Ever heard of the petrodollar?

You have undoubtedly heard the term “petrodollar.” But, like most Americans, you probably don’t have a clue as to what it means, or how it has completely and totally affected the lives of every American.  And caused the deaths of millions of innocent people in the middle-east.

The Petrodollar System 101

I’ve got an analogy that has helped a few of my friends to understand an otherwise complicated bit of economic slight of hand.  A smooth-move orchestrated in 1973 by then Secretary of State (pictured on the left) Henry Kissinger.

Imagine that Sam’s neighbor has something for sale – say a riding lawnmower – and Sam would like to buy it, but he’s short of cash.  Sam offers to buy with an IOU.

Sam’s neighbor says, “Sure Sam.  I trust you.  Hell we’ve been neighbors for years.  I know you’re good for it.”

Now suppose Sam begins papering his neighborhood with his IOUs, buying fruit from one neighbor’s orchard, a picnic table from a buddy who has a garage wood shop, etc. etc.

Usually it’s just a matter of time until Sam’s neighbors begin knocking on his door, asking him to redeem his IOUs.  In dollars, of course.

But what if Sam was able to do what Kissinger did for Uncle Sam’s IOUs (the U.S. dollar)? What if Sam could convince the owner of the gas station where everyone in town buys gas to refuse anything in payment except Sam’s IOUs?

Of course Sam would have to offer the owner of the gas station some incentive to make such a deal.  Maybe offer him protection (like Kissinger offered the Saudis) or the chance to loan the IOUs back to Sam’s business at interest (like Kissinger offered the Saudis).

What Sam offers the owner of the gas station doesn’t matter.  If he takes the deal Sam’s neighbors aren’t knocking on Sam’s door to redeem their IOUs, they’re knocking on his door asking for more of them.

“Sam.  My car is almost out of gas, and I need another IOU to give to the guy at the gas station.  He says that’s all he’ll accept.”

Now Sam can continue to run “trade deficits” with his neighbors, just like the U.S. has done with theirs for the last 44 years.  And what’s even better for Sam is that he can buy all the gas he needs just by printing IOUs.

There have been leaders of other nations who have threatened America’s political hegemony, fueled by petrodollars.  Their names are probably familiar to you.

Saddam Hussein, who began selling Iraqi oil for Euros in 2000.

Muammar Gaddafi, who threatened to quit selling Libyan oil in U.S. dollars — demanding payment instead in gold-backed “dinars” (a single African currency made from gold)

Maintaining the petrodollar system is the American empire’s primary goalEverything else is secondary.

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