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Dollars are similarly useless in Saudi Arabia. They use the riyal there. Outside of the US, dollars are really just government bonds that people hold as a store
by neilwilson 7y ago
Dollars are similarly useless in Saudi Arabia. They use the riyal there.
Outside of the US, dollars are really just government bonds that people hold as a store of savings. They have to be sold before you can do local transactions or pay local taxes.
- selectodude 7y agoSaudi needs dollars to buy everything else since they make nothing and import everything. Everybody else will take their dollars, so it’s a worthwhile thing to have around for them. Sure, you can’t buy a kebab on the streets of Jeddah with them, but the chicken that kebab was made with was almost certainly bought in some way using those aforementioned petrodollars.
- neilwilson 7y agoHow does the seller selling the kebabs in riyal get the chicken given they only earn riyal? You need somebody who wants riyal for dollars. Why would the chicken seller not take the riyal since that helps his customers and do the FX magic themselves? "Local currency sales" is what marketing men recommend. It's just the latest form of vendor financing. Who wants riyal for dollars. People who buy kebabs in Saudi. Those who live and work there. As I said the dollars are useless in Saudi, because that's not the local currency stuff you need day to day is priced in. The point again is that in aggregate you can buy things in the currency you have and you can sell things for the currency you want. The financial system smooths the path to that deal - for a price. As anybody with a Paypal account and who trades internationally understands.
- simonh 7y ago>How does the seller selling the kebabs in riyal get the chicken given they only earn riyal? They buy the dollars they need to buy the chicken off the Saudi national bank for Riyal. That’s their job. Controlling that rate is a primary way the SA government manages their domestic economy.
- 0DHm2CxO7Lb3 7y agoCan always buy US weapons and politicians with dollars
- zeofig 7y agoHe's talking about Saudi Arabia, not random people in Saudi Arabia...
- neilwilson 7y agoSaudi is random people in Saudi. Countries aren't sentient on their own.
- selectodude 7y agoWell no, in this particular case it’s the house of saud.
- zeofig 7y agoWhat is countries? I mean it's just atoms, man... This is all so trivial!
- rckoepke 7y agoCurrency is slightly more fungible than this. Not enough to invalidate your point, but worth noting that I've purchased food, transportation, lodging, and knickknacks in Saudi/Bahrain/UAE and Oman using USD. All of the above items, in each country. It's certainly not a universal currency though, I'd say the vast majority of vendors were not interested in taking USD. Even then though, generally you could find a private citizen/local expats from many other continents that would be willing to perform currency exchange to/from popular currencies at a rate profitable for them. Vendors/citizens of some other countries - Jamaica, many parts of Mexico, many parts of Canada, also are happy to deal in USD as a customary business practice, at least in my experience.
- neilwilson 7y agoSure. It's the same here. I can buy stuff with Euros in York rather than the usual GBP. But generally people want the local currency because they have fixed liabilities in the local currency - taxes and debts. Chances are they'll take your money and then swap it out for the local version rather than hold it.
- rumanator 7y ago> Dollars are similarly useless in Saudi Arabia. This is simply outright wrong. According to Wikipedia, the last arms deal that Saudi Arabia struck with the US was, that alone, around $350 billion. That's more than most of the nation's GDPs. Trying to put a Ponzi scheme such as Bitcoin on par with the US dollar is either an entirely clueless assertion or a disingenuous claim made in line with all the other pump-and-dump schemes that plague the so called crypto currencies.
- dageshi 7y agoThe point of the article is that around the world very large amounts of loans have been denominated in US dollars, even in countries that don't use USD. That means there is always a constant and large demand for USD to repay those loans. So outside of the US, no USD is not just a store of savings, it's a means of repaying debt. Hence why people want it and will accept it as a first preference over most other currencies when international transactions need to be made.
- neilwilson 7y agoRepaying debt is the same as an increase in the store of savings. Your personal balance sheet moves in the same direction from a lower value to a higher one.
- dageshi 7y agoNot in USD it doesn't. You got your loan in USD, spent it to buy whatever you needed, you have assets, not USD. You need USD to repay the loan, where do you get them from?