Ron Paul Says: Watch The Petrodollar

Submitted by Nick Giambruno via CaseyResearch,

The chaos that one day will ensue from our 35-year experiment with worldwide fiat money will require a return to money of real value. We will know that day is approaching when oil-producing countries demand gold, or its equivalent, for their oil rather than dollars or euros. The sooner the better.Ron Paul

Dr. Paul is referring to the petrodollar system, one of the main pillars thats been holding up the US dollars status as the worlds premier reserve currency since the breakdown of Bretton Woods.

Want to know when the fiat US dollar will collapse? Watch the petrodollar system and the factors affecting it. This is critically important, because once the dollar loses its coveted reserve status, the consequences will be dire for Americans.

At that moment, I believe Washington will become sufficiently desperate to enforce the radical measures that governments throughout world history have always implemented when their currencies were threatenedovert capital controls, wealth confiscation, people controls, price and wage controls, pension nationalizations, etc.

And theres more. The destruction of the dollar will wipe out most peoples wealth, leading to political and social consequences that will likely be worse than the financial consequences.

The dollars role as the worlds reserve currency was first established in 1944, with the Bretton Woods international monetary system. The USvictorious in WWII, and possessing the overwhelmingly largest gold reserves in the world (around 717 million ounces)could reconstruct the global monetary system with the dollar at its center.

The Bretton Woods arrangement linked another countrys currency to the US dollar at a fixed exchange rate, and the US dollar was tied to gold, also at a fixed exchange rate. Countries accumulated dollars in their reserves to engage in international trade or to exchange them with the US government for gold at $35 an ounce.

By the late 1960s, exuberant spending from welfare and warfarecombined with the Federal Reserve monetizing the deficitsdrastically increased the number of dollars in circulation in relation to the gold backing it.

This monetary inflation caused nervous countries to accelerate their exchange of dollars for gold at $35. The result was a serious drain on the US gold supply (from 20,000 tonnes to around 290 million ounces by 1971, an amount it supposedly still holds).

Continued here:
Ron Paul Says: Watch The Petrodollar