These articles never seem to mention that China does not want a petro yuan as it would create pressure against their currency manipulation to keep the cost of goods produced in China low. Not saying the dollar isn’t in decline, just that this may not be in China’s best interest.
capnwally14 on
Yeah so with the Saudis / Uae / Kuwait / Bahrain and all urging the US to go further, what makes the claim in this article substantiated?
Just go look at the twitter accounts of the major figures in those administrations – Saudi and UAE are moving closer to the west if anything
There is a lot of drama about the petro dollar, but let’s put that number in perspective.
|**Fund Name** |**Ticker**|**Total Assets (AUM)**|**Treasury Exposure (%)**|
|:-|:-|:-|:-|
|**Vanguard Total Bond Market**|BND / VBTLX|**$395.3 Billion**|**~49.2%**|
|**iShares Core U.S. Aggregate**|AGG|**$137.9 Billion**|**~42.0%**|
|**Fidelity U.S. Bond Index**|FXNAX|**$70.4 Billion**|**~45.4%**|
|**TOTAL (Combined)**|**—**|**$603.6 Billion**|**~47.1%**|
And there are a lot more bond funds in the world than just those.
So in summary, the petrodollar Treasury holdings of the Gulf countries are less than those held by largest bond mutual funds, let alone the entire market.
PlanetCosmoX on
Where do they find these absurd analysts?
The US controls oil from Canada and Venezuela. They have deals with Saudi Arabia and Iraq, as well as Kuwait.
They control most of the oil on the planet, and they control 36% of its refinement capacity.
If the straight of Hormuz is blocked, the US has a tighter grip on oil, not a loser grip. The single country that is the most affected by this blocked is CHINA, they depend on oil for international shipping lines which delivers their goods to markets around the world, upon which their economy is dependent.
Trump invaded Iran because its a means to an end to cripple international trade, not because he was trying to disarm Iran. By crippling international trade he hopes to force companies to manufacture in the US.
As oil prices rise, goods from China will become unaffordable due to the price of shipping, which is dependent on oil. China would have to build nuclear powered cargo ship to fix this issue, or EV trains to ship goods from one side of the planet to the other side. Even then, they won’t be able to get their goods to the US without some sort of electrically powered boat.
By pointing this out, Trump has reversed the argument on Iran and has pitted China against Iran, in order to force Iran to the table.
I’m not even sure if Trump wants a deal, this may be nothing but a show.
Clearly Trump is a madman that must be voted out as he’s willing to inflict suffering on the entire planet in order to force a concept. He must be voted out. And Iran must attempt to negotiate a deal and they need to do it PUBLICLY, in order to flip the tables on Trump. Which is frankly against their nature, which no doubt Trump is relying on.
That’s his plan, he invaded with this plan in mind. It explains ALL of his actions and incompetence with respect to this Iran war to date.
Remarkable_Sir8397 on
The dollar is the world’s reserve currency for a very simple reason: the world pays for global goods and services in dollars and is willing to save resulting surpluses in dollar assets. From 1945-1971, the dollar was “backed” by gold – namely, global central banks were able to exchange $35 for 1oz at the Fed. This was the foundation of the international monetary system known as Bretton Woods. In 1971, the US broke the dollar’s link to gold. Since then, the dollar has been in a purely fiat regime – one that is backed by the sovereign credit worthiness of the US and willingness of the world to save in its debt. Enduring support for the fiat dollar arguably comes from the dominance of the dollar in the pricing of cross-border trade. Globally traded goods and services are largely priced in USD, with payments exchanged over US controlled payment rails. Global surpluses are thus built in USD and mostly invested back into US assets. Corporates are incentivized to save and borrow in the currency of their payables and receivables, banking systems are dollarized, and central banks save in dollars to act as effective lenders of last resort. This drives demand for USD reserves.
A crucial anchor to this system is the petrodollar: the fact that most globally traded oil is priced and invoiced in dollars. Because oil is so central to global manufacturing processes – from petrochemicals, fertilizers, and transport to running factories and offices – companies are incentivized to price end products in dollars as a natural currency hedge to a key cost. This is a big reason global goods and services are priced and traded in US dollars.
The reason oil is priced in dollars can be traced back to the 1974 petrodollar arrangement between the US and Saudi Arabia. In simple terms, Saudi Arabia agreed to price its oil exports in USD and invest oil surpluses into US Treasuries. In exchange, the US provided security guarantees and military protection. The rest of the GCC followed. Structural foreign demand for US debt lowered the funding costs of the US government, acting as an indirect means of payment for the security umbrella extended to the region. To the extent that this arrangement supported broader global invoicing and saving in USD, it has been crucial to the USD’s role as
the world’s reserve currency.
The current conflict has arguably shaken some core foundations of the petrodollar regime: the security-for-oil-pricing arrangement. US military assets
and bases in the Gulf have come under attack in the war. Oil infrastructure in the Gulf has also been hit. US ability to provide the maritime security to ensure the
global flow of oil has been challenged with the closure of Hormuz. The US security umbrella has been fundamentally tested.
The legacy of this conflict for the dollar could be the ways in which it tests the foundations of the petrodollar regime. In the long-run, if the world uses less oil, the
Gulf draws more deeply on existing dollar savings, if the Gulf moves closer to Asia in its trade and investment relationships, and eventually prices less oil in dollars –
there could be significant downstream effects to the dollar’s usage in global trade
and savings.
roarjah on
It’s really starting to get old with this “sky is falling” posts. Yea our current leader is slowly destroying our country but we can grow from all of this and repair our relationships. This isn’t the end of our empire lol
6 Comments
These articles never seem to mention that China does not want a petro yuan as it would create pressure against their currency manipulation to keep the cost of goods produced in China low. Not saying the dollar isn’t in decline, just that this may not be in China’s best interest.
Yeah so with the Saudis / Uae / Kuwait / Bahrain and all urging the US to go further, what makes the claim in this article substantiated?
Just go look at the twitter accounts of the major figures in those administrations – Saudi and UAE are moving closer to the west if anything
Example: [https://apnews.com/article/trump-iran-saudi-arabia-mbs-gulf-war-uae-89f690b952fe28d3140c537b70fa5051](https://apnews.com/article/trump-iran-saudi-arabia-mbs-gulf-war-uae-89f690b952fe28d3140c537b70fa5051)
“Saudi Arabia and the UAE are among the [top ](https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt_table5.html)[20 countries](https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt_table5.html) holding US Treasuries, with around $250bn in holdings between them.”
There is a lot of drama about the petro dollar, but let’s put that number in perspective.
|**Fund Name** |**Ticker**|**Total Assets (AUM)**|**Treasury Exposure (%)**|
|:-|:-|:-|:-|
|**Vanguard Total Bond Market**|BND / VBTLX|**$395.3 Billion**|**~49.2%**|
|**iShares Core U.S. Aggregate**|AGG|**$137.9 Billion**|**~42.0%**|
|**Fidelity U.S. Bond Index**|FXNAX|**$70.4 Billion**|**~45.4%**|
|**TOTAL (Combined)**|**—**|**$603.6 Billion**|**~47.1%**|
And there are a lot more bond funds in the world than just those.
So in summary, the petrodollar Treasury holdings of the Gulf countries are less than those held by largest bond mutual funds, let alone the entire market.
Where do they find these absurd analysts?
The US controls oil from Canada and Venezuela. They have deals with Saudi Arabia and Iraq, as well as Kuwait.
They control most of the oil on the planet, and they control 36% of its refinement capacity.
If the straight of Hormuz is blocked, the US has a tighter grip on oil, not a loser grip. The single country that is the most affected by this blocked is CHINA, they depend on oil for international shipping lines which delivers their goods to markets around the world, upon which their economy is dependent.
Trump invaded Iran because its a means to an end to cripple international trade, not because he was trying to disarm Iran. By crippling international trade he hopes to force companies to manufacture in the US.
As oil prices rise, goods from China will become unaffordable due to the price of shipping, which is dependent on oil. China would have to build nuclear powered cargo ship to fix this issue, or EV trains to ship goods from one side of the planet to the other side. Even then, they won’t be able to get their goods to the US without some sort of electrically powered boat.
By pointing this out, Trump has reversed the argument on Iran and has pitted China against Iran, in order to force Iran to the table.
I’m not even sure if Trump wants a deal, this may be nothing but a show.
Clearly Trump is a madman that must be voted out as he’s willing to inflict suffering on the entire planet in order to force a concept. He must be voted out. And Iran must attempt to negotiate a deal and they need to do it PUBLICLY, in order to flip the tables on Trump. Which is frankly against their nature, which no doubt Trump is relying on.
That’s his plan, he invaded with this plan in mind. It explains ALL of his actions and incompetence with respect to this Iran war to date.
The dollar is the world’s reserve currency for a very simple reason: the world pays for global goods and services in dollars and is willing to save resulting surpluses in dollar assets. From 1945-1971, the dollar was “backed” by gold – namely, global central banks were able to exchange $35 for 1oz at the Fed. This was the foundation of the international monetary system known as Bretton Woods. In 1971, the US broke the dollar’s link to gold. Since then, the dollar has been in a purely fiat regime – one that is backed by the sovereign credit worthiness of the US and willingness of the world to save in its debt. Enduring support for the fiat dollar arguably comes from the dominance of the dollar in the pricing of cross-border trade. Globally traded goods and services are largely priced in USD, with payments exchanged over US controlled payment rails. Global surpluses are thus built in USD and mostly invested back into US assets. Corporates are incentivized to save and borrow in the currency of their payables and receivables, banking systems are dollarized, and central banks save in dollars to act as effective lenders of last resort. This drives demand for USD reserves.
A crucial anchor to this system is the petrodollar: the fact that most globally traded oil is priced and invoiced in dollars. Because oil is so central to global manufacturing processes – from petrochemicals, fertilizers, and transport to running factories and offices – companies are incentivized to price end products in dollars as a natural currency hedge to a key cost. This is a big reason global goods and services are priced and traded in US dollars.
The reason oil is priced in dollars can be traced back to the 1974 petrodollar arrangement between the US and Saudi Arabia. In simple terms, Saudi Arabia agreed to price its oil exports in USD and invest oil surpluses into US Treasuries. In exchange, the US provided security guarantees and military protection. The rest of the GCC followed. Structural foreign demand for US debt lowered the funding costs of the US government, acting as an indirect means of payment for the security umbrella extended to the region. To the extent that this arrangement supported broader global invoicing and saving in USD, it has been crucial to the USD’s role as
the world’s reserve currency.
The current conflict has arguably shaken some core foundations of the petrodollar regime: the security-for-oil-pricing arrangement. US military assets
and bases in the Gulf have come under attack in the war. Oil infrastructure in the Gulf has also been hit. US ability to provide the maritime security to ensure the
global flow of oil has been challenged with the closure of Hormuz. The US security umbrella has been fundamentally tested.
The legacy of this conflict for the dollar could be the ways in which it tests the foundations of the petrodollar regime. In the long-run, if the world uses less oil, the
Gulf draws more deeply on existing dollar savings, if the Gulf moves closer to Asia in its trade and investment relationships, and eventually prices less oil in dollars –
there could be significant downstream effects to the dollar’s usage in global trade
and savings.
It’s really starting to get old with this “sky is falling” posts. Yea our current leader is slowly destroying our country but we can grow from all of this and repair our relationships. This isn’t the end of our empire lol