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LETTER TO THE EDITOR: Reconsider the petrodollar economy
Question of the Day
The United States depends on a system of oil-backed U.S. dollars, which is detrimental to world peace and threatens to destabilize the world economy. The infrastructure for a more reliable and less destructive backing for the dollar already exists in the form of electrical energy. The next step is to simply make the transition.
Since the official end of the gold standard in the early 1970s, the United States has used its status as a superpower to force major oil producers to sell oil only in U.S. dollars. This has created a worldwide demand for dollars, which has allowed America to maintain the dollar's position as the world reserve currency and has given the Federal Reserve the ability to print virtually unlimited money.
The entanglement between dollars and oil is known as the petrodollar, and it has become essential to the stability of the American economy. If oil producers began selling oil in other currencies, the petrodollar system would fail, and there would be no demand for the $850 billion printed by the Fed each month. The world economy would take years to recover, and the American economy would be grievously harmed.
With so much relying on the petrodollar, the United States must go through great lengths to protect it. When then-Libyan leader Moammar Gadhafi pulled Libya off the petrodollar, the United States and the United Nations aided rebels who toppled the Libyan government and executed Gadhafi. Just weeks later, the new rulers of Libya went back to selling oil in dollars. Gadhafi had been a tyrant to his people for 42 years. Yet the only time we offered support was when the petrodollar was threatened.
Similarly, the United States, along with Russia, China and Europe, recently agreed to lift Iran sanctions — but do not be fooled by mainstream media or public speeches. The deal was not about world peace. It is no coincidence that soon after the deal was made, Iran agreed to once again sell its oil only in U.S. dollars.
The petrodollar system is flawed and only leads to war and debt. The dollar should instead be backed by a needed commodity that retains its value and doesn't require war to maintain. Electrical energy would be a perfect candidate owing to its close relationship with the economy and its dissociation from foreign affairs. It retains intrinsic value and has the ability to flex with demand without giving the Fed unlimited printing power, since electricity cannot be created out of thin air. The government can easily institute electrical-energy-backed money by promising to exchange dollars for a fixed amount of electrical energy measured in kilowatts, effectively standardizing the dollar with electricity. The government would then only print money to match the energy supply.
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