Myth of the petrodollar threat. [The effects of OPEC investments in US equities]
Concern that the Organization of Petroleum Exporting Countries (OPEC) will destabilize U.S. financial markets by investing in U.S. equities overlooks the fact that OPEC will want to protect its investment and will want the U.S. economy to prosper. Dr. Merklein feels that a greater threat to stability results from government policies of deficit spending and an inability to cope with problems of stagflation. He points out that OPEC investment in U.S. equities actually increased the money supply, but because of our large balance-of-payments deficit the international surplus of dollars led to devaluation. A cycle of price and interest rate fluctuations creates a false impression of the availability and scarcity of money, which could lead OPEC to cut back production and exports unless they are allowed to purchase inflation-proof equities. Dr. Merklein explains that if the $13 billion of OPEC investment money can release an equivalent amount of U.S. money into the credit market, interest rates can be held down enough to reduce inflationary trends. (DCK)
- Research Organization:
- Univ. of Dallas, Irving, TX
- OSTI ID:
- 7223415
- Journal Information:
- World Oil; (United States), Journal Name: World Oil; (United States) Vol. 183:6; ISSN WOOIA
- Country of Publication:
- United States
- Language:
- English
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