CALIBAN

The background to understanding what may be imminent is the recycling of the Petro-dollar:

Especially during the years 1974–1981 and 2005–2014, oil exporters amassed large surpluses of "petrodollars" from the sale of oil at historically high prices.[1][2][8] (The word has been credited alternately to Egyptian-American economist Ibrahim Oweiss and to former U.S. Secretary of Commerce Peter G. Peterson, both in 1973.)[9][10][11] These petrodollar surpluses could be described as net U.S. dollar-equivalents earned from the export of petroleum, in excess of the internal development needs of the exporting countries.[12] The International Monetary Fund argues that these surpluses could not be efficiently invested in their own economies, due to small populations or being at early stages of industrialization. Instead, the IMF advocated for the surpluses to be invested in other locations, most notably the United States, or spent on imports such as consumer products, construction supplies, and military equipment. Additionally, the IMF also argues that global economic growth would have suffered if money was withdrawn from the world economy and stored in the reserves of developing nations, while the oil-exporting states needed to be able to invest profitably to raise their long-term standards of living.[13] Alternatively, critics argue that the international monetary system, reliant on petrodollar recycling, exploits developing nations while advancing American imperialism.[14]

Economist Michael Hudson is more blunt:

Under the rules of (the 7th US national security advisor and 56th US secretary of state, serving under presidents Richard Nixon and Gerald Ford) (Henry) Kissinger — and all this was explained to me by the Treasury and the State Department, in 1974 and 1975 — the US military told Saudi Arabia and other OPEC countries, “You can charge whatever you want for oil, but you have to use the surplus have to invest in the United States. We’re not going to let you buy control of any major American firms. You can’t buy American companies; only we can buy control of foreign economies. You’ll buy bonds. You can finance American industry and American companies. You can buy stocks in the companies. You can make money by just depositing your money in banks”. These were the petrodollars. The petrodollars were the savings of OPEC countries invested in banks.

Enter the War against Iran, resulting in extensive damage to oil facilities and US military bases in the Middle East, not to mention the ongoing blockade of the Strait of Hormuz. Michael Hudson adds:

Now that the OPEC countries are blocked from having export earnings, they’ve announced, “Well, we’ve actually debt-leveraged our own economy. Rich as we are, our real estate projects and our investments are financed by debt, and we have to begin selling off our holdings of US securities, and gold, in order to keep our domestic budgets and the balance of payments in balance”. So all of this now is leading to a sell-off of dollars. And this has reversed what was the whole petrodollar, the whole inflow of OPEC money, into the currency, of oil into dollars. Now, this is becoming a drain on dollars.

Analyst Alexaner Mercouris sounds the alarm in the case of the United Arab Emirates' petition for US dollar swaps in this podcast (from 1:30 to 14:30), but the key discussion is undertaken by Yanis Varoufakis and Wolfgang Munchau in the following video:

Labels: economics, international business, US imperialism