The End of the Petrodollar System Will Propel Gold Higher

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Despite so many negative predictions, the dollar is still resisting as the World’s reserve currency in 2013.

Experts say its days are numbered, it’s just a matter of time until the dollar collapses.

But what is still keeping the dollar in power? According to PrimeValues.org, the dollar’s strength is partly due the petrodollar system. This is what’s ensuring the US currency its reserve currency status and its strength in terms of value on the forex markets as well.

Shortly: the petrodollar system means buying petrol for US dollars. Countries which want to buy oil must buy US dollars first in order to pay for it.

Saudi Arabia is part of the petrodollar system. It’s the second largest oil producer in the World. But there were times when the arab country was the top oil producer.

When Saudi Arabia is selling oil to, for example – Italy, then the Italians must buy dollars in order to pay for the oil.

There are several countries in the World that are part of the petrodollar system, but more and more countries are ditching it. The US dollar’s reputation is “at the edge of the cliff” mainly due to intense money printing by the fed and the immense debt accumulated.

For decades (especially in the second part of the 20th century), the US dollar has enjoyed the strong status due to the petrodollar trading system. Across the World, buyers of oil resorted to the dollar as a means to pay for the “black gold”. The US dollar has gained tremendous strength on the back of this system.

But due to the economic crisis and political interests, many countries are ditching the dollar and actually selling their petrol for “almost anything else valuable”: either other currencies or gold or they’re bartering. Venezuela and Iran are major oil producers that have ditched the dollar.

As the dollar is more and more avoided in bilateral trade between countries (and, it’s not just the case of petrol trade), the petrodollar’s significance in the global economy is diminishing.

Eventually, the crash of the petrodollar system will crash the dollar as well. Either because of avoidance of the US currency, either because of depletion of the World’s oil reserves

It’s a mix of factors that PrimeValues.org considers will put an end to the petrodollar system and the above-mentioned two are the main ones.

The US dollar may not resist until “domestic issues” will put crash it. The problems might come from outside.

February 21, 2013 – Non-Stop Gold

http://www.MissionMining.com 

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One Response to The End of the Petrodollar System Will Propel Gold Higher

  1. Pingback: Saudi Arabia And China Team Up To Build A Gigantic New Oil Refinery – Is This The Beginning Of The End For The Petrodollar? « olduvaiblog

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