Tim Worstall: The Dollar and the Euro

リンク: Tim Worstall: The Dollar and the Euro.

A slightly breathless piece about the way in which the euro is becoming an alternative reserve currency to the dollar.

All true, so far as it goes, except this might be a little overstated:

US bears have been warning for years that the dollar is damaged below the water-line, putting at risk the subtle advantages of "seignorage" and cheap debt finance that flows to a hegemonic reserve power.

There are those who insist that the value of those two things is huge: there's a well travelled conspiracy theory that a couple of oil producing nations are about to price their oil in euros and thus bring the dollar crashing down.

However, a slight reality check. The value to the US Treasury of seignorage is of the order of $ 20 billion  a year. Not chump change, no, but with regard to a $12 trillion economy and a $2.5 trillion Federal budget, not the sort of sum that's going to make much difference either way.

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October 20, 2006 in Economics | Permalink

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Comments

Quite a bit of the 'dark matter' theory you noted a few months back (or it could have been years, my memory is going) was based on the dollar's reserve status.

Posted by: Matt | Oct 20, 2006 9:55:37 AM