The Dollar

From Niall Ferguson’s discussion of the Great Depression in The Ascent of Money,

A second lesson of history would therefore seem to be that the benefits of a stable exchange rate are not so great as to exceed the costs of domestic deflation.  Anyone who doubts that there are lessons to be learned from history need do no more than compare the academic writings and the recent actions of the current chairman of the Federal Reserve System. (p 164)

I tend to agree with this, but during the time of the Great Depression, the US was a creditor nation.  Currently, the US is, in a big way, a debtor nation.  Losing control of the exchange rate can portend losing control of borrowing ability.  Somewhere in all of this there would seem to be a tipping point.


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