There has been a lot of confusion lately about Saudi Arabia allegedly ending a 50-year-deal with the United States. The "deal" tied oil sales to the US dollar. But many have claimed that the deal never actually existed. So, what's really going on here and should Americans be worried? Financial expert Carol Roth joins Glenn to break it all down, including why she believes the United States and our Federal Reserve are really to blame for the petrodollar's destruction. Plus, Carol explains why the Biden administration can insist the economy has never been better, although our wallets can tell the opposite is true.
Transcript
Below is a rush transcript that may contain errors
GLENN: Before we get to Carol, I want to give you some highlights from this Blaze media. And TheBlaze.com story.
Biden's phony numbers mask true economic pain. The official government numbers in the US economy have been contradictory and confusing for quite a while now.
What is clear upon closer examination, is that the federal government's overspending and overregulation are doing serious damage to the economy.
And we have yet to see the worst results of those policies.
The unemployment increase, seems to contradict recent signs that the economy has been weakening. In addition to the conflicting rise in unemployment. Other signs of deterioration. Include stagnant retail sales.
A slowing of consumer spending. Weak industrial product. Manufacturing orders. Increasing consumer debt.
Depressed by new housing starts. Falling annual earnings of full-time employees. And rising commodity prices. The Federal Reserve chairman, Jerome Powell, knitted, he believes the White House has been cooking the books.
This is the fed chair. Stating last week, you have payroll jobs, still coming in strong.
Even though, there's an argument, they may be a bit overstated. The only job growth, in the US, is for illegal aliens. Listen to that.
The only job growth in the US, are for those illegal aliens, who will work for below minimum wage. Which also explains why inflation hasn't spiked in the past year, as millions of illegal aliens were hired.
Legally resident American workers saw no job increase in the past year. And unlawful residents, willing to accept wages Americans can't are dragging everything down in the wage category.
With employment continues for American workers stagnant at best, the job market is another indicator that the economic growth is slowing, and the Federal Reserve should lower interest rates to reduce its suppression of economic activity.
However, they decided not to. Because it will -- it will spike inflation again.
The markets have already priced three expected interest rate reductions for the year.
However, suggesting a correction is in order.
Even so, the stock market stayed steady after the fed's interest rate announcement with the Dow falling slightly.
And the S&P 500 and NASDAQ, rising to new record highs.
Economist Robert Genetski. Genetski, calculates that the S&P 500 is currently overvalued by 34 percent.
If investors decide the market is near peak and start selling, taking their profits before prices, fall. There is more trouble.
This overspending continues from the federal government, as well.
In the first eight months of the current fiscal year, the current government has already accumulated more than $1.2 trillion, in additional debt.
With a staggering deficit of $348 billion last month alone.
Investors were reportedly believed the US economy is about to enjoy a significant expansion, because of AI.
That's boosting the stock markets. The shares in tech companies. Chip makers. And even utilities.
The government's stimulus injection may be waning, and the Fed's interest rate hikes are starting to bite, as indicated by the slowing housing and manufacturing production.
Higher interest rates hinder business from investing in production and consumers from spending on goods.
That support those businesses. Additionally, the Biden administration has implemented a regulatory program, that will directly cost the economy 3.95 trillion dollars in 2025.
And indirectly result in a staggering 75.05 trillion, in opportunity costs, for 2025, alone.
That might take a bite, no matter what AI is going to do.
Carol Roth is here with us.
Carol. Are we beginning to see all of the signs of the wheels coming off of this thing?
CAROL: I think we've been seeing the signs of the wheels coming off of this thing for quite some time.
And they're sort of hanging on by a thread.
Now, certainly, a lot of the numbers that are put forth. Are meant to window dress, and say, oh, no.
The wheels are still turning. And they're doing just fine. And they will last for a while.
We have seen cracks, and when you peel back the onion. And you look at things like the deficit to GDP, which are about two times the historic average at a time when they're telling us, there's an expansion. We know there's something wrong.
Because normally, when you have an expanding economy, that means you're taking in more revenue at the government level. And that means you're running less of a deficit because you have more money input.
What's happening now is the Biden administration has flipped that on their head. And they're using deficits to window dress the appearance, that we have growth.
And we're seeing that start to crack. Because even that, you know, window dressed growth is starting to come down.
We saw the first quarter GDP come in, almost a percentage point lower than expectations.
A first reading. The second reading was even lower.
So now, as of the second reading. We're at 1.3 percent. For the first quarter. And we're expecting a third reading.
And things keep getting revised and revised.
So all of the, you know, appearances that they're putting forth. And to make it seem like everything is looking great.
We've seen those cracks. And they're just becoming larger and larger.
GLENN: So do you think that there's any way possible, that anything, excuse the pun here, Trumps the economy.
I mean, they always say in elections.
You know, it's the economy, stupid.
And no matter how you window dress this.
Everyone knows, I don't have as much money, or my money doesn't go as far as it used to. And I'm having a hard time keeping up.
At almost every level, this is happening.
VOICE: So this is an interesting question.
There was a Monmouth poll, that came out yesterday.
That showed, far and away.
That the economy was the biggest issue.
You know, number one issue on people's minds.
But there's a disconnect by party. And obviously, when you have the -- the Republican side, and I would think to some extent. The independents as well.
There's more of a connection with the -- with the fiscal reality that's going on. And it becomes, you know, we believe so afford literally four more years of that.
There's a disconnect from the Democrats who don't believe in mass and reality anyway.
And so even though, they may be hurting, personally. They're going to make excuses. And say that it's for, you know, any sort of litany of other reasons. And it doesn't have anything to do with these specific policies, that we know have driven these outcomes.
You know, there's weather it's things like the American rescue plan. And they direct stimulus. That's literally called stimulus.
That overstimulated the economy. And caused inflation.
They're going to tell you, oh, no. Look, inflation has come down. Even though, they're still going to the same grocery stores, the same gas stations. Having to pay the same rent. And they're believing and buying into the gaslighting.
So that's my concern.
Is when you have so many people who are decoupled from reality. And can fed the propaganda that's gaslighting. And they're willing to -- basically, you know, they're cults. That that is not going to show up in the polls. The way that it should. If we were operating, you know, with some sort of normal baseline.
GLENN: Carol, I'm going to take a quick break, early here.
Because I don't want to interrupt you on this petrodollar thing.
Because I have seen stories that say, this is true.
Stories that say it wasn't true. I don't think there ever was a -- there wasn't a concrete deal. It was more of a handshake with Saudi Arabia. With the petrodollar. Wasn't it?
Or did we have a written deal?
CAROL: That's right. So I was surprised when I saw this as well. You know, I wrote about this in You'll Own Nothing. We have a whole chapter on it.
And there was a deal put in place. But never once did I come across anything that said, we have a specific expiration. But we know deals that, you know, are made. Can be shifted and changed at any point in time.
And I think that's the point we want to talk about.
GLENN: Correct.
Okay. So we'll do that next.
Because the petrodollar. If the world goes off the petrodollar.
That is -- that is the beginning of the end of the dollar.
It's just a matter of time. And what are people replacing? It with?
And so far, central banks are not replacing it with any currency at all.
We'll talk about it here, in just a second.
Okay.
So, Carol, explain why the petrodollar is so important.
VOICE: All right. So there's this story that was going around last week. That the Saudis had ended this agreement, that had been put in place in the '70s.
So what happened was that when the US went off the gold standard, they were very concerned over what was going to happen. So they created this secret delegation, that went to Saudi Arabia.
As part of a diplomatic chore. And there was a lot of chaos going on at that time. Not only did we go off the gold standard.
There was an oil embargo put in place by the Arab oil exporters. That set the price of oil sky-high.
So the big objective, was basically, they -- the US didn't want crude oil.
You know, energy. Which is obviously really what fueled growth around the world, to become an economic weapon.
And they knew they knew, okay. Well, now we're off the gold standard.
We had the currency. Wouldn't it be great to have somebody to finance their deficits?
So what they did, is they went to the Saudis. And they said, well, look, you come. You take -- you're going to agree to basically price oil in dollars.
And that's -- around the world, oil is going to be priced in dollars. And you will have all this excess money.
We want you to plow that back into US treasuries. Everything that you get in. We want to you plow that back into treasuries?
Why did they want that? Because that obviously helped the US finance their deficits at a very cheap rate.
He said with be okay. We'll do that. What we want in return, basically some economic and military support. And so they made this -- this deal. That was brokered.
The interesting part is there was a secret piece of it, and that was that the Saudis did not want everyone to know, that they had this huge Treasury stockpile. So for more than four --
GLENN: Why?
Wait. Wait. Wait.
Why didn't they?
CAROL: Because they must want everyone to know that this was sort of the underpinnings of the deals of how closely they were in bed, with the US.
GLENN: Okay. With the US. Okay.
CAROL: And that this is what they did. So this was actually uncovered by a Bloomberg report.
So for 41 years, what the US Treasury did when they broke out what central banks held the US Treasury, and you can go see if China holds this. Japan holds this.
They lumped Saudi Arabia in with 14 other nations. So basically, you could see, oh. We cut this special deal, and now it looks like now, that there's all this wonderful demand for treasuries around the world.
And it was kind of unclear that there was this alliance going on.
So what does that do? It creates a massive demand for the Treasury, because not only are the Saudis in there as huge buyers, but when you have -- you know, sort of a de facto basis. The oil price in US dollars. Then every other central bank will also want to make sure that they have a stockpile of a dollar equivalent security. That if they need dollars, they can cash in.
Of course, as opposed to holding actual dollars. When you hold the Treasury you do get some income. Or you get an interest rate. So basically, this has created huge demand for Treasuries. It means that the interest was artificially suppressed by that demand. And that the US government was able to finance their deficits.
It also meant that trade around the world, was done, you know, US dollars. So not only are these central banks, holding them in the reserves. There's all this trade that's happening in US dollars.
So this actually worked out for quite some time.
The Fed holding basically the world's reserve currency. And managing it. They held the US dollar fairly stable. When you saw the price of gas go up. That they would loosen monetary policy.
And when it was too low. They would tighten it, that they would stay in some sort of a range. Sometimes that was at odds with what was going on domestically.
But as the holder of the world's reserve currency, that was their job.
GLENN: Hang on just a second. Stop for just a second.
I just want to make the point: This is right now, where we're about to see the change, and it's not happening now. It's already happened.
We -- when we got off the gold standard. We promised the world, we will never put ourselves, you know, absolutely first. And go off, and do crazy spending.
And, you know, just break everything for America.
And that's why, it was at odds, sometimes. The fed's policies.
Were at odds.
With the United States policy.
Or -- or -- wants and needs.
Because they had to balance it for the world.
And then what happened, Carol?
CAROL: Yes. So for the economic wonks out there, that's called the Triffin dilemma. You sometimes have to make these tradeoffs between what happens domestically and what happens internationally.
What happened, if we come back to today, is that the Fed has managed to hold the dollar, not stable.
Either for the world, or domestically. So it's not like they even made the tradeoff.
They just abandoned it altogether. But going back to 2005, they decided when the price of oil shot up due to China's increase in demand.
Hurricane Katrina, a whole bunch of things. That they just weren't going to play this game anymore, and that's when things started to crack.
Then we had the Great Recession financial crisis, and so on and so forth.
And the US government continuing to run these huge deficits.
And just, you know, creating a really challenging situation, economically.
So the big issue, if you are these countries around the world. That now have everything priced in dollars.
All your major commodities.
It's not just oil.
It's then extending into food.
Everybody is trading into dollars.
When you have these huge swings in the dollar, that means, that threatens as a nation.
Because now you may not be able to afford energy.
Or you may not be able to afford your food for your country.
That's a national security issue.
GLENN: Forty seconds.
CAROL: Countries are getting sick of that. We weaponize the US dollar. And at the end of the day, they're starting to move away from it. Which threatens our ability to have cheap financing and our standard of living.
GLENN: And so the Saudis did not break a deal.
We've broken the deal long ago.
And they're just all doing what would normally be done. It's no longer good for me.
It's got to be good for both of us.
And so they didn't stop the deal. They're just naturally moving away.
And it's -- the money is going to gold, not other currencies at this point. Correct?
CAROL: Correct. You got it. You nailed it.
