End of Petrodollar: Rise of Economic Protectionism to Reshape Global Trade

• End of Petrodollar: Rise of Economic Protectionism to Reshape Global Trade
  by https://sputniknews.com/
  The era of petrodollar recycling is drawing to an end as shifts in technology and international politics render it redundant, meaning the US is entering volatile times.
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  Kristian Rouz — The rise of economic protectionism and nationalism in politics of the recent years, including the gradual implementation of US President Donald Trump’s agenda and Brexit reshaping the contours of European trade, are poised to bring an end to the petrodollar recycling. These developments signal the first overhaul of international economic relations since the Nixon administration in the early 1970s in the United States.
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  The petrodollar system entailed the end of the gold standard in the US, which had its national currency pegged to the value of gold at $35 per ounce in the aftermath of World War II. However, the severe challenges that global economy faced in the late 1960s pushed the administration of Richard Milhous Nixon to abandon the system.
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  “The essence of the deal was that the US would agree to military sales and defense of Saudi Arabia in return for all oil trade being denominated in US dollars,” The Huffington Post explains.
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  The shale revolution in oil productionin the early 2010s rendered this system irrelevant in the US, as North America is becoming increasingly independent of crude oil imports and has, in fact, increased its own oil and petrochemical exports under President Trump.
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  However, President Trump’s push for greater protectionism faces obstacles, mainly in the form of a significant Saudi investment in US Treasury bonds accrued over the past 40 years. The petrodollar system has allowed Saudi Arabia to increase its foreign reserves, and many other prominent oil-producing nations have followed the same foreign investment pattern.
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  The US, on its part, was able to increase its money supply by printing dollars, which has produced major dollar devaluation, by over 30 percent since the early 1980s. Subsequently, other oil importers, in order to pay for energy, had to buy US dollars first.
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