

Krugman: "Is This the [U.S. dollar's] Wile E. Coyote Moment?" - chris123
http://krugman.blogs.nytimes.com/2007/09/20/is-this-the-wile-e-coyote-moment/

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steveplace
I'll play the contrarian on this one.

1\. Article from 2007, we're currently 5% (or so) above those lows.

2\. Currently, there is no suitable replacement for a reserve currency.

3\. The dollar is the world's largest effective long position. Countries,
central banks, and individuals all have skin in the game.

I could easily play the other side, but the sentiment for a dollar "collapse"
is a little strong in the short term.

~~~
jeromec
> I could easily play the other side, but the sentiment for a dollar
> "collapse" is a little strong in the short term.

That is a huge point. It's unfortunate that the value assigned to non-backed
currency like the dollar is largely psychological. If enough people _believe_
its value is going down they will shed it and the domino effect makes that
outcome a self-fulfilling prophecy. For that reason I think we need to focus,
as you have done, on reasons the dollar remains a safe bet.

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davidw
For fairness' sake, I'll post this here, too, since the mises.org fans were
irritated that it wasn't attached to this article as well.

<http://news.ycombinator.com/item?id=885138>

~~~
chris123
Good point.

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RyanMcGreal
> I could say that I saw this coming; the problem is that I’ve been seeing it
> coming for several years, and it keeps not arriving (and I don’t know if
> this is really it, even now.)

This is me as well (not that I would compare my predictive prowess to that of
a Nobel prize-winning economist). I started predicting the 2008 recession in
2004 (I was right about the reasons, but obviously waaaay off on my
timelines). Naturally, it wasn't until I gave up on trying to predict a time
for the recession to hit that it finally hit.

Likewise, I've been predicting a permanent drop in the dollar's value since
around 2005, when I started paying attention to the quiet movement to
diversify oil transactions away from the petrodollar system.

I'm at the point now where I'm reduced to the unhelpful punt: _it will happen
if and when it happens._ So of course the point at which I give up trying to
predict when petrodollar hegemony fails would make a fine time for it actually
to happen.

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chris123
This is from 2007, but the question is still valid:

"[O]ne of these days there will be a Wile E. Coyote moment for the dollar: the
moment when the cartoon character, who has run off a cliff, looks down and
realizes that he’s standing on thin air – and plunges."

~~~
jacquesm
I think that's a valid question, but the scope of it is a lot larger than just
the US dollar.

For investors to get 'out' of one thing they have to be able to get 'in' to
another thing, and most other currencies don't feel a whole lot more solid
than the greenback.

Here is a hint of what might be going on:

<http://goldprice.org/charts/history/gold_1_year_o_usd.png>

~~~
chris123
I think we're all on the same page there :)

A rise in any price (gold, for example) quoted in any currency (the dollar,
for example) is as much about that currency losing value as it is about that
commodity rising in value.

Said another way, if you flood the world with anything (the dollar, for
example), all things equal, then each unit of that anything becomes worth
less. In our dollar vs. gold example, it takes more dollars to buy the same
amount of gold. The dollar is worth less. Potential Wile E. Coyote. Yada,
yada, yada.

