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Source link: http://archive.mises.org/8011/petrodollars-and-inflation/

Petrodollars and Inflation

April 10, 2008 by

Someone has to pay for the subsidized interest rates and that someone is anyone holding dollar-denominated assets. Despite the disdain some foreign politicians and planners in oil state may have for the US government, by pegging rates to the dollar and mandating the use of dollars for petroleum, they continue to prop up a dying fiat system at the expense of their own standard of living. FULL ARTICLE


mark April 10, 2008 at 10:21 am

And what would have happened to Kawait had they had private currencies?

Probably, Saddam would still be in power and expanded his empire to include Saudi Arabia by now.

Oh, and please stop all this nonsense about “the peoples” standard of living. The Sheks don’t look as if they’re starving from having to in effect make negative real rates of return on their U.S. T- Bills.

Steve Hogan April 10, 2008 at 12:18 pm

One thing is certain: when the dollar craters and investors panic, governments will blame the “free” market for their criminal behavior. I don’t hold out much hope for the average man on the street rejecting their inevitable finger-pointing, but Ron Paul’s campaign and the reaction he’s getting on college campuses allows one a glimmer of optimism.

Maybe, just maybe, the public will then demand a genuine free market money completely divorced from the state and the parasitic banking elite. A guy can dream, can’t he?

jp April 10, 2008 at 12:26 pm

off topic, but great graphic. There’s been a lot of good ones the last few weeks. Kudos to whoever makes them.

Pepe April 10, 2008 at 12:50 pm

Graet article Tim, thanks!

ScuzzaMan April 11, 2008 at 8:29 am

Very good article. Where I come from – New Zealand – often seems to be the Fabians petri dish; as the rest of the world largely moves in lock-step with the Fed, as Tim notes, we’ve moved contrary to them. Consequently, our currency has appreciated by 100% against the US$, over the last 8 years. For an exporting-dependent country, this is bitter medicine to swallow.

What happens next, Tim?

newson April 12, 2008 at 10:39 am

to tim swanson:
“have little choice but to mirror U.S. moves in deposit rates if they want to avoid attracting capital that would pressure currencies higher.”

this quote, while obviously not yours, almost paints the arab states as victims. the imported inflation is in fact very welcome in the gulf, as least to the privileged . the 7000+ princes of the saudi royal family speak for 70% of the local bourse. (recently clawing back nicely its disastrous losses of a couple years ago).
in addition, the iranians changing their crude trade to euros hasn’t stopped them pursuing the same impoverishing inflationary tactics at home, as per everybody else.

Chaudhary September 18, 2008 at 1:24 am

The above posted paragraph contains very useful information about inflation, i hope every one should enjoy this.

Chaudhary September 18, 2008 at 1:24 am

The above posted paragraph contains very useful information about inflation, i hope every one should enjoy this.

Alex Peter September 24, 2008 at 1:40 am

Inflation must be at a controlled increasing rate. too much increasing rate of inflation is not good for economy.

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Don Sabatini April 27, 2009 at 8:24 am

Nice article. Very informative.

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