PETRODollars: Deal with the Devil

If you want to cause more of the same, the White House cannot and should not accept closing the trade deficit for liquid commodities like energy. Doing so would allow the same bad actors who have exploited you to circumvent global trade once again.

Think of how Russia, despite all the sanctions, is still able to trade oil.

If a country eagerly approaches you with an annual consumption of $17 billion but offers to buy over $36 billion in oil annually, where do you think the surplus will go?

But here’s what these tricky communists do: they know they have no real economic productivity tied to anything they buy from the U.S. So instead, they swap FX reserves for something convertible through petrodollars.

They’ll use petrodollar liquidity and trade to ensure they recoup their growing reserves.

And the administration—so eager to claim they’re closing the trade deficit—will comply?

A closed capital account that wants to operate independently should be forced to do so. Providing comps and proxies like petro-dollars only reinforces a closed capital account.