

The Specter of Protectionism: World Faces New Wave of Currency Wars - sasvari
http://www.spiegel.de/international/world/0,1518,721044,00.html

======
sethg
From the article: _The US Federal Reserve still continues to print dollars to
finance skyrocketing government debt. The fact that this erodes the value of
the US currency is something that the Americans seem not to care about._

What erosion? US inflation has been below 3% for all this year, and in 2009 we
actually had _de_ flation.
([http://www.inflationdata.com/inflation/inflation_rate/curren...](http://www.inflationdata.com/inflation/inflation_rate/currentinflation.asp))

------
ajaxian
Incidentally the US Federal Reserve is currently the world's second largest
holder of treasuries after China
([http://www.zerohedge.com/article/deconstructing-pomo-fed-
bec...](http://www.zerohedge.com/article/deconstructing-pomo-fed-becomes-
second-largest-holder-us-treasurys-world)) and is on track to become the
single largest holder in about a month. I'm not sure what the long-term
implications of this are, but I'm guessing they're not good...

------
Tichy
"Within just a few months, the pound had lost nearly a third of its value
against the dollar. This produced the desired effect: The British economy
recovered quickly."

Isn't that just economics for simple minds? I don't know why the economy
recovered, but it seems dangerous to assume it was just a single factor.

~~~
chopsueyar
I believe the article said that was because the British 'unpegged' their
currency from the gold standard. Why couldn't the British have simply printed
more money?

Back to today...

Is the real problem China, or is the US printing too much money and auctioning
off too many t-bills/bonds?

~~~
Tichy
I guess they couldn't print more money as long as they had the gold standard.

Still, money is just a tool. It increases the efficiency of the economy, but
somehow I doubt that it is the only determining factor. If people were able to
produce and consume, they would find ways around a scarcity of money (for
example exchanging things directly).

Come to think of it, how did banks work back then? Seems to me even with a
gold standard it should have been able to work with credit. So if somebody
wanted to buy something from you, they could just give you a note that they
owe you 100GBP? It's only the government that had to be able to present the
gold, after all?

Of course working with credit has risks, but that is just the efficiency I
mean. But how much more efficient is an economy with money? 10% or 1000%? If
they claim that "freeing the money" rescued the economy, it sounds as if it
was more on the 1000% side of the equation. Somehow I doubt it.

~~~
gaius
The clue is the text on the note "I promise to pay the bearer on demand the
sum of..." - you could walk into the Bank of England with a note and get the
equivalent in gold (theoretically anwyay!)

~~~
Tichy
That's what I said - you can't print more money as long as you are on the gold
standard.

~~~
gaius
Yes you can - you're just gambling that there won't be a run on the bank. That
the fact that someone knows they _could_ convert your note into gold meaning
they never actually do it.

