The US dollar is currently implicitly backed by oil. We 'print' (not literally - that's not how money is created) immense amounts of money to pay for things we cannot afford which ought have a catastrophic impact on any currency. We create 'growth' in wealth by dumping aforementioned funny money into assets creating price inflation -- quantitative easing. And our deficit is gradually growing out of control meaning we're left ever more paying off old debts by taking on more debts -- a policy that has a special term in the world of finance...
But the big thing here is that oil is still by far the most in demand resource in the world. And, thanks to some incredibly prescient negotiations dating back to the 70s, the majority of all oil producing nations only settle oil contracts in the dollar. This means that if you have a dollar you have access to oil. This creates an amazing system of externalizing stability. Imagine the value of the dollar decreases. This incentivizes foreign nations to increase their reserves of the dollar to ensure stable access to a fixed amount of oil. This, simultaneously, creates a natural dampening affect on any sort of inflation as that money is taken out of circulation. And this even applies with the Mideastern nations themselves. Saudi Arabia and other nations also agreed to purchase US securities with whatever leftover dollars they have after accounting for national expenses. Once again, helping to mitigate any negative consequence of let's say 'creative' economic policy.
Oil, the petro dollar in particular, stabilizes our currency and our economy. If you take the control of oil away from America, I do not think our military might alone would be sufficient to keep the dollar stable. And if the dollar loses stability our entire nation implodes. Everything that happens in the Mideast is based around this relatively simple fundamental aspect. Iran, Iraq, Syria, Libya. What they all actually have in common is that they expressed real intents to move away from the petro dollar. Venezuela has done the same.
The reason China/Russia would side against the US has nothing to do with oil or Saudi Arabia or Iran. It has to do with the US. If the petro dollar collapses, which it arguably already is, the US isn't far behind. And the US is still the greatest immediate danger to those nations. And the only reason Saudi Arabia would ever turn away from the petro dollar is if they believe the US will not be able to force them back to it, which would all but require the collapse of the US.
But the big thing here is that oil is still by far the most in demand resource in the world. And, thanks to some incredibly prescient negotiations dating back to the 70s, the majority of all oil producing nations only settle oil contracts in the dollar. This means that if you have a dollar you have access to oil. This creates an amazing system of externalizing stability. Imagine the value of the dollar decreases. This incentivizes foreign nations to increase their reserves of the dollar to ensure stable access to a fixed amount of oil. This, simultaneously, creates a natural dampening affect on any sort of inflation as that money is taken out of circulation. And this even applies with the Mideastern nations themselves. Saudi Arabia and other nations also agreed to purchase US securities with whatever leftover dollars they have after accounting for national expenses. Once again, helping to mitigate any negative consequence of let's say 'creative' economic policy.
Oil, the petro dollar in particular, stabilizes our currency and our economy. If you take the control of oil away from America, I do not think our military might alone would be sufficient to keep the dollar stable. And if the dollar loses stability our entire nation implodes. Everything that happens in the Mideast is based around this relatively simple fundamental aspect. Iran, Iraq, Syria, Libya. What they all actually have in common is that they expressed real intents to move away from the petro dollar. Venezuela has done the same.
The reason China/Russia would side against the US has nothing to do with oil or Saudi Arabia or Iran. It has to do with the US. If the petro dollar collapses, which it arguably already is, the US isn't far behind. And the US is still the greatest immediate danger to those nations. And the only reason Saudi Arabia would ever turn away from the petro dollar is if they believe the US will not be able to force them back to it, which would all but require the collapse of the US.