Remembering The Once-Almighty Dollar

Remembering The Once-Almighty Dollar

By Gerald Harris

Predictions for a new calendar year are usually made a few days or at most a few weeks before they arrive. But one prediction for 2018 looks incredibly timely – and it was made 30 years ago.

The prediction appeared in the highly respected UK magazine The Economist, which is owned by a group of high and mighty families and bankers that include the Rothschilds. According to the prediction, a new currency called the phoenix will be introduced in 2018, and if this turns out to be right, all of us will be affected.

Time For Change?

This entire concept needs to be clarified. After all, why would anyone have been thinking about a replacement for the dollar 30 years ago? Why would one be introduced now? And what are the ramifications if one is introduced? Some background information may make these questions easier to answer.

For decades, the U.S. dollar was the reserve currency in the world. It was universally trusted, accepted, and even prized in every country. However, this began to change in 1971.

Until then the dollar had been backed by gold. But in 1971, then-President Richard Nixon took the dollar off the gold standard, which meant that the government would no longer convert dollars into gold; this made it very easy for the government to print many new dollars, and that is exactly what happened. And as all those new dollars were printed, its value began to decline.

Some believe that cryptocurrencies have reached a point
where they now serve as a new currency

1973 was an eventful year. The Yom Kippur War and initial successes by the attacking Arab armies shocked everyone. This was immediately followed by an embargo by oil-producing countries and the world was faced with a serious energy crisis. In a very short time the price of oil tripled, stock markets around the world plunged, and so did their economies.

Rise Of The Petrodollar

A diplomatic arrangement was reached to resolve these problems: the Saudis agreed to price their oil in U.S. dollars, and every country that wanted to purchase Saudi oil first had to convert their currencies into U.S. dollars. In return, the U.S. agreed to sell weapons to the Saudis and also provided them with military protection. In 1975, the same agreement was reached with other members of the oil-producing group of nations called OPEC. The Saudis were one of the world’s largest producers even back then, so this arrangement of pricing oil in dollars was very important.

Pricing oil in dollars added stability to the energy market, but there was an even bigger benefit: it also greatly increased demand for U.S. dollars, making the currency very valuable even though it was no longer backed by gold. This agreement provided tremendous benefits for the U.S. economy and boosted Americans’ standard of living significantly.

This arrangement gave rise to the term “petrodollars.” Petrodollars simply refers to the dollars oil-producing countries receive for their oil – and there are bundles of them. However, the real purchasing power of their dollars depends not only on their quantity but also upon the inflation rate in the U.S. and the value of the dollar.

Fall Of The Petrodollar

Unfortunately, the value of the dollar dropped steadily because so many of them were being printed. Since 1971, the dollar has lost 98 percent of its value as compared with gold. And it also hasn’t performed very well when compared to most other currencies. For example, the dollar has lost 77 percent of its worth against the Swiss franc.

Over time, the dollar came to represent an economy wracked by huge deficits and astronomical debt that keeps growing. The last time the U.S. budget enjoyed a surplus was back in 1960, and there has been a trade deficit every year since 1975. In addition, consumers have trillions more in debt from student and auto loans, and state pension plans are unfunded by additional trillions.

These problems have convinced a growing number of countries that the value of the dollar will continue to decline and that there is no logic in accepting them in exchange for oil or other merchandise. However, countries need to do business in money, and if they don’t want to do business in the dollar it has to be in another currency. And that other one seems to be in the making.

Rise Of The Petroyuan

To date, there has been no official move away from the U.S. dollar. But in late 2017, China announced it was considering a move to price oil in its own currency, the Chinese yuan. This move made sense because China is the world’s biggest importer of oil.

At least 23 countries are now pricing deals for oil and/or other goods away from the petrodollar system. These countries include Iran, Syria, North Korea, and Venezuela. This is not a surprise, as they are political opponents of the U.S. However, some of the other countries in this group – Brazil, Russia, China, India, the U.K., Germany, and France – are also supporting this policy and this does come as a surprise.

Economists warn that if a new reserve currency is established, many of the dollars being held by these countries could “come home” to the U.S. and create very high inflation here.

China has just announced a new move described as “a potential bombshell” to get oil priced in the yuan: this move is the introduction of its own oil futures trading. Writer Adam Levinson reports that this will aid the acceleration of de-dollarization and the rise of the petroyuan. Saudi Arabia seems to be giving at least tacit support to this idea, as the oil kingdom has in recent months inked deals worth tens of billions of dollars with China.

A New Cryptocurrency?

Some believe that cryptocurrencies have reached a point where they now serve as a new currency. There are now well over 2,000 of them and they have a combined value of more than $800 billion. And more are coming onto the market every day.

Here’s how King World News analyzes the situation. “If there will be a new currency in 2018 it is unlikely to be bitcoin or any of the other cryptos. It is possible that bitcoin was constructed by a government in order to experiment with how a cryptocurrency would work. Or it could be, as former Wall Streeter Catherine Austin-Fitts believes, that governments are closely watching the crypto mania and letting private enterprise develop the market before they step in and ban all cryptos in order to install their own. …

“The U.S. government could introduce a cryptodollar in 2018 or later to replace the current dollar, which they know will soon collapse. All existing debt would remain in the old dollars. The U.S. government would then encourage and assist a fast appreciation of the [U.S.] cryptodollar, just like bitcoin. This would enable repayment of the old dollar [debt] with the new inflated cryptodollar. Obviously, this scheme would not work [over the long term], but for a while a euphoric crypto world might [initially] buy it hook, line, and sinker.”

King World predicts that neither Russia nor China would find these developments acceptable, and that these two countries would introduce some form of gold-backed payment system, a scenario that’s very plausible since both of these countries have huge inventories of gold. “This would drive up the price of gold and silver into a mania that the world has not seen before.”

So, on the bottom line there’s a lot of theorizing that a new currency will be introduced in 2018, either in the form of a petroyuan, or a petroruble, or a new cryptocurrency, or one backed by gold. If any of these materializes it would be a devastating and amazing development.

Almost as amazing as predicting the introduction of a new currency 30 years ago.

 Sources: ftmdaily.com;
investopedia.com;
kingworldnews.com.
truthandaction.org;
zerohedge.com


Gerald Harris is a financial and feature writer. Gerald can be reached at geraldhrs@yahoo.com

 

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