''Marin Katusa pulls things together nicely in this superb article:
“By 1975 all of the members of OPEC
agreed to sell their oil only in US dollars. Every oil-importing nation
in the world started saving their surplus in US dollars so as to be able
to buy oil; with such high demand for dollars the currency
strengthened. On top of that, many oil-exporting nations like Saudi
Arabia spent their US dollar surpluses on Treasury securities, providing
a new, deep pool of lenders to support US government spending.”
He continues:
“The “petrodollar” system [as it came to
be called] was a brilliant political and economic move. It forced the
world’s oil money to flow through the US Federal Reserve, creating
ever-growing international demand for both US dollars and US debt, while
essentially letting the US pretty much own the world’s oil for free,
since oil’s value is denominated in a currency that America controls and
prints. The petrodollar system spread beyond oil: the majority of
international trade is done in US dollars.”''
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