“As bad as the US is, it’s far away from that position.
There is also a lot of comparable activity going on in most every OECD country.”
Naturally, I hope you are right, but I do not share your optimism. We’ll see who is right in the long run.
Agreed that most countries are devaluing their currency these days, many just to try to prop up their current dollar holdings. It’s just serving to shake confidence in fiat currency world wide. But the US is in the unique situation that our currency is the world’s reserve currency, held by other nations’ treasuries as reserves in the absence of a gold standard. The belief system is that the dollar is “good as gold”. This meltdown in the US is shaking that belief. The problem is that we don’t need to turn to the printing press today, we’ve already been using it for decades. All those extra dollars are already out there, held largely by countries that export to us. As some of these holders of dollars, like Iran and China, are starting to call for a new reserve currency to replace the weakening dollar, these dollars held in reserve are likely to re-enter circulation. If enough of the rest of the world becomes wise to the Fed and Treasury’s debasing of the dollar, they could consider us “in default” and dump their dollar holdings. The more agressively the Fed and Treasury move, like this proposed $700B bailout plan, the more likely the rest of the world will be wise to it. It could get really ugly. Hopefully not, but the prospect is there.
