The gold standard may have ended in the early 1970s, but something else quietly took its place for the next 50 years: oil. The so-called “petrodollar” system wasn’t well understood for most of this time, but a secret deal between Henry Kissinger and Saudi Arabia ensured the dollar would remain the dominant reserve currency. The outbreak of war in Iran is exposing America’s Achilles’ heel, though, as China positions the “petroyuan” as the obvious successor, and to top it all off, the Saudis quietly killed the petrodollar two years ago.
U.S. and Israel’s war on Iran has put a spotlight on the strength of the “petrodollar,” which makes up the cornerstone of America’s dominance over global trade, but economists warn the currency architecture has been eroding at its edges for years now.
