1/ While doing research for my essay on the negative externalities of the petrodollar, I learned a huge amount. Much of it was shocking or surprising.

Here's a thread with a few of my favorite bits of insight, with links for further reading 🧵

2/ The Vietnam war was the first American war fought almost entirely on credit.

Previous wars were financed significantly by higher taxes:

3/ In 1971 the French were so worried that the dollar would devalue as a result of exorbitant American spending on war and social programs that they sent a battleship to New York City to collect their gold.

A few days later, Nixon closed the gold window:

4/ The US dollar was devalued around 10% as a result of Nixon suspending dollars from being redeemed into gold.

This was initially pitched as a temporary measure, but it’s still the case 50 years later:

5/ In June 1974, the Saudi crown prince visited Washington and President Nixon visited Saudi Arabia.

This is when the pact was formed for the Saudis to price their oil in dollars and for the US to sell them weapons and protect them:

6/ One thing kept secret at the time — and later declassified — was that the Saudis would get preferential rates on purchasing US treasuries, + they began to buy billions worth of them with their petrodollar income.

This is called “petrodollar recycling”

7/ As a result of this recycling of dollars back into the dollar-based financial system, the “eurodollar” shadow banking system and financialization of the world economy spiked dramatically:

8/ The effects of the petrodollar were huge: in 1974, the pound still accounted for 20% of oil trade. By 1976, that number was down to 6%.

Between 1972 and 1976, arms and military sales to Saudi Arabia grew from $300M to more than $7B:

9/ The effect of OPEC pricing oil in $ stretched far beyond energy markets. Countries were forced to either build export-led economies to earn $, or buy them in international markets, creating a stronger trading pair between their currency and the $:

10/ The petrodollar system put enormous pressure on the Soviet Union, which had to dig oil out of the ground, whereas the US gained the privilege of printing money to buy oil:

11/ If a country runs a high deficit, its currency weakens, allowing it to export more, balancing the deficit + strengthening the currency.

But since other countries want US debt as the global reserve currency, this balancing has not happened to America:

12/ As emerging market countries were forced to prioritize accumulating dollars to buy oil, they did not invest in local infrastructure.

They were also discouraged from building nuclear energy and thus remained "energy dependent" on foreign actors:

13/ The Saudis have supported a huge amount of global extremism, destroyed Yemen, and tortured women's rights activists all while being protected by the US.

15/19 9/11 hijackers plus Bin Laden were Saudi, but the US reacted by attacking other countries:

14/ In October 2000 Saddam announced Iraq was leaving the petrodollar system. By 2002, Iraq was selling billions of euros of oil to Europe via the “petroeuro.” In March 2003 the US + UK invaded Iraq. In June 2003 Iraq started selling oil in dollars again:

15/ In pages 364-368 of "Debt" David Graeber wrote in detail about the petrodollar system and its intersection with American foreign policy.

This section is highly recommended reading:
16/ The environmental cost of upholding the petrodollar system is enormous.

For example, the US military continues to be the world's largest institutional consumer of oil:

17/ In the past decade the petrodollar system has begun to fade. Countries are "recycling" less and less back into US debt.

What's next? Continued dollar hegemony by other means? A multipolar model? Centralized rule by SDR/BIS? Separate economic islands?

18/ The world reserve currency may not follow these models but rather may trend towards a Bitcoin standard. This could be good for freedom, peace, + the planet and bad for dictators, war, + fossil fuels.

If you liked this thread, check out my full essay!

19/ Beyond David Graeber (may he RIP) there are many others I learned a lot from in researching this topic.

In particular I'd highly recommend following these folks:

-Michael Hudson

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Alex Gladstein

Alex Gladstein Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @gladstein

30 Mar
1/ In a new @Telegraph column @jamestitcomb claims that it is "hard to argue that Bitcoin has lived up to its mysterious inventor’s early intentions as a world-changing financial protocol" and says the main outcome has been making "a small number wealthy"

🧵 on why he is wrong:
2/ To be fair, it is easy to arrive at this conclusion if you completely ignore (as Mr. Titcomb does) how people are creatively using BTC worldwide.

If you only read buzzy US headlines about Tesla + NFTs, you'll miss the big picture. I hope journalists are willing to dig deeper
3/ A lower-bound estimate of unique Bitcoin users based on exchange data (excluding p2p activity) is ~130M people. Many of these millions are in emerging markets. For example there are 1.3M users of one Bitcoin trading platform alone (@Paxful) in Nigeria:

Read 23 tweets
29 Mar
Important to keep in mind:

Bitcoin's Proof-of-Work was invented to escape Proof-of-Stake financial systems, where the largest asset owners can unduly influence the rules of the game.

Thanks to PoW + full nodes, neither miners nor the biggest BTC hodlers can change the protocol.
In the coming year, we will see many people increasingly try to argue that Bitcoin should shift to Proof-of-Stake for various reasons.

This would defeat the entire purpose of Bitcoin.
Most recently, @Noahpinion argued that Bitcoin should move to Proof-of-Stake in Bloomberg.

By doing so he demonstrates that he does not understand how or why Bitcoin work.

@nic__carter did a great job dismantling his argument here:

Read 5 tweets
22 Mar
1/ Want to know who controls Bitcoin?

Read "The Blocksize War" by Jonathan Bier.

This should be *required reading* for any journalist or scholar writing about Bitcoin.

🧵 on some of my favorite insights:

2/ The book covers the "blocksize wars" of 2015-2017 and the two major visions for scaling Bitcoin to the world.

Which philosophy would win out, the one that prioritizes transaction volume + corporate control?

Or the one that prioritizes decentralization + individual control?
3/ This tour of the battle for the soul of Bitcoin starts with the scaling debates that began with Satoshi and revisits Gavin and Mike, Bitcoin XT/Classic/Unlimited, the DAO, SegWit, the NYA, Segwit2X, Bcash, NO2X, and the eventual triumph of a Bitcoin controlled by its users.
Read 21 tweets
18 Mar
New @DeutscheBank future of payments report on Bitcoin is out.

Their top conclusion? Bitcoin is “too important to ignore”

It’s long but interesting with some neat charts so here’s a 🧵:

2/ The title of the report is worth pondering:

“Bitcoins: Can the Tinkerbell Effect Become a Self-Fulfilling Prophecy?”

There are pictures of little girls wearing fairy costumes on the cover and Peter Pan quotes inside.
3/ DB: “Bitcoin’s value will continue to rise/fall depending on what people believe it is worth. This is the Tinkerbell Effect: the more believe in something the likelier it is to happen based on Peter Pan’s assertion that Tinkerbell exists because children believe she exists”
Read 21 tweets
16 Mar
1/ Honored to be cited by SEC Commissioner @HesterPeirce in her latest remarks on Bitcoin, human rights, and regulation.

This 🧵summarizes her thesis, inspired by the work of abolitionists, about why the US should be open, not closed, to liberation tech:

2/ “Harriet Tubman will soon grace our $20 bill… She brought herself and many other enslaved Americans to freedom through a remarkable combination of intelligence, courage, faith, boldness, diverse expertise, fearlessness, experience, strength, resilience, and cooperation”
3/ “These traits and experiences equipped her to serve in the Civil War as a scout, nurse, cook, and military expedition leader. Tubman’s commitment to liberty was not abstract, but personal and life-changing to each of the individuals whom she led on a grueling march to freedom”
Read 16 tweets
8 Mar
1/ The Aker shareholder letter from Kjell Inge Røkke is remarkable.

Having worked in Norway since 2008, IMO this is a major step towards more Scandinavian Bitcoin discussion + adoption.

Here's a 🧵 on the letter's unexpected highlights especially regarding Lightning + privacy:
2/ Aker is a 180-year-old Norwegian corporation now launching Seetee, a Bitcoin company:

"We will use bitcoin as our treasury asset and join the community. We will be hodlers. Perhaps not as rebellious as the cypherpunks... But more progressive than most established corporates"
3/ A recurring theme in Røkke's letter is an interest in privacy.

Early on:

"I am particularly interested in micropayments and how these may enable us to avoid usernames, passwords, and our personal data being monetised with, and often without, our knowledge or consent”
Read 14 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!