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Rise of US
economy
after WW-II
Gold for
Dollars
Peripeteia :
Falling USD
Oil for
Dollars
At the end of world war-II, USA e...
Rise of US
economy
after WW-II
Gold for
Dollars
Peripeteia :
Falling USD
Oil for
Dollars
In 1944, At United Nations Moneta...
Rise of US
economy
after WW-II
Gold for
Dollars
Peripeteia :
Falling USD
Oil for
Dollars
American
Consumers
Federal
Govern...
Sudden rise of demand for USD resulted into
Inflated asset prices in ecomonies worldwide.
By 1971, weights of ‘Gold for US...
Rise of US
economy
after WW-II
Gold for
Dollars
Peripeteia :
Falling USD
Oil for
Dollars
Way to
survive
for USA
Raise
Taxe...
By 1971, US economy was
suffering from High trade
deficits and High spending on
Vietnam war.
Which resulted into improper
...
On Aug 15,1971 US President Nixon changed
the game completely.
They announced the end of ‘USD
convertibility for Gold’ mak...
US offered a two criterion deal to saudi
arab:
1) Sell your Oil in exchange of only one
currency US dollars.
2) Surplus Oi...
Benefits of Petrodollar System
Global Demand for Dollar
• Artificial Demand for
dollars created
• By providing incentives ...
Consequences of the petrodollar
collapse
Petrodollar
Collapses :
USA loses
ability to print
dollars
Supply of
Dollar great...
US in Afganistan: Why?
Aim declared by the United States: “liberate”
Afghanistan from the terrorist network, Al
Qaeda, hea...
The Bush Years
• The Bush administration swore up and down that Iraq had
weapons of mass destruction and that Saddam Husse...
Al Qaeda: Just Another CIA Creation
Operation Cyclone
Extent to which USA can go for Oil
Security
• Iraq War: Leveraging on the world trade
center attack USA Created false atta...
Timeline Of the War
April 1995- The U.S.
State Department,
the CIA, and the
National Security
Council formed a
working gro...
Critical Analysis:
• 1. the dominance of petrodollar penetrates all the economies.
• 2. Petrodollar seems the primary forc...
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An overview of 'Petro Dollar' system

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Petro dollar System

  1. 1. Rise of US economy after WW-II Gold for Dollars Peripeteia : Falling USD Oil for Dollars At the end of world war-II, USA emerges as a leader of global economy Reason: USA was having 80% of world gold reserves at that time, Gold was supposedly the most stable trading commodity. Earlier superpower Britain had become debt-ridden and war torn by the end of WW-II.
  2. 2. Rise of US economy after WW-II Gold for Dollars Peripeteia : Falling USD Oil for Dollars In 1944, At United Nations Monetary & Financial Conference (Bretton woods Conference)- US dollar was accepted unanimously as a means to trade against Gold. WHY: Two Reasons: 1) US Dollar was the most stable currency at that time, because of high gold reserves of USA. 2) USA offered fixed trading rate for Gold: 35 $ per ounce of gold, Many countries became overwhelmed by this kind of financially stable opportunity.
  3. 3. Rise of US economy after WW-II Gold for Dollars Peripeteia : Falling USD Oil for Dollars American Consumers Federal Government US Federal Reserves “Gold for US Dollars” accepted, and USA successfully created a strong demand for its currency in global markets.
  4. 4. Sudden rise of demand for USD resulted into Inflated asset prices in ecomonies worldwide. By 1971, weights of ‘Gold for USD’ system upon US economy became unbearable. Nations were demanding more and more US Dollars to trade against Gold. This led to shortage of US dollar liquidity in Global economy. Rise of US economy after WW-II Gold for Dollars Peripeteia : Falling USD Oil for Dollars
  5. 5. Rise of US economy after WW-II Gold for Dollars Peripeteia : Falling USD Oil for Dollars Way to survive for USA Raise Taxes Cut Spending Print more Dollars Borrow more money US government had only 4 ways to tackle with this issue.. But they did something which shocked the world.
  6. 6. By 1971, US economy was suffering from High trade deficits and High spending on Vietnam war. Which resulted into improper balance in US Gold Reserves to Debt Levels. USA had Large debts, they finally got caught in their own trap. They fell short of their own currency to pay off their debts. Things got reversed, other nations started trading Rise of US economy after WW-II Gold for Dollars Peripeteia : Falling USD Oil for Dollars
  7. 7. On Aug 15,1971 US President Nixon changed the game completely. They announced the end of ‘USD convertibility for Gold’ making US Dollar and other global currencies almost- Floating Currencies. Rest of world currency dependence on USD started decreasing. Now, USA wanted to increase the demand for USD by some another means. They Introduced “ Oil for Dollars” Rise of US economy after WW-II Gold for Dollars Peripeteia : Falling USD Oil for Dollars
  8. 8. US offered a two criterion deal to saudi arab: 1) Sell your Oil in exchange of only one currency US dollars. 2) Surplus Oil reserves should be invested back into US debt securities. In exchange, USA offered them ‘Guaranteed Protection against their neighbour enemy- ISRAEL’. So, USA finalised ‘Oil for Dollar’ deal in exchange for weapons. OPEC countries accepted this lucrative offer.
  9. 9. Benefits of Petrodollar System Global Demand for Dollar • Artificial Demand for dollars created • By providing incentives to countries that conduct oil trade to dollars • Demand for dollars increas-Permission slip to print in Dollars Global Demand for US Debt Securities • Recycle Petrodollar by encouraging investment of profits made from oil sales in US Debt securities • Money comes back- Dream come true for a country like US that has huge expenses. • Distorts the true demand for Debt securities- Hence an artificially low interest rate maintained that will vanish once the petrodollar system collapses Buy Oil in Domestic Currency • USA ‘s consumption of Oil is greater than it’s doemestic supply • Hence US buys oil from other countries using dollars that it can print at will. • Cause an increase in demand for dollars and Debt securities by Oil buying countries.
  10. 10. Consequences of the petrodollar collapse Petrodollar Collapses : USA loses ability to print dollars Supply of Dollar greater than the demand All dollars across the globe rushes back to US from foreign nations Hyperinflation in USA; Subsequent increase in interest rates. Oil related prices sky rocket in USA Massive reduction in supply of dollars attempted by USA. Massive reduction in value of assets. Massive layoffs in businesses. A recovering economy which will be much smaller due to drastically reduced money supply
  11. 11. US in Afganistan: Why? Aim declared by the United States: “liberate” Afghanistan from the terrorist network, Al Qaeda, headed by Osama Bin Laden Name of the Operation: Operation Enduring Freedom
  12. 12. The Bush Years • The Bush administration swore up and down that Iraq had weapons of mass destruction and that Saddam Hussein was intimately connected to the attacks of 9/11 and to Al Qaeda itself. Reality:  15 of the 19 alleged 9/11 hijackers were citizens of Saudi Arabia, not Afghanistan or Iraq.  Iraq had no WMDs and, despite massive intelligence efforts, no connection could be found between Iraq and Osama Bin Laden.
  13. 13. Al Qaeda: Just Another CIA Creation Operation Cyclone
  14. 14. Extent to which USA can go for Oil Security • Iraq War: Leveraging on the world trade center attack USA Created false attack to Conquer Iraq for its Oil Reserves. • Afgan War: With motives to establish peace USA Spends $2 billion per week, but the ulterior motives here are to establish control over the Country’s Oil Reserves.
  15. 15. Timeline Of the War April 1995- The U.S. State Department, the CIA, and the National Security Council formed a working group to study U.S. oil and gas interests in the Caspian Sea region. October 1995-Turkmenistan’s president, Saparmurad Niyazov, signed an agreement with Unocal and the Saudi Arabian Delta OilCompany.Development of the Trans-Afghanistan pipeline Pakistani offi cials claimed the Bush administration informed them fi ve weeks before 9/11 that they would begin military operations in Afghanistan against the Taliban in October of that same year.
  16. 16. Critical Analysis: • 1. the dominance of petrodollar penetrates all the economies. • 2. Petrodollar seems the primary force driving the oil trade accross the world • 2. One single country with it's brilliant economic move of petrodollar has not let countries like EuroZone and Opec dominate the oil sector. • 3. Opec Countries who have a monopoly in supply of Oil across globe also are a big drivers of Petrodollar System. It could be possible for them to create their own currency system of oil trading but they haven't. • 4.Euro Currency is still not in demand as much as the dollar despite entire europe trading in it.
  • WilliamColeman34

    May. 4, 2017
  • PrashantGupta56

    Dec. 24, 2014

An overview of 'Petro Dollar' system

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