Quote:
Originally posted by Dave
And I don't think we recognize how dependent we are on the rest of the world being courteous enough to finance our massive current account deficit.
It works both ways. We kick the legs out from under China et al by devaluing, they retaliate by yanking all their money out of Treasuries and putting it into whatever the new safe investment is. Everybody's economy goes directly into the crapper.
This is of course a simplistic analysis, but there are downsides to devaluing that ought to be taken into consideration, and I don't just mean that your next trip to Lichtenstein would cost more.
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See, I disagree with this, to the extent that it assumes that productivity exists in more places than just here. (In a relative sense, of course.)
I think we could do this. I think that we would end up bluffing them out and winning, but, if we had to, we could carry it off. They're not "financing" us. They're investing their currency in the only stable account. We own that bank.
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