This space for rent
- Feb 3, 2012
That is part of the new "modern monetary theory" policy shift the far left (and AOC) are pushing, that essentially we can print unlimited supplies of money to solve our problems because we have the world's only reliable base currency. My feeling is that is a very dangerous game and sure to have unintended consequences. For starters, currency's worth is a proxy for productivity. If you give everyone more cash tomorrow we will only be able to unlock so much more productivity and so new economic bubbles will be created (everyone will want a car, a vacation home, a vacation and a new phone) and yet the ability to provide all that wont match demand and thus prices will quickly rise wiping out the gain. Second, our currency is deemed trustworthy thanks to the integrity of the American government, our people and our politics. Printing money might work for a decade, but over that time the globe is going to work hard to find another currency because now the US Dollar has become a clear political tool that is no longer with integrity.Reading Krugman's latest book and he talks about a lot of powerful fiat currency like the dollar, euro, pound, being immune to run away inflation. The scenario where the world dumps dollars and goes to the Euro or something else to peg their currency would scare me though. I guess the dollars true worth is only the paper it is printed on?
Once a country lacks currency credibility its very hard to regain your footing. Argentina and many places are good examples.