T Nation

Risk of US Currency Devaluation


I currently have my own opinions on this, but i'll wait till we have some points for discussion. What do you personally think the current chances of such an event occuring are and WHY. What do you perceive as the implications on a personal and national level.



I'm no expert on this topic, but I think the graph above should make one a bit concerned.

I wonder if the Fed will engage in more bond buying once QE2 finishes...

Are you talking about devaluation simply through increasing the money supply?


I'm talking about an actual currency devaluation along the lines of the one that the british government enacted before the 1970's winter of discontent. The british public finances were in a similar state to the USA's, with some considerable differences of course.

There is also another risk of devaluation through external economic forces. As the money supply is increased and the value of the dollar decreased in real terms, there is the risk of US trade partners taking preference of payment in other currencies, which to an extent has already started, but if it were to become widespread would automatically start the process of devaluation due to the vastly reduced demand for USD.

The federal reserve has already denied rumours of an internal devaluation publicly. There have also been meetings between the major economic players in the world economy that have excluded the USA, reported in the british and european media. Add to that the massive rise in the gold price and the fact that several well known hedge fund managers have publicly disclosed their positions in the gold market it seems that some people think that this, or something close, is on the cards.


Oh okay. In this scenario the US Gov would simply declare the currency unit to be a fraction of its original value then?

It seems something like that would be very unpopular politically. Creditors and savers would be pissed off...pretty much everyone. If the Fed however continues with bond buying, this is a less blatant means of accomplishing the same thing, right? The US gov will have an easier time paying off its debts in either case.

I know China and Russia have started using their own currencies for bilateral trade as opposed to the USD, so there is less foreign demand in that case.


Even more telling is the collapsing exchange rate. The dollar is falling even relative to other junk currencies.

Eventually no one will accept paper money from ANY source, governments around the world will sieze gold from its rightful owners, and try to issue gold backed currency, just to try and start the game all over again.

Owning the mining stocks is the only viable option though governments will probably tax the living hell out of those, calling it 'windfall profits tax', or some other satanic device.

Ah well, who is John Galt?


Huh? The US Dollar is a floating currency. Devaluation/revaluation happens continuously.


Floating on what?


Legal tender laws?


Complete emptiness of word, the utterance of the power of the dollar is like nails on a chalk board. What power does one have if all that he has is the word of a corrupt man?

With the spread of universal suffrage it has come about that everyone's appetites are considered worthy of feeding, and the only sin is to stop a fellow man's gluttony of one of his more popular appetites. The government is not here to feed man's appetites but it is also not the ultimate end of government to restrain man's feeding of his appetites, that is only a means to an end. However, the unleashing of man's appetites will be the downfall of this country and the world.


The US dollar has been incredibly devalues since the Federal reserve was created. It will only get worse.