Is The Petro-Dollar About To Be Killed?

Hyperinflation is virtually always a currency event—a blindside hit that national monetary authorities did not adequately foresee, and which is too big for them to control.

From Seeking Alpha:

Several largely overlooked items came out of China this week. First, the Shanghai Exchange is moving toward trading in petro-yuan. As we have seen with gold, Shanghai is a very effective delivery based market. This helps set the stage for Saudi Arabia to disengage from its 1973 Petro-dollar agreement, which essentially involves selling oil in U.S. dollars in exchange for U.S. debt. In the last few years the Saudis have been the most aggressive country in the world in terms of adding to Treasury holdings, now holding a stash of $700 billion.

The alternative really doesn’t seem so farfetched at this late stage: Simply begin selling oil to Europe and China in currencies other than the U.S. dollar. China is now Saudi Arabia’s biggest oil customer. With the start up of the joint Sino-Saudi 400,000 bbd refinery at Yanbu next September, this promises to widen further.

It’s important to note that China is already moving to buy all of its oil in yuan. So far, Russia, Iran and the UAE transact in yuan, while others have the option and await an opening. The new exchange will facilitate that…

Make no mistake, the moment China and Saudi Arabia agree to trade oil in yuan rather than U.S. dollars a series of economic dominoes will begin to topple, changing our economic lives in ways not 1-in-100,000 Americans understands. Good thing you’re among those aware of the danger, and are considering steps to avoid the monetary tsunami, as I’ve been urging you.

Consumer prices for anything imported from overseas (which is about everything—including fuel and much of our food) will leap upwards. Are you ready to battle the wave, or will your assets be hopelessly crushed by the curl?

Note that when the author uses the phrase “reset the global economy” (as he goes on to say) that’s a nice way of saying, “cause unpredictable economic chaos and destruction just about everywhere.”