The Petrodollar agreement between the United States and Saudi Arabia has officially expired, marking a significant shift in global economics.

Andrei Jikh explains the profound implications of this change, which occurred on June 9, 2024. This system, in place for 75 years, established the US dollar as the world's reserve currency, providing economic stability and access to rising asset prices. The arrangement between the US and Saudi Arabia was pivotal in maintaining the US dollar's dominance in global trade.

However, this past Sunday, the Saudi Arabian prince announced that the contract would not be renewed, signaling a major change in the global financial landscape. Originally initiated after World War II, the Petrodollar system replaced gold as the standard of value and allowed the US to control the world's energy markets. Its impact on the standard of living for Americans has been substantial, as the US economy benefited greatly from exporting dollars and issuing debt in the form of treasury bonds, which created a stable economy, lower interest rates, and financial market liquidity.

Andrei discusses the trend of countries moving away from using the US dollar in international trade and oil transactions, with Saudi Arabia being the latest addition. This shift could signal the end of America's global financial dominance and raises concerns about the US economy's future. Higher interest rates resulting from this decision could lead to more expensive mortgages, rents, auto loans, student loans, and credit cards. It could also strain the banking system, national deficit, and federal budget, potentially leading to higher taxes. Additionally, the value of the dollar itself could be affected, making traveling and purchasing goods from other countries more expensive.

He touches on the reasons behind Saudi Arabia's decision, including its commitment to the BRICS alliance and the trend of countries reducing their dependence on the dollar. Andrei argues that the US has limited options to counter this trend, despite the world's holdings of foreign exchange reserves in dollars and the dollar's use in foreign exchange transactions remaining high. He concludes by sharing his personal thoughts on the situation and offering investment advice.

This decision by Saudi Arabia not to renew the Petrodollar agreement is part of a larger story, and its full implications for the US and future generations are yet to be fully understood.