The sky is falling, but this current downturn isn't it. It's just another turn in the business cycle. Since the world has gone off the gold standard, there are no physical restrictions on what countries can do to correct financial imbalances. The only limit is the willingness of others to accept their money or credit.
The sky is commencing its fall IMHO but the problem does not lie in the US exchange rate. I agree with you that creditor nations share an unholy mutual interest in not seeing the dollar go entirely down the toilet.
That is not the problem.
The problem in the US is that the deficit-based monetary system is entirely - and probably permanently - fucked.
ie a pending shortage of money.
IMHO the only policies capable of avoiding the pending Depression are fiscal: a Green New Deal, for choice.
Unfortunately not one of the existing Presidential candidates shows any signs of applying any policies other than conventional monetary insanity.
Give it a few months, and lots of red lights will be showing.... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Q: What's the difference between one dollar and one euro? ... A: One euro.
That not-so-light-hearted jest tends to confirm your point that the "deficit dollar" has about reached the end of its useful life, and high time, too.
On the other hand, I'm not sure about a "shortage of money." I think the Feds will continue to respond by feeding money into the system. What's not clear is how and where they would feed it. I do totally agree that a works program is the only possible right answer, assuming that's what you mean by a "Green New Deal."
Since our friends the financiers have failed so pathetically to manage the, you know, finances, it's time for others to get a shot at running the system.
Obama will be smart enough to make that happen, I think. A few more months like these past few and an awful lot of people are going to be ready to go along with him on it.
Less than a mile from my house in New Jersey, I just saw gasoline at $3.54 and diesel at $4.49. If those prices persist, big changes are coming to Main Street a lot sooner than most people realize.
On the other hand, I'm not sure about a "shortage of money." I think the Feds will continue to respond by feeding money into the system. What's not clear is how and where they would feed it.
The shortage of money derives from the nfact that historically it has been the Banks - not the Fed - which creates it.
Bank balance sheets are fucked, but more than that the investors (through securitisation, credit derivatives and credit insurance) whose capital actually backed most of the credit fuelling the Mother of All Bubbles have gone - probably for good.
The question is whether the Fed actually dares to bail out the banks by buying rather than pawning their toxic waste. As opposed to actually nationalising the banks like we do over here.
Did you mean to give me a "3"? I'm offended! ;-) "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
