Quote:
Originally Posted by hilgi
Very true. An interesting argument I have heard about why the dollar is increasing in value against other currencies is because most world debt is denominated in dollars and the more trouble people have in paying back debts the more dollars are needed.
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Yes, our position in holding the world's de facto universal reserve currency has shielded us from the consequences of our dysfunctional policies, and allowed us to get away with things that we've been taught you can't do without consequences.
But it can't continue forever. Right now, the dollar is doing OK largely because (1) the Chinese are intervening in the markets to keep the dollar so that their own exports to the US remain cheap (and US exports are more expensive); and (2) other regions or countries, such as Europe, are perceived as doing worse, so the dollar is a safer choice, even under the bad policies that we have.
But our bad policies have effectively given others the ability to control our economy, to a large degree. Decisions on the value of the dollar relative to other currencies are made in Beijing and Riyadh and places like that, as opposed to Washington. That's one of the prices of our use of ever increasing debt to avoid hard choices.