In 1973, US President Nixon asked King Faisal of Saudi Arabia to accept only the US$ in payment for oil, and to buy US Treasury bonds, notes and bills with their excess profits, so that USA can continue spending money and not pay it back. In return, the USA pledged to protect Saudi Arabian oil fields from seizure by USSR and other nations including Iraq and Iran.

The 1973 Arab-Israeli War upset this agreement and caused the Great Oil Embargo of 1974. By 1975 the Great Oil Embargo was over and all members of Organisation of Petroleum Exporting Countries (OPEC) accepted to sell their oil only in US$. Every nation was saving their surpluses in US$ since every country needed US$ to buy oil. The OPEC oil sales supported the US$.

Since only the US Federal Reserve can print the US$, the US control the flow of oil. The US essentially owns the world’s oil for free because oil is denominated in US$ and the US$ is the only fiat currency for trading in oil.

So long as almost three quarter of world trade is done in US$, the US$ is the currency which central banks accumulate as reserves. But central banks, whether China or Japan or Brazil or Russia, do not simply stack US$ in their vaults. Currencies have one advantage over gold. A central bank can use it to buy the state bonds of the issuer, the USA. Most countries around the world are forced to control trade deficits or face currency collapse, but not the USA. This is because of the US$’s reserve currency role and the underpinning of the reserve role is the petrodollar. Every nation needs to get US$ to import oil, some more than others. This means their trade targets US$ countries.

Because oil is an essential commodity for every nation, the Petrodollar system, which exists to the present, demands the buildup of huge trade surpluses in order to accumulate US$ surpluses. This is the case for every country but one — the USA which controls the US$ and prints it at will or fiat. Because today the majority of all international trade is done in US$, countries must go abroad to get the means of payment they cannot themselves issue. The entire global trade structure today works around this dynamic, from Russia to China, from Brazil to South Korea and Japan. Every country aims to maximize US$ surpluses from their export trade. Currently over $1.3 trillion of newly printed US$ is flooding into international commodity markets each year.

The Petrodollar system nearly broke down during the US President Carter’s tenure, mainly due to double digit inflation. But US President Reagan removed all controls on oil and fuel prices and all restrictions on oil drilling to restore the stability of the US$. Oil flooded the market, prices fell, and petrodollars became more valuable. These were some of the most prosperous years that the US had. But the danger remained, because the US continued to spend more US$ than it earned. The high US$ allowed the US to buy imported goods at a massive discount, a kind of subsidy for US consumers at the expense of the rest of the world. The high consumption of imports, however, hit US manufacturing very hard. The overvalued US$ was a major component of the bubble economy of the late 90′s.

The reality is that the value of the US$ is determined by the fact that oil is sold in US$. If the denomination changes to another currency, such as the euro, many countries would sell US$and cause the banks to shift their reserves, as they would no longer need US$ to buy oil. This would thus weaken the US$ relative to the euro. The USA propagates war to protect its oil supplies, but even more importantly, to safeguard the strength of the US$. The fundamental underlying motive of the US in the Iraq war, even more than the control of the oil itself, is an attempt to preserve the US$ as the leading oil trading currency. The fear of the consequences of a weaker US$, particularly higher oil prices is seen as underlying and explaining many aspects of the US foreign policy, including the Iraq and Libyan War.

Until November 2000, no OPEC country dared violate the US$ price rule. So long as the US$ was the strongest currency, there was little reason to as well. But November 2000 was when France and other EU members finally convinced Iraq’s Saddam Hussein to defy the USA by selling Iraq’s oil-for-food not in US$, but only in euros. Few months before the US moved into Iraq to take down Saddam Hussein, Iraq had made the move to accept Euros instead of US$ for oil, and this became a threat to the global dominance of the US$ as the reserve currency, and its dominion as the petrodollar. The euros were on deposit in a special UN account of a French bank, BNP Paribas.

If this Iraq move to defy the US$ in favor of the euro were to spread, especially at a point the US$ was already weakening, it could create a panic selloff of US$ by foreign central banks and OPEC oil producers. In the months before the latest Iraq war, hints in this direction were heard from Russia, Iran, Indonesia and even Venezuela. In April 2002 at the invitation of the EU, in Oviedo Spain, Iranian OPEC representative Javad Yarjani delivered a detailed analysis of how OPEC at some future point might sell its oil to the EU for euros not US$.

All indications are that the Iraq war was seized on as the easiest way to deliver a deadly pre-emptive warning to OPEC and others, not to flirt with abandoning the Petro-dollar system in favor of one based on the euro. The Iraq move was a declaration of war against the US$. As soon as it was clear that the UK and the US had taken down Saddam Hussein’s regime, a great sigh of relief was heard in the UK Banks.

After considerable delay, Iran opened an oil bourse which does not accept US$. Many fear that the move will give added reason for the USA to overthrow the Iranian regime as a means to close the bourse and revert Iran’s oil transaction currency to US$. In 2006 Venezuela indicated support of Iran’s decision to offer global oil trade in euro.

Muammar Qaddafi made a similarly bold move, by initiating a movement to refuse the US$ and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Muammar Qaddafi suggested establishing a united African Union , with its 200 million people using this single currency. The initiative was viewed negatively by the USA and the European Union (EU), with French president Nicolas Sarkozy calling Libya a threat to the financial security of mankind. But Muammar Qaddafi continued his push for the creation of a united Africa.

Muammar Gaddafi’s recent proposal to introduce a gold dinar for Africa revived the notion of an Islamic gold dinar floated in 2003 by Malaysian Prime Minister Mahathir Mohamad, as well as by some Islamist movements. The notion, which contravenes IMF rules and is designed to bypass them, had had trouble getting started. But today Iran, China, Russia, and India are stocking more and more gold rather than US$.

If Muammar Qaddafi were to succeed in creating an African Union backed by Libya’s currency and gold reserves, France, still the predominant economic power in most of its former Central African colonies, would be the chief loser. The plans to spark the Benghazi rebellion were initiated by French intelligence services in November 2010.

The cost of wars are not nearly as big as they are made out to be. The cost of not going to war would be horrendous for the US unless there were another way of protecting the US$’s world trade dominance. The US paid for the wars by printing more US$.

In February 2011, Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), has called for a new world currency that would challenge the dominance of the US$ and protect against future financial instability. In May 2011 a 32 year old maid, Nafissatou Diallo, working at the Sofitel New York Hotel, alleged that Strauss-Kahn had sexually assaulted her after she entered his suite, causing him to quit his job on May 18, 2011

Accepting Chinese renminbi (RMB), also known popularly as the yuan for oil, Iran and Venzuelathey have constantly been threatened by the US. If euros, yens, yuans or rubles were generally accepted for oil, the US$ would quickly become irrelevant and worthless paper. This petro dollar arrangement is enforced by the U.S. military.

Venezuela reportedly has the largest oil reserves in the world. Venezuelan President Hugo Chavez has been a strong proponent for tighter Latin America integration – which is a move away from the power of the US banking cartels.

Venezuelan President Hugo Chavez formed oil export agreements with Cuba, directly bypassing the Petrodollar System. Cuba was among those countries that were later added to the “Axis of Evil” by the USA. On Aug 18 2011, Venezuelan President Hugo Chavez announced a plan to pull Gold reserves from US and European Banks. On Aug 24, 2011 a 7 magnitude earthquake occured in Northern Peru bordering Venezuela which doesn’t use the Petrodollar system and Brazil which has been engaged in discussions to end US$ denominated oil transactions.

Venezuelan President Hugo Chavez has accused the US of using HAARP (High Frequency Active Auroral Research Program) based weapons to create earthquakes. HAARP is an ionospheric research program that is jointly funded by the US Air Force, the US Navy, the University of Alaska and the Defense Advanced Research Projects Agency. The HAARP program operates a major Arctic facility, known as the HAARP Research Station, located on an US Air Force owned site near Gakona, Alaska.

HAARP has the ability to manipulate weather and produce earthquakes, since it is capable of directing almost 4 Mega Watts powerful radio waves in the 3 to 10 MHz region of the HF band up into the ionosphere. This energy can be bounced off of the ionosphere and permeate the earth and subsequently cause strong intense oscillations along fault lines of targeted areas to produce earthquakes. Using HAARP, depending on the frequency, focusing, wave shape, adversaries can induce at a distant aiming point, a variety anomalous weather phenomena such as hurricanes, flooding, or drought.

Already several countries including Russia, China and Venezuela have suggested that a HAARP type technology weapon is capable of such and attack, been used against several countries causing severe destructions in Haiti, Japan, Russia, China, Iran, Chile, New Zealand, Afghanistan, Turkey etc. Any naturally-occurring earthquake has a ‘pulse-wave’ and several recent earthquakes did not have a pulse effect, indicating to seismologists that they could not have been caused naturally.

If any country attempt to eliminate the Petrodollar system and dump surplus US$ into the international and US financial markets to cause the quick collapse of the US$ may be attacked with HAARP to destabilize its economy and currency and to prevent a move away from the US$ and the Petrodollar system.

The credit crunch initiated in 2007 in the subprime mortgage market in the US had devastating spill-over effects for China’s exports. The scarcity of US$, due to the repatriation and deleveraging flows into the American financial system caused a sudden plunge in the external demand for goods manufactured by China and triggered the consequent lay-off of several millions of workers in China. This experience encouraged China to use its own currency in trade.

The US may have averted a debt default by compromising on how to cut the US budget deficit, but underlying problems remain and those economic woes are driving a global search for an alternative reserve currency. The US now needs a net inflow of several billions US$ a day to cover its deficit.

In 2011 Russia began selling its oil to China in rubles. The US debt crisis adds new urgency to the China’s efforts to promote its currency renminbi as an alternative reserve currency. China has already signed bilateral currency swap agreements with several countries ranging from Indonesia to Belarus and Argentina to promote the renminbi as a means of settlement in international trade. China’s growing trade and financial links with the rest of the world will make the renminbi more acceptable. If countries continue to lose their willingness to hold the US$ the impact to the US$ and the collapse of the US$ could be very dramatic.

I didn’t know that our country even suffered hyperinflation during World War II – remember the lessons from history – Mickey Mouse money? Our elders had mentioned that the money used to have no value at that time, and they were really carrying bayongs of money to buy necessities (just like the kid above).

Some first world countries too, had suffered hyperinflation: Japan, Poland, Russia, Germany and even US are examples. However, these countries were able to recover and we look up to these countries now.

If you don’t know how to trade in the forex market then don’t start trading until you have learned at least the basics. You can make a lot of money in forex trading, but you can also lose a fortune.