So… Is It Over? And The Surprising Player That Is Holding The Cards
So… Is It Over? And The Surprising Player That Is Holding The Cards
Notes From the Field By James Hickman (Simon Black) April 23, 2025
Franklin Roosevelt pressed the red emergency button to stop the elevator on the way down to his private dining room. The King of Saudi Arabia was waiting for him, but the President wanted to smoke a couple of cigarettes first.
It was 11:30 in the morning on Valentine’s Day, 1945. World War II was nearing its end, and Roosevelt had just come from the famous Yalta Conference with Winston Churchill and Joseph Stalin to discuss what post-war Europe would look like.
But on the way back home, Roosevelt went out of his way to meet with the Saudis. Legendary amounts of oil had been discovered in the Arabian desert a few years before and knew that such vast energy reserves would be strategically important to the United States after the war.
The problem was that Roosevelt was on death’s door at that point. His doctors had urged him not to go, but the President overruled them, sensing that the trip would solidify American interests.
He was right-- it was a critically important trip. But the doctors were right too-- it was obvious the trip had taken its toll, and a senior aide described FDR as “helpless in fatigue”.
The quick smoke break on his way to the lunch meeting was Roosevelt’s quick moment to relax, gather his wits, and put his game face on before taking on King Abdulaziz.
Apparently, the cigarettes did the trick, because Roosevelt was able to summon enough strength to build great rapport with the King.
As US Marine Colonel William Eddy (who was present at the meeting) later described, “the King and the President got along famously together” and became fast friends.
Roosevelt and Abdulaziz discovered they were the same age, both deeply interested in agriculture, and even shared similar physical handicaps.
In fact, Roosevelt gave one of his own wheelchairs to the King as a goodwill gesture, which Abdulaziz later recalled was “my most precious possession [from] my great and good friend President Roosevelt.”
President Roosevelt with King Ibn Saud aboard USS Quincy, 14 February 1945. Naval History & Heritage Command, Public domain, via Wikimedia Commons.
Roosevelt died less than two months later. But he had planted the seeds of a relationship with Saudi Arabia that soon became very important… and eventually critical to the United States.
In the 1940s and 1950s, the US economy grew leaps and bounds and had an insatiable appetite for energy; Saudi oil played a key role in fueling that growth, and both nations prospered from the relationship.
Their amity was put to the test in the 1970s when the US dollar was taken off the gold standard. World leaders revolted, and the dollar’s standing as the global reserve currency could have ended very quickly.
But Saudi Arabia stuck with the dollar. And in 1974, the two countries inked a new economic cooperation deal: the US would provide security and technology, and the Saudis agreed to maintain their currency peg to the dollar… which ultimately meant that oil would still be sold exclusively in US dollars.
If the Saudis had gone the other way and abandoned the dollar, America could have lost its global financial dominance by the end of the 1970s.
Instead, Saudi Arabia’s commitment encouraged (and realistically forced) the rest of the world to continue to hold US dollars, even if just for the sole purpose of buying oil from OPEC.
As a result, the US dollar has remained the global reserve currency through this day-- which is the ONLY reason why America can have a $36+ trillion national debt or run multi-trillion-dollar deficits each year… and yet the world keeps buying US government bonds.
Saudi Arabia could now be poised for another big decision that will have a major impact on America’s future dominance.
But first-- as of today, it appears that the Trump administration may be climbing down from hard-nosed positions they had adopted as recently as Monday.
Suddenly now the President doesn’t want to fire Fed Chairman Jerome Powell. Suddenly the gazillion percent tariffs on China are “too high”. Suddenly Elon thinks that he is spending too much time at DOGE.
Granted, all of this could change by the time I finish writing this article. Such are the times in which we live. However, it seems that the administration is feeling the pressure from the bond market rout, the stock market rout, the currency market rout.
It’s all very Truss-ian, i.e. reminiscent of 2022 when then-British PM Liz Truss had to resign after domestic financial markets crashed and investors vomited all over her economic plan.
Obviously, the guys in the US aren’t going to resign. But it appears that they’re capitulating to investors’ demands: “Go back to the way things were in March… keep hitting the woke universities, keep policing the border, keep doing all the other stuff. Just leave trade alone.”
So, is the economic war already over? Who knows. But even if they really are backing down, it remains to be seen if the rest of the world will simply forget about the past month and move on.
How much trust and confidence will other nations continue to have in the dollar, and in the United States? Already, over the past several years, there has been serious effort from the Usual Suspects (i.e. Russia, China, Iran, etc.) to de-dollarize.
Some of their efforts have been laughable. Others have made great progress.
And Saudi Arabia may once again be the key swing vote.
Saudi’s Crown Prince, Mohammed bin Salman (MBS), knows his kingdom’s oil will eventually run out, and he’s desperately seeking to build a real economy to replace it.
On one hand, Saudi Arabia has a longstanding relationship with the US-- though one that has clearly soured over the years. On the other hand, he has the Chinese offering all sorts of cash and prizes.
China knows that the petrodollar, i.e. selling oil in US dollars, is a key driver for global US dollar demand… which props up the US government and supports America’s gargantuan national debt.
Chipping away at that dollar demand will really hurt the United States. China wants this to happen. And they’ve been pushing Saudi Arabia to start selling oil in Chinese yuan, i.e. petroyuan.
Bottom line, MBS is going to have to make a decision about whether partnership with China or the US is better for his kingdom over the next several decades.
If he sticks with the US and rejects Chinese overtures, it will go a long way in keeping other countries in line, eliminating doubts about America, and maintaining the dollar as the reserve currency-- for now.
On the other hand, if he decides that China is the better option and starts selling oil in yuan, it could be crippling for the US economy.
Foreigners holding trillions of US dollar assets would no longer need to maintain such vast dollar reserves. The dollar would plummet as a result, US government bond yields would skyrocket, and inflation would surge.
Saudi Arabia is holding a lot of cards right now regarding the fate of the dollar… which is a key reason why Donald Trump himself is heading there in a few weeks.
Make no mistake-- this is a monumental story in the making.
To your freedom, James Hickman Co-Founder, Schiff Sovereign LLC
