WI US Dollar goes into 10x inflation?

proximefactum

WI the US dollar goes into 10x inflation? In other words, the effective purchasing power of $10 = $1 today, $100 = $10 today etc. Let's say that the trillion+ deficit becomes such a burden that the dollar sinks very low due to printing unbacked money. Subsequently, low market confidence in the currency throws the US dollar out of its preeminent position in world trading. Throw in the Chinese pulling some of our debt out from under us and the re-denomination of oil in another major currency. What would be some of the major effects? Suggestions ...

1) gas prices would go high and remain high given the re-denomination of crude into euros or another major currency

2) food prices would rise according to inflation and then stabilize at a certain point

3) Lower standard of living; possibly higher interest rates on mortgages etc.

4) Loss of esteem in the global community; euro takes pre-eminent position in world economy. Or, the Chinese suggestion for a global trading currency overtakes the euro and other stronger world currencies.

5) Possible civil unrest over food and fuel prices
(think teabaggers but much more crazy.)
 

xchen08

1) Shouldn't this be in Future History?

2) There are no major "backed" currencies in the world, with the possible exception of the RMB, which of course is "backed" by the dollar.

3) You are talking some major geopolitical shifts here, whose wider effects would absolutely dominate the relatively minor effects you mention. China dumping enough of its dollar reserves to collapse the U.S. currency would also collapse their currency, as well as lose them tens of billions. There most likely will be a global depression. (and I mean depression, not recession)

4) Redenomination of the oil market to the Euro or some other currency would have no effect on the "real" price of oil, except that caused by any economic recessions/depressions that are a sideeffect of the redenomination. In that case, the most likely change is a reduction in real fuel prices.

5) The Fed would most likely act when inflation rates get as high as you seem to be suggesting. This would most likely trigger the depression I talked about before, but inflation will be arrested. The Fed not acting to stop a ten fold collapse of the currency is most likely a sign that it has lost its independence. (ie civil disturbance, a coup, or general collapse of the United States)

6) Long term effects of the end of the dollar as global reserve currency are as likely to be positive as negative. Borrowing will be more difficult, as without the effects of being reserve currency, the inflationary effects of excessive borrowing are no longer cushioned by foreign purchases of dollar reserves. But the Fed's ability to act is strengthened, and a less distortionary currency market should lead to a more stable economy overall. The penalties of being global reserve currency would be transfered to the EU or whichever other state takes over.

7) There is unlikely to be civil disturbance over prices, since a) price increase should be arrested by the Fed before inflation goes so high as to make currency transactions inefficient, and b) only holders of large amounts of cash would be hurt by any likely inflation rate. There might, however be civil disturbance over the general economic depression resulting from whatever global event that caused this, and whatever Fed actions were taken to arrest inflation.
 

Corbell Mark IV

The chinese would be working "with" us to stop this. They have perhaps as much as we do to lose (if not more), when you stop to consider their dollar/debt holdings that would be devalued and the impact on their exports to the US, which would be quickly becoming noncompetive.

Also, "teabaggers"?:confused:

Do you really need to diminish people who are protesting against financial irresponsiblity in an OP about a financial crisis what if?:confused:
 

Mark E.

10x inflation over what time period? That's exactly what happened since about 1950, so it took nearly 60 years. We are not living badly for it.
 

Dathi THorfinnsson

Mark E. said:
10x inflation over what time period? That's exactly what happened since about 1950, so it took nearly 60 years. We are not living badly for it.
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Or even late '60s
I remember when a 'cheap' SF paperback was 60 cents, an 'expensive' one 75 cents; cheap cars ~2k$ (OK, so that's more like 7x, not 10x), candies as cheap as 3/penny, MAD magazine 35cents (and actually funny)....
 

ryackov

I remenber reading that it took a couple years of wages to buy a house, and six months wages to buy a car.

Keep in mind of other forms of inflation.
 

Jaded_Railman

Banned
2) There are no major "backed" currencies in the world, with the possible exception of the RMB, which of course is "backed" by the dollar.
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The dollar is indeed 'backed' by something: The Full Faith and Credit of the United States of America.

Likewise, the Federal Reserve keeps a store of assets at a central location. For instance, the Fed owns about $200 billion worth of gold bullion.
 

Rny2

Jaded_Railman said:
The dollar is indeed 'backed' by something: The Full Faith and Credit of the United States of America.

Likewise, the Federal Reserve keeps a store of assets at a central location. For instance, the Fed owns about $200 billion worth of gold bullion.
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As well as the full arm of the law (read: legal tender)
 

Dathi THorfinnsson

Rny2 said:
As well as the full arm of the law (read: legal tender)
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err... Countries, including the United States, have tried legislating the value of paper money. If people don't trust the value of paper money, if they don't believe the government can back it up, then it is 'Not worth a Continental'. So, 'Full faith and credit', yes. Full arm of the law. Nope, no way, no how.
 

Rny2

Dathi THorfinnsson said:
err... Countries, including the United States, have tried legislating the value of paper money. If people don't trust the value of paper money, if they don't believe the government can back it up, then it is 'Not worth a Continental'. So, 'Full faith and credit', yes. Full arm of the law. Nope, no way, no how.
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Yet stores, businesses, etc. are required to accept federal currency as legal payment, no?

Or did the US decide to end its currency monopoly behind my back?
 

Dathi THorfinnsson

Rny2 said:
Yet stores, businesses, etc. are required to accept federal currency as legal payment, no?

Or did the US decide to end its currency monopoly behind my back?
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Yes, but they were legally required to during the Articles of Confederation period, and it didn't work. You can pass any laws you want, if people don't see it as 'real money', it won't work.

So, 'full faith and trust' it is, NOT the laws.
 

Jaded_Railman

Banned
Rny2 said:
Yet stores, businesses, etc. are required to accept federal currency as legal payment, no?

Or did the US decide to end its currency monopoly behind my back?
Click to expand...

Dathi is correct. While legal tender laws may prevent businesses from rejecting US dollars entirely, they in no way prevent them from raising the price on goods bought with US dollars if they don't trust those dollars to hold value.
 

DuQuense

As well as the full arm of the law (read: legal tender)
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?And when in your lifetime has anyone been arrested for violating the legal tender laws?:rolleyes:

This Note is Legal Tender, for all debts public and Private
And is exchangeable for Lawful Money upon demand

Yea:rolleyes: Just try to use that Legal Tender 100$$ Note after 10PM.
 
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