Debunking the Petrodollar Myth
It makes little difference to the US if oil is traded in dollars. It also never made any economic sense for Iraq to try and switch to trading oil in Euro.
Dean Baker, in Foreign Policy Mag, addresses this issue directly in an article back in 2009.
It is true that oil is priced in dollars and that most oil is traded in dollars, but these facts make relatively little difference for the status of the dollar as an international currency or the economic well-being of the United States.
Dean Baker also goes on to say this…
…the pricing of commodities in dollars is primarily just a convention.
Debunking the Dumping-the-Dollar Conspiracy
The US did not invade Iraq because Saddam threatened to dump the dollar. That is just a conspiracy theory based on bad economics. Trading oil in dollars has little effect on the US economy. Oil is traded in dollars because of two main reasons
- The US has one of the most stable currencies
- The US is the largest economy
Even if the world decided to dump the dollar, all it would do is make the US currency cheaper, which would boost US exports abroad. In fact, the US has argued for years that China undervalues it’s own currency in comparison to their’s, causing Chinese exports to be cheap and US imports to be expensive. Whether or not that is true isn’t the question.
The US did not invade Iraq to prevent them from pricing oil in Euro v Dollars. That doesn’t make economic sense and would in fact likely just be a pain to other nations who value oil in dollars.
No America Doesn’t Invade Countries because they use another currency than the Dollar
The US Dollar is the world’s reserve currency for a few reasons, but primarily because the US has one of the most trusted and stable economies on the globe.
The US, being the largest economy and having it’s currency managed by the Federal Reserve, has become home to the most watched currency in the world. We trade global commodities like oil, or grain, or other items in dollars because the dollar is a safe store of value. It’s not going to inflate, or destabilize. It will hold it’s value and is accepted by nearly every country for these same reasons.
Never once has the US sent soldiers to force a nation to continue trading in US dollars. People trade in US dollars because they want to and because it’s beneficial for everyone involved.
