🚀 go-pugleaf

In article <1993Jan25.201022.18348@Princeton.EDU> nfs@volkl (Norbert Schlenker) writes:
%In article <1993Jan25.103542.7525@hemlock.cray.com> rja@mahogany126.cray.com (Russ Anderson) writes:
%>
%>In June 1992, M1 had grown 11% over the previous 12 months (Source: 
%>Federal Reserve Board).  The 3 month average was 6% (indicating a 
%>slowdown in the rate).
%
%In December 1992, M1 had grown 15% over the previous 12 months (same
%source).  The actual increase was $125 billion and it was ALL currency.
%Federal Reserve Notes.  All of it.  Currency outstanding increased by
%50% in one year.
%
%Now I'm puzzled, because I simply do not understand what people are
%doing with all this currency.  Did we ship it all to Colombia?  Does
%half the country have a couple of thousand dollars stuffed (literally)
%under the mattress?  Are people that scared?  (I am, but I certainly
%don't get that impression from others while walking around.)
%
%Any economists care to guess?  I've set followups to sci.econ in hopes
%of some reasonable speculation.
 
 I am by NO means an economist, but I'll answer anyway :)

 EuroDollars and EastDollars.
 Believe it or not, one of the chief exports of the US is... dollars!

 When a Japanese businessman buys a Korean freighter, the transaction is
 (usually) undertaken in dollars. When a Dutch oil freighter loads 
 a tanker full of oil in the  mideast, the transaction is undertaken
 in dollars. Ther list goes on and on and on...

 Dollars are a "Key currency" - as such, there are probably much more dollars
 in circulation OUTSIDE the US than inside (I think it's like 140% more).

 And you know what? we (the US) make a PROFIT off of these "external"
 dollars. It's called "seignorage" (What a country). Although seignorage
 is not really what makes dollars so valuable, it's more accurately the
 "convertability" of the dollar that makes it so attractive for non-US
 trade transactions.

 A book that I often tout ("The competitive advantage of nations", by
 Michael Porter) talks quite a bit about the financial advantages of
 undertaking  world trade in western currencies. For over 200 years,
 the British Pound Sterling was the chief international trade currency
 (it still is in many parts of Europe), but dollars have obviated it.

 Anyway, hope this helps.
--
Kevin Carothers   {psivax,philabs,retix,quad1}!ttidca!kevin