Michael became a “Tea-Bagging” activist as his liberal friends on the Left would say, volunteering within the Jacksonville local Tea Party, and most recently Michael was sworn in as an attorney. Today, Michael is a major contributor to, he owns and operates, where Michael provides what is often very ‘colorful’ political commentary, ripe with sarcasm, no doubt the result of Michael’s frustration as he feels we are witnessing the end of the American Empire. The topics Michael most often weighs in on are: Martial Law, FEMA Camps, Jade Helm, Economic Issues, Government Corruption, and Government Conspiracy.

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