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Currency Wars, from Gary Rogan

November 1, 2010 |

This article, "Currency Wars: Debase, Default Deny!" seems somewhat confused: are they cleverly trying to take over the world assets by creating infinite credit or are they kicking the can down the road because they are completely confused and also have no political will to fix the problems? Of course it kinda, sorta implies that there are two "they": the shadowy financiers of the currency wars and the idiot "public servants" who enable them, but it's not entirely clear that they are not connected or in fact one and the same. I love a good conspiracy theory but when they are written in a completely paranoid style they wind up sounding like paranoia.

I find that the most likely theory is simply this: the government spends until it can spend no more because even one extra day of spending pays off more cronies. They are finally about to pay a political price, but old habits die hard. The Fed for whatever reason feels that they have to enable managing the resulting debt. They are doing it mainly via two mechanisms: keeping the interest rate around zero and devaluing the future dollars needed to repay it. Both are in turn accomplished by buying debt of every conceivable kind with newly printed dollars. They have successfully dealt with the post-WWII debt by inflating the dollar and so it seems likely that they are trying to do in again but on a more massive scale. I don't believe they believe in any of the inflation targeting rhetoric or even competitive devaluation, they are simply feigning concern about deflation because Bernanke is credible given his history of publicly worrying about it.

They have already destabilized the trust in the dollar enough to unleash hellatious commodity inflation. This is about to squeeze most manufacturers in the world and pretty soon most consumers. In their own mind they have no choice, the debts must be paid or the country goes bust. Robbing whoever they can is considered perfectly acceptable for the greater good. The root of all of this is the crazy spending, these guys are just following orders.


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