The END of the Petrodollar Is Changing The Value of the USD!

The 50 year agreement between the United States, Saudi Arabia, and the petrodollar officially came to an end.

– With the end of the gold standard in the 1970s, the US made a deal with Saudi Arabia to price oil in US dollars, elevating the dollar to the world’s reserve currency.

– The shift of the BRICS alliance has led to the unraveling of the petrodollar system, which was central to the US dollar’s status as the world’s reserve currency.

– With fewer nations buying US bonds, the US government may have to curb reckless money printing and excessive spending, potentially leading to more fiscal responsibility.

With the end of the gold standard in the 1970s, the United States struck a deal with Saudi Arabia to standardize oil prices according to the US dollar. In many ways, this deal elevated the US dollar to the world’s reserve currency since with dollars you could buy oil and gas directly without going through some kind of exchange rate. A petrodollar in effect is the pricing of oil according to the US dollar rather than gold or some other currency. But since then, the world has gone through a dramatic restructuring.

The international BRICS alliance controls nearly 40% of the world’s GDP, and the bloc now encompasses nearly half of the world’s population. This alliance includes Saudi Arabia, Iran, and the UAE. BRICS is an oil and gas superpower. According to InfoTEK, BRICS now controls 39% of global oil exports, 46% of proven reserves, and 48% of all oil produced globally. 1 in every 2 barrels of oil produced on the planet comes from a BRICS member nation. Russia and Saudi Arabia alone account for a quarter of the world’s oil production and Russia and Iran hold the world’s first and second-largest gas reserves in the world respectively.

This is an economic and commodity dominance that was not even imaginable a few short years ago. The petrodollar has been unraveling for quite some time now. The petrodollar, in many respects, was at the heart of the US dollar functioning as the world’s reserve currency! We are already beginning to see that status wane.

A headline in Forbes from last week said, “The Fed Quietly ‘Admits’ Gold Is Replacing The Dollar” This is because, as we can see, more nations, particularly BRICS nations are starting to turn away from the dollar as the world’s reserve currency. For decades, nations buying and selling oil in US dollars in turn purchased US Treasury bonds with their surplus dollars to not lose money in the exchange process back to their own currencies.

This buying up of our debt allowed the US government to print up a lot of money as they could in effect distribute the dollars out to the rest of the world. Without the world using dollars and buying up our debt, that diffusing mechanism largely disappears and we are seeing what happens in real time with the printing up of more money without being able to spread it out to the rest of the world. Inevitably inflation rates have gone up and the Fed has tried to make it more expensive to borrow money in order to knock the inflation rate back down.

This required the raising of interest rates which has been an enormous stress on our banking industry. Over the last 15 years they have invested in a booming bond market assuming that low interest rates were the new norm. The sudden spike in the interest rates and the collapse of the bond market is one of the reasons we have witnessed the colossal financial collapses of Silvergate Bank, Silicon Valley Bank, and the New York-based Signature Bank. It’s not just the financial system. Higher interest rates at the banks means higher interest rates on credit cards, mortgages, and car loans, and as we can see, day to day, we are living in the midst of a cost of living crisis. The prices of gas and groceries continue to surge.

There is some good news in all of this. With much of the world turning away from buying up US bonds, our government is simply not going to be able to continue to print money so recklessly. Without being able to print money recklessly, it’s going to be harder to send money overseas like with the insane funding we have been seeing with Ukraine. It’s equally going to be harder to maintain the mass spending in general, which means that finally we may end up seeing our government begin to try to live within its means again! Also, the dollar remains far stronger than any other international currency and promises to remain the go-to choice among international investors and their portfolios for the foreseeable future. This changing world order is causing a boom in the gold market such that real money, based on commodities and real estate, is finally returning as a central part of a growing number of patriots’ financial strategies!

Copyright, 2024.

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