tongodeon and arian1 a bit of an expalnation. So let us start with one of the stock Stalking Horses of Monterism - the theory that there is some relationship between the current accounts and the value of the national currency.In this simple notion, if Countries A and B get into a trade imbalance, then the MAJIK of the Free Trade in Free Markets will force the currency of one of the nations down. This will make importing more expensive. Thus driving down the volume of imports, strengthening internal production of goods and services that were formerly outsourced to foreign regimes. This also means that the goods and services in the debtor nation are now cheaper, and in a better position to fight in the global market place.
Thus all that is needed is the Free Trade In Free Markets, and the Majik of Monetarist Policies. { More than the simple hanky waving that Hayak offered us the KEEN insight that at times markets are lovely way of deciding various types of pricing thingies. }
But what happens if Country A has their currency adopted as the Global Currency. OR, they offer to make sure that all contracts for PRODUCT X, must be made in Amerio's, the defacto global currency, because of course Country A happens to have the BIG MAJIK ZEL MILLER LASER DEATH RAY EYES and can burn up anyone opting to price PRODUCT X in anything other than Amerio's.
Now, when Country A gets into any sort of current accounts issues, it need not devalue it's currency, since everyone NEEDS Product X, and will be FRIED TO CRISPIES, if they offer to price their contracts for it in anyting other than Amerio's. NOW, the 'price' of the Amerio's is based upon the usual supply and demand curve that is associated with two external factors.
- Global demand for Product X.
- Global aversion to wanting to be FRIED TO A CRISP
It is a market that it somewhat outside of the usual debating range for most Monetarists.
Where does this take us? To the really unpleasant place. Do americans REALLY want to retreat into a space where they seriously wish to have their national currency, well, american. Something that is used to establish a working relationship about the goods and services in the market place? In particular, the goods and services that the americans bring to the market, over and against the goods and services of others. Without the monetary distortions of using the American Dollar itself as a weapon. Buy Our Bucks, or you can not buy Product X. Buy our Debt Instruments, or deal with the financial crisis that will follow...
And can they really find their way off of Phantasy Island and back into the real world?
OR, is it finally time to agree with Dick Cheney, that Reagan told us that Deficits do not matter. A point that is as truthier for the National Federal Debt, as with the problems of our current account deficits.
If we agree with Dear Old Dick, then we stab Milton Friedman in the back, by asserting that we no longer religiously believe in the majikal powers of the Free Trade in Free Markets. While, ironically, we can also sorta agree with Dear Old Dick and with Milton Friedman, in that we want to be able to have the correct manipulation of the market, in a way that helps define the winners, as well as make sure that the threat of Democracy is not so grave as to upset the Free Trade in Free Markets.
IF we opt to move to the idea that the US Dollar should be defended in the Market Place by market forces, then we clearly have a whole lot of work on our hands to end the Culture of War and the Culture of the US Dollar as the Global Currency. NOTE PLEASE, I did not say 'the cult of global economics' - that is another problem, it is not the core concern of the National Currency RANT here.
Ah yes... In america, americans do not really have to worry about these questions, since Jesus gave them Nuclear Weapons, and the war winning courage, to defeat anyone who would attack the American Dollar Hegemony.
But that way does lead us into Nuclear Merchantilism... And it's somewhat unpleasant marriage to the other end of the 'escalatory theory' - the "war on persons who's ideological alignment is a threat to American Dollar Hegemony'. Formerly known as 'the dirty war', but now all cleaned up and ready for prime time as 'The War On Whatever' - or as we like to say, "WOW!".
In short, for me to buy into the full force Monetarist Milton Friedmanesque Triumphalist Free Marketeering has it's obvious costs. IF you are not willing to pay them, then we have arrived at a place where we can either start to negotiate about what other options are open to us as civilized persons. Since I am here defending 'truth, justice, and the american way', others are allowed to confess to being in league with satan and the terrorists...