The Us dollar was at one point backed by gold.
That was until 1972, when president Richard Nixon “temporarily” suspended the convertability of US dollars into gold. (use this footage) He famously claimed that this move was to protect the dollar against speculators. In fact, the United states had issued more dollars than there was gold to back them. If everyone went to convert their dollars into gold, there wouldnt be enough to go around. This violated a gaurantee that the US promised its european allies and the rest of the world post world war 2. The dollar was meant to be backed by the rare, precious metal. After 1972 it was backed by nothing.
This was a major problem. A currency gains and maintains value through demand for it. If there is no demand for a currency it can hyperinflate or lose value. Despite being the world reserve currency, if the US dollar was not backed by gold or anything of value, it loses its appeal as a store of value or means of exchange. Nixon knew the dollar’s days were numbered and he had to act fast.
So, in 1973 President Richard Nixon and Saudi Prince Fand Ibn Abdel Aziz (use this footage) signed a 6 page agreement that all Saudi Oil would be traded exclusively in US dollars. Oil was and in many ways still is the worlds most valuable commodity, and by guaranteeing trade in US dollars, Nixon in effect was guaranteeing demand for the currency and in essence backing it with Oil.
And so the the petrol dollar was born. In the years that followed, all oil worldwide would be sold and bought through the US dollar, guaranteeing a high level of demand and therefore value for the foreseeable future
While the powers that be in the West celebrated this deal, not all Oil producing nations were pleased. The US had an incomprehensible advantage: it could print unlimited dollars out of thin air with almost no effort or cost, and trade these for valuable, scarce oil which took monumental amounts of energy to produce.
Not everyone wanted to supported the United States exorbitant privilege, and over the past 5 decades. 3 notable examples exist of countries Stepping away from this system - and the consequences they faced were far from minor
12 сен 2024
