I would say it's not exactly mistaken so much as completely out of proportion to the effects ascribed to it.
Let's pretend that there are literally no oil sales for any currency other than dollars. So, if I (holding GBP) want to buy oil from Norway's Statoil (Norwegian Kroner), I have to buy dollars to execute the transaction. That might create an artificial demand for dollars. However, once this transaction's executed, it creates an artificial *supply* of dollars, because the Norwegians want to change their dollars back into local currency (unless they spend it on US exports and we know that on a net basis they don't). So the USA in this world is only earning seignorage on one day's float. The amounts of money that any reasonable estimate of the size of this float might be worth, is just an order of magnitude smaller than the amounts of money that the USA is alleged to have spent protecting it. best, dd -----Original Message----- From: PEN-L list [mailto:[EMAIL PROTECTED] Behalf Of John Exdell Sent: 26 February 2005 05:14 To: PEN-L@SUS.CSUCHICO.EDU Subject: Re: Oil & dollars "And b) so what anyway; if you have some euros and want to buy something quoted in $, it is not exactly difficult to find someone who will sell you $." I think the point is that if it were generally true that oil purchases can be made only for dollars, so that you have to change your euros into dollars to make the purchase, that generates an artificial demand for dollars, and will strengthen the dollar in currency markets. Why would this not give support to $ seignorage? How is this mistaken? >Jeff
