Proof-of-Nuclear-Bombs & the Nixon Shock
While I was traveling from eastern Turkey to Georgia in 2015, I met some truck drivers coming from Iran to Uzbekistan at a local gas station since my car broke down. Thousands of miles away from my apartment in New York, they were all dealing in US Dollars from buying groceries, gambling to dealing with debts. I inquired, they responded: it was because the dollar was as liquid as the gas in their trucks, the source of their livelihood. How did this happen?
In the late 1960s, the US controlled more than ¾ of the global gold reserve, but was facing a deteriorating US balance of payments by competitive economies through a loss of power and confidence in the US economy. Even other “pegcoins” today are facing the Triffin dilemma that the US once faced.
Bitcoin seems to be getting a lot of heat for being an “economic experiment,” but the USD was no less of an experiment when Nixon’s administration ventured into uncharted territories of fiat currency issuance. While the story behind the elimination of Bretton Woods and an international gold standard is well known in the history books and public forum, there were lesser known unilateral events that had an equally political and economic impact: namely the US’s unprecedented control of the world’s oil circulation.
Separate events may have indirectly contributed to an oil-focused imperialism through various initiatives, such as the development of SWIFT, that slowly made all transactions and oil trades to be settled in USD: an “oil-USD payment restriction.”
Counterpoints: I do not want to further perpetuate the debate about the petro-dollar theory in the present economy, there seems to be some consensus that this concept was a defendable theory at a previous point of time. Nevertheless, all of the oil continuing to be settled in USD seems not to be a coincidence, nor did the future involvements in the Gulf War, Afghanistan and Iraq. In reality the Proof-of-Nuclear-Bombs is a double entendre: it is not to show that the US is strong in order to reinforce the USD value, but rather it is the fabricated “proof” that can be used to prove that Middle East countries have stockpiles so the US government can take over the oil circulation. If I get asked to have a superpower, it wouldn’t be “nuclear power” or the “ability to control perceived reality,” but I’d like to have the “United States.”
There are a few qualities about oil that I want to highlight:
– Essential for industry/economy
– Scarce resource
– It is expendably used and not recyclable
– Essential for the human well-being in the modern age
The more basic questions arise, why is oil so vital from a modern anthropological perspective? Oil is the basis of mobility, industry and production in a consumer-driven environment, and to not have control over its circulation is to have no hold over one’s own economy and therefore currency — it is a human need, and every day that the US did not control this commodity was another day that they saw their mortality in the hands of the producers. This goes beyond economic well-being, military supremacy or strength. This constrained, mutually critical resource was a centerpiece of the world when the USD reinforced its status as the reserve currency, and this is also true in a world before a dependence on oil but for other mortality-revealing commodities. If the US already had its dollar face used to settle this resource, why proxy through gold? More importantly, this was a good that was used, and individuals needed a perpetual flow for their own well being — the USD was settling not just a commodity, but the flow of the river that fed the village every season. While this may have catalyzed the world to begin depending on USD fiat, I do not necessarily claim that it is the continued truth that we see today. The United States in the 1970s now controlled what I introduce as the mortal sink, or oil in the case of USD.