This is a follow up from the first two articles. Readers can follow the theme on its own but it would make more sense if read together.
Act 3 - Saudi Arabia
Petrodollars and Dedollarisation
Joe Biden does not appear to be impressed with Saudi Arabia and its crown prince even before he becomes the US president.
However, this behaviour by Biden appears perhaps a little curious. Biden was US Vice President for Obama and the establishments have always shown courtesy if not favouritism towards the Saudis regime. The Saudis has always been an important ally of the US since 1933. The alliance was strengthened in 1973 with the pricing of Saudis oil in USD and began the era of petrodollars.
I guess Saudis regime, with the rise of Mohammed bin Salman Al Saud or MBS, posts a different challenge to Biden and his support base. Perhaps with the rise of shale, Saudi's 🪔 does not appear as important. Does Biden perhaps think that US can run its own petrodollars without the Saudis, since US has taken over as the biggest oil producer?
It then comes as no surprise that Saudis decided on cut its oil production in Oct 2022 to prop up the price of oil. The production cut happened despite the plead by US president Joe Biden to squeeze the Russians of its all important financial source. Another recent production cuts was announced last week by OPEC+ to further boost oil price despite the Americans protest.
All these activities by Saudis happened with Russia and China looming large in the background. Russian war chest has been kept very much alive with the all important oil exports to China, India and many others. A more important development is the pricing and transaction of Russian oil in Chinese Yuan (RMB).
This move helps to counter the restriction over Russian use of USD. Similar discussion has taken place between Saudi Arabia and China.
If the Saudis does eventually adopt RMB for its oil pricing and transactions, this could led to the gradual dedollarisation. It will in turn lead to the diminishing of USD and the beginning of the decline in US economy.
Finally, it has been shown in all occasions of countries' history, the economy almost never goes back to where they were before the decline from the strongest economy of the 🌎 (at least not by another 1000 years). Think Great Britain and Rome, or even China. Having said that, we are not expecting an immediate collapse of US economy, but just a gradual decline over time, just like all strong economies did in the past.
The end of petrodollars would have a strong effect on USD. With USD losing its significance, US cannot print its way out of trouble. Every print will result in devaluation of USD and resulted in a downward spiral. Positive effect of USD devaluation is that US debt will become cheaper over time. Big negative however is that US economy will come down faster as people loses confident in USD. Who would lend to US government knowing that💰 tomorrow means less than today?
This concludes the third part of the series. Feel free to send me any thoughts, suggestions, or any feedback. It is a type of writing style that perhaps not going to be repeated by the author, given the time and effort it takes to join the dots and combine into one big theme. The idea of breaking up one big theme into bite-size smaller articles is aim to provide the readers easy to read snippets. The only reason why I spent the effort is to let readers know this possibility and how one can be prepared for it. Many will be in for a rude shock if going into the event unprepared. This series is just the start of your own research and conversation, and not an end by itself.
Part 3 of the series is important as it connects the first two scenes setting with the last two actionable ideas. I hope @TigerStars can appreciate the effort and share it with as many readers as possible. Thank you for reading.
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