Guess Who Said This:

“U.S. Dollars have value only to the extent that they are strictly limited in supply. But the U.S. Government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. Dollars as it wishes at essentially no cost.” (1)

Think about what that statement means for a minute, specifically as it applies to a currency system in which a single currency is the currency which is mandated to serve as the global reserve currency - i.e. the 1944 Bretton Woods Agreements - for all global trading activities.  And then think about what that statement above means when the country which happens to issue the global reserve currency - originally meant to be "anchored," i.e. supply-constrained by gold - decides to disconnect the anchor to gold and freely create as much supply of that currency as it wishes. 

We have actually witnessed what happens in that case, as the value of the U.S. dollar, after 38 years of basically unfettered supply creation, has lost 80% of its value since 1971, when Nixon closed the gold window (meaning that Nixon thus decreed that U.S. dollars would no longer be exchangeable into gold by foreign central banks wishing to do so).

Getting back to the quote above, Ben Bernanke made that statement in the infamous speech in which he proudly announced that he could prevent deflation by dropping unlimited amounts of dollars from helicopters if he had to (he actually bastardized what was mostly likely a sarcastic comment by Milton Friedman).  Ben was thus perjoratively labelled, "Helicopter Ben." (Think about how disgraceful it  is for a tenured professor from Princeton to be known by well-educated people as either "Helicopter Ben" or "Banana Ben").

The problem is that Helicopter Ben could ultimately print dollars to the point were the value of each marginal dollar is equal to the marginal cost of printing that dollar. In the case of our modern printing press technology, in which the marginal cost of printing dollars is close to zero,  theoretically the supply of dollars can be close to infinite, conversely inflation can theoretically approach infinity - and, tautologically, the value of the dollar can approach zero.

When you have the ability to print up the pieces of paper which are legally mandated to be used in exchange for goods of intrinsic value - oil for instance - the issuer of the pieces of paper can theoretically render that oil worthless.  That being the case, rest assured that the producers of goods with intrinsic value - oil for instance - will eventually deny the ability to trade those printed pieces of paper in exchange for oil.  In fact, I would bet that ultimately those producers of oil will eventually require any exchange for oil to involve either gold, or a piece of paper unequivocally backed by gold, which means the holder of that paper can turnaround and exchange the paper for gold from the issuing coutry's Central Bank.

Apparently there has been much ado about nothing over comments made by a well-followed blogger in which said blogger claims, using remarkably vacuous examples, that having reserve status of one's currency is irrelevant.  I'm not sure why anyone has given that commentary anything more than a good laugh.

(1)  Ben Bernanke, Remarks to the National Economists Club,  Washington, DC, 11/21/2002