It doesn't cause economic collapse, it causes an endless cycle of boom and bust. You're just too pessimistic, Crosshair, you only see the glass half empty and disregard the fact that it will fill again in a few years.
Oh certainly, the problem is, what will the glass be filled with? What will happen to your savings? People who had good healthy investments in Germany around 1919 quickly lost everything because of hyperinflation. While life went one, those who worked to save and had their money in Marks soon had nothing. Those who had diversified their investments in other currencies lost some, but still held onto most of their money.
So yea, life will go on, but I could quickly find that my savings and investments are worthless.
The dollar will return and other currencies will drop. Slowdowns in the USA eventually reach the rest of the world and when our booms hit they follow elsewhere as well.
That's a big assumption. The dollar isn't some magic being that will always maintain value. It has appeared that way because it has been the default world currency world for so long. A big concern lately is that OPEC will switch from selling oil in dollars to selling oil in Euros. That alone would seriously damage the dollars value.
Having your currency debased is different from an economic recession. The currency is the foundation of the economy. It is the oil that keeps things lubricated and flowing smoothly. Having a strong currency won't prevent economic recession, but having a weak one will ensure that they last longer and are more severe.
People worry about how much dollar debt is owed overseas but that debt was accepted there becasue of their faith in the US economy in the long run.
Faith can change. What was a good investment 10 years ago may no be a good investment now. The foreign investors may have confidence in the US economy, but if they loose faith in the currency they have no choice but to either distance themselves from the US economy or demand a higher return. Either way is bad news for us.
I think if we pull out of Iraq, and do some serious cutting back of goverment spending, we'll see things start to level off, and perhaps even start swinging back up. I think America will return back to the top, but first we have to stop spending money we dont have In county that doesnt want us for a reason that doesnt exsist.
Agreed. It's not like this is an unsolvable problem. It's just that many people don't like the answers.
The concept that fiat currency has caused "economic collapse" is a curious one, considering the regular and never-ending cycle of true economic disasters that occurred when the US was firmly wedded to gold.
As I said above, the economy and it's currency are two separate beasts. The causes of those boom-bust cycles had nothing to do with the currency. It had everything to do with the unregulated capitalism and the resulting monopolies, market manipulation, and other shady deals that went on at that time. The collapse of Enron would have happened under a Fiat or a Gold standard. It was shady business practices that caused it, not the currency.
The use of Fiat Currencies has eventually results in debasement and at the least, severe recession of the hosting economy in EVERY CASE IT HAS BEEN TRIED. There is 2000 years of history to back it up. From the Romans, to the French, to the Chinese. The Swiss went off their gold standard in 2000 and their currency has been suffering from increased inflation ever since.
Here is a good read.
The Downfall of Fiat Currency
Our current dollar has lost over 90% of it's value from when it was introduced in the early 1900s. Is that the sign of a strong currency? Hell, I wish that dollar WAS strong, I wish I didn't have to worry about how much my dollar will be worth next year or next month, but the exchange rates are showing it.
