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asset-stripping, Anglo Disease style
is a political choice, I'm not clear how it flows inevitably and unavoidably from being the reserve currency...

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jan 13th, 2009 at 10:57:20 AM EST
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It doesn't unavoidably flow from being a reserve currency, in the same sense that having a military capable of fighting colonial wars doesn't unavoidably cause colonial wars - it remains a policy decision.

But being the only reserve currency makes it easier, because there is enormous inertia in a system with only one reserve currency.

If the country with the only global reserve currency decides to strip-mine its industry, it can do so with greater ease because it has an inflated exchange rate on account of being a reserve currency. And it can continue to do so for a longer time without the damage becoming obvious to Joe Average, because it will continue to have an inflated exchange rate (allowing it to buy stuff from abroad on the cheap) for a long time, due to the inertia in the system.

If you had two or three reserve currencies, it would be a lot more viable for the rest of the world to shift away from the Anglo Diseased currency. Which would remove the upwards pressure on the exchange rate, and make life more difficult both for the people who are strip-mining the country's industry and for the people who are tasked with running the bread and circus shows.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Jan 13th, 2009 at 11:13:57 AM EST
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