So Long, US Dollar

by Marin Katusa, Casey Research:

Signs the Dollar Is Going the Way of the Dodo
The biggest oil-trading partners in the world, China and Saudi Arabia, are still using the petrodollar in their transactions. How long this will persist is a very important question. China imported 1.4 million barrels of oil a day from Saudi Arabia in February, a 39% increase from a year earlier, and the two countries have teamed up to build a massive oil refinery in Saudi Arabia. As the nations continue to pursue increased bilateral trade, at some point they will decide that involving US dollars in every transaction is unnecessary and expensive, and they will ditch the dollar.
When that happens, the tide will have truly turned against the dollar, as it was an agreement between President Nixon and King Faisal of Saudi Arabia in 1973 that originally created the petrodollar system. Nixon asked Faisal to accept only US dollars as payment for oil and to invest any excess profits in US Treasury bonds, notes, and bills. In exchange, Nixon pledged to protect Saudi oilfields from the Soviet Union and other potential aggressors, such as Iran and Iraq.
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