The Petrodollar Soon To Vanish! Why?

September 5, 2017

China announced on September 4, 2017, that they desire to import their oil using their Yuan currency (backed by gold)…not the US petrodollar.  Since China is the biggest importer of oil on our planet this decision should/could dramatically alter the perceptions of traders within the oil markets globally. The U.S. petrodollar could become less prominent for all exporters of oil. If the Saudi’s should decide to sell their oil to China and others for Yuan rather than dollars, then this situation will change global markets significantly and permanently. De-dollarization will accelerate globally and the dollar will gradually become less of a global reserve currency. Watch out for this move in the coming days, weeks, months. This is significant!

In 2014 Russia and China signed two mammoth 30-year contracts for Russian gas to China. The contracts specified that the exchange would be done in Renminbi [yuan] and Russian rubles, not in dollars. That was the beginning of an accelerating process of de-dollarization that is underway today,”. Russia and China are now creating a new paradigm for the world economy and paving the way for a global de-dollarization.

A Russian-Chinese alternative to the dollar in the form of a gold-backed ruble and gold-backed Renminbi or Yuan, could start a snowball exit from the US dollar, and with it, a severe decline in America’s ability to use the reserve dollar role to finance her wars with other peoples’ money,” Engdahl concludes.

All export countries (such as Nigeria, Venezuela, Iran, Russia, and especially Saudi Arabia) could change our global markets to punish the USA and their control system over global markets. This is ominous for Americans and their entire financial control system. The American dollar has been dominant for all international trading since Bretton Woods. Even American sanctions (now so prevalent and ubiquitous) will be affected as this decision becomes known to the world community. Our world financial system could change dramatically and permanently soon!

“Yuan-backed oil and gold futures mean that users can be paid in physical gold, said Alasdair Macleod, head of research at Goldmoney, a gold-based financial services company based in Toronto. While some potential foreign traders have expressed reservations that the contract would be priced in yuan, according to analysts who spoke to Nikkei Asian Review, backing the yuan-priced futures with gold would be appealing to oil exporters — especially to those that would rather avoid U.S. dollars in trade.”

It is a mechanism which is likely to appeal to oil producers that prefer to avoid using dollars, and are not ready to accept that being paid in yuan for oil sales to China is a good idea either,” Macleod said. These recent moves by the Chinese are part of a larger de-dollarization strategy by other world powers (Russia and Iran mostly) intent on creating a more multi-polar global framework. The petrodollar, which was created back in 1975 by Henry Kissinger, following the closing of the gold window, could be history soon. This will expose the U.S. dollar as a ‘naked’ currency unit with no tie to any real material wealth.

Watch the oil/dollar markets for evidence of the coming effects. Also watch the dollar index to see if this affects the ‘value’ of this reserve currency. My sense is that this move by China and Russia (mostly) will change all our international markets soon. The dominance of the U.S. dollar will diminish and the ‘nakedness’ of this fiat/digital/imaginary dollar will be exposed. At some point this will mean that our Congress will need to address this situation. Will our authorities change their policy and create a tie of our dollar to gold? This is likely IMO (temporarily). Watch closely and adjust your investments based on these emerging changes. I am: https://kingdomecon.wordpress.com.

P.S. the RMB and YUAN are ‘names’ for the Chinese currency. A tie of this currency to gold allows traders the option to exchange this currency at the Shanghai gold exchange for real physical gold if they choose. The Yuan would be viewed as backed. The dollar would be viewed as naked. The definition of a gold Yuan is still unknown, however. What would be the exchange rate? Let’s watch and see what emerges!

The Federal Reserve Bank of New York holds the world's largest accumulation of monetary gold.