Saudi Arabia Just DITCHED The US Dollar

scratching your heads trying to figure out what that means. Basically, the US dollar was backed by gold until nineteen seventy one when Richard Nixon removed it from the gold standards, and then the dollar was sort of like in freefall. And then in nineteen seventy four, a couple years later, when the US made a deal with Saudi Arabia creating

what was known as the Petro dollar. Now, the United States basically agreed to sell Saudi Arabia cheap military equipment and weapons, think you know, protection in exchange for Saudi agreed to keep the oil trade domnominated in dollars, meaning any country that wanted oil from Saudi Arabia had to

invest in dollars. Then, as a result of that agreement, percent of all global oil trade happened in dollars, and that basically cemented the US dollar as the world's reserve currency, which the dollar's been since the end of World War Two with the Brettonwoods Agreement signed in nineteen forty four. But now Saudi Arabia just officially walked away from that agreement.

So the ripple effects for the US dollar are going to be massive, which is why in this video I want to go over what exactly is going on, why are the Saudis walking away from this deal now, and more importantly, where are they going? And then of course how is this going to affect our future and the potential consequences of it all. So let's get into it now. If you're new here, my name is Mark Moss, and I talk about a range of topics covering investing, macroeconomics, business, finance, bitcoin,

and more. But it's crucial that you stick around to the end of this video to understand everything we're about to break down because these ripple effects could affect you no matter where you are in the world. Okay, so first, what just happened and what's going on? Well, the decision

of Saudi Arabia just made not to extend. The petro dollar agreement allows them to now sell oil and other goods in multiple currencies, including the Chinese R and B, Euro, Yen yu want, and even even Bitcoin if they want, which it sort of sounds like they may want to do. We'll come back to that. But there's basically more choice for Saudi, which is of course great news for them.

But the issue is the problem for the US, and that is that the petro dollar agreement that's been going on for now decades has kept the dollar in the dominant position, and without it, we, speaking of those of US that use the dollar system, lose a great amount

of global power. This agreement acts as a safety valve for our economy because it allowed US to release pressure by exporting dollars to other countries, because after an oil trade, one party is sitting on too many dollars surplus dollars, and then those dollars are then reinvested back into the US dollar system, usually into US treasuries or equities, or

or even sometimes local infrastructure. When the excess dollars are reinvested, it's called petro dollar recycling, and petro dollar recycling is the primary way the US is able to export its inflation. Now, petro dollar recycling allows the government to print money and keep those dollars outside the US money supply. However, the resulting inflation, we feel, although very high, it actually only represents about four percent of the monetary expansion because those

dollars have been exported to the other countries. Meaning again, like I said, we've exported the inflation. But if those dollars come back, we could experience massive, even potentially triple digit inflation in the US. Okay, So now that we understand that deal, then the question is why why are the Saudies ending the deal now? And then what's this new system? Well, from the outside, it looks like they're simply stepping away from the agreement to be able to

trade any currency. They want more options, more choices. If you have a store, why not accept more currencies I suppose, which, you know, like I said, as a country, seems pretty reasonable. However, in reality, there's a few things going on. The First one is it turns out that, like in a partnership, they're supposed to work two ways, meaning you know, both

partners should be respectful of each other. But when President Biden came in, he basically came into office with threats and even name calling, which of course is you know, not a good way to start a partnership or a relationship. When President Biden was on the campaign trail back in twenty nineteen, he vowed to make Saudi Arabia quote the pariah that they are, and even Biden initially shunned the Crown Prince, agreeing to speak only to his alien father,

King Solomon. Then he went on to rescind Trump's terror designation for the Huthies despite the group having attacked Saudi oil infrastructure, and of course now we've seen what the Hoothies have done to the oil industry overall. Then even worse, Biden attempted to revive the nuclear deal with Iran, which

is Saudi Arabia's bitter enemy. On October eleventh, twenty twenty two, President Biden gave an interview with Jake Tapper on CNN basically talking about you know, the sanctions Russian President Vladimir Putin China, Saudi Arabia and so forth, the midterms, all that, and in the interview, Biden threatened Saudi Arabia publicly with consequences. Well, let's just listen to it. They're going to have to. There's going to be some consequences for what they've done

with Russia. What kind of consequences, Menenda says, suspend all arm sales? Is that something you'd consider. I'm not going to get into what i'd consider and what I'm have in mind, but there will be consequences, okay. So besides that, it's also a result of Saudi Arabia's commitment to the Bricks Alliance. The Bricks I've talked about them a lot, Brazil, Russia, India, China,

South Africa, and of course more nations now. But China and Russia have been reducing their reliance on the dollar, or what we call de dollarizing, for over a decade now, and of course Russia has been now completely kicked out of the entire global financial system. So how could all three of these powerful nations continue to trade. Well, they'd have to use another currency, one that's outside the dollar.

So China and Saudi Arabia have been engaging in trade using the Chinese yuan, especially for trades involving oil and gas. Nigel Green, the CEO of one of the world's largest independent financial advisory and asset management companies said quote. One of the most significant but underreported outcomes of April's three day summer between Russia's Vladimir Putin and China's Xijingping was that Putin said, Russia is now in favor of using

the Chinese yuan for oil settlements end quote. Ever since Western sanctions were put on Russia for its invasion of Ukraine early last year, Russia's increasingly depended on China to buy the oil other countries won't touch. This move away from the petro dollars suggests that the world's second largest economy and the world's largest energy exporter are actively intending to reduce dominance of the US dollar as the bedrock

of the international financial system. Now, if we look at the data, as you can see from the graft that I have on the screen, in the first two months of twenty twenty three alone, China's imports of Russian goods surpassed their total purchases for all of twenty twenty two, with a staggering nine point three billion flowing in February even saw a record high of over two million barrels

of Russian crude oil being imported by China. Now. This surge suggests that Yuan is gaining traction as a major currency, and this points towards a larger shift in global power dynamics, potentially giving China more influence in shaping economic policies that impact everyone. In Russia, they've also been buying up tons of gold since the sanctions were imposed on them by

the Western States the NATO Alliance. In twenty twenty three, Russia announced that it's Boyon holdings jumped by approximately one million ounces over the past twelve months. The bank reported having nearly seventy five million ounces at the end of February twenty twenty three, up from about seventy four million a year early. Now, while the US dollar remains the current king of preserve currencies, its rain isn't guaranteed. It's

not absolute, at least not as it once was. Over the past two decades, the dollars share in global central bank holdings has shrunk from a dominant seventy two percent in two thousand and one to just under sixty percent in twenty twenty three. Meanwhile, Duan has been steadily climbing. Since twenty sixteen, its share has more than doubled, reaching roughly two point eight percent of global reserves by September of twenty twenty two. Now I get it. Those numbers

are small. It's a small number compared to a big number, but it's not about the absolute number. Obviously that's important, but we also have to consider the rate of change and the direction. Right we're trying to see where we're going, not where we're at, and it's pretty clear what's happening. So then the question is, so what what does this

matter to me? And why should I even care? Well, as we've already discussed less countries, recycling trade surpluses into US treasuries makes them by less treasuries, and we can see how this has been happening over the last ten years. Central banks around the world have become net sellers of US treasuries and net buyers of gold. At this point today, there's no good reserve currency status. It's not like the other nations are going to start parking their money in

Russian or Chinese bonds. But going back to gold is working well for them, and you can see the price of gold is moving in accordance of that. And if the FED is forced to buy more of their own treasuries. That means more money printing. More money printing means more inflation, and it also means less global influence for the US when it comes to trade and political issues. Now does this mean it's game over for the US dollars global status?

Well not entirely. The US could raise the Fed Fund rate right, and by doing that they could attract more capital. The problem is it also makes it way more expensive for the US government to borrow money, and as we've seen in the interest payments on the US debt, which have now exceeded a trillion dollar even exceeded the amount that the US spends on its military. That's a problem, and that's only a problem for the government, but it's

also extremely hard on the economy. Homeowners are struggling to buy homes, Businesses struggle to finance new projects, finance inventory, Consumers struggle to keep up with living expenses. Now, the other thing the US could do, or really I guess could have done, or maybe should have done, is to be less demanding, less demeaning, right less coercive. It turns out, when you see the global superpower like Russia's assets and then you threaten nations like Saudi that quote, there will

be consequences. Those other nations don't really like that, and then they start to maneuver to protect themselves from that. So while the US could try to go back on that, you know, that hard line rhetoric, it's one of those things that you can't really take back. Okay, So that's the what and the why and even what comes next. But what do you and I do about this? Well, first off, I'm not saying, let me be clear here, I'm not saying the US dollars demise and the end

is imminent. I'm not saying it's coming anytime soon. As we've already discussed, the dominance is falling, and I think it continues to fall, but the dollar doesn't just disappear, at least at least not for decades, in my opinion. You have to understand history, right, So the US dollar took over the global status from the pound sterling about one hundred years ago, and yet the pound it's still the third largest currency today and the UK doesn't even

really like produce an export anything. So US has a long way to go. And I think this is a process. It's not like an event that's going to happen it's a process, and I think this goes out more of like with a whimper and not a bang. That means that we continue to just sort of head in the direction that we're going into, which is, you know, the same direction, more inflation, more money printing, but only at accelerating rate. This means more deficit spending, more money printing,

more inflation. It also means less global cooperation, which means more trade proper problems, which means uh, more inflation, which is exactly why I've been an inflation bowl. I continue to remain an inflation bowl. I've been saying for a long time. I think this is still just getting started. Now. There's good news and there's bad news in this Now. If you work for hourly wages and you don't own

any assets, it's going to be bad, right. You're going to continue to fall further and further behind, and your quality of life is going to continue to go down. And I know that's bad. But for those of us who do own assets and even long term debt like a home, we can expect inflation to continue to push those asset prices higher and higher, and inflation will continue to make our fixed rate debt cheaper and cheaper now for bitcoin. Of course, not all assets move at the

same rate and speed. Now, we know that bitcoin has a nine percent sensitivity ratio to global liquidity, so as more money is printed, more debt is finance, more inflation, Bitcoin should continue to outperform the rest of the market. But interesting developments are that Saudi specific mentioned accepting bitcoin as payments for oil. Now, I don't expect them to do that today. Okay, so I already hear all the comments. I'm not expecting them to do that today. But again,

it's the trend, it's the direction that we're going. We know that some of the oil producing nations in the region are already starting to mine bitcoin with their energy, and there are talks of Saudi Arabia joining into this. We also know that bitcoin is legal there, We know there's lots of bitcoin ATMs there. We know their Sovereign Wealth Fund, the Saudi Sovereign Wealth Fund, invests into bitcoin and crypto projects, so there's lots of interesting developments there.

And remember, again, it's the direction we want to be focused on. And as we continue to see a decline in the global power of the US dollar, I think the trend will be that we continue to see a rise of foreign countries investing into bitcoin, sort of like what else Savador has done. Why Well, of course, instability of the dollars means people need somewhere else to park their money, something else to use as trade, something else they can trust. Now, I hope this is answered a

lot of your questions. My honest opinion is again, this isn't emminent. I'm not saying warning, warning, warning, like I have to go do something right now, but rather it's the confirmation that we're on the same trend, which means for our future plans of wealth building we want to stay long. We also need to continue to watch for further developments and for more on the Bricks Alliance and

the developments there their currency reserve status. You might want to go watch this video I did about that here now. As always, give me some thumbs up if you like the video. If you don't, you can give me some thumbs down. That's okay, but at least tell me why in the comments down below. And of course, while you're at it, don't forget to subscribe. And that's what I got to your success. I'm out