Brendan Greeley

Private banks are doing this on their own.

They're doing this on their own books because they want to make their own loans work.

They actually don't have an incentive in creating too many of them because they want people to pay those loans back.

Well, so the old story that we told ourselves about the petrodollar was it was a deal between the Saudis and the United States.

The Saudis agreed to price their oil in dollars, and we agreed to send carrier groups from time to time to guarantee security.

If we believe that story, right now, the United States is not guaranteeing the free flow of oil out of the Strait of Hormuz.

And in fact, it's stopping that free flow of oil as part of its negotiations with Iran.

So if we believe that story, then the deal is up.

The petrodollar is over.

What I argued in this piece in the FT that you mentioned is that this much older system where banks abroad create their own dollars, that's actually expanding.

So when we look at data from the Bank for International Settlements of sort of offshore dollars, again, this is dollars created by private banks

outside of the regulatory reach of America, those dollars are growing.

That's actually expanding.

So it's hard to look at the evidence of sort of what is the offshore dollar and say, well, because of what's going on in the Strait of Hormuz, that's now collapsing.

And again, the crucial thing here

is that the Federal Reserve will offer what's called a swap line.

This is just a temporary loan to foreign central banks, which can then in turn lend those dollars to their own commercial banks to make sure that the dollars are propped up everywhere in case of an emergency.

These swap lines are incredibly important, and I think we're going to get to that in a second because we're looking at new swap lines now.

Yeah, absolutely.

It's important to recognize that not all oil-producing economies in the Gulf are the same.