This is a great overview. Thanks for talking the time to write it. I have two questions:
1. The Bretton Woods Agreement at the end of WWII with Europe in 1944 established the US dollar as the world currency for all commodities, so why would we need an agreement from the Saudi's in the 1970's to "only buy oil is dollars" when that was already the only acceptable unit of exchange at the time? Given the enormous profits the Saudi's were making from oil in the 1970's combined with their lack of infrastructure, only the US had financial markets deep enough to hold the value from their oil wealth in the form of treasuries. They found themselves in the same situation as the Japanese in the 1980's and the Chinese now. They may not like it or us, but we are the only country in the world with reserves large enough to store trillions in a form that can later be converted back to usable currency.
2. You mentioned Nixon took us off the Gold Standard because we could not pay our debts to Europe, but inflation was running at such a high rate our debt was essentially being erased without us paying hardly a cent. Gold, however, was trading at over $2000 an ounce due to this inflation, so Nixon was forced to take us off the Gold Standard because it was simply unaffordably to store gold at that cost and to do so would have only caused the price to go higher. The world begged him to exit the gold standard for their own sake since some were pegged to the dollar and all of them handled all exchanges in US currency (back to the Brenton Woods agreement mentioned above).
This is a great overview. Thanks for talking the time to write it. I have two questions:
1. The Bretton Woods Agreement at the end of WWII with Europe in 1944 established the US dollar as the world currency for all commodities, so why would we need an agreement from the Saudi's in the 1970's to "only buy oil is dollars" when that was already the only acceptable unit of exchange at the time? Given the enormous profits the Saudi's were making from oil in the 1970's combined with their lack of infrastructure, only the US had financial markets deep enough to hold the value from their oil wealth in the form of treasuries. They found themselves in the same situation as the Japanese in the 1980's and the Chinese now. They may not like it or us, but we are the only country in the world with reserves large enough to store trillions in a form that can later be converted back to usable currency.
2. You mentioned Nixon took us off the Gold Standard because we could not pay our debts to Europe, but inflation was running at such a high rate our debt was essentially being erased without us paying hardly a cent. Gold, however, was trading at over $2000 an ounce due to this inflation, so Nixon was forced to take us off the Gold Standard because it was simply unaffordably to store gold at that cost and to do so would have only caused the price to go higher. The world begged him to exit the gold standard for their own sake since some were pegged to the dollar and all of them handled all exchanges in US currency (back to the Brenton Woods agreement mentioned above).