The Secret Reason Trump Is So Cozy With Saudi Arabia | Zero Hedge
Description: "For decades, the petrodollar system has allowed the US government and many Americans to live way beyond their means... One day soon, Americans may wake up to a new reality."
Keywords: Zero Hedge,Zerohedge,Finance,Economics,Markets,Politics,Analysis,Donald Trump,Fail,fixed,Henry Kissinger,Italy,Kuwait,Nationalization,OPEC,President Obama,Purchasing Power,Reality,Reserve Currency,Saudi Arabia,Twitter,World Trade
Date: 2013-01-07T00:00:00Z

### Former Clinton Advisor Scorned By Fox New Host Melissa Francis

by The_Real_Fly - Nov 8, 2017 2:38 PM

So mean. SAD!

### It's Bin A Rough Week In The Middle East

by Capitalist Exploits - Nov 8, 2017 4:04 PM

Here's why the Saudi élite are panicking

### Victim Blame: Media Suggests Rand Paul Deserved To Be Attacked

by TDB - Nov 8, 2017 1:34 PM

And if the nonchalant attitude of the media wasn’t enough, GQ published a piece called Rand Paul Sounds Like the Worst Guy to Have as a Neighbor.

# The Secret Reason Trump Is So Cozy With Saudi Arabia

by Tyler Durden
Nov 8, 2017 7:05 PM
0
SHARES

Authored by Nick Giambruno via InternationalMan.com,

As a candidate, Donald Trump used uncommonly harsh language to criticize Saudi Arabia—the world’s largest oil exporter.

He called the Saudi regime the world’s biggest funder of terrorism.

He also said the Saudi government uses “our petro dollars—our very own money—to fund the terrorists that seek to destroy our people, while the Saudis rely on us to protect them!”

At another point, Trump said, “Who blew up the World Trade Center? It wasn’t the Iraqis, it was Saudi [Arabia].”

Trump also criticized Hillary Clinton for taking Saudi money for the Clinton Foundation. (They were its biggest “donors.”) He even challenged her to return the money.

He also famously got into a Twitter spat with a prominent member of the Saudi royal family, Alwaleed bin Talal.

As a candidate, Trump blasted the Saudis countless other times.

But, after he took office, Trump did a complete 180. He stopped criticizing the Saudis. In fact, he’s now singing their praises.

It’s bizarre… as if someone put a severed horse head in his bed.

Mere months after criticizing the Saudis, he was on Air Force One headed to Saudi Arabia to do the sword dance with his new friends.

It was his first foreign trip as president.

President Trump with King Salman

Trump’s about face was astounding. But his newly adopted deference to the Saudis is no different than Obama’s, Baby Bush’s, or any previous president’s.

President Obama with King Abdullah

President G.W. Bush with King Abdullah

Today, I’ll tell you why Trump made such an abrupt turnaround.

I’ll also explain why the Saudis get special treatment from the US Deep State.

### “As Good As Gold” - From Bretton Woods to the Petrodollar

It’s been rightly said that he who holds the gold makes the rules.

After World War 2, the US had the largest gold reserves in the world, by far. Along with winning the war, this let the US reconstruct the global monetary system around the dollar.

The new system, created at the Bretton Woods Conference in 1944, tied the currencies of virtually every country in the world to the US dollar through a fixed exchange rate. It also tied the US dollar to gold at a fixed rate of $35 an ounce.

The dollar was said to be “as good as gold.”

The Bretton Woods system made the US dollar the world’s premier reserve currency. It effectively forced other countries to store dollars for international trade, or to exchange with the US government for gold.

However, this pseudo gold standard was doomed to fail.

Not surprisingly, runaway spending on warfare and welfare caused the US government to print more dollars than it could back with gold at the promised price.

By the late 1960s, the number of dollars circulating had drastically increased relative to the amount of gold backing them. This encouraged foreign countries to exchange their dollars for gold, draining the US gold supply. It dropped from 574 million ounces at the end of World War 2 to around 261 million ounces in 1971.

To plug the drain, President Nixon “temporarily” suspended the dollar’s convertibility into gold in 1971. This ended the Bretton Woods system and severed the dollar’s last tie to gold.

The “temporary” suspension is still in effect today.

This is why the Fed can print as much paper money as it pleases.

The death of the Bretton Woods system had profound geopolitical consequences. Most critically, it eliminated the main reason foreign countries stored large amounts of US dollars and used the US dollar for international trade.

At this point, oil-producing countries began to demand payment in gold instead of rapidly depreciating dollars.

It was clear the US would have to create a new monetary system to stabilize to the dollar.

So, the US government concocted a new scheme—the petrodollar system. It gave foreign countries another compelling reason to hold and use the dollar.

The new arrangement preserved the dollar’s special status as the world’s top reserve currency.

For President Nixon and Secretary of State Henry Kissinger, it was a geopolitical and financial masterstroke.

From 1972 to 1974, the US government made a series of agreements with Saudi Arabia that created the petrodollar system.

The US handpicked Saudi Arabia because of the kingdom’s vast petroleum reserves and its dominant position in OPEC—and because the Saudi royal family was (and is) easily corruptible.

In essence, the petrodollar system was an agreement that the US would guarantee the House of Saud’s survival.

In exchange, Saudi Arabia would:

1. Use its dominant position in OPEC to ensure that all oil transactions would only happen in US dollars.

2. Recycle the many billions of US dollars from oil revenue into American weapons manufacturers and infrastructure companies—and critically, into US Treasuries. This let the US issue more debt and finance previously unimaginable budget deficits. By 1977, at least 20% of all Treasuries held abroad were in Saudi hands.

3. Guarantee the price of oil within limits acceptable to the US and prevent another oil embargo.

Oil is the largest and most strategic commodity market in the world.

As you can see in the chart below, it dwarfs all other major commodity markets combined.

Every country needs oil. And if foreign countries need US dollars to buy oil, they have a very compelling reason to hold large dollar reserves.

Think about it… If Italy wants to buy oil from Kuwait, it has to purchase US dollars on the foreign exchange market to pay for the oil first.

This creates a huge artificial market for US dollars.

In part, this is what differentiates the US dollar from a purely local currency, like the Mexican peso.

The dollar is just a middleman. But it’s used in countless transactions amounting to trillions of dollars that have nothing to do with US products or services.

Since the oil market is so enormous, it acts as a benchmark for international trade. If foreign countries are already using dollars for oil, it’s just easier to use the dollar for other international trade.

In addition to nearly all oil sales, the US dollar is used for about 80% of all international transactions.

This gives the US unmatched geopolitical leverage.

The US can sanction or exclude virtually any country from the US dollar-based financial system at the flip of a switch. By extension, it can also cut off any country from the vast majority of international trade.

The petrodollar system is why people and businesses everywhere in the world take US dollars. Other countries have had little choice over this.

Today, the biggest US exports are dollars and government debt. The US government can create unlimited quantities of both… from nothing.

It requires no effort to create US dollars, which can then be exchanged for real things like French wine, Italian cars, electronics from Korea, or Chinese manufactured goods.

Ultimately, the petrodollar boosts the US dollar’s purchasing power. It entices foreigners to soak up many of the new currency units the Fed creates.

The system helps create a deeper, more liquid market for the dollar and US Treasuries.

It also helps the US keep interest rates artificially low. This allows the US government to finance enormous and permanent deficits. Otherwise, this would be impossible without destroying the currency through money printing and inflation.

The petrodollar allows the US to finance the world’s largest military, which is bigger than the next seven largest militaries combined.

The petrodollar has also allowed the US to spend astronomical amounts of money on welfare and other benefits for over half of its population. It gives Americans a much higher standard of living than they would have otherwise.

In short, the petrodollar is the ultimate enabler of big government.

The US government could never have become as powerful without it.

It’s hard to overstate how much the petrodollar system benefits the US. It’s the bedrock of the US financial system.

And it’s the reason the US political elite pamper the Saudis.

Bretton Woods lasted 27 years. So far, the petrodollar has lasted over 40 years.

I think we’re on the cusp of another paradigm shift in the international financial system. It will be at least as fundamental as the end of Bretton Woods in 1971.

For decades, the petrodollar system has allowed the US government and many Americans to live way beyond their means.

The US takes this unique position for granted. But it will disappear once the petrodollar system breaks down.

When that happens, I expect severe inflation.

This will likely be the tipping point…

Afterward, the US government will be desperate enough to implement capital controls, people controls, nationalization of retirement savings, and other forms of wealth confiscation.

I urge you to prepare for the economic and sociopolitical fallout while you still can. Expect bigger government, less freedom, shrinking prosperity… and possibly worse.

It probably won’t happen tomorrow. But it’s clear where this trend is headed.

One day soon, Americans may wake up to a new reality.

Once the petrodollar system kicks the bucket and the dollar loses its status as the world’s premier reserve currency, you will have few, if any, options.

The sad truth is, most people have no idea how bad things could get, let alone how to prepare…

Yet there are straightforward steps you can start taking today to protect your savings and yourself from the financial and sociopolitical effects of the collapse of the petrodollar.

We recently released a special Guide to Surviving and Thriving During an Economic Collapse. Click here to download the PDF now.

- Donald Trump
- Nationalization
- Purchasing Power
- Twitter
- Fail
- Reserve Currency
- fixed
- Henry Kissinger
- President Obama
- Saudi Arabia
- OPEC
- World Trade
- Italy
- Reality
- Kuwait
- Twitter

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## Comment viewing options

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More_sellers_th... Nov 8, 2017 7:10 PM

Goodbye ZH... its been a good run. Goodbye to hedgeless and the other friends i have met here.. this website just jumped the shark!

Vlad the Inhaler More_sellers_than_buyers Nov 8, 2017 7:13 PM

Wtf are you talking about, this is all very mainstream stuff that everyone already knows, it's so mainstream it's even on Investopedia https://www.investopedia.com/articles/forex/072915/how-petrodollars-affe...

Brazen Heist Vlad the Inhaler Nov 8, 2017 7:24 PM

Was it too much of a revelation or too much of an affirmation for him?

evoila Nov 8, 2017 7:13 PM

Thanks for the article. Tell us something every person here doesn't know. The point is, people are upset because we rely on crap like the petrodollar system to create demand, whereas people would rather see demand be based on things like fiscal responsibility, social responsibility, no/low debt, prudent governance, a stable tax and political system, and a political system that hasn't been inundated with special interests like AIPAC, the Saudis, the pharma lobby etc.

HRClinton evoila Nov 8, 2017 7:20 PM

Indeed. I was hoping for some new insight, but... Noooo... got suckered into a B&W B-Movie.

That's time I won't get back. But, hey, all click bait is good for business. Right?

Brazen Heist evoila Nov 8, 2017 7:21 PM

If something is good, it doesn't need to be shoved down people's throats. Example; dumbocracy.

The empire extorts its way to artificial demand for its currency at the barrel of a gun.

This is more of a curse, because the Petro-dollar actually encourages runaway splurging on bullshit projects and discourages prudence and fiscal responsibility. The elites are milking the system into oblivion i.e. bankruptcy.

earleflorida evoila Nov 8, 2017 7:30 PM

how do you expect the average layperson to understand how money works via petrodollars than explaining the other side of the ledger that they've never been exposed to?

all the genuis on zh that find this article foolish should get fucking lost and open their own financial blogs instead of feeding off TD/ZH for their personal clicks`shit mr. know-it-all...[s]!

Son of Captain Nemo Nov 8, 2017 7:11 PM

Because they carry more than 1/3 of the U.S.'s debt!

Son of Captain Nemo Son of Captain Nemo Nov 8, 2017 7:15 PM

Not that cozy considering Al-Waleed was just imprisoned by the President of the United States who received 2 loans from the Saudi Royal to bail his real estate "empire" out of Chapter 7 debt in the 90s!!!...

WillyGroper Son of Captain Nemo Nov 8, 2017 7:26 PM

read what you just wrote.

imprisoned? in the fkn ritz?

bailout or not, this is nothing but more theater.

ParticularlyStu... Nov 8, 2017 7:12 PM

Stupid subtitle. People aren't going to start understanding the monetary system. Ever.

Slippery Slope Nov 8, 2017 7:14 PM

May the Orb be with you.

stinkhammer Slippery Slope Nov 8, 2017 7:16 PM

Patrick, you know that thing's turned off, right? Patrick? Yoo-hoo? Patrick?!

totenkopf88 Nov 8, 2017 7:16 PM

Petrobitcoin, Peanutz!

4shzl Nov 8, 2017 7:17 PM

Occam's explanation: when they finish sweating Talal and some of the other greasy sleazeballs, the Crown Prince will be able to hand Trump the smoking gun that he needs to put crooked Hillary away. We should all be grateful.

totenkopf88 4shzl Nov 8, 2017 7:21 PM

LOL. Hillary, Drumpf, The House of Saud- they're all in The Big Club and you ain't!

Brazen Heist Nov 8, 2017 7:16 PM

Old news...

Policies towards Israel and Saudi Arabia don't change with presidents.

Saudis should go for the Petro-Yuan and give the dollar a run for its money by diversifying its "Petro" currencies. You know, shop around a bit.

screw face Nov 8, 2017 7:17 PM

...what Orb?

...ohhhh that Orb.

RubyPetunia Nov 8, 2017 7:17 PM

OK, what are the differences between the photos of Bush and Trump vs Obama?

Bush and Trump are being honored by the Saudis i.e. they are being given a medal.

Obama is just bowing.

totenkopf88 RubyPetunia Nov 8, 2017 7:19 PM

Get over it, bro- Obama is long gone and only lives in your dreams.

Able Ape Nov 8, 2017 7:19 PM

You can only stretch a rubber band so far - from one end of the Universe to the Other is out of the question; therefore....

Bigly Nov 8, 2017 7:21 PM

They are currently rolling over all the Bush cronies, etc.

I think what is going on is interesting. But I confess, all those names sound the same and they all have beards and dark hair, so I confuse them all anyway.

I Write Code Nov 8, 2017 7:27 PM

Secret, huh?

wisehiney Nov 8, 2017 7:30 PM

Trump the great negotiator.

Talks grade shit to and about them.

And then they give him that gold medal.

The nations highest honor.

Trump is always 10 steps ahead.

“We’re going to win. We’re going to win so much. We’re going to win at trade, we’re going to win at the border. We’re going to win so much, you’re going to be so sick and tired of winning, you’re going to come to me and go ‘Please, please, we can’t win anymore.’ You’ve heard this one. You’ll say ‘Please, Mr. President, we beg you sir, we don’t want to win anymore. It’s too much. It’s not fair to everybody else.’” Trump said. “And I’m going to say ‘I’m sorry, but we’re going to keep winning, winning, winning, We’re going to make America great again.”

Nobodys Home Nov 8, 2017 7:31 PM

At least there's no pic of Trump bowing for the king! I read that he didn't. Not that I believe everything I read. The turnaround does suck though. I though the US wuz da Kanngs!

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11-08 19:31: Appears to be only be about (Atomizer)
11-08 19:31: At least there's no pic of (Nobodys Home)
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11-08 19:30: L1O, well written and real. (Wild tree)
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