June 14, 2024, Fairfax, Va.—Americans for Limited Government President Rick Manning today issued the following statement in response to reports that Saudi Arabia beginning to accept payments in other currencies besides the U.S. dollar for oil:
“It is being widely reported that Saudi Arabia will begin accepting multiple different currencies in exchange for oil, presumably ending the U.S.-Saudi petrodollar agreement. Why does this matter? Because for the last fifty years, the Saudis only accepted the U.S. dollar for oil, forcing world governments to in part accumulate U.S. treasuries in order to purchase the one commodity that makes the world go round, black gold, Texas tea, as an old 60s sitcom called it.
“What is the practical effect? As the need to have U.S. dollars rather than Chinese yuan or Indian rupies or euros is negated, the world demand for U.S. Treasuries will go down. Each year, we sell around $9 trillion of treasuries to buyers around the world. The market for these is at least partially driven by the demand to purchase them with that demand partially created by the need to have them to transact business around the world.
“Now that the artificial oil demand is lessened, the allure of U.S. treasuries will be significantly more tied to the interest rate they pay. Less demand, more supply — due to an on-going $2 trillion deficit and rolling over maturing treasuries — equals higher interest payments on the debt. Higher interest payments on the debt equals higher annual deficits and more inflation due to the increased cost of borrowing. Needless to say this vicious cycle is bad for our nation’s short and mid-term economic outlook.”
For media availability contact Americans for Limited Government at media@limitgov.org.
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