Bloomberg Business recently ran a retrospective by Andrea Wong about what she calls the “petrodollar deal” between the US and Saudi Arabia, a deal she says was created in the summer of 1974, when treasury Secretary William Simon and an assistant, Gerry Parsky, went on a diplomatic mission for the Nixon administration. Simon passed away in 2000. Parsky, though, is still alive, and Wong seems to have been working in large part from Parsky’s recollections. Simon “understood how to sell the Saudis on the idea that America was the safest place to park their petrodollars.” A “strikingly simply” barter developed. The US would buy Saudi oil, and would provide the Sauds with military and diplomatic cover. In return, the Saudis would buy lots of US Treasury bonds, becoming a huge part of the financing of the ballooning US debt. There was also a diplomatic cable sent from King Faisal to the US Treasury months later, dealing with one small but critical a...
