Chokepoints: American Power in the Age of Economic Warfare

by Edward Fishman

In July 1974, Simon boarded a plane at Andrews Air Force Base and headed for the Saudi coastal city of Jeddah. En route, he indulged in copious amounts of whiskey. By the time he got off the plane, he was noticeably drunk. The liquor had no apparent effect on his negotiating ability, however. Simon was no Kissinger; he was not schooled in the art of diplomacy. But he was a damn good bonds salesman, and he left the desert kingdom with a deal in hand: In exchange for American military assistance and continued oil purchases, the Saudis would funnel their oil money into U.S. Treasury bonds, which they would be permitted to buy in secret outside the normal auctions. Simon had secured a commitment by a foreign country to finance American deficits—and the petrodollar was born.