Disclaimer: I am a former U.S. Marine and proud of it. This may rile up some of my conservative friends, but oh well, I’m not a conservative anymore, I’m a Libertarian 🙂 I am still working on confirming a few details, but this is a theory I’ve developed and have discovered substantiation for quite a bit of it.
In 1971, the United Stated ended the last link to gold-backed currency. The dollar was now 100% fiat currency. In 1974, OPEC countries, most notably Saudi Arabia, began to accept only U.S. dollars for oil transactions. This meant that countries wanting to purchase their oil had to buy dollars on world currency markets and then buy oil. This became known as the “petrodollar”. This artificial demand for the USD on world currency markets allowed Washington to print money and spend it as they saw fit, without the downside of third-world runaway inflation, as oil buyers around the world bought up excess dollars. Because enormous amounts of dollars were funneled into very few pockets (Saudi monarchy, etc), the vast majority of these dollars were effectively taken out of circulation, thus restraining the growth of the circulating supply of dollars.
In 2000, Saddam Hussein broke ranks with OPEC and stopped accepting US dollars as payment for Iraqi oil. The U.S. government, well aware of the implications of this, was not pleased. The terrorist attacks of September 11, 2001 provided the first plausible cover that the United States needed to remove Saddam Hussein from power. It is noteworthy that Iraqi oil is once again traded only for US dollars.
The topic of Iran frequently makes headlines. The rogue state and it’s nuclear ambitions are frequently discussed. There’s no question Iran is a rogue state and I certainly am not a fan of its government. However, what if its nuclear aims are defensive in nature? What if Iran, seeing the true value of its oil decline with the dollar has plans to also end accepting dollars and demand another currency? Euros for instance. Having witnessed the Iraqi experience, perhaps Iran wants to exercise control over its natural resources and exchange them for a commodity with more “staying power” than the dollar. The rise of Venezuelan and Russian oil in recent years has begun to deteriorate the petrodollar, as these countries accept US dollars, but do not demand them.
Since 1974, the US has enjoyed the spectacularly enviable position of being able to “print oil”. Other countries must trade REAL wealth for oil. The United States merely prints the money it needs for oil and keeps its treasure for other purposes. There is a great deal of news and history that has been shaped by the “petrodollar”, but nearly all of the populous is unaware of the history of the petrodollar.