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Petrodollars And Clearances
4 Answers
I had a conversation with someone who was under the impression that Petrodollars are a type of currency concept and that the USA benefits directly from its use, everytime any amount is transacted.
I said I do not think that petrodollars are a currency but simply a shorthand term to replace "Earnings from the export of petroleum" - a figure of speech, an expression which I sometimes understand to have a slightly derogatory/snide flavour.
Oil prices are generally quoted in USD and it seems reasonable to assume that oil is generally paid for denominated in USD by default. I believe the reason is historical whereby the USD has been a relatively stable currency since, for example, the GBP slumped badly and the practice of using USD was widely/universally established before the advent of the EUR.
What is not clear to me is how the USA would inevitably benefit from two non-USA entities outside the USA doing USD denominated business. Obviously, if I pay someone from USD cash I have lying around, that person later pays someone else using the same cash, and so on all of it outside the USA, the USA not only does not benefit but does not even know of any of that. Presumably payments going through the international banking system would not be quite so invisible. Of course, the USA is the issuer of the unit of measurement/currency but the actual worth is held by/in a different country and transferred to a third country.
Lately, USA sanctions on Iran are in the news and most recently there has been a suggestion for a separate or independent financial system to be set up so that the USA has nothing to do with and no knowledge of business EU enterprises do with Iran. This presumably has something to do with the sort of matter my friend and I were discussing.
If the USA not only "sees" what is being transacted and with whom but also actually gains simply from the fact that transactions are denominated and paid for in USD, how does that happen just because the monetary unit is USD even when the two parties and the goods/service have nothing to do with the USA ? How does the USA get a cut if USD are transferred from, say, the USD or other holdings of a European bank are transferred to a Saudi bank in payment for oil bought by a European oil importer ?
I said I do not think that petrodollars are a currency but simply a shorthand term to replace "Earnings from the export of petroleum" - a figure of speech, an expression which I sometimes understand to have a slightly derogatory/snide flavour.
Oil prices are generally quoted in USD and it seems reasonable to assume that oil is generally paid for denominated in USD by default. I believe the reason is historical whereby the USD has been a relatively stable currency since, for example, the GBP slumped badly and the practice of using USD was widely/universally established before the advent of the EUR.
What is not clear to me is how the USA would inevitably benefit from two non-USA entities outside the USA doing USD denominated business. Obviously, if I pay someone from USD cash I have lying around, that person later pays someone else using the same cash, and so on all of it outside the USA, the USA not only does not benefit but does not even know of any of that. Presumably payments going through the international banking system would not be quite so invisible. Of course, the USA is the issuer of the unit of measurement/currency but the actual worth is held by/in a different country and transferred to a third country.
Lately, USA sanctions on Iran are in the news and most recently there has been a suggestion for a separate or independent financial system to be set up so that the USA has nothing to do with and no knowledge of business EU enterprises do with Iran. This presumably has something to do with the sort of matter my friend and I were discussing.
If the USA not only "sees" what is being transacted and with whom but also actually gains simply from the fact that transactions are denominated and paid for in USD, how does that happen just because the monetary unit is USD even when the two parties and the goods/service have nothing to do with the USA ? How does the USA get a cut if USD are transferred from, say, the USD or other holdings of a European bank are transferred to a Saudi bank in payment for oil bought by a European oil importer ?
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I wonder of the confusion has arisen because Venezuela has, in the last few days, linked its new currency to a cryptocurrency known colloquially as the PetroDollar, or 'El Petro'.
Cryptocurrencies – such as Bitcoin, and el Petro – have no central bank to support them. In the same way, although the Venezuelan government has developed the 'Petro' it does not have to support it, should the value of the currency fall against the US dollar, for example.
In fact, the Petro has risen strongly against the US dollar in the last few days, since the link was announced by the Venezula government. You can check it out by searching on XPD - USD exchange rates
https:/
I think you may be referring to an older usage of the term 'petrodollar' when the US was an exporter of oil, and certain states, such as Saudi, Nigeria and others earned most of the foreign currency wealth through the export of petroleum-related products.
Cryptocurrencies – such as Bitcoin, and el Petro – have no central bank to support them. In the same way, although the Venezuelan government has developed the 'Petro' it does not have to support it, should the value of the currency fall against the US dollar, for example.
In fact, the Petro has risen strongly against the US dollar in the last few days, since the link was announced by the Venezula government. You can check it out by searching on XPD - USD exchange rates
https:/
I think you may be referring to an older usage of the term 'petrodollar' when the US was an exporter of oil, and certain states, such as Saudi, Nigeria and others earned most of the foreign currency wealth through the export of petroleum-related products.
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