The Petrodollar Bargain of 1974
In 1974, Saudi Arabia agreed to sell oil only in US dollars. The arrangement became known as the petrodollar system. It has lasted roughly 50 years.
Every country then needed US dollars to buy oil. Governments bought interest-bearing US debt rather than holding cash notes.
The result was enormous demand for American government borrowing. The US could run massive deficits funded by the rest of the world. Foreign governments were, in practice, lending Washington cheap money as a consequence of buying oil.
Why the System Is Dying
BRICS nations have begun trading in local currencies. Felix argues the dollar's dominance is waning as these economies settle more trade without it.
India, for instance, is formulating strategic responses to what officials there call the "dollar dilemma."
When countries need fewer dollars, they can sell US Treasury bonds. Sellers outnumber buyers, so bond prices fall.
A bond's yield (the interest it pays) moves inversely to its price. Interest rates therefore rise as bond prices fall.
Higher interest rates then drag stock values down. Such currency shifts have created the largest wealth transfers in history.
The US Pivot to Energy Export
As Felix puts it, the US is now the largest oil exporter in the world. It is bigger than Saudi Arabia.
Venezuela's relevance is a matter of refining chemistry. Its crude is the exact quality that US Gulf refineries are set up to process.
Reuters and Politico have reported a deal giving US firms access to Venezuelan reserves. The arrangement extends this advantage.
Gulf Coast refineries process that crude. The arrangement reinforces US energy self-sufficiency.
Cuba's Strategic Mineral Reserves
The US cut off Venezuela as Cuba's energy supplier and Iran as its financial supporter.
In Felix's analysis, the resulting isolation creates conditions for political change. Cuba is roughly 90 miles from the US.
In Felix's view, the island has massive mineral deposits. Cobalt, nickel, rare earth elements, copper, gold, and silver remain largely untapped. Investment in Cuban mining has been scarce for decades and its operations are not well run.
Cuba is the fifth largest supplier of cobalt in the world. Even so, much of its mineral wealth remains in the ground.
While Washington has imposed sanctions on Cuban mining entities, policy appears to be moving toward access.
WPLG Local 10 has reported policy discussions about opening the island to US investment. A Canadian firm, Sherritt, has already secured a US licence for its nickel operations there.
When Cuba reopens, US companies are expected to build ports and mines. Energy infrastructure would follow.
The Materials That Matter
Batteries and solar panels need cobalt, nickel, rare earth elements, and copper. Drones and other new technology consume the same minerals.
Drones, a feature of modern warfare, require batteries which in turn depend on these minerals.
Cuba's deposits, 90 miles from Florida, would shorten supply lines for each of these minerals.
Friendshoring and the Western Hemisphere Pivot
The US strategy called friendshoring is designed to pull supply chains into the Western Hemisphere. McKinsey and The Diplomat have documented the policy.
S&P Global has reported a contest between Washington and Beijing over Latin America's mining sector.
The reshoring and Caribbean resource shift will take 5 to 10 years. A similar pattern was seen in post-sanctions Venezuela, where Chevron expanded after restrictions eased.
Distributional Effects of the Wealth Transfer
The petrodollar's decline points toward a weaker dollar, higher inflation, and opportunities in new technology sectors.
Hard assets such as gold perform well when currencies lose value. Their dollar price tends to rise, preserving purchasing power.
Prices of real property tend to rise more than the dollar falls. A salary paid in a weakening currency buys less each month. Workers dependent on savings or fixed pensions lose purchasing power the same way.
In one illustration of how fast capital can rotate into hard assets, silver gained 213 per cent over 140 trading days.
The 1974 bargain gave the dollar its reserve status and funded American deficits. BRICS nations now settle trade in local currencies, repricing bonds, stocks, and commodities. Washington is responding by securing Cuban cobalt and Venezuelan crude within a Western Hemisphere supply chain, a shift that will take 5 to 10 years.
Asset prices tend to rise more than the dollar drops, while fixed incomes lose purchasing power as the currency weakens. Silver rose 213 per cent in 140 trading days as money moved into the metal. The petrodollar system lasted 50 years, and its unwinding coincides with a US pivot toward mineral and energy assets in the Caribbean. Currency shifts create the largest wealth transfers in history. Bond yields, commodity prices, and gold will move as the dollar adjusts.