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Indeed, notice how in the following:
With low interest rates and a depreciating currency a feedback would rapidly emerge, where ever fewer investors would bid for bonds denominated in ever less valuable currency.
(1) Yes, if the government engages in responsible monetary policy, the currency will naturally depreciate.
Does every currency go into a downward spiral meltdown every time it depreciates? Of course not ... if it did, every foreign exchange market would always be melting down.
Remember how Japan experience a currency meltdown when it put its cash rate at basically 0% ... going from a bit over 100 yen for a dollar or a euro to 1,000 yen for a euro then 10,000 yen for a euro then 100,000 yen for a euro, because setting the cash rate at 0% sets up a feedback loop?
Oops ... an explanation that explains things clearly and simply is a fine thing ... but when it explains clearly and simply effects that do no happen in its cause and effect story ... that's not a real world explanation, its just faith-based bullshit used to justify the system by which the speculative class is allowed to parasite on the productive sectors of the economy.
I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
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