Saudi Arabia Will Not Renew the Petrodollar Agreement. How This Will Affect the US Economy. Wednesday, June 19, 2024

In the 1970's, Saudi Arabia agreed to sell their oil exclusively in US currency. In return, the US agreed to protect Saudi Arabia. Recently, Saudi Arabia has decided to not renew the agreement. They will sell their oil in multiple currencies. This is a seismic event economically. It will have massive affects in the short and long-term. This agreement solidified the US dollar as the world's reserve currency. Any country or company that bought oil from Saudi Arabia had to use US dollars. Also, about 80% of world trade is transacted in US currency. This has created a strong demand for US dollars worldwide. For example, it is estimated there are more $100 bills in Russia than the US because of the need to use US currency to purchase oil or trade internationally. The US government has been able to easily sell bonds due to the global reserve currency status. Due to the perceived safety, the interest rates offered on US bonds were lower than bonds from other countries. This has had the affect of keeping interest rates lower in the US. The reduced demand for US dollars will likely have the following economic effects: Interest rates will higher on average in the future than the past 50 years. Goods produced outside the US will cost more. This will increase inflation. The US will have less influence geopolitically due to the weakened reserve currency status. Protect your money. Diversify your portfolio. This is particularly important with increased uncertainty. Reduce market risk. Reduce your tax liability. Increase returns safely. Increase liquidity to take advantage of future opportunities. This is the best time to invest in annuities and high cash value insurance in 40+ years. Fixed interest assets are expected to increase for the next 5 -10 years due to higher for longer interest rates. Until the federal government starts spending less than it receives to start paying down the debt, the upward pressure on bond interest rates will continue. Vanguard and others have recently predicted bond interest rates will increase over the next 5-10 years. The federal government fiscal irresponsibility creates an opportunity. You can invest in high cash value Your Personal bank TM policies that are insured, with guarantees, income tax-free, highly liquid, and likely to increase returns for the next 5-10 years!