lördag 23 maj 2009
Hyperinflation and Depression
The dollar is the world’s reserve currency. It gives us special privileges. It’s value has held up no matter how much of it we printed and exchanged for foreign goods. That’s going to change. As we inflate the world with dollars, they are going to lose popularity. There’s too many of them. Eventually, the dollar’s reserve status will end. When it does, we’ll be unable sell our bonds to foreigners to finance the government’s debt and all the dollars out there in in the world will come back to us, either sold off or exchanged. As the dollar sinks, inflation will roar. In a flash hyperinflation will set in and the dollar will be doomed. It could happen now, or it could happen after the next credit-induced boom and bust. Inevitably it will happen. Remember this, no country has ever been privileged to have a paper reserve currency. Reserves were always gold and silver. We’ve abused this privilege. So much of our paper exists outside the U.S., it adds to the certainty of runaway inflation when the dollars reserve status ends and dollar holders dump. As its role as the world’s reserve currency once helped the dollar, so it will reinforce the doom of the dollar.