I read Ms. Dion-Kirschner’s op-ed on climate change and national security with interest. I agree that climate change is a risk and can be a destabilizing force. Opposing carbon emissions, however, may have some very serious unintended consequences in the near-term for our national security and the economic growth and financial solvency of Illinois, one of the five largest coal-producing states and a vital transportation hub for oil and natural gas for the North American continent.

Unknown to most Americans is the key role that Saudi Arabia and other oil-exporting Gulf states play in boosting the purchasing power of the dollar.

Ever since the collapse of the international monetary order in 1971, when Washington came to the realization that to allow all the countries to redeem their dollars in gold would wipe out the once gigantic U.S. gold reserves, the U.S. has used Saudi oil to strengthen the demand for the dollar and thereby empower the American consumer.

In the 1950s, the U.S. Treasury had about 20,000 tons of gold, which was most of the world’s monetary gold. Less than 20 years later the Treasury had less than half of that, and there was no end in sight to the drawdown. The U.S. had simply issued far too many dollars in the post-war period to adhere to the monetary agreement to deliver an ounce of gold for every $35. Understandably, this led to a crisis of confidence in the dollar and a global run on the U.S. gold vaults. Because of other shocks to the global economy at the time, the purchasing power of the dollar plunged. We remember this as the stagflation of the 1970s.

To restore confidence in the plunging dollar Washington chose to back the dollar with another strategic commodity: Saudi oil. In this arrangement with the Saudi kingdom, the U.S. promised to provide military support to the kingdom and, in exchange, the Saudis would refuse all currencies except the dollar in their oil trade. This meant that European and Asian countries would need to sell their goods to the US and acquire dollars if they wanted Saudi oil.

In a few short years the dollar pulled out of its death spiral and, by the mid-1980s, stabilized at about $350 per ounce of gold or $1/350th of an ounce of gold, down about 90% percent from its initial 1/35th of an ounce of gold exchange rate. Not long after, however, this arrangement with Saudi Arabia was put to the test. In 1990 Iraq invaded Kuwait and threatened Saudi Arabia with a large invasion force. The kingdom was in danger. The future of the dollar was in doubt. The US went to war and was victorious, at least for a while.

And so here we are, more than a quarter-century later, the dollar’s future again in doubt as Saudi Arabia is threatened once more but this time by longtime rival Iran and growing concerns about climate change undermining of demand for oil, and thus the demand for the dollar itself. In another crisis of confidence in the dollar, the American middle class, especially those in Illinois, benefiting indirectly from the North American demand for fossil fuels, will likely face untold hardship. Something to consider.

Sincerely,

Sherwin Cho, MD
Lieutenant Commander
Medical Corps, US Navy

The opinions expressed are my own and not those of the Department of Defense.