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Sunday, November 07, 2010
Dollar To Crash and Burn?
I doubt Dr. Mundell will find the time to answer me, but I thought I would post my email anyway in case anyone was wondering what keeps me up at night. I approached Dr. Mundell on this topic because he is the foremost expert on all things currency related, and if NIA is correct in their assessment, and I have no reason to believe that they are not, this should be keeping you up at night, too. NIA's statements are correct as far as theory/mechanics go, however, I have not had the time, (nor am I sure I would know how) to look at the scale of the amounts involved. (By scale, I mean the $$s of QE in relation to the total money supply, how much of our deficit is being financed by actual debt vs. inter-agency swapping/official counterfeiting/money printing ... plus a ton of other stuff)
Greetings Dr. Mundell,
A newsletter I subscribe to quotes you as having said something to the effect of "we are teetering on the edge of an unprecedented global financial debt crisis" (in October, to the WSJ), yet when I Google that phrase, it returns no results. Could you tell me whether this statement or similar reflect your views? I was able to verify the other quote attributed to you in my newsletter "We've never been in this unstable position the the entire currency history of 3,000 years" however, I want to understand the context of the two statements in relation to each other.
Also, are you concerned about the recent announcement and actions of the Fed with regards to QE2, and eventual price inflation in the US as well as further devaluation of the dollar. Do you see a dollar collapse as imminent or even likely?
Finally, if the US continues to play loose-y goose-y with the monetary supply, given that China holds a large amount of US debt, might that not severely annoy the Chinese to the extent that they are no longer willing to finance the US government's deficit spending, resulting in a bit of a cash crunch in Washington? Might that not force them (US Gov.) into money printing and the US into a scenario of hyper-inflation?
My daughter is a student at Columbia and I am going to insist that she take a course or several from you, (assuming you are teaching at the moment), but there is so much talk and chatter on the internet with regards to impending economic doom here in the US that I worry I might not have the luxury of waiting until the next semester begin to have my questions answered.