The ghosts of the 70s

Oil replaced gold as the foundation of the dollar in the 70s and now the Iranians are blowing it up

Money begins as a promise.

Before it became digits on screens and abstractions in central bank language, it was a claim on something tangible. In the ancient world, money was not first imagined as a free-floating symbol. It referred back to things that could actually sustain life and production such as grain, silver, copper, or livestock. In Mesopotamia, systems of account were tied to measurable stores of value, and across the Bronze Age world, metal objects circulated because value had to remain anchored to something real. A token only mattered if it could still command substance.

That is the first thing modern people forget. Money is not wealth. It is a socially recognised claim on wealth, and it only works for as long as people believe the claim can eventually be honoured. Strip that away and the whole thing becomes theatre.

As Eurasian civilisations expanded, metals became the preferred backstop because they solved the problem better than almost anything else. Grain rots. Cattle die. Land cannot travel. But gold and silver can be stored, weighed, divided, transported, and recognised across frontiers. More importantly, they impose a discipline on rulers and merchants alike. A king can stamp his image onto a coin, but he cannot decree the underlying metal into existence. Material reality still governs the system.

That gave the old world a monetary continuity that outlived dynasties and empires. States rose and fell, borders moved, regimes changed, but the underlying logic of exchange remained coherent because it rested on something outside political wishfulness. Gold and silver were not perfect foundations, but they were foundations.

When Europe expanded across the globe, it did not invent a new monetary order. It exported the Eurasian one.

The conquest of the Americas was not just territorial plunder. It was a vast enlargement of the world’s metallic monetary base. Silver from Potosí and gold from across the New World poured into European systems and then into Asia, binding distant economies into a single expanding order organised around precious metals. Europe did not simply seize land and labour. It imposed valuation. Indigenous systems of exchange and obligation were subordinated to a monetary logic that understood metal as the universal denominator of worth.

By the nineteenth century, that process had matured into a world economy running on gold and silver standards. Paper money existed, but paper was not the foundation. It was the claim. Its credibility depended on convertibility into specie. Exchange rates between major currencies were relatively stable because they all referred back to fixed quantities of metal. Trade could widen because trust had a common substrate.

But there was always a limit hidden inside this arrangement. Gold and silver can stabilise a civilisation. They cannot easily accelerate one.

As economies became larger, denser, and more industrial, the stock of precious metal available to support them became increasingly inadequate. The modern world required more than coins and bullion. It required a far larger architecture of claims on future production, future trade, and future growth. Money had to become less like stored substance and more like a system of layered promises.

This is where modern banking and finance become central. Banks discovered that they did not need to hold enough metal to redeem every depositor simultaneously, because under normal conditions not everyone asks for redemption at once. That gap between actual reserves and circulating claims became the operating space of modern debt-based money creation. Credit could now expand beyond the physical stock of gold and silver.

Once that door opened, the modern world rushed through it. Stock exchanges allowed ownership in future enterprise to be bought and sold. Futures contracts allowed prices to be fixed for goods not yet delivered. Credit networks linked producers, merchants, insurers, investors, and states into increasingly dense structures of interdependence. Economic life ceased to be a simple exchange of existing goods and became instead a system built on anticipated production.

This is what made modernity possible. It is also what made modernity unstable.

Because once a civilisation begins living on claims about the future, it becomes capable of enormous expansion and enormous fragility at the same time. Credit allows a society to build ahead of itself. It also means that when confidence breaks, the whole system can suddenly discover that it has been leaning on expectations rather than reserves.

That is why financial history looks the way it does. Tulip Mania is remembered as a joke about flowers, but the mechanism underneath it was deadly serious. The Australian banking collapses of the 1890s followed the same deeper pattern. So did repeated financial crises across South America. Debt and speculation allowed these systems to stretch beyond their foundations. Collapse came when reality called those claims back in.

That tension between symbolic expansion and material constraint never went away. It simply moved upward into larger systems with larger consequences.

After the Second World War, it was folded into the American order.

Bretton Woods was not merely a tidy monetary agreement between technocrats. It was part of the machinery of Pax Americana. The United States emerged from the war with overwhelming industrial power, huge gold reserves, command of the sea lanes, and the capacity to organise the postwar world around itself. Under Bretton Woods, major currencies were tied to the US dollar, and the dollar itself was tied to gold.

That arrangement preserved the old monetary truth that money required a material anchor while making the United States the gatekeeper of that anchor. Gold remained the final foundation, but the dollar became the instrument through which the world accessed it. And because the arrangement sat inside a much larger system of American power, it worked. The US Navy secured trade routes. American industry supplied a rebuilding world. American institutions provided liquidity and credit. The postwar order was not simply ideological. It was logistical, military, and monetary all at once.

But the contradiction at its core was obvious. The world needed more and more dollars in order to function, because trade was expanding, production was expanding, and the American imperium itself was expanding. Yet every dollar remained, in theory, a claim on a finite quantity of gold.

That could never hold forever.

By the 1960s, the pressure was becoming intolerable. The United States was financing the Vietnam War while also carrying the costs of empire and domestic expansion. Dollars flooded outward into the world economy. Foreign governments accumulated them in vast quantities and began to understand what was happening. There were now far more claims in circulation than could plausibly be redeemed.

This is why 1971 matters.

When Nixon closed the gold window, he did not just tweak a monetary arrangement. He ended the final formal link between the reserve currency and the metallic discipline that had underwritten serious money for centuries. The dollar ceased to be a claim on gold. It became a fiat instrument resting on American power.

But a reserve currency cannot remain dominant purely because a government says so. It still needs a foundation. It still needs a reason for the rest of the world to keep demanding it. Once gold was gone, something else had to replace it.

That something was oil.

This was the real significance of the post-1971 order. Gold had anchored the old dollar. Petroleum would anchor the new one. Under Henry Kissinger, Washington moved quickly to stabilise the broken system by binding the dollar to the one commodity every industrial economy could not do without. Through agreements with the major oil-producing states of the Gulf, especially Saudi Arabia, oil would be priced and sold in US dollars. That meant any country needing energy would need dollars first. Since industrial civilisation runs on energy, demand for the dollar would now be sustained not by convertibility into gold, but by the necessity of purchasing oil.

This was not some incidental diplomatic convenience. It was a structural replacement.

Gold was the ideal monetary anchor for a mercantile world. Oil was the ideal monetary anchor for an industrial one. Gold stores value. Oil moves civilisation.

Oil powers ships, trucks, aircraft, mechanised agriculture, petrochemicals, plastics, mining, construction, and the transport systems that hold modern economies together. It is not just another commodity. It is the concentrated energy source that made twentieth-century civilisation possible. By tying the dollar to oil, the Americans effectively replaced one material foundation with another.

But this new foundation came with a new danger.

Gold can sit inert in vaults for centuries. Oil has to move. It has to be extracted, refined, shipped, insured, defended, and delivered through chokepoints and corridors that are vulnerable to sabotage, war, state collapse, and imperial rivalry. In other words, the post-1971 monetary system did not transcend material reality. It attached itself to a far more volatile part of it.

That is why the Gulf mattered so much. The Gulf monarchies were not merely lucky desert kingdoms sitting atop useful resources. They became custodians of the commodity that now underwrote the monetary order of the industrial world. This gave them extraordinary leverage, and they used it. The fuel crises of the 1970s were not just economic disturbances. They were demonstrations of where real power in the system had shifted. Western economies convulsed because the hidden energetic basis of the monetary order had suddenly become visible.

And this is the environment in which the Iranian Revolution has to be understood.

Iran in 1979 was not simply a country having an internal political crisis. It was one of the key states inside the strategic architecture of the emerging petrodollar order. Under the Shah, Iran had been deeply integrated into the American system in the Gulf. It was part of the machinery linking energy, security, and monetary dominance.

The revolution shattered that arrangement.

The Islamic Republic that emerged was not just anti-Western in a rhetorical sense. It represented a postcolonial revolt against a regional order that had become inseparable from American power and the monetary system that power upheld. Iran sat on enormous hydrocarbon resources, near one of the most important maritime chokepoints on earth, while refusing full submission to the system that had replaced Bretton Woods.

That made it intolerable.

So Iran was punished. The Iran-Iraq War of the 1980s bled it heavily, with Iraq receiving backing from the United States. Sanctions followed. Isolation followed. Decades of economic strangulation followed. Iran was not simply being disciplined for bad behaviour. It was being contained because it occupied a structurally dangerous position inside the energy geography of the American world order.

That reality has not changed. It has only become more dangerous.

And this is why the present moment matters.

When Iran attacks oil infrastructure, shipping routes, and the wider energy architecture of the region, then it is not merely retaliating in the ordinary military sense. It is striking at the actual foundation of the post-1971 system. It is reaching beneath speeches, alliances, and diplomatic noise and touching the load-bearing structure itself.

Because beneath all the abstractions of modern finance, the American monetary order still rests on the same proposition it adopted after Nixon severed the link to gold. The dollar remains central because the industrial world still runs on hydrocarbon energy priced and moved through systems organised under American predominance.

That is the real backstop and Iran is now hitting it with missiles.

This does not mean the system collapses tomorrow. Large systems rarely fail in one dramatic gesture. They weaken through repeated stress. Shipping becomes more expensive. Insurance becomes more expensive. Energy volatility bleeds outward into inflation, capital markets, and political instability. Every disruption can be managed in isolation. But management is not the same as durability. A system that must constantly absorb shocks at its foundation is not stable. It is simply not dead yet.

What matters is that the hidden mechanism is becoming visible again.

For decades, people in the developed world have been encouraged to think of money as something generated by central banks and sustained by confidence alone. But confidence is never the foundation. It is only the surface effect of deeper material realities. Under every serious monetary order lies a substrate that cannot be negotiated with.

For centuries, that substrate was precious metal.

After 1971, it became concentrated energy.

And that means the ghosts of the 70s are not historical curiosities. They are still alive inside the system because the problem was never solved. Gold was removed, but the need for a foundation remained. Oil took its place. Now that foundation is under attack.

Trump is being haunted by the same reality that earlier generations of American strategists wrestled with. They created the illusion of stability we’ve taken for granted ever since.

Unfortunately, reality is not Trump’s strong suit. His inability to deal with it will haunt Americans for a very long time to come.