[tsyd]

> The petrodollar hypothesis is a myth. The United States, now a net oil exporter, does not depend on Saudi oil.

The notion that the United States does not depend on Saudi oil (or that it's energy independent) just because it's a net oil exporter is a myth. Not all crude oil is equal. The US has an abundance of light oil which it exports but it still imports a lot of heavy and sour oil from OPEC and Canada.[1]

[1]: https://www.eia.gov/tools/faqs/faq.php?id=727&t=6

[JumpCrisscross]

> The notion that the United States does not depend on Saudi oil (or that it's energy independent) just because it's a net oil exporter is a myth

One, this has nothing to do with the petrodollar hypothesis. The U.S. dollar is fine with or without the Saudis dollar denominating their oil. If anything, the causation goes the other way. The large American consumer base generates dollar supply, which creates dollar-investment demand, which leads to economies of scale across the dollar financial system.

Two, yes--switching from Saudi crude would be painful. But within the scope of foreign policy, it's not unprecedented. Moreover, switching the Saudi military and financial system off American support would likely cost the House of Saud its country. Long story short, NOPEC is a low-probability bill. The KSA should have ignored it instead of levying empty threats.

[ilaksh]

So you're saying that the reason that the United States dollar is dominant and the US is able to consume vastly more resources than any other country is not because it uses its much larger military to dominate territorial, resource, and strategic control of the globe? Instead, the reason the United States dollar is so strong is just because Americans consume so much??

Wow! This is amazing. It changes my entire worldview! All a country needs to do to boost its currency and economy is to start consuming more! I wonder why more countries don't try that? Maybe they are just not ambitious enough. Hmm.

https://en.wikipedia.org/wiki/List_of_countries_by_oil_consu...

https://en.wikipedia.org/wiki/List_of_countries_by_military_...

[JumpCrisscross]

> not because it uses its much larger military to dominate territorial, resource, and strategic control of the globe?

The U.S. dollar was in global use preceding WWII. Going back to 1915, the Federal Reserve was pioneering electronic money transmission [1]. After World War II, the United States being the only developed country not bombed to the Stone Age helped it set the terms of the peace. But the Bretton Woods system catalysed an existing trend; it did not create it.

> All a country needs to do to boost its currency and economy is to start consuming more!

Yup. This was a foundational motivation for the creation of the Eurozone. It's also why we're seeing offshore renminbi financial markets. If you sell to a consumer in Europe or China, you'll tend to end up with Euros and renminbi. You can swap it into your own currency and lose the spread. Or you can invest it in assets in that currency. The latter drives down capital costs, which makes those currencies more attractive for fundraising. That, in turn, creates financial centers. As long as one has relative price stability, it's a relatively-difficult feedback loop to screw up.

TL; DR The petrodollar hypothesis has bad predictive value.

[1] https://en.wikipedia.org/wiki/Fedwire

[ilaksh]

I believe there is a physical limit to how far you can stretch that because it takes actual resources to make things for people to consume. We only have a certain amount of oil supply and reserves, minerals, etc. Which is why its not feasible for every country to just consume as much as they want, because some percentage of the money is tied to real things in a finite world.

Countries with more resource control may be able to take that concept pretty far. But it doesn't come from them just deciding they want more stuff.

[JumpCrisscross]

> it takes actual resources to make things for people to consume

Value is subjective. Energy intensity of global GDP has been falling for decades [1]. Where I've seen estimates, it looks like material intensity has been doing the same.

Broadly speaking, most countries won't have a reserve currency. Neither their demographics nor economy can support it. But some countries punch above their weight. Canada, Switzerland and Japan have outsized influence for (a) being trading economies with lots of buying power (i.e. lots of overseas vendors end up with their currency) with (b) limited or no history of currency controls (i.e. people aren't in a rush to swap out of the currency, for fear of it getting trapped), and (c) stable governments and central banks.

Given (b) requires free capital flow, which through the impossible trinity [2] means giving up a fixed exchange rate or monetary sovereignty, reserve currencies aren't something most countries may even want. Using dollars tends to be fine. Having alternatives in Europe and China is probably for the best, for everyone, in the long run.

[1] https://yearbook.enerdata.net/total-energy/world-energy-inte...

[2] https://en.wikipedia.org/wiki/Impossible_trinity

[ilaksh]

The energy/material intensity of global GDP has probably been falling because most of the GDP actually is generated by way of massive unaccounted debt piling up.

[catawbasam]

The U.S. was able to consume vastly more resources than any other country well before we have a much larger military, so that can't be the explanation.

[rswail]

The US was left eseentially undamaged by WW2, its industrial base was vastly enhanced. While Europe and USSR had to rebuild, the US was able to build from that enhanced base.

The Marshall plan provided a mechanism for the US to fund European rebuilding, which caused Europe to purchase industrial goods and machinery from the US, using those very same funds. The end result was a win-win through to the early 1970s.

At the same time, the USSR was rebuilding from an even more destroyed economy than Europe and could only leverage its domination of Eastern Europe. China was occupied with its own political upheavals and Japan was in the same state as Europe.

The post war "military industrial complex" warned about by Eisenhower, is a real thing. The US has a large military because the large military is a way to recycle taxation to defence employment. The US doesn't need a military that costs $750b per annum and is larger than the next 10 nations combined. However, US employment requires that military to keep the balls in the air. It provides industrial employment to people in places where it isn't financially prudent and the military itself provides employment for those that can't get employment in the general economy.

In essence, the US military is a giant social security network for the US. It consumes vast resources to do so and could be done at much lower cost, but the likelihood of that occurring is zero due to the vested interests.