posted on Aug, 21 2009 @ 11:15 PM
Originally posted by Rockpuck
A devaluation would be a last ditch attempt to save the currency. But the reasons outlined by the OP make no sense at all.. if there were to be a
devaluation it would be for other reasons than to just knock off a zero on our debt.
Hi RP. By design (entitlements pay-outs - gov pensions - current account deficit , etc) , the authorities have been relatively successful at managing
an orderly $ devaluation....up to this point (pre stimulus effect/QE). But leaving debt relief aside , yea , I agree that the major incentive for a
one-off , formally crafted emergency devaluation would be to put a floor under Uncle Buck...preempt a chaotic currency event - free-fall $USD.
Additionally , theory says the US economy would benefit in a couple of respects. US industry becomes more competitive globally. The resulting trade
advantage means increased export production = jobs , and , the rising cost of foreign imports translates to increased demand for domestically produced
goods (even more jobs) , but , with the decline in our manufacturing base , we'd have to suffer the inflationary effects of an enormous amount of
repatriating dollars...chasing a limited amount of domestic production.
Naturally , the big losers would be all those 'unpatriotic' savers , treasury holders , folks living on fixed incomes. The inflationary impact of
the overnight spike in major , dollar denominated commodities like oil & grains...would be global.
As you already know , the respect is mutual RP.