"Most oil sales throughout the world are denominated in United States dollars (USD). According to proponents of the petrodollar warfare hypothesis, because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to continue imports. This creates a consistent demand for USDs and upwards pressure on the USD's value, regardless of economic conditions in the United States. This in turn allegedly allows the US government to gain revenues through seignorage and by issuing bonds at lower interest rates than they otherwise would be able to. As a result the U.S. government can run higher budget deficits at a more sustainable level than can most other countries. A stronger USD also means that goods imported into the United States are relatively cheap."
Yes, really. There is a huge amount of US dollars circling in the oil trade. If those were instead used to buy non-oil stuff, the price of non-oil things will go way up and so the value of dollar way down.
Comments
Really? Exactly how?
From the article:
"Most oil sales throughout the world are denominated in United States dollars (USD). According to proponents of the petrodollar warfare hypothesis, because most countries rely on oil imports, they are forced to maintain large stockpiles of dollars in order to continue imports. This creates a consistent demand for USDs and upwards pressure on the USD's value, regardless of economic conditions in the United States. This in turn allegedly allows the US government to gain revenues through seignorage and by issuing bonds at lower interest rates than they otherwise would be able to. As a result the U.S. government can run higher budget deficits at a more sustainable level than can most other countries. A stronger USD also means that goods imported into the United States are relatively cheap."
Yes, really. There is a huge amount of US dollars circling in the oil trade. If those were instead used to buy non-oil stuff, the price of non-oil things will go way up and so the value of dollar way down.