Sep 4, 2026 · 18 min · 9 segments
The Tactical Edge Podcast with Raj Bhuyan returns for Episode 10, a shorter "Flash" episode on the petrodollar trap and what it may mean for the U.S. dollar, inflation, interest rates, and portfolio…
And the question is, why is this a trap in our minds? Well, to do this properly, we need to go back to the beginning, all the way to the beginning, when the United States is actually in its formation process during the Continental Congress, which was actually kept in secret for a number of months.
We have this passage from Benjamin Franklin in his closing speech in the Continental Congress.
So we believe Benjamin Franklin came to a resolution with a flaw in the system with this democratic republic to which the United States is organized.
And that is at some point in time, the public can get so corrupt that they would only elect other corrupt or even more corrupt individuals, which creates this pay for play situation.
And over time, you might see this pay-for-play situation grow, perhaps limited to a large degree for the first 175 years by the inability to outright print money by the United States.
And it was really kicked off by the oil embargo and the resulting crisis for energy in the United States, as well as other Western nations in particular.
From the U.S. perspective, there was a very strong incentive to really handle and deal with this crisis in a very material way and also very quickly.
We had a stock market that was really getting hammered, especially with the high PE stocks.
The top 50 companies in the S&P 500, however, fell closer to almost 70%, known as the nifty 50 crash.
And we also saw consumer sentiment fall to multi-decade lows as measured by the University of Michigan.
Now from a Saudi Arabia perspective, a little different, they had actually huge uptick in wealth.
Their revenues, along with other OPEC countries, increased by sevenfold in just three years with these higher oil prices.
And that created a very strong sense of urgency to find a military partner to potentially protect Saudi Arabia from this concern of Soviet encirclement, an outright invasion with all of this wealth underground in the form of oil.
So Saudi Arabia was very incentivized to find a partner with a very strong navy to help them with their goods.
And the question is, why is this a trap in our minds? Well, to do this properly, we need to go back to the beginning, all the way to the beginning, when the United States is actually in its formation process during the Continental Congress, which was actually kept in secret for a number of months.
We have this passage from Benjamin Franklin in his closing speech in the Continental Congress.
So we believe Benjamin Franklin came to a resolution with a flaw in the system with this democratic republic to which the United States is organized.
And that is at some point in time, the public can get so corrupt that they would only elect other corrupt or even more corrupt individuals, which creates this pay for play situation.
And over time, you might see this pay-for-play situation grow, perhaps limited to a large degree for the first 175 years by the inability to outright print money by the United States.
And it was really kicked off by the oil embargo and the resulting crisis for energy in the United States, as well as other Western nations in particular.
From the U.S. perspective, there was a very strong incentive to really handle and deal with this crisis in a very material way and also very quickly.
We had a stock market that was really getting hammered, especially with the high PE stocks.
The top 50 companies in the S&P 500, however, fell closer to almost 70%, known as the nifty 50 crash.
And we also saw consumer sentiment fall to multi-decade lows as measured by the University of Michigan.
Now from a Saudi Arabia perspective, a little different, they had actually huge uptick in wealth.
Their revenues, along with other OPEC countries, increased by sevenfold in just three years with these higher oil prices.
And that created a very strong sense of urgency to find a military partner to potentially protect Saudi Arabia from this concern of Soviet encirclement, an outright invasion with all of this wealth underground in the form of oil.
So Saudi Arabia was very incentivized to find a partner with a very strong navy to help them with their goods.
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