Wednesday, May 4, 2011

The collapse of the dollar



Krugman wrote a very sensible post on why the dollar is not a problem (unemployment is). He says:
"Dollar declines haven’t brought woe in their wake in the past: neither the huge decline after 1985 nor the sustained decline during the Bush years — both of them dwarfing anything we’ve seen recently — brought catastrophe; in fact, both were associated with OK economic growth and mild inflation. In some cases, currency declines have caused major balance sheet problems — but that’s because highly leverage players have large debts in foreign currency. US households are plenty indebted — but those debts are in dollars."
Worth reading too on the same topic this (full disclosure: I'm favorably biased by what this guy says).

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