Is a severely depreciated Dollar the end of the world?

Depreciated currencies has resulted (or correlated with, for those who are in denial) in at least 3 of the BRIC group of nationsskyrocketing out of poverty.

We all know that a severely devalued US dollar means skyrocketing gas and import prices, dogs and cats sleeping together and the Rapture coming early for the rich and the 1% who create all of the world’s wealth, yada yada. But aside from that end of the world scenario, there is also this:

http://www.ibankcoin.com/peanut_gallery/index.php/2008/02/11/7-reasons-to-value-the-devalued-dollar/

Essentially: Foreign investment in the US would skyrocket, and every job from manufacturing to programming, general services, plus research and development, would flood back here, driving millions of Americans out of unemployment. Tourism would go up, bringing more money to America, and also jobs.

So, is a rock bottom-value US dollar the end of the world? I doubt it. It would make America’s highly educated and skilled labor force the most attractive place in the world for global industries. It would finally put American workers in the globalism game.

Apparently it will be, tomorrow.

It can’t come early – it’s scheduled for tomorrow. I filled in my datebook and everything.

Right, but it would mean every good and service we purchase from overseas (like, you know, oil) would increase in cost as well.

Also the reason foreigners would be buying our cheap goods and services is that we’d be selling them at discount prices. If I lower the price of widgets from $100 to $20, I’ll sell more. But I’ll also make less. If we devalue the dollar such that $100 dollars used to buy 100 Euros and now $100 buys only 20 Euros, then widgets produced in the US that used to sell for 100 Euros can now be purchased for 20 Euros. I now have fewer Euros after selling my product. Wouldn’t it be better to have more Euros?

But it is better to have 20 Euros rather than the 0 Euros you would have if your customer bought his widgets in another country. You also get more visitors because it is cheaper.

no it is not the end of the world.

As for your arguments about consequences in other countries, this is magical thinking. Argentine currency collapse led to big investment in Argentina because it made sense to invest in Argentina for many reasons.

Investing in the country ruled by Obama or whatever similar obamanation that will come after him will not make sense. Even if the dollar is pretty low at the time. You might just as well go invest in Hiroshima in the year 1939 because of an apparent downtick in real estate. Long term it is a fundamentally losing strategy.

The U.S. government would no longer be able to get a loan from almost anyone at less than ruinous rates. U.S. debt is paid in dollars. If we devalue, all foreign held debt would decrease in value, screwing over the debt holders. Rates would go up massively to protect future investors against that risk. Expect massive cuts in all government services.

Or, get out of the widget exporting business and produce something worthwhile instead.

How long do you expect the artificial devaluation to last in a democracy? China can keep their currency devalued for decades because if workers complain they get arrested.

Don’t let the door hit you on the ass on your way out.

Do you have absolutely any facts to back up these nutjob claims?

Obama has done nothing to nullify America’s investment potential. We’ve got the most advanced workforce in the world - a devalued dollar would then make us cheap, too. Every form of new technology in the world would get researched, developed and then manufactured here.

Offset by a skyrocketing rise in jobs and its attendant positive effect on tax revenue.

And that tax revenue is worth a lot less because it’s collected in devalued dollars.

I don’t understand why anyone who wasn’t a factory owner would be in favor of giving every American worker a massive pay cut.

You’re looking at it pretty simplistically. As others have pointed out, USD would lose it’s place as the defacto global reserve currency. Interest rates would skyrocket on the devaluation and would eventually settle at least 1-2% higher than the current level (again based on that global reserve currency thing). Hope you don’t mind paying $10/gallon of gas - there is an inverse relationship between the value of the dollar and the price of gas.

There’s tons more. Obviously you’ve never lived in nor visited a country that recently devalued it’s currency. Life isn’t fun for a local. and for all of the proletariat that you identify with, they take it especially hard because of skyrocketing prices for basic necessities. Oh ya, hope your Chinese is getting pretty good in order to welcome your new capitalist overlords when they buy up the discounted US.

One thing that I never hear the “weak dollar” fear mongers talk about is what level, exactly, the dollar would have to fall to before their prophecies come to pass. It certainly can’t be anything we’re close to now; the dollar is valued about where it was in 2007.

I think that the classic answer to trade imbalances is that they are self-correcting in the long term via changes in exchange rates. We’ve had an increasing trade deficit in the past few decades, which is partly due to the fact that we can obtain foreign currency very cheap. As the US dollar goes down and down, it will become more expensive to buy from Mexico and China, to the point where it becomes economically feasible to make things here again. As well, the depressed US dollar will be worth so little on the market that people from other countries scramble it up on the market at a steal, then use it to buy loads of American stuff, thus pushing the trade balance the other way.

Tourism also works similarly, though strict US immigration laws may dampen this somewhat. The US has been an appealing travel destination for Western Europeans and Japanese in the past few decades. Perhaps soon we’ll start seeing lots of Guatemalan tourists eager to see the country that they couldn’t afford a few years ago.

May I use this for my sig?

shhhhh we’re talking in hysterics here, logic doesn’t belong.

I already acknowledged the threat of skyrocketing gasoline prices in this scenario at the start of the thread. This is NOT a surprise. At that price, electric cars become more attractive, forcing us to wean ourselves off of oil, at least for fuel purposes. This is something I feel is a long-term good move for America regardless.

Let’s take a guess: you think we’ll go into hyperinflation. Gotcha. So the cost of apples goes up to $1000 a bushel and the Government issues price controls, causing shortages. Now apples are worth $100,000 a bushel.

Problem with that is, in America, tons of Victory gardens have sprung up already. By the time we get to that $1000 a bushel (much less $100,000) most everyone’s growing apple trees just about everywhere you look. $100,000 a bushel? Fuck it, I’ll pluck it off my tree. Maybe trade a few for some tomatoes. Granted, of course, farmers win big in that situation; but we’ll never get to $1000 a bushel anyway, especially those of us who live close by farmer’s markets.

You can reasonably predict miserable levels of inflation, though. That’ll get tamed once we learn our lesson about imports and are forced to ditch oil in favor of alternative, renewable fuels.

Buy up the discounted US? Dude, they’re doing that already. They own a ton of our debt, and they’re stealing a ton of our intellectual property to boot. China has been doing pretty well for itself with its devalued currency. For all the bullshit about how poor they are, their middle class is absolutely exploding.

Anyhoot, America could always use some more foreign investment. And more tourists. It would also help us greatly to become the net exporters of manufactured goods, services, and everything else for that matter, to the world.

America is a net importer. Raising the cost of imports will have wide-ranging effects. It’s not just the cost of gas and oil.

It’s not even as simplistic as saying that the cost of American goods will go down - American goods are built with stuff purchased from other countries as well. And if the cost of energy goes up, that also drives up the cost of American goods.

Why must you constantly put words in people’s mouths? You just made up an argument, attributed it to your opponent, then tried to refute it.

But even though you made up your opponent’s argument, you did a lousy job of trying to refute it. Victory gardens? Really? Modern agriculture is a large-scale, mechanized, industrial affair. If you tried to feed everyone from victory gardens and apple trees, half the population would starve to death.

You don’t understand what inflation does. You’re making stuff up. One of the key problems of inflation is that it becomes a barrier to trade. It becomes hard to price things. Goods that take longer to make or which require more investment up front change prices in different ways than products that don’t. The time delay of payments becomes a problem. Creditors and debtors are punished or rewarded in different ways. The information content in prices gets destroyed, making it hard to deal with supply chains or know what the market needs.

High inflation plays havoc with the efficient functioning of an economy. And it doesn’t have to be hyperinflation - The inflation of the 1970’s did plenty of damage.

Infllation is just as big a problem at home even if you make everything yourself. It distorts decisions for everyone.

And what happens if they stop buying that debt? Would YOU buy American treasuries that pay 3% if the real value of the treasury was declining 10% per year? No, you wouldn’t. You’d demand more like 13% in interest.

The U.S. has a debt of 14 trillion dollars. For every 1% increase in the average interest rate paid on that debt, the U.S. has to cough up an extra $140 billion dollars. PER YEAR.

Unfortunately, the U.S. has been keeping its debt servicing costs down by issuing a lot of short-term debt. If all the debt was in 30-year Treasuries, then there would be some time to correct things before the debt had to be rolled over. But the government has been taking advantage of historically low short-term rates to save debt-servicing costs - at the expense of taking on higher risk from future interest rate hikes.

Inflation could easily trigger another massive financial crisis. Given high enough inflation, no one will buy U.S. dollars at any interest rate that would not bankrupt the government from debt-servicing costs. And if people don’t buy the debt, the government can’t pay its bills.

If that happens, all this talk of $50 billion dollar budget cuts will seem laughable, because the government will very quickly have to come up with close to a trillion dollars in spending cuts or tax increases per year. But it gets worse, because the interest rates required to get inflation back under control would probably throw the economy into a deep recession again, which would kill revenue and make the problem worse.

That’s the problem with running huge deficits and maintaining huge debt - it takes away all your options. You have to just trust that everything works out because if it doesn’t, all hell breaks loose.

Come to America! See the breadlines!

Weird thread. The OP asks what will happen if something that is currently happening happened. Bunch of people come up speculating what would happen.

http://www.dollars2euro.com/

There’s also services, like programming and research and development; which are largely (but not entirely) unaffected by such things.

It’s called anticipating objections ahead of time.

Now you’re putting words into my posts. You don’t have to try to feed EVERYONE from victory gardens. I never said you had to. Victory gardens could drastically depress the prices of certain foods.

Absolutely none of your scattershot argument does anything to refute the fact that “Made in America” will make a major resurgence in such a scenario. We’re still going to be exporting goods and services to the world. That means work comes back here.

If they stop buying that debt they lose America as a market and we start exporting to them. India and China’s export-based economy take a headshot. This is why they don’t want our currency to collapse, even though it should have done so years ago.

You seem to have some misguided idea that we can avoid hell breaking loose. What makes you think that is remotely possible? Deus ex machina?

We’ve got a projected $1.5 Trillion deficit in 2011. That’s our DEFICIT. How can we possibly cut that? By cutting entitlements. That means Social Security, Medicare, welfare and education. And those cuts will get even deeper because we can’t be arsed to drop the tax breaks on the rich and corporations, or cut down military spending.

You talk about breadlines, we have 40 million Americans on breadlines, it’s called food stamps. The cuts we need just to lower the deficit will put many of these people on the streets begging for food. Then you will have a lot of seniors, in the millions, who will also be thrown out there to beg.

You know, these facts about the consequences of cutting the deficit are solid. If you think that cutting the deficit even by half can be done without triggering an outright revolution, you’re seriously deluding yourself.

Let me put this plainly for you, not that I expect anyone to respond: you will not cut this deficit by even half without sparking a revolution. At that point you do not need to care about any “economy”.

Just kill everybody over 65. Carousel! Carousel!