The fact that a Forbes columnist used the D-word is very significant. Usually the media supports the government’s desire to maintain confidence in the dollar. Government needs this confidence to preserve the dollar’s value as it prints trillions from thin air to support wars, domestic spying and the salaries of 22 million federal employees. Why are rumors of devaluation dangerous? Think about it. What would you do if you knew dollars were about to lose half their purchasing power?
In my mind, the fact of devaluation’s discussion is news in itself.
“What began as government social tinkering–with implied threats to banks and mortgage companies to extend home loans to even the most marginal of borrowers–led to a greed-blinded mortgage banking business and the meltdown we are experiencing today. Now we are asked by the same congressional leadership to go along with taxpayer-funded bailouts of the very banksters who, while making millions, created the mess.
Despite the trillions of dollars already expended recapitalizing banks, there is very little, if any, progress to show. Will a few trillion more do the trick? That seems to be the consensus among Congress and the banks. ‘They are simply too big to let fail,’ or are they really just too big to save? We can go back to “Plan A” and buy the toxic assets. If so, at what price? What if a few trillion does not remove enough toxic waste from the system or doesn’t get credit flowing again and the economy bustling?”
“A quick dollar devaluation would work wonders for submerged borrowers. Don’t kid yourself: It could happen.”
“It can be done on a country-by-country basis, but a coordinated devaluation would work best. A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments. Both the homeowner and the bank are immediately better-off.
It would even benefit those who purchased their homes responsibly, as the value of their homes would rise by the same 43%. The current course of throwing trillions of dollars at the culprits is without any benefit to those who acted responsibly. Admittedly, this is not a solution without the price of inflation.” (Read more from forbes.com)