A cura di Walter Snyder, Swiss Financial Consulting
It is ironic that the fate of the US dollar depends on whether Saudi Arabia will continue to insist on accepting only US dollars for oil. The Free Thought Project had a good article by Jay Syrmopoulos on this subject on 16th July 2017, Russia and China Declare All Out War on US Petrodollar — Prepare for Exclusive Trade in Gold, which was picked up by Activist Post. It is the position of the US dollar as the main world reserve currency that has made it possible for the US to continue in its role as the global policeman or, as some would have it, the imperialist bully.
The current 2017 budget deficit of $670B, national debt of 19.7T and huge trade deficit ($502B in 2016) and a $696B military budget just passed by Congress should make foreign investors wary of buying US dollars in order to buy overpriced US stocks. Despite government malfunction and a worsening financial environment with more than $1T of student debt, more than $1T of credit card debt and more than $1T of auto loan debt, soft data is optimistic. “What, me worry?”
The fact is that the US has exploited the advantage of having the dollar as the world reserve currency by living beyond its means and maintaining a military structure that it cannot really afford. Twenty years ago Russia and China were not in a position to challenge the dominance of the US dollar. That has now changed.
The fracking revolution in the US has also contributed to the weakening of the Saudi economy in that oil prices have been hovering around $50 a barrel or less for some time now. The recent trip of the US President to Saudi Arabia may give the impression that the Saudis will not pay attention to overtures from Russia and China, but that could be a mistake. The frackers have caused the Saudis lots of problems.
The US now has eight military bases in Syria, where it has not been invited by the Syrian government. The Saudis meanwhile have rebuffed Turkish proposals for a military base in the Kingdom while plans go ahead for a Saudi base in Djibouti, an important strategic point where Americans and Chinese besides the French also have bases. In fact Djibouti is the largest American base in Africa just as Qatar is the largest American base in the Middle East. The Saudis are well aware of that.
How Saudi Arabia is going to act will greatly depend on to what extent the US can influence the Saudis to stick with the petrodollar. This is a case where geopolitical considerations weigh heavily on the development of international finance. Investors can hedge by buying physical gold now while the price is extremely low. Some miners have all-in costs of more than $1,240.00 an ounce.