Jim Rogers Warns: Petrodollar Collapse In 2018, Financial Collapse, Economic Collapse

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we'll the petrodollar collapse in 2018 will the petrodollar collapse in 2018 the oil industry and geopolitical risks have gone hand in hand oil represents energy and without it modern economies cannot run salt sugar and spices were also strategic resources once but even at the peak of their appeal and value they are mere shadows of oils importance to the modern world yet changes in the oil industry and the erosion of America's dominance over geopolitics have also hurt the u.s.

dollar which has long served as the one currency that all countries must have to buy oil the concept has become known as the petro dollar and a petro dollar collapse in 2018 is possible if not likely oil demand has been increasing slowly since the 2008 financial crisis however the United States wants the principal driver of the oil industry will no longer be the primary source of demand the new emerging economic powers like China and India will soon be dictating the terms of the price of oil the pairing between the size of the American economy and its world leading oil appetite is what allowed the petro dollar system to emerge thus any changed to one or both variables could spell the collapse of the petro dollar system why should you or anyone else care about the petro dollar the petro dollar is one of the main reasons why America itself can survive on debt it's the main reason why unlike many countries in the European Union for example in times of turmoil the Federal Reserve can apply monetary policies to help prevent or mask economic or financial collapse in the 1970s when oil prices reached their longest peaks inflation adjusted the producing countries reinvested the billions of dollars they received as payment into the global economy this drove the demand for dollars sustaining their value in other words global oil demand turned the dollar into the world's defacto reserve currency the US economy could collapse trying to cope with the effects of a petro dollar collapse oil exporters agreed with the u.s.

that the returns on their use would be held in dollars indeed the creation of the petrodollar in 1973 coincided with the USD pegging the value of the dollar from gold prices to allow for fiat money the oil producers were told they would earn returns on their dollars equivalent to those they would have earned investing in gold the end of the petrodollar is bad news for US military surely countries are free to accumulate reserves of other stable currencies from the british pound or the euro but why would they they need dollars to buy the most critical resource or it's the oil plus dollar system that enables the United States to invest in terribly expensive weapon systems fund the world's biggest and most spread out the military and conduct military operations whose costs alone would anyone else demand for oil equals demand for dollars thus if some countries suddenly demand to pay for the oil they need and another reserve currency it poses a major risk to the United States China might be one of the primary culprits in facilitating the petro dollar breakdown it could replace the petro dollar with the petro yuan this is hardly far-fetched the United States doesn't need Middle Eastern oil as much as it did 30-40 years ago still many countries still do China for example imports a significant percentage of its oil from Iran as a result there's a natural shift in demand for a currency that best suits those countries China has proposed that you want could replace the dollar in oil transactions it would find string agreement in Iran Russia and Venezuela which account for a large share of the oil market the current is that the Chinese have also asked the Saudis to consider accepting yuan for oil that move could even spell the end of the special military supply relationship between Washington and Riyadh even if the Saudis may not feel that now is the right time to switch horses in the oil / currency wars they might consider diversifying the way they sell their debt it's a given that when Saudi Arabia or other Gulf states issue all their bonds in dollars they could move to yuan is the next recession coming in 2019 or 2020 next recession 2019 some analysts fear the next recession in 2019 others warned it may have already begun end of the year for the next recession as 2018 they are both right because the economy in the markets whose performance can trigger a downturn are operating in a parallel universe now whether it's 2019 or 2018 it seems appropriate to start asking when will the next recession be the Federal Reserve lacks a plan and it will switch to new management in 2018 Janet Yellen is out and Jerome Powell is in but judging by the rumors all of the people who will help him evaluate the best great policy are already in disagreement some say there should be three rate hikes others fear that even two hikes might be too many three rate hikes could interfere with plans to boost inflation to about two percent certainly it could slow economic growth meanwhile the interest rate policy has to confront the effects of the aggressive tax reform its intention is to stimulate investment in employment but it also makes paying down the federal debt more difficult until recently the US dollar and its dominance of all transactions involving commodities from oil to gold have worked because of a challenge the US economic and military might now both those things are under threat what will cause the next recession predicting the next recession with precision is always hard if not impossible but it's even harder to pinpoint the specific cause or causes only in retrospect can such a complex processes a recession be taken apart and understood then there's the fact that no recession begins the same way or under the same circumstances for example by any measure most indications suggest that Donald Trump's first year in office would have been marked by some form of economic or financial malaise gold prices after all we're going up in stocks seemed headed for a correction on November 9th 2016 the day after the 2016 presidential election nevertheless perhaps unlike other recessions there are abundant signs and hints that something isn't quite what it seems that something is wrong with the health of the US economy the rules of economics flaunting valuations on Wall Street have created the illusion of widespread prosperity and that's the key to guessing the next recession is coming simply the tax reform has exacerbated the distortion in equity prices they haven't risen because of any organic growth that is from actual revenues or profits per share they've risen on the expectation of profits and the fact that lower taxes will boost profits without companies necessarily having sold more widgets so far so good until interest rates start moving higher essentially offsetting the effects of the tax cuts if borrowing costs more even the fiscal incentives that Trump has fought to get through Congress won't work as intended uncharted financial territory the United States is literally entering uncharted financial territory rather than help the middle and lower classes put more money in their bank accounts fueling the economy with more spending across the board the tax cuts have added leverage mostly to stock prices meanwhile they risk pushing federal budget deficits to about one trillion dollars apart from making government shutdowns into annual events over the next few years they fly in the face of standard practice now there's a situation where interest rates are still low but taxes are relatively lower with plans for the government to spend to improve infrastructure nonetheless it's when the economy slows down that interest rates are low and taxes are cut the recipe for higher valuations in the stock market and higher interest rates contributes to a recession perhaps the recession is not an immediate one but it could arrive by 2019 or 2020 certainly all the ingredients are in the caldron and boiling the problem is that with the low interest rates the resulting outflow of liquidity is the reason stocks keep moving higher so far the interest rate hikes have not done any damage on the contrary the fact that the for interest rate hikes so far that have pushed it to 1.5 percent after almost the decade at near zero has enhanced market performance the same way that anabolic steroids do for athletes investors are too confident they have become used to picking stocks as if they were playing darts no matter where they land on the board they score points Jerome Powell another Yellen US Senate has approved Jerome Powell's nomination to head the Federal Reserve this allows Trump to have his cake and eat it too after all what's the point of having a cake Trump got to choose his own Fed chair he did so taking care not to appoint a replacement he might tamper with yellen's gradual approach to rates Trump is not shaking the boat clearly he sees his legacy has one tied to stock market performance but that's not necessarily a good thing for the economy or the markets economy predictions for 2020 or earlier have become uncertain at best and dire at worst the Federal Reserve has released such an overflow of liquidity that nobody knows how equities will react in the face of the nominal rate moving to over 2% in 2018 in accordance with the course set by Yellen and 3% in 2019 in addition the purpose of embarking on a course to gradually tighten the monetary supply when Yellen started to raise rates in 2015 was to avert inflation but inflation has not come it has not moved by much people aren't spending their cash there's too little of it given few Americans have any to speak of or they're holding on to it because they have a pessimistic sentiment about the economy one of the nominees for a Federal Reserve seat Marvin good friend even suggests the possibility of applying negative interest rates this he says might prompt people to spend their money and fuel the inflation so any fear even if it's not there inflation is not rising fast enough in other words for inflation to rise and justify the rate hikes there needs to be actual economic growth the Khan dad comes in the tide that lifts all boats so far there appears to be faith that this might happen thanks to the tax cuts but no evidence the other problem about higher rates is that there is always the risk that it may prompt investors to sell their shares after all the cash they earn can be put in a bank account and start to accumulate interest cash in an uncertain situation like the one higher Fed rates are creating helps many investors deal with fear the fear is valid Wall Street is overvalued the risk of an accident or to use a more current term a Black Swan has become extremely high anything could burst the bubble now looking at a chart of stock market performance from the last century to the present it becomes evidence that the markets have already entered a stage that finds its closest president in the 1990s and the jointed October 1929 crash note that the latter crash was merely the earthquake that prompted the start of the equity avalanche it would only be in 1933 that the lowest values were achieved note the similarity in the way the index rose between 1923 to 1929 and 2009 to 2018 then note the sharpness of the jagged ascent from 1929 to 1933 investors act as if drunk they are writing the wave of euphoria and have forgotten what it's like when they lose that market Corrections have been minor in brief nobody has had the opportunity to burn their fingers and many investors have never known what it's like to confront the bear market or the kind of interest rates that were once considered nor as recently as the early 2000s rates were in the order of seven to nine percent that would be positively catastrophic today the Trump tax plan is a convenient way to mask deeper problems in the American economy the cuts didn't just materialize from thin air the government will have to find the funds to keep the many services that Americans need including very rich Americans evidently medical services will suffer the much-lauded infrastructure schemes may start but there is a risk the government will run out borrowing meanwhile will become more expensive adding billions to the interest payments on the federal debt alone individual families meanwhile will face higher interest on mortgages and loans oh by the way it was higher interest rates that caused the real estate bubble to explode in 2007 to 2008 rather Trump should have pushed for tax cuts but the bulk of the benefits would have been better invested in the middle and lower classes that would truly have increased spending it would also have helped debt repayment reducing risk instead for most people the tax breaks are almost insignificant and they're not guaranteed to last perhaps had Trump persisted in conducting an isolationist foreign policy he could have made some concessions by cutting military spending but this too is different there are risks of wars in Asia and the Middle East and Trump seems ready to go in with both feet and all fleets somewhere sometime someone will have to pay the bill we'll the petrodollar collapse in 2018 petrodollar collapse in 2018 the oil industry and geopolitical risks have gone hand in hand oil represents energy and without it modern economies cannot run salt sugar and spices were also strategic resources once but even at the peak of their appeal and value they are mere shadows of oils importance to the modern world yet changes in the oil industry and the erosion of America's dominance over geopolitics have also hurt the US dollar which has long served as the one currency that all countries must have to buy oil the concept has become known as the petro dollar and a petro dollar collapse in 2018 is possible if not likely oil demand has been increasing slowly since the 2008 financial crisis however the United States once the principal driver of the oil industry will no longer be the primary global oil demand turned the dollar into the world's B facto reserve currency the US economy could collapse trying to cope with the effects of a petro dollar collapse oil exporters agreed with the u.s.

that the returns on their use would be held in dollars indeed the creation of the petro dollar in 1973 coincided with the USD pegging the value of the dollar from gold prices to allow for fiat money the oil producers were told they would earn returns on their dollars equivalent to those they would have earned investing in gold the end of the petro dollar is bad news for US military surely countries are free to accumulate reserves of other stable currencies from the British Pound or the Euro but why would they they need dollars to buy the most critical resource or it's the oil plus dollar system that enables the United States to invest in terribly expensive weapon systems fund the world's biggest and most spread out the military and conduct military operations whose costs alone would anyone else demand for oil equals demand for dollars thus if some countries suddenly demand to pay for the oil they need and another reserve currency it poses a major risk to the United States China might be one of the primary culprits in facilitating the petro dollar breakdown it could replace the petro dollar with the petrol yuan this is hardly far-fetched the United States doesn't need Middle Eastern oil as much as it did 30-40 years ago still many countries still do China for example imports a significant percentage of its oil from Iran as a result there's a natural shift in demand for a currency that best suits those countries China has proposed that you want could replace the dollar in oil transactions it would find string agreement in Iran Russia and Venezuela which account for a large share of the oil market the current is that the Chinese have also asked the Saudis to consider accepting yuan for oil that move could even spell the end of the special military supply relationship between Washington and Riyadh even if the Saudis may not feel that now is the right time to switch horses in the oil / currency wars they might consider diversifying the way they sell their debt it's a given that when Saudi Arabia or other Gulf states issue all their bonds in dollars they could move to yuan is the next recession coming in 2019 or 2020 next recession 2019 some analysts fear the next recession in 2019 others warned it may have already begun end of the year for the next recession as 2018 they are both right because the economy in the markets whose performance can trigger a downturn are operating in a parallel universe now whether it's 2019 or 2018 it seems appropriate to start asking when will the next recession a resource of demand the new emerging economic powers like China and India will soon be dictating the terms of the price of oil the pairing between the size of the American economy and its world leading oil appetite is what allowed the petro dollar system to emerge thus any change to one or both variables could spell the collapse of the petro dollar system why should you or anyone else care about the petro dollar the petro dollar is one of the main reasons why America itself can survive on debt it's the main reason why unlike many countries in the European Union for example in times of turmoil the Federal Reserve can apply monetary policies to help prevent or mask economic or financial collapse in the 1970s when oil prices reached their longest peaks inflation adjusted the producing countries reinvested the billions of dollars they received as payment into the global economy this drove the demand for dollars sustaining their value in other