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Beneath the Surface

De-Dollarization Update: Saudis Cancel the Petrodollar

Loading ...Addison Wiggin

June 17, 2024 • 6 minute, 52 second read

De-Dollarization Update: Saudis Cancel the Petrodollar

“Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.”
– Henry Kissinger

[Special Reminder: In case you missed our recent announcement, The Essential Investor has merged with legacy contributors to Agora Financial. The new, larger, more inclusive project is called The Grey Swan Investment Fraternity. If you’re interested in the scope and benefits of our new endeavor, please see what prompted us to merge here. If you’ve been a member of The Essential Investor, please keep an eye out for your new benefits.]

June 17, 2024 – Today, John Rubino takes a look at news that came just as we were gathering for a Grey Swan meeting of the minds on Friday.

The House of Saud has declared, more or less, they don’t care which currency they price their oil in.

The announcement could be devastating… and could serve as a catalyst for any number of Grey Swan events… as we’ve clearly laid out here.

While, it’s not the immediate ‘death of the dollar’, which so many will dismiss as “gloom and doom.” But it does signal the continued erosion of confidence, globally, in the currency most Americans earn, spend, save and plan in. Enjoy ~~ Addison

De-Dollarization Update: Saudis Cancel the Petrodollar

John Rubino, John Rubino’s Substack

Over the past couple of decades, the US has invaded and/or destabilized multiple countries — including Iraq, Libya, and Syria — for accepting currencies other than the dollar for oil. That’s how big a deal the petrodollar was for the Empire.
But now it’s over.

Kitco News reports that he established financial world order of the past 50 years is now transitioning to a new and unknown paradigm.

That’s because the so-called petrodollar agreement between the U.S. and Saudi Arabia was allowed to expire last week.

The term ‘petrodollar’ simply means the U.S. dollar serves as the worlds’ currency for crude all oil transactions on the world market.

It traces back to the early 1970s. That’s when the United States and Saudi Arabia struck a deal after the U.S. left the gold standard. The agreement has had far-reaching consequences for the global economy.

The petrodollar agreement came about following the 1973 oil crisis. It stipulated that Saudi Arabia would price its oil exports exclusively in U.S. dollars.

Plus, Saudi Arabia agreed to invest its surplus oil revenues in U.S. Treasury bonds. In exchange, the U.S. provided military support and protection to the kingdom.

This helped the USD cement its position as the world’s reserve currency. It also ushered in an era of prosperity for Americans.

Why? They enjoyed the benefits of being the preferred market for global corporations to sell their wares. Additionally, the inflow of foreign capital into U.S. Treasury bonds has supported low interest rates. It’s helped make the U.S. Treasury considered the only global “risk-free” asset.

All that is set to change now as Saudi Arabia is looking to move beyond a dollar-based trading and investment policy.

That’s evidenced by the kingdom becoming one of the newest members of the BRICS bloc. This bloc is working on its own potential currency, although details are still scant.

Long-Term Impact

Is this the end of the US dollar? Absolutely not.

Huge amounts of debt around the world are denominated in dollars, which means borrowers have to acquire dollars to pay the interest. And the US capital markets are the world’s deepest and most liquid, which will make the dollar an important trading currency and reserve asset for the foreseeable future.

But the end of the petrodollar does open the field for competing currencies, and the BRICS countries are already signing bi-lateral trade deals that completely bypass the dollar. This trend will gain momentum going forward.

So…four questions:

  • What happens to the trillions of dollars that now reside in corporate and central bank accounts that may not be needed in the future? Do they pour back into the US as holders convert them into American real estate and financial assets? Is this inflationary? In other words, does it cause the value of the dollar to decline?
  • Can the US government continue to run massive trade and budget surpluses if fewer foreign entities are willing to buy Treasury paper? Will Washington be faced with a choice of cutting spending (with the collapsing growth and civil unrest that “austerity” brings to overindebted systems) or having the Fed monetize everything and hope that the resulting inflation is manageable?
  • Will the US start lashing out at trading partners who de-dollarize too enthusiastically, causing other countries to accelerate their own transitions?
  • Will Europe be collateral damage as its banks and real estate companies are caught in the middle of a US-BRICS battle for financial supremacy?

The answer to all of the above is probably “yes”, and the result won’t be pretty for anyone but gold bugs.

More De-Dollarization Developments

There’s a lot more going on out there.

Kitco also reports that over 100 tonnes of gold have been moved from the United Kingdom to the Reserve Bank of India’s (RBI) vaults.

That marks one of the most ambitious transfers of gold ever seen. What’s more, the amount could double, according to the Times of India.

Over half of the RBI’s gold reserves were being held with the Bank of England (BoE) and the Bank of International Settlements (BIS) overseas.

Now, it’s clear that the Indian government has begun the process of repatriating the country’s bullion holdings. That’s similar to Germany moving its gold reserves from the Federal Reserve Bank’s vault in New York throughout the 2010s.

As of March 31, 2024, the RBI’s gold reserves were listed at 822.1 tonnes, up from 794.63 tonnes in March of 2023. Of that, 413.8 tonnes of l was held overseas.

Finally, Russia continues down the path of de-dollarization, following news of a new round of US sanctions last week.

Do the new US sanctions mark Russia’s final divorce from the dollar?

As RT reports, the endless parade of Western sanctions on Russia barely makes the news anymore.

But last week,  the US Treasury did, in what may be the most ambitious package since the initial round of sanctions back in February 2022, expand the scope for applying penalties on foreign financial institutions found working with restricted Russian entities.

Plus, it placed the Moscow Exchange and its clearing house under blocking sanctions, among other measures.

The exchange subsequently announced that it was suspending all settlements in dollars and euros. It’s the latter that is the most interesting and has elicited the most chatter.

~~ John Rubino, John Rubino’s Substack

A new event is unfolding that’s about to blindside most Americans. It will upend the financial order of the past 50 years. And it will be the ultimate October surprise that could even reshape politics as we know it…

Worthy of note: The Western media has gone all in. The Russian stock exchange’s move to end dollar and Euro trading is being perceived as an attempt to avoid a mass exodus out of the ruble… rather than “Putin’s Gambit” – a further push to de-dollarize the global banking system.

Biden’s 10-year security agreement with Ukraine, signed Friday at the G7 summit in Apulia, Italy, also comes replete with a Gang of Seven-backed $50 billion loan, er, guaranteed with interest on seized Russian assets…

“The world appears to be picking sides for World War III,” was just one comment overheard at a Grey Swan meeting of the minds on Friday.

Got gold?

So it goes,

 

 

Addison Wiggin
Founder, The Wiggin Sessions

P.S.: How did we get here? An alternative view of the financial, economic, and political history of the United States from Demise of the Dollar through Financial Reckoning Day and on to Empire of Debt — all three books are available in their third post-pandemic editions.

(Or… simply pre-order Empire of Debt: We Came, We Saw, We Borrowed, now available at Amazon and Barnes & Noble or if you prefer one of these sites:Bookshop.org; Books-A-Million; or Target.)

Please send your comments, reactions, opprobrium, vitriol and praise to: addison@greyswanfraternity.com

Joe Withrow: The Hollow Class, Part III

November 13, 2025 • Andrew Packer

What we’ve seen since 2008 is nothing short of a theft of the commons. Except it happened in little pieces that seemed unrelated at the time. But if we look at the story holistically, it all comes together.

When we step back and view the entire picture, what emerges is not just a story of market excesses and economic shifts. What we see is the gutting of middle America – be it intentional or otherwise.

Now the question is – are we going to see the restoration of the American middle class in the coming years… or are we going to watch everything devolve into a modern redux of the War Between the States, more commonly but mistakenly known as the American Civil War?

Joe Withrow: The Hollow Class, Part III
Performative Clowns

November 13, 2025 • Addison Wiggin

Today’s Washington isn’t governed so much as stage-managed.

Politicians don’t solve problems; they perform them.

The current fixation is affordability — a word that will be repeated ad nauseam from now through the 2026 midterms, until it becomes as meaningless as “bipartisan.”

The script hasn’t changed in decades: promise relief, pass a law that raises costs, blame capitalism, hold hearings, fundraise, repeat.

Performative Clowns
A Bubble in Bubble Talk

November 13, 2025 • Addison Wiggin

Yes, Nvidia’s profits are up 500%, and its share price followed suit — a rare case where the story actually matches the math. But that’s the exception, not the rule.

Beneath the headlines, we’re starting to see the kind of financial gymnastics — circular lending, balance-sheet origami, and creative “partnerships” — that usually signal the boom is running out of breath.

If history rhymes, it looks like we’re closing in on the tail end of a mania.

A Bubble in Bubble Talk
The Hollow Class, Part II

November 12, 2025 • Addison Wiggin

As interest rates fell, investors swarmed into real estate, lured by yields and the illusion that home prices never fell. Wall Street’s private-label securitizers were soon packaging everything from pristine mortgages to what were effectively loans scribbled on napkins, thus turning them into bonds that glowed like gold — until you looked too closely.

For their part, the regulators and ratings agencies conveniently looked away and allowed the bubble to grow. Fannie Mae watched the frenzy from the sidelines at first.

The company’s mandate — written in law — was not to chase profits but to promote affordable housing. That is to say, to make sure that teachers, nurses, and other first-time buyers could own their own homes and unlock the American Dream.

But as Wall Street flooded the market with high-risk mortgage products, political pressure mounted. Congress demanded that Fannie “do its part” for low and moderate-income families.

The Hollow Class, Part II