Sunday, January 31, 2010

Devaluing the US Dollar

Devaluing the US Dollar

To say that the US needs to devalue the dollar is to look at the mechanism as an end in itself. The desired end is to get production and consumption back in alignment to get back to full employment. America could do this by becoming a net exporter to finally repay the benefits it received for its years as a net importer. This isn't going to happen. Instead America is going to print money to reduce all debts. It will spend the money directly to pay national debt (buying bonds). It will keep buying private debt, turning it into national debt, and paying for it by printing. And eventually it will cause inflation which will reduce all debt: but that is not too bad since so much of that is owed to foreigners. In the end Americans are back working, though less wealthy, and foreigners will lick their wounds for a while, then go back to investing in a land of vast natural wealth where so many of the best and brightest people prefer to live.


[Posted comment to BusinessSpectator.com.au in response to an article saying that America needs to devalue and start exporting.]