[cladopa]

Are you American? Because if you are from the country that dominated the world since WWII it feels different than being from the rest of the world.

Bretton Woods gave the Americans an "exorbitant privilege" that basically meant the US could live extracting wealth continuously from the rest of the world.

Then later the petrodollar system was established. People needed oil, the US would protect the Arabs with its immense army (financed with the dollar system) and in return the oil had to be sold in dollars, so all the world needed dollars if they wanted energy.

The US could just print dollars, and the rest of the world would suffer inflation.

That was great for the US for sure. Why not continue? Because the rest of the world do not want to continue supporting the US system.

The US was ok with Sadam using chemical weapons against Kurdish civilians until he decided to change the currency for paying the oil to euros.

The US does not want to de-escalate if that means the world stops buying US bonds and suddenly they are bankrupt and can not pay its debts exporting inflation to the rest of the world.

If Americans suddenly lose 50 to 70% of purchasing power then there will be war inside the US, not outside.

[sidewndr46]

Given the immense capabilities of the United States government, I don't think there is going to be a war inside the US. Or at least not one that lasts any amount of time.

[nostrademons]

This isn't really a given. Historically, whenever you have a civil war the existing state's military splits down the middle, with people generally unwilling to fire on friends, family, and neighbors. Former military officers usually form the core of the rebel military, taking their training, experience, and oftentimes equipment with them to fight for the other side.

The mistake here is thinking of the U.S. government as a monolith. Ultimately it's all just people, bound together by being paid for in dollars that are either raised as taxes or borrowed as treasuries. GP's post posits a world where the dollar is worthless; what's binding them together then?

[sidewndr46]

The mistake you're making is assuming "historically" applies to the US. We had one Civil War, where part of the existing government decided to fight other parts of the government. They then sent the citizens to fight (often against their own interest) against each other via conscription.

An actual war against the people of the United States by the United States by the standing military would be so utterly one sided as to be incomprehensible. Let me just put it this way: no one at Waco was stopping those tanks.

[pstuart]

There's a stealth Civil War II currently going on. The South had their fingers crossed when they surrendered.

[ctippett]

Except America went to war with Saddam Hussein a full decade before the move to the Euro and was largely a reaction to the invasion of Kuwait.

[coldtea]

Saddam was their man for a full decade prior to that war, to go against Iran. Even the Kuwait invasion was given the go ahead by the us with false assurances, until they sucker punched him for it. It's not as if they us gave a shit or two about Kuwait's freedom or not (which was partitioned from traditional iraq teritorry in the past anyway, and a monarchy itself).

Then they'd let him mostly be after 1991 until we made the mistake to push for the Euro in early 2000s.

[cogman10]

To add, the primary reason the US supported Iraq was because it didn't want Iran to send oil to the USSR.

This was because the US didn't want a communist nation to have a good economy.

That's the story of a bunch of the CIAs operations.

[kakacik]

Iran itself in its current form is a continuous line of failures of CIA and MI6 that led to their revolution against highly unpopular shah that was undemocratically installed only by those powers.

Why do you think back then the us embassy situation evolved as it did. 'Embassy' my ass, full of cia folks regardless what shallow hollywood flicks try to propagate, meddling with internal affairs for profit and power of british and americans, while impoverished common locals suffered greatly.

As usual with cia it backfired tremendously, made huge mess for decades in entire region, killed gazillion of innocents but since there aint no us citizens its just some annoying background noise of some brown 'people', right.

Anybody with above-maga intelligence can piece together those few wikipedia articles, but egos got hurt so its highly emotional topic for americans. If at least you guys learned from your collosal mistakes...

[dTal]

I keep seeing comments that refer to Iranians as "brown people" - usually to emphasize their perceived "otherness" by the ignorant, as in this case. But Iranians aren't brown, or Arab apart from a small minority, and relatively speaking their culture isn't even that "other" - it would probably feel more familiar to the average American than some European countries even.

Do Americans really hear "Iran" and think of durka-durka from Team America?

[cogman10]

Iranians tend to have a little more pigment in their skin and it's not a minority.

I get why you'd say this, Iranians don't have particularly dark skin and some are as white as my English/swedish ancestors.

> Do Americans really hear "Iran" and think of durka-durka from Team America?

Some do. But usually the "killing brown people" is a shorthand for the fact that US policy has mostly focused on immiserating non-western-European nations for the benefit of of the US.

It implies racism at the core of US policy because only Western European nations are considered civilized and deserving of fair international treatment.

[fingerlocks]

Correct, “Iran” literally translates to “Ayran”.

But America is a big place. Americans living in cities probably know a first or second gen Persian, there’s lots of them everywhere. They even have a reality TV show.

Outside the urban archipelago the average person couldn’t tell you the difference from India, Turkey. and everything in between.

[type0]

> Do Americans really hear "Iran" and think

and think: oriental culture, as do other westerners. Some think "Not Without My Daughter"

[cogman10]

> but egos got hurt so its highly emotional topic for americans.

We've simply had decades of propaganda teaching us that the US is the most moral nation that has only fought moral wars for moral reasons.

A lot of the history books are about American exceptionalism and triumph. Even when they cover topics like slavery and civil rights, they paint it as being temporary embarrassments that we got over and now everything is OK.

MAGA is just a bunch of people who swallowed that propaganda whole and never questioned it in the slightest. We can see that in the fact that they get really upset about history lessons that are even slightly critical or analytical of America's past.

[DeathArrow]

IMO, invasion of Iraq was to support Israel.

[CraigJPerry]

>> the world stops buying US bonds and suddenly they are bankrupt and can not pay its debts

How does this work exactly? It doesn't. It's a misunderstanding of public debt.

When you say stops buying US bonds, you're talking about the secondary market for US government bonds right - because in practice, contrary to the econ textbooks and common understanding, only a small number of institutions are allowed to purchase them in the primary market, not only that but these purchasers are compelled by law to continue buying them, to continue bidding for them at a fair price, and if they don't have the reserves to buy them then these purchasers will be given the reserves to continue to buy them. The entire premise of the argument falls apart as soon as you step away from the econ model and look at the legislation governing what actually happens by law.

[majormajor]

How does the "petrodollar" exactly prop up the US dollar? The price of a barrel of oil has oscillated quite a bit in dollar terms, so it's not like there's anything like a fixed or artificially-maintained 'exchange rate' there. There's, what, a 10x swing between highest and lowest USD price of oil in the last 10 years alone? The dollar has fluctuated vs other currencies too. I've never fully followed how trading for a dollar just to sell that dollar immediately for oil would only help the USD. It all gets turned into oil quickly, so wouldn't that mostly balance out in how demand for oil then relatively-weakens the dollar against the value of toil itself? The "medium of exchange" need has some effect, but I don't see it by itself driving "store of value." If there was a better store of value for the people selling the oil, what prevents them from swapping out those dollars essentially immediately? And then switch to taking payment in those other things as well?

And "just printing dollars" has well-documented inflationary effects inside the US too.

[gls2ro]

Not an economist but the petrodollar concept helps the dollar because everybody that needs oil needs to buy dollars. You see it as small thing but it is fundamental thing because oil is used in so many places that as we have seen a disruption of 20% of it would start causing real problems on almost the entire world.

QED: oil powerful, only dollar buy oil, dollar stronger.

[carefree-bob]

The use of dollars to purchase any commodity is a negligible fraction of demand for dollars.

What you should be looking at is investment demand for dollars, that is, in which currency does the seller store their surplus.

Think about it:

I need to buy a barrel of oil, but I am in Argentina. So I sell my pesos for dollars, I buy the oil with the dollar. The seller now has dollars, and sells the dollars for Swiss Francs and invests the money in swiss bonds.

Now, what happened? The global demand for dollars by the buyer was exactly offset by the seller. It is the seller that decides, by choosing where to store his surplus, of what currency is boosted by oil. And it is not the currency that oil is sold for, it is the currency that the proceeds are invested in.

So oil is completely irrelevant for the value of the dollar, what is relevant is that investors want to store their funds in the US capital markets. That's what matters, and it is investor preference to store their earnings in capital markets that determines why they want to denominate oil in dollars. It just saves on an extra transaction.

But focusing on the transactions misses the picture of the dollar's strength, because denominating oil in dollars is merely a consequence of the desirability of US capital markets as a destination for foreign capital. And that desirability drives everything else. It's not oil, it's deep, liquid capital markets with established foreign investor rights. That trumps everything else.

Think about it -- would you keep your earnings in a country with weak foreign investor rights or lack of financial transparency or illiquid markets where you couldn't easily pull your money out when you wanted to? That is much more important to the seller of the oil than anything else. It will drive what oil is priced in. And it will drive the demand for dollars.

[mlsu]

Certainly correct, but I think you’re underselling the historical exchange part of this. Dollars being everywhere causes the financial infrastructure to be built out in dollar terms.

Part of what enabled that huge capital flow you’re talking about is that it was the Americans who came in and gave [country’s] banks a counterparty to exchange dollars for oil.

A lot of that soft power is not just the ability of America to print dollars, but also the ability of America to control the financial infrastructure. To surveil, KYC, sanction, etc. that is a huge part of it.

The petrodollar is less mechanically important today but back in the day it was huge to have “everyone who needs oil” be the counterparty to a currency exchange. It is what injected all that liquidity, which set the whole thing off.

I think what people are realizing and considering now is with the computerization of everything, capital can flow more freely. That is what is dangerous (for the US) about today’s moment; our political leaders are taking it all for granted.

[carefree-bob]

I do think history is also important, but again it boils down "where is a safe place to store my money?". That really controls everything else.

Now, in the past we had a gold standard, so you could literally move your money from one country to another. Now during both WW1 and especially the runup to WW2, the wealthy moved much of their money to the United States as a safe harbor, since we were the only advanced economy with deep liquid bond markets, rule of law, and foreign investment rights (sorry, Canada, but it's true).

This was the greatest wealth transfer in history. By 1940, the US held 80% of the world's global gold reserves. 80%! And this was in the era when international trade was settled in gold.

So it all happened in single decade between 1930 and 1940, and the US instantly became the world's global reserve leader, an extremely dominant position, merely because people were afraid of war and wanted a safe place to park their money.

After the devastation after WW2, the flood of European money into the US continued and more than offset the Marshall plan.

So already at the end of WW2, the majority of the world's liquid savings was tucked away in America.

Now, people like to tell stories of American soldiers spending dollars somehow making the dollar a reserve currency, and those are the types of things that seem plausible to people who don't monitor global capital flows, but that's honestly a ridiculous story. That was chump change.

Bottom line, there are no special technical reasons beyond "I want a safe place to store my money". That controls everything else.

There is an adage in the world of money markets: "It does not matter what currency you trade in, what matters is what currency you store the proceeds in".

And the moment that some other nation opens its doors to foreign capital inflow, establishes rule of law (which takes decades to develop a reputation for stability and not confiscating assets), is safe, stable, and secure, establishes financial transparency, and has deep, liquid capital markets -- then the world's wealthy will flood that nation with money also. But unlike declaring that "I will sell my oil for euros", doing the above takes decades of building trust and reputation. Gimmicks aren't going to do it when you are looking for a safe place to store your money.

[spwa4]

I think you're drawing the wrong conclusion from the comment. How can you read that comment and not conclude that this is the way of thinking from before "Pax Americana"? They are talking about "wealth extraction" ... in other words, free labor (not money), without paying. In other words, slavery.

Nations used to fight for extracting tax, and with it free labor, from each other, and that situation was pervasive, and the cause of many wars, before WW2. In fact WW2 is the last such war.

Before WW2, France and England extracted (a LOT of) tax, without doing anything, from Germany. That's how the wealthy in France and England got richer, you know, without producing anything.

Before WW1, the Ottoman empire (the "islamic world" as people like to refer it now) extracted wealth, by capturing slaves and forcing them, at gunpoint (well "at knifepoint", and by simply letting them starve chained up in ditches until they worked), from essentially all of Africa. By the end of the slave trade, Europe participated. Again, let's not pretend that either the caliphs or sultans or royal houses used what was effectively unlimited free labor to end poverty. In fact they made it a lot worse, everywhere, from England to "the islamic world" to India.

You can go back thousands and thousands of years and compare the many situations (e.g. people would not tax foreign nations directly but tax things they needed, sometimes as dramatically as water, but lots of things, including access to international trade), but it goes back very, very, very far. The story of the Minotaur (slaves, militarily extracted from foreign nations would be thrown to a beast if they didn't work). The Exodus story. The Vedas. Right up to the story of Epic of Gilgamesj.

The comment you're replying to is a scream that this situation must be restarted. The US does wealth extraction, and, read the comment, their point is not that they want wealth extraction to stop. No. They want to ... uh ... participate in it.

[nerdsniper]

> In fact WW2 is the last such war.

https://en.wikipedia.org/wiki/1954_Guatemalan_coup_d%27état

(Many other examples)

[psd1]

> Before WW2, France and England extracted (a LOT of) tax, without doing anything, from Germany

If you mean Versailles, there was a little kerfuffle leading up to that, called WWI.