Re: Currency and Seigniorage

[EMAIL PROTECTED] wrote:


> OK.  Maybe you can remember his logic.   Sure any production of oil, books,
> wheat, or whatever supports currency, but he seems to be singling out one
> particular product produced around the world and one particular currency.
>
> Could I say every single peppercorn in the world is an indirect subsidy into
> the pockets of the American consumer because of the effect it has on
> propping up the dollar?

Wait, the reason is twofold: because everybody on earth buys oil, and 
because the Saudis demand payment for oil in US dollars.  So everyone 
who wants oil has to buy US dollars first, and then give those to the 
Saudis.

Hence demand is created for the US dollar, driving it's value up.

Normally the Saudis would sell those US dollars to buy South African 
Rand or Rupees or whatever they choose to, making the gain in the dollar 
above cancel out.  But when they spend the US dollars in America, then 
they never have to sell those dollars, keeping its value high, and 
effectively turning the Saudi economy into a support for economy in the 
US, since a high dollar makes imports in America from abroad cheaper.

Hasan