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“Is The Collapse Of The Petrodollar Imminent?” A Report Reveals A New Monetary Era 06/04/2023 1435 Earth News / The large reserves of gold in the United States of America after World War II allowed Washington to rebuild the global monetary system and make it based mainly on the dollar, but this system began to disintegrate in the recent period for several reasons, including political and economic, according to reports. The new system, which was established at the “Bretton Woods” conference in 1944, linked the currencies of almost every country in the world to the US dollar through a fixed exchange rate, and also linked the US dollar to gold at a fixed rate of $ 35 an ounce, which encouraged banks around the world to adopt dollars in its reserves. The era of linking the dollar to gold made the “Bretton Woods” system make the US dollar the first reserve currency in the world, and forced other countries to store dollars for international trade or exchange them with the US government for gold at the specified rate. The day Washington surprised the world.. Cutting off the dollar's link with gold Unbridled spending on war and social welfare led the US government to print more dollars than it could support in gold and at the price set for it, according to a report published on the "internationalman" website. By 1967, the number of dollars in circulation had increased dramatically relative to the amount of gold backing them, which encouraged other countries to exchange their dollars for gold, which led to the depletion of the American gold supply at an alarming rate, and the collapse of the London gold complex, and at this point, it was clear This system was beginning to collapse. On Sunday night, August 15, 1971, US President Nixon cut off all scheduled television broadcasts and made a surprise announcement to the American people and the world, announcing the unilateral end of the Bretton Woods system and severing the dollar's last peg to gold. America creates the “petrodollar” to get out of its predicament. The end of gold support for the dollar had great geopolitical consequences, and most importantly, it eliminated the main reason that made countries store large amounts of US dollars and use the US dollar in international trade. As a result, oil-producing countries began to demand With gold payments instead of a rapid depreciation of the dollar. In order to get out of the dilemma of linking the dollar to gold, Washington, which is considered one of the largest consumers of energy, linked oil purchases to the dollar, and since that time, the term “petrodollar” appeared. Washington recycled hundreds of billions of US dollars from annual oil revenues and transferred them to US Treasury bonds, which allowed it to issue more debt and finance a previously unimaginable budget deficit, but these measures also caused major problems, on top of which were financial crises. Globalism. But this method ignored countries also continue to use the dollar, and give it more time, to maintain its unique position as the largest reserve currency in the world. Why was the oil chosen? Oil is the largest and most strategic commodity market in the world, the annual production value of the oil market is ten times greater than the gold market. According to the report, every country needs oil, and if foreign countries need US dollars to buy oil, they have a convincing reason to keep US dollars even if they are not backed by a promise to redeem them in gold. For example, if France wants to buy oil from any oil country, it must buy US dollars from the foreign exchange market to pay for oil first. This creates a huge artificial market for the US dollar to distinguish the US dollar from the local currency, and for the dollar to become just a medium to be used in countless transactions, worth trillions of dollars that have nothing to do with US products or services. Because the oil market is huge, it acts as a standard for international trade, so if foreign countries already use dollars for oil, it is easier to use dollars for other international trade. In addition to almost all oil sales, the US dollar is used in about 80% of all international transactions, and the “petrodollar” system eventually boosts the purchasing power of the US dollar by enticing foreigners to buy dollars. The petrodollar system helped create a deeper and more liquid market for dollars and US Treasuries, and it also helped the US keep interest rates lower than they would otherwise be, allowing the US government to finance huge deficits it otherwise would not be able to. The US army protects the dollar, not the economy. The report indicated that “the United States protects the hegemony of the dollar in a great way. For example, a number of presidents tried to give up the hegemony of the dollar and sell oil in this currency, so that their fate would be death, as happened with Iraqi President Saddam Hussein and Libyan Muammar Gaddafi.” However, the matter seems different with the emergence of nuclear superpowers such as Russia and China, which are challenging the dollar, as the United States will not enter into a direct military conflict with these two powers, despite their taking the step of giving up the “petrodollar.” US sanctions accelerate the collapse of the petro-dollar system The report talked about the sanctions imposed on Russia after its special military operation in Ukraine, where the United States imposed fierce sanctions against Russia, which a former US Treasury official described as a “financial nuclear war and the largest sanctions event in history.” The era of loss of confidence and disengagement from the dollar Washington imposed sanctions on the reserves of the Russian Central Bank, but this measure showed to the public that the United States of America is able to seize the dollar reserves of other sovereign countries, which made many countries reconsider this link and try to find alternatives to it. . The sanctions showed that the currency reserves accumulated by central banks could be withdrawn, noting that China might be able to reshape geopolitics, economic management, and even the international role of the US dollar. The report indicated that Russia is the largest producer of energy and China is the largest importer of energy, and Russia is one of the largest suppliers of oil to China. Now that the US has banned Russia from the dollar system, there is an urgent need for a reliable system capable of handling hundreds of billions of dollars worth of oil sales outside of the dollar and the US financial system. According to the article, the “Shanghai International Energy Exchange” is that new system, where there is a massive trade exchange of energy between Russia and China in yuan and not in US dollars, and if the United States implements sanctions against China using the dollar, this will be a new “financial nuclear bomb”. The article concluded that oil-producing countries have two options: 1. Continuing the “petrodollar” system, which is facing problems at the present time, because the financial situation in the United States is not promising, which may cause the dollar to lose its great purchasing power and expose these countries to great economic risks. 2. Shanghai International Energy Exchange, where oil producers can participate in the largest market in the world and try to get a larger share of the market. They can also convert its revenues and return them easily to gold, which is an international form of money without political risks or risks from the counterparty. The author of the article concluded, "Although most people do not realize this yet, we are at the end of the petrodollar system, on the cusp of a new monetary era."