Friday, July 10, 2009

Dollar devaluation this summer?

Voltron says: rumor has it that the dollar will be devalued this summer during a special "bank holiday." You see, any banana republic can devalue its currency to shrug off its debt by adjusting the official foreign exchange rates. The problem is that the US Dollar is the world's reserve currency and everything is pegged to the dollar. This fact has allowed the US to get away with monetary murder for decades (low interest rates), but it's a double edged sword. The US gets to finance its debt at low interest, not because its a super cool peachy keen country, precisely BECAUSE it can't default very easily through devaluation (a.k.a inflation).

No comments: