The US dollar is currently implicitly backed by oil. We 'print' (not literally - that's not how money is created) immense amounts of money to pay for things we cannot afford which ought have a catastrophic impact on any currency. We create 'growth' in wealth by dumping aforementioned funny money into assets creating price inflation -- quantitative easing. And our deficit is gradually growing out of control meaning we're left ever more paying off old debts by taking on more debts -- a policy that has a special term in the world of finance...
But the big thing here is that oil is still by far the most in demand resource in the world. And, thanks to some incredibly prescient negotiations dating back to the 70s, the majority of all oil producing nations only settle oil contracts in the dollar. This means that if you have a dollar you have access to oil. This creates an amazing system of externalizing stability. Imagine the value of the dollar decreases. This incentivizes foreign nations to increase their reserves of the dollar to ensure stable access to a fixed amount of oil. This, simultaneously, creates a natural dampening affect on any sort of inflation as that money is taken out of circulation. And this even applies with the Mideastern nations themselves. Saudi Arabia and other nations also agreed to purchase US securities with whatever leftover dollars they have after accounting for national expenses. Once again, helping to mitigate any negative consequence of let's say 'creative' economic policy.
Oil, the petro dollar in particular, stabilizes our currency and our economy. If you take the control of oil away from America, I do not think our military might alone would be sufficient to keep the dollar stable. And if the dollar loses stability our entire nation implodes. Everything that happens in the Mideast is based around this relatively simple fundamental aspect. Iran, Iraq, Syria, Libya. What they all actually have in common is that they expressed real intents to move away from the petro dollar. Venezuela has done the same.
The reason China/Russia would side against the US has nothing to do with oil or Saudi Arabia or Iran. It has to do with the US. If the petro dollar collapses, which it arguably already is, the US isn't far behind. And the US is still the greatest immediate danger to those nations. And the only reason Saudi Arabia would ever turn away from the petro dollar is if they believe the US will not be able to force them back to it, which would all but require the collapse of the US.
Isn't this only a meaningful statistic when compared to the energy generated by current currency production and maintenance? Considering what the U.S. does to support the dollar, it's probably not even remotely a comparison.
Total worldwide production of oil is only ~90 million barrels/day and middle eastern production is a fraction of that. That’s not very significant compared to the total value of all USD in circulation. All FidoBucks in circulation might only be worth ~50 Billion in your example and depending on the velocity of money could actually be significantly less. People might start using it for other things, but it’s just as likely to be an odd quark of the oil market.
What actually props up the USD is the US taxes being paid in USD. Even transactions like selling burgers for Bitcoins suddenly force someone to not only get dollars to pay their taxes on that sale but set it aside for significant periods. This is the basic mechanism which forces all fiat money to have value, which then causes it to be used for loans and whatnot which further increases value.
The US is trillions of dollars in debt. The gold holdings in Fort Knox are a few hundred billion at most. You can't prop the dollar up with gold if there's a major economic boo-boo - the value just isn't there to offset such massive deficiencies. When they tried exchanging dollars for gold under the BW system they started to run out of gold.
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If anything's propping up the American Dollar, I suspect a far more likely culprit would be that OPEC primarily uses dollars - creating a demand for dollars in the international exchange markets.
The dollar is backed by the petro-dollar, the fact that Saudi Arabia and friends only accept dollars when selling oil is one of the reason the dollar is strong. When you factor in that the US military protects the petro-dollar while at the same time being the biggest consumer on earth of oil, it starts adding up. Europe and therefore the Euro is also protected by the US army. All of a sudden, your fiat's energy consumption is probably much bigger than bitcoin ever will be.
The USD is backed by military might and risk of invasion, this is known as the petrodollar it currently requires a US military that uses the equivalent resources as 140 countries.
If you consider 98 million barrels per year used by the military to protect 1.5 trillion USD, every million in the bank uses 65.5 gallons of oil per year.
Oil is what matters less here.
The point is that the ability of the US to refinance its debt and support the massive consumption levels of the American people through cheap imports and massive trade deficits rely on a healthy global demand for the USD.
The Us is now a massive producer of oil, but it is not a massive net exporter of it, because it consumes a lot. So, when the big net exporters of oil decide to accept other things in payment in lieu of the USD it inevitably has a depressing effect on the global demand for the dollar.
How do you think the dollar keeps its value? Do you understand that the reason it has value is because it’s backed by the US military, which provides peace and stability for industry to consume a vast amount of energy to produce goods that get shipped around using fossil fuel? Have you calculated the total energy expenditure of the entire US financial system, direct and indirect, and then compare it to proof-of-work calculations? No. No you haven’t. Don’t just parrot what the current-day zeitgeist told you to think.
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