Libertarian Jackass

"Life is short, but truth works far and lives long; let us speak truth." -- Schopenhauer

Wednesday, October 08, 2003

Dump the Dollar!

Russia considers conducting oil sales in Euros rather than the U.S. dollar! What does this mean? In short, the euro is increasingly being used as a reserve currency around the world, indicating a higher demand to hold the currency and thus--all other things being equal--a higher objective exchange value for the euro (the purchasing power of the euro rises!) In this respect, a movement out of dollars into euros would create a falling demand to hold the currency and thus a falling objective exchange value. This, in conjunction with the U.S. Federal Reserve's expansion of the money supply, indicates that the value of the U.S. dollar will tend to fall relative to other currencies and also relative to real goods and services (meaning an increase in U.S. dollar inflation rates).

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