ozzy43

In Defense of the Dollar

"I do not believe that central bankers will allow their power to disappear by witnessing the fall of the fiat currency system. Instead, the dollar will eventually stabilize and rebound."

The entire preceding article argues against this point cogently - and then the author makes this assertion without any argument or logic to back it up! Unconvincing.

Consider: the only real power that central bankers have comes in two forms:

1. Positive: actions like increasing the money supply, printing money, monetizing debt. All positive actions lead to currency debasement, and these are the 'standard operating procedures' for central banks - indeed, these sorts of actions are their raison d'etre - the whole goal behind establishing central banks was NEVER to 'manage' or 'coordinate' - it has ALWAYS from the very start been to exploit and inflate. This is why the USD has lost more than 90% of its value since the Fed sprang into existence in 1913. No-brainer.

2. Negative: choosing *not* to manipulate and inflate - in other words, doing nothing and allowing markets to manage themselves would be negative actions. How often in the nearly 100 year history of the Fed has it done this, especially during times of crisis? And looking at the current hyper-activist Fed and Treasury, to expect them to engage in such hands-off, negative interactions would be like expecting Ralph Nader to suddenly open a Corsair dealership. It would be to violate everything they stand for. Yet that's what would be required for the Fed to stabilize the dollar long term.

With all the incoming debt (and don't forget - there was something like $60 - $90 TRILLION in public debt incoming BEFORE this crisis [what? you didn't watch I.O.U.S.A.?], which is aggregate to recent debt developments), the Fed and the US Govt has ONLY two options, and the author's knowledge of the history of fiat currencies should make this abundantly clear:

default or debase

Those are the only POSSIBLE paths forward. What we are seeing is that they have made their choice and we're only beginning to glimpse the consequences.