Oil’s Busted? The ‘Petrodollar Imperium’ Explained… Part 1

fuel gas

…or how it all came to be.

WWII is about to break out in Europe & the Pacific.  Frightened nations send their gold bullion to America’s newly constructed bullion depository at a giant military base in the heartland, Ft. Knox, KY.

It’s newly built to house tens of thousands of expropriated tons after FDR’s 1933 executive order #6102.  Ft. Knox is considered impregnable.

So it’s now 1945, war’s nearly over, Roosevelt’s dead, and America is sole proprietor of most of the world’s gold and, as General Leslie Groves noted, “the biggest club on the playground”, i. e. the Atomic Bomb.

Understandably, the previous [largely destroyed] countries now wanted their gold back; America says, “No”.

In a prior meeting (1944) at Bretton Woods, NH, a plan was hatched to bring the world back, and away from the conditions it was felt that had directly led to this bloodiest of conflicts.

Nations were to take specially printed US dollars into their central banks, and call those dollars “reserves.” They’d be free to then print-up a fixed number of their own various currencies, according to an early algorithm.

They could then “earn their gold back” by trading with one another and the United States, and gaining these other trade-dollars …which would then be redeemed at the US Treasury’s gold exchange window.

Nixon had to shut this window in 1971 because “Bretton Woods” was so successful US gold tonnage reserves had fallen to a 4 –digit number, from a high 5-digit number at the end of the war.

American financial elites at the time (1970’s) all parroted the banker’s phrase, “gold was a barbarous relic”. Heaven forbid forcing American to be thrifty & save.

Having to abandon their new found orgy of consumerism & credit-creation would be to admit to gold’s usefulness.  But after 15 years of depression & war, people were more than ready for a little fun.

Parallel to all this, and just 57 days before his death, FDR does one of the most creative business deals in history.

It’s right up there with Peter Minuit buying Manhattan, and the Doge of Venice bribing the 4th Crusaders to sack Constantinople, sparking the Renaissance.

On Valentine’s Day 1945, meeting in secret aboard a battleship anchored at the North end of the Red Sea, Roosevelt secures the exclusive oil concession for the entire Arabian Peninsula from the warlord, Abdul Aziz Ibn Saud, (see Picture).  Geologists from the Standard Oil Company of California, (now Chevron) had covertly ascertained that this was the world’s largest pool of oil, the most valuable industrial commodity on Earth.

FDR gives bin Saud 2 things he desperately needs: Guns to beat-back his half-brothers’ claims, and recognition of his clan’s claim.  In return, only US oil companies can drill for oil, and it must be only priced & sold in US dollars.  The Kingdom Of Saudi Arabia (KSA) comes into existence.

While the agreement has been modified over the years, this is still the basis of the agreement.

Part 2 Next Time: The ‘Petrodollar Imperium’ Explained

Sellers is a South Park Republican who lives in incorporated Oro Valley.  His background is federal tech-transfer commercialization.  

About Bill Sellers 105 Articles
Sellers is a South Park Republican who lives in incorporated Oro Valley. His background is federal tech-transfer commercialization. Contact him at readbill19@usa.net Sellers is also a grad of Clemson's Architecture School and the University of NC School of Business. He was a founding member of the Albuquerque Friday Morning Breakfast Group which elected numerous conservatives. He has lived in the SouthWest & PacNorthWest more than 40 yrs.