Can the current system of global
trade and several
hard currencies ($, euro, yen)
be a house of cards?
Can trade dwindle and nations
return to producing
at home all of their needs that
are possible?
Can the euro replace the dollar
as the gold standard?
Why should these threats be
considered? Is deflation
a fact -- with double digit
unemployment on the horizon
here and in Japan? ( I
think NOT! )
How important are war and
peace to these matters?
Are currencies backed
by effective power as well as
exports?
It seems to me that the US will
have to enter huge deficit
territory with the national debt
returning to a much higher
ratio to GDP than today. Only by
such deficit spending
can it avoid deflation and
unacceptable declines in jobs
and asset values.
With the US running huge
deficits, as we Keynesians
prefer, the dollar will decline
enough to reduce our imports.
Exporting nations will then run
deficits too, to protect
their jobs and asset
values.
If these things happen, there
will be no house of cards
model to view. Instead we will
have global trade and the
same hard currencies we have
today -- but with very
national debts that really don't
hurt.
Eventually, the EU, US and a new
Asian currency will
all be used to monetize national
debt and start all over
again.
John
Gelles