| ▲ | 0xbadcafebee 18 hours ago |
| This is the US trying to salvage the petrodollar. They want those t-bills and oil priced in dollars to maintain reserve currency status, but the whole world is divesting anyway. UAE is hoping that by leaving OPEC they can continue to do business and get protection from US. But US isn't gonna risk a larger war just to defend UAE, US has plenty of oil to exploit in Venezuela and at home. So UAE is just kinda screwed, and petrodollar will become north-american-petrodollar. My guess is it'll happen by Q1 2027 |
|
| ▲ | unmole 16 hours ago | parent | next [-] |
| I’ve developed a simple heuristic: If someone unironically invokes petrodollar as an explanation for anything in 2026, they’re probably not worth taking seriously. |
| |
|
| ▲ | throwaway2037 17 hours ago | parent | prev | next [-] |
| The petrodollar and petroeuro is misunderstood. The real point: These oil/gas exporting nations don't have enough investable assets in their own nations. As a result, they need to invest overseas. For a long time, the best places to invest this excess capital in the world were/are North America, Europe, and Northeast Asia (Japan/Korea/Taiwan). If you want to say that petrodollar or petroeuro is doomed, what will replace it? |
| |
| ▲ | 0xbadcafebee 13 hours ago | parent [-] | | It's not that the petrodollar is doomed, it's just 'devaluing'. The US isn't a stable, safe place for cash anymore. But the world still needs massive amounts of safe cash. So there really is only one alternative: diversify. They'll diversity into Gold, rare-earth metals (they're only getting more important), CIPS, Yuan, Euro. That diversification helps everyone else, but will hurt the US, which hurts financial markets, and thus everyone else. And once they're all divested, the diversification will add risk and losses. Can't be helped though, they still need security. So we're looking at a generation of slow global decline, probably propped up slightly by the industrialization of AI (which of course China is leading the world in, as nobody cares about "better", they care about "cheaper"). China is the real winner, because all they need is oil, and their partners will make sure they get a steady supply (because it's in their partners' interests; that's what having allies is all about). US can't stop this; their military isn't equipped to fight wars on multiple fronts, their lumbering, expensive weapons can't be sustained in a protracted conflict, their wars aren't popular at home, and they don't have the manpower. Even when they eventually start the draft back up it'll take years to build up their warfighting capabilities, and by then the world will have diversified enough that they can take the hit. (The US will try a World War anyway to try and retain the Empire, because their leaders are psychotic morons and their people are compliant, but they'll still lose. (Historic parallel: Sparta. Great military, but tiny, so most of their power came from wealth and tenant states; eventually the rest of the mediterranean got tired of their shit (installing dictatorships, alienating allies) and their empire died. Hell, even their Navy was paid for by Persia - foreign investment used to weaken rivals via proxy war)) I don't think this is avoidable. Nobody trusts the US now. The divestment has already begun. Countries aren't suddenly going to change their minds - even if Trump doesn't overthrow the government to cement this new status quo in 2028 (which he 100% will), the next President could be another Trump. Nobody wants to be subject to their insane policies (foreign & fiscal) anymore. So the US isn't a secure place for cash. Nations aren't just going to shrug and ignore it, they're going to act to protect their interests. | | |
| ▲ | cman1444 12 hours ago | parent [-] | | To be honest this comment kind of reads like anti-US fanfiction. >That diversification helps everyone else, but will hurt the US, which hurts financial markets, and thus everyone else. These are huge jumps in logic, I'm not even sure where to begin. I guess the most glaring question is: If other countries are actively diversifying from US assets as you claim, why would they still be so hurt by a US financial market downturn? >And once they're all divested, the diversification will add risk and losses. Since when does diversification ADD risk, and how would losses be incurred? >which of course China is leading the world in, as nobody cares about "better", they care about "cheaper" Also a huge claim to make. You'll find plenty of people who want the best models and are pretty price-insensitive, especially among those who get the most economic value out of AI. | | |
| ▲ | throwaway2037 an hour ago | parent | next [-] | | I too laughed when I read the response. If anything, the more bat shit crazy the response, the more it validates my original point. > To be honest this comment kind of reads like anti-US fanfiction.
You said it better than I could. The best analogy I could dream up: This post feels like it was written as an editorial for an anti-US newspaper, like The Global Times.About the weak diversification argument: If people really do invest much less into US assets, then other available high quality assets will also become more expensive and result in lower yields. In turn, the US assets will appear "cheap" and attract new capital. This feels like a mirror of the global soybean trade. If China says they won't buy US soybeans (primary used to feed hogs), but buy Canadian or Brazilian, then other buyers just shift where they buy from. In the end, the global demand for soybeans has not fallen, rather a brief game of musical chairs was played. | |
| ▲ | 0xbadcafebee 11 hours ago | parent | prev [-] | | > If other countries are actively diversifying from US assets as you claim It's not a claim, it's been reported for years. US foreign exchange reserves are at a 30-year low. Central banks have bought ~900 tonnes of gold in 2025, nearly matching the historic high during the pandemic. Central banks' holdings in gold now surpass US Treasury holdings (and we all know that gold is nearly 5x its price from last year). Poland, Turkey, India, Czech Republic have all been hoarding gold instead of dollars. France repatriated its gold. Saudi Arabia didn't renew their oil-for-tbills protectionist agreement with US in 2024. Big oil deals are now being done in Rupees and Yuan. Canada dumped its US treasuries. BRICS is already operating a new banking system independent of the US dollar. mBridge and CIPS allows China to settle payments with other countries solely in Yuan. Japan made a $75BN swap deal with India to deal in Rupees if it needs to avoid the dollar, with similar deals with Indonesia and Thailand. Japan is also working with UAE on non-dollar oil deals in the future. > If other countries are actively diversifying from US assets as you claim, why would they still be so hurt by a US financial market downturn? Because the global economy is one gigantic system of systems standing on top of the US financial system. When the US has a gigantic economic shock it ripples worldwide. But de-dollarization is gradual, so it will be a gradual drawdown in international economies. > Since when does diversification ADD risk, and how would losses be incurred? The US is where people put their money because putting it elsewhere was riskier. But now the US might be more risky. So you diversify... to the places that were risky before. So you can only move to risky places. That risk eventually leads to some loss. It's a "least-worst option" situation, but the end result isn't going to be great. > You'll find plenty of people who want the best models and are pretty price-insensitive That's now how capitalism works, that's how rich people work. The echo chamber of HN is full of upper-middle-class people with disposable incomes that are happy to waste money to feel emotionally better about their choices. But businesses aren't emotional, they're competitive. They want lower costs and higher profits. That means spending less. If a business can use a model that's 1/6th the price to get approximately the same results, they're going to do that, in order to gain a competitive edge. China is the place you go when you want to cut costs. |
|
|
|
|
| ▲ | corford 11 hours ago | parent | prev | next [-] |
| Coincidently, FTAV posted a good "petrodollar" article today for anyone interested (article is free but might need a free account to read it): https://www.ft.com/content/a65efb54-306b-49ad-9920-40d59b195... |
| |
| ▲ | throwaway2037 9 minutes ago | parent [-] | | Wow, this is a great share. I am regular reader of FTAV. I highly recommend it to others here. I like this part: > One big flaw in their argument is that the petrodollar isn’t nearly as big a factor in the global dollar ecosystem as it used to be
And: > A proper grasp of the events in question suggests that the ballyhoo over the petrodollar’s alleged imperilment will prove to be just the latest in a series of false alarms about the dollar’s status atop the world’s currency hierarchy.
A lot of online armchair analysts miss the fact that the Euro is just as important as the US Dollar in global trade. The Eurozone has a combined GDP of about two thirds of the US. That is huge! And they Eurozone does lots of trade with countries outside the Eurozone, so the Euro is a vital part of the global economy. The number one forex pair globally is EUR/USD. It is trivial to convert between the two (tight spreads, giant order capacity), so buyers and sellers are fine with either. |
|
|
| ▲ | mattmaroon 17 hours ago | parent | prev | next [-] |
| It does seem like the petrodollar is coming to an end. Even if we wanted to keep killing/abducting the leader of every tiny oil nation shortly after the decide to sell oil in another currency (like we did to Iraq, Libya, and Venezuela), bigger ones we can’t just do that to practically are going to start. The writing is on the wall. It might take decades, but it’ll end. |
|
| ▲ | geraneum 5 hours ago | parent | prev | next [-] |
| > it'll happen by Q1 2027 Which month? |
|
| ▲ | jmyeet 5 hours ago | parent | prev [-] |
| Petrodollar discourse tends to annoy me because people tend to get cause and effect confused. The dollar isn't strong because oil is traded in it. Oil is traded in dollars because the dollar is strong. What makes the dollar strong? The US military and, at least up until now, the US essentially guaranteeing global maritime trade. Oh and the US also being the world's arms dealer. Why this is such a huge strategic blunder is because the US has proven itself unable to militarily open the Strait of Hormuz. This should surprise precisely no one. The Joint Chiefs knew it. The Intelligence community knew it. Let me put this another way: you could make all oil trades in euros tomorrow and pretty much everyone would still hold dollars and convert to euros as needed. People don't understand this so you get silly conspiracy theories around, say, the Iraq War being started because Saddam Hussein was starting to trade oil in euros. Let me give you a concrete example of this all in action. Iran has threatened to charge tolls to pass through the Strait and they wanted to be paid in crypto, largely to avoid having their funds frozen (as has already happened) because the US has that kind of control over the financial system. But that's still a problem because all US companies and any financial institution that wants to main access to the global financial system isn't legally allowed to trade with Iran, even in crypto. My point is that all of this could be traded in crypto and it wouldn't matter. The "petrodollar" would still rule. |
| |
| ▲ | unmole 9 minutes ago | parent [-] | | You say "people tend to get cause and effect confused" and then unironically follow that up with: > What makes the dollar strong? The US military The US military and the dollar are strong because the US economy is strong. |
|
