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The £ was backed by UK's (perceived) military might just as $ is by the States'. The the war on Iran (and many years of war on terror) showed we have anything

The £ was backed by UK's (perceived) military might just as $ is by the States'. The the war on Iran (and many years of war on terror) showed we have anything but

rtkwe 8d ago
There are other backers to that as well. The main ones being oil trades being settled largely in USD and the need to acquire USD to pay for US goods/services. It's not all military might there's a lot of economic might in there too.
- toomuchtodo 8d ago
  This is the important point. Oil was/is settled in dollars. The world is rapidly moving away from oil. China has already hit peak oil. China is 1/3rd of global manufacturing capacity. If you're leaving oil behind, and buying solar, batteries, and EVs from China, your need for dollars declines, and need for yuan goes up. Also, stocks vs flows. You have to keep buying oil every day from petrostates, while the clean tech you buy is yours for its entire service life (a decade or more for EVs, decades for solar and stationary battery storage). The US did well when the Saudis required dollars for oil as part of the US-Saudi security and military arrangement, and that arrangement is declining in value over time as the value of oil to the global economy declines. The US loses investors in US treasuries when folks who sold oil for dollars do not have dollars from oil sales. Shades of theta decay. China Adds Currencies to Central Clearing in Yuan's Global Push - https://news.ycombinator.com/item?id=49736124 https://news.ycombinator.com/item?id=49736124 - September 2026 The Iran War Just Broke the Petrodollar - https://www.bloomberg.com/opinion/articles/2026-04-06/the-petrodollar-loop-supporting-the-treasury-market-is-broken https://www.bloomberg.com/opinion/articles/2026-04-06/the-pe... | https://archive.today/RyJA8 https://archive.today/RyJA8 - April 6th, 2026 > "The petrodollar loop requires two moving parts: dollars earned and dollars invested. Both have stopped." > The standard reassurance is that there is no alternative to Treasuries — no other market offers the depth, liquidity and legal infrastructure that central banks require. This remains true. Foreign central banks will not abandon Treasuries wholesale. But “no realistic alternative” and “unquestioned safe haven” are not the same thing, and the Iran war is clarifying the difference. https://ember-energy.org/data/china-cleantech-exports-data-explorer/ https://ember-energy.org/data/china-cleantech-exports-data-e... > As the world’s largest manufacturer of clean technologies, data on China’s cleantech exports provide an important early insight into the pace and scale of the energy transition. In 2024, China produced around 80% of the world’s solar PV modules and battery cells, and 70% of electric vehicles. (as of this comment, China is exporting EVs at a 12M unit/year annualized run rate, with the capacity to build 50M EVs/year; they are only constrained by not enough marine vessels to keep up with export demand; every 24 months of EV production destroys ~1M barrels/day of oil demand at current run rates, which continue to increase) China growth straining global auto shipping capacity - https://news.ycombinator.com/item?id=49553327 https://news.ycombinator.com/item?id=49553327 - September 2026 (0 comments) China's Manufacturing Advantage, Explained [video] - https://news.ycombinator.com/item?id=49451076 https://news.ycombinator.com/item?id=49451076 | https://www.youtube.com/watch?v=OgYKVpOsMJs https://www.youtube.com/watch?v=OgYKVpOsMJs - August 2026 (think in systems)
  - carefree-bob 8d ago
    Oil being settled in dollars is completely unimportant. It makes no difference in what currency a trade is conducted. What matters is the jurisdiction in which you store the proceeds. That selection of jurisdiction drives everything else. I can declare that all oil must be settled in blue seashells. Who cares? What matters is that I do not keep my profits from selling oil as a pile of blue seashells, I invest those profits in some country. As long as that country remains the US, disproportionately, then oil can be marked in British pounds, seashells, hollywood B-list handjobs, it really makes no difference at all. But, you object, "Doesn't oil being priced in dollars mean that nations need to have dollars to buy oil?". Nope, there are forex markets. So let's look at a situation in which oil is priced in Euros but Saudi Arabia stores its surpluses in dollars. Which currency sees an increase in demand? Japan goes to buy oil, so it sells the Yen and buys Euros. Those Euros are handed over to Saudi Arabia, which immediately sells them to buy dollars. So the net result is that the euro transactions cancel out and all that matters is the selling of Yen and the buying of dollars. The yen falls against the dollar and the euro goes nowhere. It's a literal null op, in terms of net demand for the currency. It means nothing. The jurisdiction in which the proceeds are stored - that is everything. Now I would ask you, in which jurisdictions do you think Saudi Arabia can efficiently store the ten billion or so it earns each day from selling oil? Nepal? Where does it store a couple trillion dollars worth of financial assets each year? Argentina? Which nation allows such vast unrestricted capital inflows and outflows? Go ahead, make a list. So you see, whereas one can literally invent anything in which oil is priced in, to find a jurisdiction that can accept those capital inflows, that limits you to basically a single choice. Now, given that Saudi Arabia needs (not wants, but needs) to store its proceeds in dollars, it makes sense that it would price the oil in dollars to save on transaction fees. But really it can price the oil in anything it wants, no one cares except people caught in dank youtube caverns where the ominous phrase "petrodollar" is scrawled on the walls by torchlight.
    - rtkwe 8d ago
      No France still needs X USD to send to Saudi Arabia for Y barrels of oil. The only way the USD becomes funny money is if SA buys X from France also denominated in USD so that the cycle is closed, otherwise France needs a continuous source of USD to send over to SA. [0] [0] Simplifying to national here; yes it's not just one unit in France and one in SA but on net there's X trade between the major money movers in each country.
rayiner 8d ago
But what does “backed” actually buy you in economic terms?

The £ was backed by UK's (perceived) military might just as $ is by the States'. The the war on Iran (and many years of war on terror) showed we have anything but

rtkwe 8d ago

There are other backers to that as well. The main ones being oil trades being settled largely in USD and the need to acquire USD to pay for US goods/services. It's not all military might there's a lot of economic might in there too.

toomuchtodo 8d ago
This is the important point. Oil was/is settled in dollars. The world is rapidly moving away from oil. China has already hit peak oil. China is 1/3rd of global manufacturing capacity. If you're leaving oil behind, and buying solar, batteries, and EVs from China, your need for dollars declines, and need for yuan goes up. Also, stocks vs flows. You have to keep buying oil every day from petrostates, while the clean tech you buy is yours for its entire service life (a decade or more for EVs, decades for solar and stationary battery storage). The US did well when the Saudis required dollars for oil as part of the US-Saudi security and military arrangement, and that arrangement is declining in value over time as the value of oil to the global economy declines. The US loses investors in US treasuries when folks who sold oil for dollars do not have dollars from oil sales. Shades of theta decay. China Adds Currencies to Central Clearing in Yuan's Global Push - https://news.ycombinator.com/item?id=49736124 https://news.ycombinator.com/item?id=49736124 - September 2026 The Iran War Just Broke the Petrodollar - https://www.bloomberg.com/opinion/articles/2026-04-06/the-petrodollar-loop-supporting-the-treasury-market-is-broken https://www.bloomberg.com/opinion/articles/2026-04-06/the-pe... | https://archive.today/RyJA8 https://archive.today/RyJA8 - April 6th, 2026 > "The petrodollar loop requires two moving parts: dollars earned and dollars invested. Both have stopped." > The standard reassurance is that there is no alternative to Treasuries — no other market offers the depth, liquidity and legal infrastructure that central banks require. This remains true. Foreign central banks will not abandon Treasuries wholesale. But “no realistic alternative” and “unquestioned safe haven” are not the same thing, and the Iran war is clarifying the difference. https://ember-energy.org/data/china-cleantech-exports-data-explorer/ https://ember-energy.org/data/china-cleantech-exports-data-e... > As the world’s largest manufacturer of clean technologies, data on China’s cleantech exports provide an important early insight into the pace and scale of the energy transition. In 2024, China produced around 80% of the world’s solar PV modules and battery cells, and 70% of electric vehicles. (as of this comment, China is exporting EVs at a 12M unit/year annualized run rate, with the capacity to build 50M EVs/year; they are only constrained by not enough marine vessels to keep up with export demand; every 24 months of EV production destroys ~1M barrels/day of oil demand at current run rates, which continue to increase) China growth straining global auto shipping capacity - https://news.ycombinator.com/item?id=49553327 https://news.ycombinator.com/item?id=49553327 - September 2026 (0 comments) China's Manufacturing Advantage, Explained [video] - https://news.ycombinator.com/item?id=49451076 https://news.ycombinator.com/item?id=49451076 | https://www.youtube.com/watch?v=OgYKVpOsMJs https://www.youtube.com/watch?v=OgYKVpOsMJs - August 2026 (think in systems)
- carefree-bob 8d ago
  Oil being settled in dollars is completely unimportant. It makes no difference in what currency a trade is conducted. What matters is the jurisdiction in which you store the proceeds. That selection of jurisdiction drives everything else. I can declare that all oil must be settled in blue seashells. Who cares? What matters is that I do not keep my profits from selling oil as a pile of blue seashells, I invest those profits in some country. As long as that country remains the US, disproportionately, then oil can be marked in British pounds, seashells, hollywood B-list handjobs, it really makes no difference at all. But, you object, "Doesn't oil being priced in dollars mean that nations need to have dollars to buy oil?". Nope, there are forex markets. So let's look at a situation in which oil is priced in Euros but Saudi Arabia stores its surpluses in dollars. Which currency sees an increase in demand? Japan goes to buy oil, so it sells the Yen and buys Euros. Those Euros are handed over to Saudi Arabia, which immediately sells them to buy dollars. So the net result is that the euro transactions cancel out and all that matters is the selling of Yen and the buying of dollars. The yen falls against the dollar and the euro goes nowhere. It's a literal null op, in terms of net demand for the currency. It means nothing. The jurisdiction in which the proceeds are stored - that is everything. Now I would ask you, in which jurisdictions do you think Saudi Arabia can efficiently store the ten billion or so it earns each day from selling oil? Nepal? Where does it store a couple trillion dollars worth of financial assets each year? Argentina? Which nation allows such vast unrestricted capital inflows and outflows? Go ahead, make a list. So you see, whereas one can literally invent anything in which oil is priced in, to find a jurisdiction that can accept those capital inflows, that limits you to basically a single choice. Now, given that Saudi Arabia needs (not wants, but needs) to store its proceeds in dollars, it makes sense that it would price the oil in dollars to save on transaction fees. But really it can price the oil in anything it wants, no one cares except people caught in dank youtube caverns where the ominous phrase "petrodollar" is scrawled on the walls by torchlight.
  - rtkwe 8d ago
    No France still needs X USD to send to Saudi Arabia for Y barrels of oil. The only way the USD becomes funny money is if SA buys X from France also denominated in USD so that the cycle is closed, otherwise France needs a continuous source of USD to send over to SA. [0] [0] Simplifying to national here; yes it's not just one unit in France and one in SA but on net there's X trade between the major money movers in each country.

rayiner 8d ago

But what does “backed” actually buy you in economic terms?