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The massive issuance of U.S. Dollar debt to Saudi Arabia, as a result of the deal mentioned in the OP, coincided perfectly with the abolition of the gold standa
by aedron 10y ago
The massive issuance of U.S. Dollar debt to Saudi Arabia, as a result of the deal mentioned in the OP, coincided perfectly with the abolition of the gold standard (the dollar being linked to physical gold reserves) [1]. So right from the start, the U.S. was purchasing oil with pieces of paper with no guaranteed value of any sort.
[1] https://en.wikipedia.org/wiki/Nixon_shock https://en.wikipedia.org/wiki/Nixon_shock
- rwmj 10y agoI'd rather have fiat currency than gold, because that would save me the time and hassle of selling the gold and getting something I can actually spend.
- ericHosick 10y ago> I'd rather have fiat currency than gold, because that would save me the time and hassle of selling the gold and getting something I can actually spend. Isn't currency backed by commodities considered something other than fiat currency?
- deleted 10y ago[deleted]
- toomuchtodo 10y agoIt's called the "gold standard".
- lmm 10y agoFor an individual that makes sense. For a nation the cost/hassle of selling gold is comparatively low, and the risk of the fiat backer's interests being averse to one's own is much higher.
- dpc59 10y agoThe ability the US has to assure people that you'll be able to buy oil with USD through military bullying of OPEC countries is a pretty good guaranteed value.