The Dollar and Inflation

What can a possible crisis in Vietnam tell us about the US Dollar? Or rumors of currency stress in in nations in the Persian Gulf? That loose US monetary policy is rippling out, and affecting the countries with fixed (or dirty-fixed) exchange rates. These countries face a challenge — float their currencies, or revalue the significantly higher, and send their export economies into the cellar, or, keep importing inflation from the US.

Inflation is a global problem today, and many countries are ignoring it, because in the short run, economic growth is better. Because the US Dollar is the global reserve currency, it can get away with a lot of excess borrowing, given that there aren’t any countries capable of taking the place of the US as the reserve currency, yet.

1 Comment

  • Curt says:

    Sooner or later, foreign nations are going to get sick of the inflation that the weak dollar is creating. When they do, they will unpeg the dollar and let the dollar sink. Then, they will create several new regional currencies unions to stabilize the currency crises created by the falling dollar.