"What about a massive repatriation of dollars back to the US causing hyperinflation? "
I don't think i quite understand what you mean by this sentence. "Then there is the emergence of trading blocs using their own currencies as a substitute for dollars. There is yet no rush for the exits, but, as the relative amount of dollars in the global system declines, so does the incentive to protect the value of the remaining dollar holdings, particularly if they are declining in value. Another source might be social instability in the US leading to a decline in credibility of government. " an attempted shift away from the dollar by many central banks could cause a rather large devaluation if no one is willing to buy the dumped u.s currency at or near current prices. I tend to think, in the u.s's case, it would be self terminating. remember that devaluations reduce the net international investment position by devaluing u.s assets and increasing foriegn assets (as long as there is little to no foreign debt). given the u.s.a's low to non-existent foreign debts, a devaluation is essentially self terminating (negative feedback loop) rather then self perpetuating in the case of large foreign currency denominated debt (positive feedback loop). I also think that the value of dollar holdings have been massively overstated as a concern for foreign central banks. they have held those dollars to prevent a sharp jump in the exchange rate and the harming of domestic industries (not to mention the political repercussions of pissing off the u.s). You are correct about the search for substitutes, but as of now none have been found (and some have been destroyed through the creation of the Euro). It would take a radically different political situation for there to be few to no central banks willing to hold dollars. Even in that case, i think a balance of payments stabilization is more likely then hyperinflation (put perhaps still highish inflation like 10%-15% ). -- -Nathan Tankus ----------------------------------------------------------------------------------------------------------------------------------------------- _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
