From a 2016 piece from the Financial Times. There will be some opinion injected along the way.Moreover, there is a bigger issue still being missed here. The petrodollar story is in fact a eurodollar story, always was and always will be.If fact… there are no Petrodollars.When William Simon (formerly of Salomon Brothers), negotiated with Saudi Arabia, he merely arranged a public relations situation that would disguise Saudi US treasury purchases. Most oil was already priced in dollars, as USD was already the global medium by 1960. A Salomon Brothers banker would have been deeply familiar with the advent of modern banking at the time.Treasuries had already become prime collateral by the 70’s. Saudi Arabia was merely pointed towards a pre-existing global banking system… by a banker who just so happened to be working for the government at the time.Oil could, and had been occasionally priced in other denominations; but the most accepted medium remained USD… only rivaled by the pound pre-1950s. Attempting to price oil in any other denomination would have limited the access to buyers as no other denomination had the depth of liquidity to facilitate global trade.And that’s important because… eurodollars are in effect nothing more than the original bitcoin. A free-float of dollar-denominated claims whose fractioning is out of the control of the Federal Reserve system or the state, and which is instead supported by the combination of growing US consumption of foreign goods, services and commodities as well as US speculative investment abroad, in exchange for consumption claims on its own system today.What a statement there, eh? (As a note: I don’t fully agree with that first bolded section)And again, eurodollars are dollars. The dollar is a global unit.That’s a complicated way of saying: “US energy dependency has forced the superpower to share a significant chunk of its wealth with the rest of the world for decades now, a form of underwriting by the richest state in the world which has increased global interconnectedness, global trade and global growth in general.Yes. Being the global reserve, means allowing the globe some degree of control over the medium of exchange. That control is mostly in the hands of the global banking system.And it is this foregone stake which has lubricated the global liquidity system ever since the eurodollar story first began in the 1960s. It’s also what has empowered the build up of significant foreign current account surpluses, which in themselves represented gigantic shock-absorbing balance sheets for global supply and demand mismatches.Began in the 1950s, maybe slightly earlier. Again, this is the global banking system.The unfortunate irony seems to be that the Fed is tightening policy into a dollar bank run (in Eurodollars, i.e. offshore dollars), while believing that its domestic economy is stronger than it really is, and as banks become less and less willing to extend Eurodollar funding as they constrain balance sheets due to regulation/risk aversion.The Fed does not realize the extent of the global dollar system, preferring a narrow view that matches its toolkit and mandate.Risk aversion as a topic could be a whole other post.In the meantime, however, we have the clear and present danger from more than US$10 trillion of offshore (Euro) dollar debt riddled with currency, maturity and, in some cases, commodity mismatches. Brazil’s currency has been decimated and its economy is in recession. China is now the focal point of this problem, with in excess of US$1.1 trillion of dollar debt and a further US$0.6-0.9 trillion in Hong Kong (a decent slug of which will have been lent to Chinese corporates).It’s more than $10T now.And there’s a graphic to portray the balance sheet mechanics of the issue …which may give further context to monetary problems in China today.That’s enough for now. Petrodollars are just global dollars. Most commodities are priced in USD.