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Weekly Updates

  • Google Trends is reporting an astonishing spike in searches for “petrodollars” in the past two weeks, to the highest on record. This is apparently because of a viral story that on 9 June Saudi Arabia failed to renew a secret 50-year deal with the US to keep oil priced in dollars.
  • The US and Saudi Arabia did establish a Joint Commission for economic cooperation in June 1974. This aim was to help Saudi Arabia spend its sudden glut of dollars on US products. In July of that year, Saudi agreed to invest oil dollars in US Treasuries (this was kept confidential until 2016).
  • Oil has always traded in non-dollar currencies. In January 2023, Saudi indicated it was happy to negotiate oil sales in other currencies. The possibility changes little for financial markets. Saudi Arabia’s riyal remains pegged to the dollar, and its stock of financial assets are dollar focused. The dollar’s reserve status depends on how money is stored, not how transactions are denominated.
  • This is a reminder of confirmation bias. The story seems to have started in the crypto world. Many crypto speculators desperately want to believe in the dollar’s demise. Confirmation bias encourages people to ignore what is realistic if their prejudices are seemingly confirmed. This is a poor investment strategy.

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