Podcast Summary: Demystifying the Petrodollar Scheme with Alex Gladstein (WiM082)
Podcast Information:
- Title: The "What is Money?" Show
- Host: Robert Breedlove
- Guest: Alex Gladstein
- Episode: Demystifying the Petrodollar Scheme (WiM082)
- Release Date: December 1, 2021
Introduction
In this enlightening episode of "What is Money?" hosted by Robert Breedlove, he engages in a deep conversation with Alex Gladstein, a prominent thinker in the geopolitical and monetary realms. The discussion primarily revolves around Gladstein's insightful article, "Uncovering the Hidden Cost of the Petrodollar," wherein he unpacks the intricate relationship between the US dollar, the petrodollar system, and their profound impacts on global economics and geopolitics.
1. Transition from Gold to Debt-Based Money
The conversation begins with a historical overview of the evolution of global reserve currencies:
- Gladstein underscores that the world's reserve currency shifted from gold (asset-based money) to debt (liability-based money) over the past century. He explains that debt money, embodied by the US dollar, is now a liability of the US Government rather than being backed by a tangible asset like gold.
- Breedlove adds, "Gold acted as the base layer for human action. It's whoever held the gold made the rules" (09:13).
Notable Quote:
“Nearly 90% of international currency transactions are in dollars, 60% of foreign exchange reserves are held in dollars, and almost 40% of the world's debt is issued in dollars, even though the US only accounts for around 20% of global GDP.” — Alex Gladstein [00:43]
2. The Birth of the Petrodollar
Following the abandonment of the gold standard in 1971, the US sought stability by pegging the dollar to oil, culminating in the petrodollar system:
- Gladstein describes how, after President Nixon ended the gold-to-dollar convertibility, the US collaborated with Saudi Arabia to price oil in dollars, ensuring continued global demand for the US currency.
- Breedlove emphasizes the strategic advantage this provided the US, dubbing it the "exorbitant privilege," which allowed the US to print currency without immediate restraint.
Notable Quote:
“This set up a really perverse funding dynamic for the U.S. government.” — Robert Breedlove [11:48]
3. Implications of the Debt-Based System
The shift to debt money unleashed numerous economic and geopolitical consequences:
- Gladstein explains the Triffin Dilemma, highlighting the inherent instability in maintaining a global reserve currency tied to debt. This led to persistent US deficits and an unsustainable reliance on other nations purchasing US debt.
- Breedlove points out that this system facilitates unchecked government spending, particularly for military endeavors, without the immediate need for restraint imposed by asset-backed currencies like gold.
Notable Quote:
“Debt-based money itself is an oxymoron.” — Robert Breedlove [29:00]
4. Consequences for the US and Global Economy
The petrodollar system has had profound effects both domestically within the US and globally:
- Gladstein discusses how the US leveraged this system to fund prolonged wars (e.g., Vietnam, Iraq) by issuing debt that other nations held, often without direct accountability or benefit to the US populace.
- Breedlove links this to rising inflation, wealth disparity, and political polarization in the US, asserting that the system disproportionately benefits financial elites while burdening the average worker.
Notable Quote:
“Dollars became the dominant medium of exchange for international settlement, backed by a promise to pay in gold.” — Alex Gladstein [00:43]
5. Role of International Institutions and Manipulation
Central banks and international institutions played pivotal roles in sustaining the dollar's supremacy:
- Gladstein critiques institutions like the IMF and World Bank, arguing they were designed to perpetuate US economic dominance rather than genuinely assist developing nations.
- Breedlove concurs, noting that these bodies have facilitated the US's ability to manipulate global markets to its advantage, often at the expense of other nations' sovereignty and economic stability.
Notable Quote:
“World commerce has been directed not by the free market, but by an unprecedented intrusion of government planning coordinated by the World Bank, IMF and what has come to be called the Washington Consensus.” — Alex Gladstein [86:07]
6. The Dark Side of the Exorbitant Privilege
The benefits of the petrodollar system come with significant costs:
- Gladstein highlights how this system has led to exploitation, such as the economic destabilization of developing nations, supporting oppressive regimes, and fostering global inequality.
- Breedlove adds that internally, the US has experienced deindustrialization and reduced competitiveness, leading to economic hardship for the working class while financial sectors thrive.
Notable Quote:
“The US government was able hold the most gold, but simultaneously be the biggest debtor.” — Robert Breedlove [48:53]
7. Bitcoin as the Future of Money and Potential for Peace
The conversation shifts towards Bitcoin's role as a solution to the flaws inherent in the fiat and petrodollar systems:
- Gladstein envisions Bitcoin as a tool for establishing true monetary sovereignty, reducing the capacity for governments to manipulate currencies and, by extension, engage in unchecked military actions.
- Breedlove echoes this sentiment, advocating for Bitcoin as a means to create a resilient and incorruptible monetary system that prioritizes individual property rights and limits governmental overreach.
Notable Quote:
“Bitcoin is something so radically new, we struggle to describe it through historical analogy, one of the most prevalent of which being gold.” — Robert Breedlove [110:08]
8. Real-World Applications and Future Prospects
The episode concludes with discussions on the practical adoption of Bitcoin:
- Gladstein shares instances where Bitcoin is empowering marginalized communities, such as Native Americans and nations like El Salvador, offering them financial autonomy and resilience against exploitative economic systems.
- Breedlove emphasizes the growing transactivity of Bitcoin in everyday transactions and its potential to supplant fiat currencies through market-driven demand.
Notable Quote:
“More transactable in Bitcoin. I like to work with bitcoiners. So a lot of my service providers want to be paid in bitcoin so I pay them on the lightning network. It's simple. It's 24 by 7. They like it, I like it, it's great.” — Robert Breedlove [114:24]
Conclusion
This episode delves deep into the intricate web of historical monetary systems, geopolitical strategies, and economic policies that have shaped the current global landscape. Alex Gladstein and Robert Breedlove provide a compelling critique of the petrodollar system, highlighting its far-reaching consequences and advocating for Bitcoin as a transformative solution. The discussion underscores the need for a more equitable and sustainable monetary framework to foster global stability and individual sovereignty.
Further Learning and Resources:
- Alex Gladstein's Work: Follow @gladstein for more insights and updates.
- Human Rights Foundation: hrf.org
- Oslo Freedom Forum: oslofreedomforum.com
- Books Mentioned:
- Super Imperialism by Michael Hudson
- Global Fracture by Michael Hudson
- Economic Theories:
- Triffin Dilemma
- Democratic Peace Theory
- Gresham's Law vs. Thiers' Law
Listeners are encouraged to explore these resources to gain a more comprehensive understanding of the topics discussed.