Either governments pursue the path of fiscal rectitude (although it is a bit late for that) and we subside back into recession or we debauch the currency through deficits, the printing press and devaluation.The FT Alphaville blog offers a fantastic American, de-Anglicized translation of Edward's wisdom:
SocGen’s Albert Edwards says everyone should just relax and stop worrying about GBK because in an Ice Age a weak currency is the escape route of choice from the deflationary quicksand.What's ironic is that the American public and policymakers seem to completely lack the understanding that, since 2002, the U.S. dollar has experienced substantial devaluation, with the dollar index plummeting from 120 to a low of 71 and a current reading of 80.66. That's drop of 41% from high to low and 33% from high to current. Remember, this drop is measured against a basket of global currencies, predominantly euros, yen and sterling.
Anyone want to take the position that a drop in the U.S. dollar of that magnitude is NOT debasement? Our "future" is here and now. Prepare yourself for serious price inflation ahead.
(click to enlarge the chart)
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