Re: Federal Budget Deficit Expected to Reach Over $300 Billion Next

["Dr. Bruce R. McFarling" <Bruce.McFarling@xxxxxxxxxxxxxxxx>]

On Mon, 20 Jan 2003 13:19:58 -0500,
"Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx> wrote:

[quoth I]
>>Why can't oil sellers sell in dollars and use those dollars
>>to buy Euro or Yen assets?

>They do, to a certain extend.  But they do not consider that
>to be holding non-dollars assets.  It only means that they
>trade off dollar exchange exposure for higher return offered
>by non-dollar assets.  All non-dollar assets today carry a
>non-dollar premium that require them to pay higher returns,
>either in interst rates or appreciations or dividends to
>attract investors.

Following this specific argument strictly, it implies
that it is all psychology.  After all, what dollar
exchange exposure would, say, Saudi Arabia face if they
split their acquisitions in half between Euro denominated
and US dollar denominated assets, and managed each pool
of assets in their own terms.  After all, they could buy
pretty much anything they might wish to buy by dipping
into either pool and spending it without exchange.  And
the risk of politically inspired account freezing, while
probably low with the US, would be even lower with the EC.

Its seems more like institutional intertia than
hegemony to me, at least in that specific case.