Gold, the Petro-Dollar & U.S. Foreign Policy

For seventy years, the United States dollar has been the reserve currency for the globe. After World War II until quite recently, more than 70% of all foreign exchange transactions and 40% of all world exports have been denominated in dollars.  

Today [Aug. 30, 2016], the dollar is worth only a tiny fraction of what it was worth when the currency was backed by gold. The dollar’s loss of value can be measured by gold:

1971:  $1 =  1/35th of a 1 oz gold coin
2016: $1 = 1/1,380th of a 1 oz gold coin

Dollar debasement has defrauded individual Americans and America’s creditors. Yet, the dollar has maintained global supremacy because of its oil backing. Although most OPEC oil is still transacted in dollars, dozens of oil-producing countries have attempted to replace the dollar with gold and other currencies. Global dollar dominance has depended on the U.S. military to defend the status of the “petro” (petroleum) dollar.

P ET R O- D O L L A R   H I S T O R Y

Fifty years ago, the United States made a bargain with OPEC (the Organization of Petroleum-Exporting Countries). OPEC agreed to peg the price of oil to the gold-backed dollar. And, in exchange for U.S. protection, the oil cartel agreed to trade its share of the world’s oil supply only in dollars.

The landmark agreement gave birth to the petro-dollar. Under the original contract, the U.S. was essentially exchanging gold for oil. OPEC nations could exchange their oil export dollars for U.S. gold at $35 per Troy oz.

The U.S. broke the oil-price contract with OPEC. President Nixon reneged on the long-standing agreement by refusing to exchange U.S. gold for OPEC oil dollars.

The President severed the tie between the dollar and gold on August 15, 1971. (Under-Secretary of the Treasury Paul Volcker was the principal planner in the decision to suspend gold convertibility.) Prior to that date, the dollar had been “gold-backed.” For 179 years, all U.S. government creditors could have exchanged paper dollars for U.S. gold. 

Leading up to the pivotal year (1971), the Federal Reserve had created massive credit to finance the costly Vietnam War, Medicare, Medicaid, and multiple “Great Society” programs. In response to reckless money printing, the watching world had rushed in alarm to exchange paper dollars for U.S. gold. 

Nixon closed the “gold window” after European central banks exchanged their dollar reserves for more than 17,000 metric tons of U.S. gold — more than 571,428,571 Troy ounces of physical gold. (1 oz coins below)

Nixon’s ‘temporary measure’ to stop the gold hemorrhage by closing the gold window became permanent. After the dollar was permanently de-linked from gold, members of OPEC grudgingly continued to trade oil exclusively in dollars with all other nations.  

The petro-dollar system forces the world to hold enormous dollar reserves. Countries need dollars in order to buy oil from OPEC. Despite the debasement of the currency, the dollar retains its status as the global monetary reserve because –in effect– it is backed by oil. The dollar will remain the world’s reserve currency as long as OPEC sells oil in U.S. dollars. American foreign policy is dedicated to making sure OPEC oil producers keep their original bargain. 

“DOLLARS ONLY” STRICTLY ENFORCED

In 2000, Saddam Hussein nearly caused a run on the dollar by demanding Euro for Iraqi oil. The decision to reject the dollar and trade the third largest supply of OPEC oil in Euro was not tolerated.

Former U.S. Secretary of the Treasury, Paul O’Neill, said the main topic of President G. W. Bush’s first Cabinet meeting was how to find a way for a pre-emptive invasion of Iraq. Regime change was topic ‘A’ only ten days after Bush’s inauguration ( Jan. 20, 2001). Secretary O’Neill said the main topic of the second Cabinet meeting was the future occupation of Iraq.  

O’Neill was fired for his widely-reported revelations: Eight months before September 11th, President Bush and his Cabinet discussed the invasion and occupation of Iraq. Iraq abandoned the Euro, and resumed trading crude oil in dollars two months after the 2003 invasion.

From 2000 until the middle of 2014, the dollar was
down 62% against the Euro
(from 82¢ to $1.33).  

AFRICAN OIL: More than twenty African nations produce crude oil; a larger number of countries have proven oil reserves and/or proven natural gas reserves.  

Libyan oil reserves are the largest in Africa. In 2011, the head of Libya officially rejected both the dollar and the Euro, and demanded gold payment for oil.

The rest is history. The decision to require gold for oil was not tolerated (US/NATO invasion March 19, 2011).  

AFRICAN MONETARY UNIFICATION. Prior to the 2011 invasion, Libya’s Qadhafi had conceived and financed a plan for African economic independence. After years of discussion, the heads of fifty-three countries agreed to unify their sovereign nations with one gold currency. In 2004, the pan-African Parliament laid plans for the African Economic Community and a single gold currency by 2023.

Qadhafi was the Chairman of the African Union in 2009. Members chose the Libyan dinar to become the gold currency for the continent and the only possible money to buy African oil. **

Four billion people in the Eastern Hemisphere believe real money is gold (or gold-backed). OPEC members measure the dollar’s loss of purchasing power by gold.

From 2000 until the middle of 2014,
the dollar was down 470% against gold.

“The fall in the value of the dollar is one of the biggest problems facing the world today.  The damage caused by this has already affected the global economy, particularly those of the energy-exporting countries. … Therefore, I repeat my earlier suggestion, that a combination of the world’s valid currencies should become a basis for oil transactions, or (OPEC) member countries should determine a new currency for oil transactions.”  Iranian President Ahmadinejad to the OPEC Council of Ministries, June 17, 2008 (via John C. K. Daly, OilPrice.com, July 18, 2011)

The petro-dollar is a key to understanding American foreign policy. The U.S. will not tolerate non-dollar deals.  

N O N – D O L L A R    D E A L S:  

  • Syria is a member of OPEC. In 2007, the Commercial Bank of Syria switched the country’s transactions from dollars to Euro. Western economic sanctions (coordinated among sixty nations) are targeting Syria’s central bank, oil exports, and 25.8 metric tonnes of gold. By 2012, foreign exchange reserves were down 50%, oil revenues were down 30%, and Syria was forced to sell gold reserves at a big discount (it was illegal for any country to trade gold with Damascus (Reuters, April 18, 2012).
  • Venezuela has the world’s largest oil supply; the President is was a founding member of OPEC. On March 17, 2008, Venezuelan state oil giant PDVSA signed oil contracts in Euro “in the face of a plummeting dollar.”
  • Brazil, Russia, India, China, South Africa (BRICS) signed an agreement (April 2011) to use their own currencies when issuing credit to each other, rather than using dollars.
  • Russia’s Prime Minister Putin and China’s Premier Wen Jiabao met in Saint Petersburg, Nov. 2010. They agreed to use their own currencies in bilateral trades, rather than dollars.
  • Japan and China are phasing out of dollars in their bilateral trades. 
  • China has (non-dollar) oil deals with Angola, Libya, Sudan, Syria, Nigeria, and Iran.
  • Iran has the world’s fourth largest oil supply, the world’s second largest natural gas reserves, and was OPEC’s #2 producer in 2012. The country’s foreign currency reserves have been held in Euro since 2009.  

On August 19, 2011, Iran’s new Kish Bourse began trading crude oil and gas in gold bullion, Euro, and the dirham (pegged to the SDR) in exclusion of the dollar. Iran replaced the dollar in oil trade with India, Turkey, Japan, China and Russia.  

The West tightened economic sanctions, targeting the Central Bank of Iran. Iran dropped from OPEC’s #2 oil producer to #5: 

“The U.S. and EU measures targeted oil export revenues… prohibited large-scale investment in the country’s oil and gas sector, and cut off Iran’s access to European and U.S. sources of financial transactions. Further sanctions… targeted the Central Bank of Iran.” U.S. Energy Information Administration.

On Feb. 27, 2012, the EU increased sanctions to prohibit and target countries that trade gold or other precious metals with Syria (Reuters, April 18, 2012). Since July 2013, U.S. law has forbidden selling gold to the citizens or government of Iran.

Will currency war lead to world war? 

If Iran’s Kish Bourse continues to trade oil and gas for gold and other currencies, European countries will not have to hold dollars to buy oil. If OPEC were to trade oil in gold or yuan, countries such as India, Korea, China, Russia, Taiwan, Brazil, and Japan could lower dollar reserves and eventually convert out of dollars. If the dollar lost dominance, the U.S, would not be able to cover trade deficits with printing-press money.   

Will there be a war to contain “rogue” nations so the petro-dollar system can be prolonged as long as possible?


RECENT NON-DOLLAR DEALS

  • United Kingdom: China’s Foreign Exchange Trade System announced (June 19, 2014) a bilateral agreement between the U.K. and China for direct renminbi [yuan]/ pound trade – with no dollar intermediary.
  • Russia signed agreements (June 7, 2014) with 90% of Gazprom Neft customers to switch from dollars to Euro/ renminbi.
  • THE NON-DOLLAR DEAL OF THE DECADE between China and Russia was announced in Shanghai May 21, 2014: Putin and Zi Jinping met for the signing of a $400 billion, 30-yr. gas contract between Gazprom and the Chinese National Petroleum Corporation (CNPC). This HUGE non-dollar deal will supply ¼ of Chinese demand.
  • On April 2, 2014, Reuters reported a $20 billion barter for oil deal between Iran and Russia.
  • A memorandum was signed March 2013 for bilateral trade in renminbi/ ruble: Gazprom, the Russian gas export monopoly, and the Chinese National Petroleum Corp (CNPC) began the Altai natural gas pipeline project (Oct. 2009) that will open Asia to Russia via the ‘Power of Siberia’ route to western China.
By Denise Rhyne

END NOTES  

*Before the 2011 international invasion of Libya, the following oil/gas-producing nations were planning to replace the petro-dollar with gold currency:

Egypt, Sudan, South Sudan, Equatorial Guinea, Congo, Democratic Republic of Congo, Tunisia, Gabon, South Africa, Uganda, Chad, Suriname, Cameroon, Mauritania, Morocco, Zambia, Somalia, Ghana, Ethiopia, Kenya, Tanzania, Mozambique, Cote d’Ivoire, and OPEC member-states → Libya, Angola, Nigeria, Algeria.

“Interventions” by the US-NATO-UN-EU Alliance (invasions of Iraq, Libya, Darfur, Somalia, etc.) were advertised as “protecting civilians” and peace missions “to manage conflicts.” Western Sudan/ Darfur is a major oil source; Rwanda has huge natural gas reserves; Iraq was OPEC’s #2 oil producer; Libya has the largest oil reserves in Africa; East Africa/ Somalia have been called ‘the new Middle East’. 

On Nov.26, 2012, Defense Secretary Panetta announced expanded drone warfare in Africa. On Dec. 24th, 2012, the Pentagon deployed “military teams” to thirty-five African nations.  

FOR THE RECORD 

Hundreds of tons of gold were seized after the invasions of Iraq and Libya. In 2011, Libya alone owned 143.8 tons of gold. There is no account of the bullion captured from the two countries. (Iraqi gold pallet below) 

Libya’s national currency was a “hard currency.” Since the bombing of Libya, not one national hard currency exists anywhere in the world. For the first time in all history, privately sold silver and gold coins/ bars are your only alternatives to fiat currencies.

There will be a RESET. GLOBAL DEFLATION WILL LEAD TO CREDIT COLLAPSE/ CURRENCY FAILURES.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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