The unwinding of the petrodollars

[EliG]

I came across a couple of blog post on the same theme: the repatriation of the petrodollars by the likes of Saudi Arabia.

 

Oil Squeeze. Saudi Arabia withdraws overseas funds.

 

Here Comes The Blood

 

Quote from the second piece:

 

"Roughly defined, petrodollars are the dollars earned by oil exporting countries that are either spent on goods or more often tucked away in central bank war chests or sovereign wealth funds to be invested. I’ve read dozens of research reports on the topic and depending on how its calculated, this flow of capital has averaged between $500 billion and $1 trillion per year for most of the past decade. This is money that has been going into financial assets around the world—mainly in the US. This flow of reinvested capital is now effectively shut off. Since many of these countries are now running huge budget deficits, it seems only natural that if oil stays at these prices, this flow of capital will go in reverse as countries are forced to sell foreign assets to cover these deficits.

 

Over the past year, the carnage in the emerging markets has been severe. Barring another dose of QE, I think this carnage is about to come to the more developed world as the petrodollar flow unwinds..."

 

Any thoughts on this?

 

 

 

 

 

[Cardboard]

Likely neutral to positive as it consumers who end up with the extra U.S. dollars and are more likely to spend it on regular goods and paying off debt vs Bugatti's, other high goods and investments. 

 

Cardboard