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US dollar is appointed currency in oil trading. Because the oil trade is a huge business, a large amount of dollar is locked up in that trade. That money is called petro-dollar. Why it is so important to US? Because it acts as a long term none interest loan The prosperous US economy partly was based on the petro-dollar - a long term loan without interest. Let me depict it in this way:
US bought a house from Japan (whom represents the oil customers of Iran) for one million dollars. US also bought another house from France (whom represents other oil customers of OPEC) for one million dollars. Japan and France use these two million dollars as fund to buy oil. The money was used in oil trading circle and never back to US. US enjoys the two houses almost free. He doesn't have to pay monthly mortgage payment. Not a penny for interest, nor for principle. All the cost was the printing of a green back paper. However, that green back paper - petro dollar, is still a debit note. How long is it? So far it's more than forty years - since dollar became the appointed oil trade currency.
But suddenly, Iran refuses to accept dollar. Japan has to ask US to exchange that one million dollar into Euro or yen. What US can do is:
1. to get the dollar back by export more merchandise. But he is not able to. He has a trade deficit already.
2. To get the dollar back with gold or foreign currency reserve. But he hasn't that much reserve.
3. To lock up that extra one million dollar in US Bond by raising the interest rate to attract the buyer. But he unwilling to do it. There is a sub-prime crisis in real estate market. Any interest increase will further devalue the house. Feds holds a large amount of real estates in my case, they don't allow such thing to happen. So to solve the problem, they go to the fourth option.
4. By pushing up the oil price.
France (other oil consumption countries) keeps one million dollar as oil trading fund. How much does he need if the oil price doubled? Two million. Thus the one million dollar Japan abandoned is absorbed by France. That's why the oil price jumped like crazy in recent days - a tricky way to keep US dollar from collapsing.
US has to pay for high oil price too. Ordinary people bear the cost. But the high oil price will hurt the economy. The condition won't last long. So war on Iran is unavoidable.
Of course, US is a "democratic" country. It can't start a war because others refusing to use its currency. Then beware of another 911 style false flag attack.
US bought a house from Japan (whom represents the oil customers of Iran) for one million dollars. US also bought another house from France (whom represents other oil customers of OPEC) for one million dollars. Japan and France use these two million dollars as fund to buy oil. The money was used in oil trading circle and never back to US. US enjoys the two houses almost free. He doesn't have to pay monthly mortgage payment. Not a penny for interest, nor for principle. All the cost was the printing of a green back paper. However, that green back paper - petro dollar, is still a debit note. How long is it? So far it's more than forty years - since dollar became the appointed oil trade currency.
But suddenly, Iran refuses to accept dollar. Japan has to ask US to exchange that one million dollar into Euro or yen. What US can do is:
1. to get the dollar back by export more merchandise. But he is not able to. He has a trade deficit already.
2. To get the dollar back with gold or foreign currency reserve. But he hasn't that much reserve.
3. To lock up that extra one million dollar in US Bond by raising the interest rate to attract the buyer. But he unwilling to do it. There is a sub-prime crisis in real estate market. Any interest increase will further devalue the house. Feds holds a large amount of real estates in my case, they don't allow such thing to happen. So to solve the problem, they go to the fourth option.
4. By pushing up the oil price.
France (other oil consumption countries) keeps one million dollar as oil trading fund. How much does he need if the oil price doubled? Two million. Thus the one million dollar Japan abandoned is absorbed by France. That's why the oil price jumped like crazy in recent days - a tricky way to keep US dollar from collapsing.
US has to pay for high oil price too. Ordinary people bear the cost. But the high oil price will hurt the economy. The condition won't last long. So war on Iran is unavoidable.
Of course, US is a "democratic" country. It can't start a war because others refusing to use its currency. Then beware of another 911 style false flag attack.
