Faith-based currency
A new bestseller in Germany called "World War for Wealth" addresses, among other things, the prospect of an economic crisis driven by devaluation of the dollar. Author Gabor Steingart says the only thing propping up the dollar right now is faith.
The only way to fight a weak dollar is to strengthen it. Many people no longer care whether the US currency still justifies the faith people seem to have in it. The new game, which amounts to playing with fire, works exactly the other way around: The dollar deserves the faith it gets because otherwise it loses that faith. Dollars are bought so they don't have to be sold. The dollar is strong because that's the only thing that can prevent it from growing weak. Reality is ignored because only by ignoring it can the dream come true. Or, to put it still more clearly: Behaving irrationally has become rational behavior.
A rush to the exits is inevitable, he says. But no, he won't hazard a guess about when it comes.
(Thanks to Will Reishman via Le Metropole Cafe)
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