I hope I do end up mistaken. "Who says that third world economies have to hold dollars? Can't they use them to buy the things they do need. From the countries that have them. You know, trade." They can. The will. But financing our US government deficit up until a couple years ago was dependent on them not spending them but holding the potential currency as US debt instruments. Now we just create new potential currency to pay for the excessive government spending (Fed buying 90% of US debt issuance). I say potential currency because either someone someday has to work and pay off the debt we are running up, or more likely it will just be monetized away and the new currency created to pay off the debt, thereby debasing the currency or said in another way inflating the currency supply. Currency inflation leads to price inflation like night leads to day. It can have a delayed effect as long as the populace does not anticipate the price inflation, or it can be front run once they catch on to the game. The problems will come when the other economies decide to spend their foreign reserves instead of hold US debt. It has already started, but currently just a slow current. The problem will be come more evident when it turns into a flood. The inflation will show up in the form of increased prices for imports. My opinion only. John
Edited by John Burns 11/18/2013 09:04
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