pimpjui

Is Inflation a Fact… Or Just an Opinion? Part II

"The world is currently operating under a fiat currency discipline: meaning no major currency is backed by anything of real value."

You already gave us the answer. If currency debasement is the worst thing the US does, then it has very good company (e.g Switzerland).

Fiat currency is not about how much is printed. By definition, it is already worthless.

It's about confidence levels in the government that issues it. It should be painfully clear that for various reasons, most of the world still has great confidence in the US system.

The most probable inter-dependent reasons are:

1) US military might trumps all (if you can get nuked into oblivion, the expected value of your currency will be worth less than that of the nuker.)

2) US market liquidity is tops, hence the liquidity premium of the currency.

3) US market elasticity. Name one 1st world market that can drop 40% and at the same time keep the standard of living for its people at pretty much the same level. The UK is probably the only close 2nd.