William E. Simon

So as a hegemony, we gave security to the world, and along the way, we took some bounty.

So in 1974, Henry Kissinger goes to Saudi Arabia, and he and Treasury Secretary Bill Simon, who was a great, smart bond trader, created the petrodollar.

as a way for us to be able to substitute a gold standard and finance our deficits.

And in return for the Arab world saying, yes, we're going to sell all our oil and dollars, they said, and we want security.

And that set us into this really kind of interesting reset of what our dollar means and what it means in the global environment.

And he really used his treasury secretary at the time was William Simon to create an economic relationship with Saudi Arabia and those other oil producing states to facilitate using this dollar as the settlement vehicle for the buying and the selling of oil.

And so essentially, the value of the dollar is really because of what Simon says, right? So we create this fiat currency system, and we're able to just create more of these dollars out of thin air and have been able to do that for quite some time.

That's going to have a huge impact on us when we lose that.

And remember, this goes all the way back to the early '70s.

Bill Simon, who was the Treasury Secretary under Nixon, went over there and said, "This is the deal.

We replace gold with oil.

You agree that you will do all of your business in dollars, and as a result, recycle your profits into US Treasuries and into the US economy, and you buy our military equipment.

I told them to come in a little later, and we'd have a meeting at 4:00, because I always had a meeting at 8:00.

And I had, uh, breakfast with, uh, Bill Simon, and Denny Young was my counsel.

Right.

Bill was a former assistant running for governor of California.

I just don't know how that middle looks like.

Well, if you go back to 1972-73, after Richard Nixon suspended the gold standard for the United States for the dollar, he sent Bill Simon, who was his treasurer at the time, over to Saudi Arabia, and it was an agreement made.

I don't know all of the contents of it.

I'm not even sure it's ever been completely declassified and released, but it effectively said the following.

And one of the things that nobody mentions is that the petro dollar is effectively dead.

And remember, the petrodollar has been with us certainly since Bill Simon, the U.S. Treasury Secretary, was sent over by Richard Nixon to Saudi Arabia to cut the deal.

And the deal was, look, if you'll... agree to sell all of your oil in dollars, make everybody else do the same thing in OPEC.

And at the time, Saudi Arabia was the big act swinger and could make sure that virtually everybody did business in dollars for oil, then we'll protect you in perpetuity because all those excess dollars, those profits, if you will, could be reinvested in US treasuries.

We may disagree under Richard Nixon.

He sent the Treasury Secretary Bill Simon over there and said, look, you know, if you'll promise to recycle your dollars in the U.S. Treasuries, which is essential for us to sustain ourselves as a growing power, well, then we promise you, come what may, we will protect you.

Well, nothing would have happened in any of these places had we not followed the Israelis into war against Iran.

If we had not done that, all of these various protectorates, oil protectorates, if you will, we'd be sitting very comfortably there with our clients.

I never recall a secretary of the Treasury.

And I mean, we've had some good ones, Bill Simon, George Shultz, but I don't recall them ever being this out front in a Republican administration.

Do you?

I think that's a fair statement, Hugh.