Quote from Ed Breen:
Misterno, your last post is a profound example of a person talking to himself while in public. The question that occurs to me is why bother to post it on a site that involves interaction and argument between people?
I will assert again for comment...the limit to printing money with impunity is the acceptance of foreign creditors. This is so becuase currency is debt, it is part of a debt continuum...it is at the non interest bearing end and longer sovereign bonds are supposed to be at the more interest end. THe currency starts the yeild curve at zero and continues to the longest sovereign bond. The viability of the currency as currency, its acceptance in the commerce of the sovereign is limited by the acceptance of the longer term interst bearing bonds. Currency debt is justified by sovereign debt sold to private and foreign purchasers. If and when the longer term debt auctions begin to fail, then the currency will begin to fail. At that point the continuing printing of money will accelerate the collapse of the currency. Since the currency is only backed by the good faith promise of a sovereign, since there is no collateral, the promise is no good when the sovereign is insolvent, the sovereign is insolvent when private and foreign investors will not but the sovereign's debt.
If the sovereign itself is the only buyer of its own debt it must stop printing money or its currency will collapse in a matter of weeks and months. That is the way that hyperinflaiton works. That is the history of all hyperinflations.
It is key to understand that inflaton cannot take place unless private and foreign parties will buy debt. There is a balance to money printing and the debt markets that limits the ability to increase currency creation with impunity.
I am sorry I was not ignoring you. You have valid points but I think your points are mostly valid for any currency other than USD due to the fact that USD is RESERVE CURRENCY
That means there is so much to be absorbed by the global economy I mean, if USA prints as much as whatever it is out there, I wonder if anybody would feel it.
In other words, USA is pushing the global trade for a reason. The more the trade between countries go up the less the effects of too much USD printing will be felt as inflation.
USA is lucky in the sense that the time that it needed to print currency as much was the time that China and other Asian countries exploded their exports to the world thus no inflation was felt in USD terms. There is a surge in commodity prices in USD but I think it is because of speculation not too much USD printing.
You said "The viability of the currency as currency, its acceptance in the commerce of the sovereign is limited by the acceptance of the longer term interst bearing bonds."
But do other countries have a choice other than USA if USA collapses? What is out there other than accepting US Bonds?
As long as the ultimate super power is believed to be non replaceble in any way, its bonds and currency will be priced irrationally like today.
Again I was not ignoring you, you seemed to have a better understanding of this than I am.
I am just presenting my ideas here. who knows may be I am wrong.
