
Dollar tumbles as Fed rescues China in the nick of time - walterbell
http://www.telegraph.co.uk/finance/economics/12141369/Dollar-tumbles-as-Fed-rescues-China-in-the-nick-of-time.html
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thaumasiotes
This is conceptual nonsense. From the article:

> The central banks of Europe and Japan discover that it is impossible to
> stave off deflation by debasing their currencies when everybody is playing
> the same game

> A more dovish Fed and a weaker dollar is a bitter-sweet turn for the Bank of
> Japan and the European Central Bank as they try to push down their
> currencies to stave off deflation. Their task has become even harder.

It's apparently a common mistake, but while it's certainly true that the yen
and the dollar can't mutually weaken _against each other_ , it's not at all
true that they can't both weaken at the same time. If oil is $31 / barrel and
you want it to be $50 / barrel, the price of a barrel of oil in yen is not
relevant to that.

Inflation and deflation are not measured in exchange rates.

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hackaflocka
What did the author mean by "stave off deflation by debasing their
currencies"? How does the latter lead to the former?

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thaumasiotes
> How does the latter lead to the former?

Debasing your currency is, by definition, inflation. Debasing your currency
means that the value of the currency drops, such that the same amount of
currency buys a smaller amount of whatever (for example, if $30 will get you a
barrel of oil today, but only 60% of a barrel tomorrow, the dollar has been
debased). Inflation means that the same thing costs more money (for example,
if a barrel of oil costs $30 today, but $50 tomorrow, we're seeing inflation
in the dollar, as reflected in the oil price). As you might notice, those are
two different ways to frame exactly the same pricing information.

(The reason we have two terms is (at least in part) that they arose from
different historical circumstances -- debasing a metal currency meant, e.g.,
taking what were supposed to be gold coins and mixing a base metal into them,
so that your new coins weighed just as much as they should but were worth less
(since they contained less gold).)

So, the mechanism is: they are the same thing.

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hackaflocka
Thank you.

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hackaflocka
What is the mechanism by which "debasing a currency" leads to "staving off
deflation"??

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zurn
"Debasing a currency" is a dysphemism for effecting inflation, and inflation
is the opposite of deflation.

So the lead-in reads in plain English that Europe and Japan aren't able to
cause inflation by causing inflation when everyone is trying to cause
inflation.

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hackaflocka
I learned a new word today!... "dysphemism".

The article author seems to have a case of delusions of grandeur. This is the
third article I've read from him over the last 2 years or so, and all of them
look like concerted efforts to make simple things extremely complex sounding.

