You know, Aejay may have a couple of points here.
The US dollar is in for big trouble. There are still a very large
number of debts outstanding that have not yet been taken into account.
From some of the information I have seen it is far from over yet.

Our balance of trade is not in a good position and our oil imports are
rising at around 4% per year. If we start to see a recovery we can
probably add another 1 to 2 % on top of that.
If however oil prices rise again we might have to add another 5% on
top again.
The government does need to get us out of debt as a matter of urgency.
It will end up being cheaper to pay out the dole rather than large
interest bills and capital repayments with a devalued currency.

If the US$ crashes it will be easier to repay our US$ loans.
What effect would a US$ crash have on the Australian dollar ?
Would a flight to the Euro crash the Aussie dollar ?
If it is true that many of the government loans and commercial debt
that we have is in US dollars, then if the US$ crashes we could be in
considerable difficulty.

This assumes that the A$ falls more than the US$

Does anyone know what proportion of our debt is in US$ ?
It all makes a good case for localisation.

Bazz, few doubt that the US dollar is in for a prolonged period of pain.

>>Aejay may have a couple of points here. The US dollar is in for big trouble<<

The discussion here is whether it is a fault of the system itself, or just the result of the system in its normal operation.

Arjay, don't try to manufacture a new argument - stick to the one that you started.

>>Are you saying that it is OK to trash your currency in order not to pay your debts? I cannot believe this nonsense you are writing!<<

The reason you can't believe it is because I didn't say it.

I merely pointed out that if the US dollar has "devalued" by 98% as you keep rabbiting on about, and is still a viable currency, then "devaluation" by itself cannot be a problem.

Exchange rates fluctuate substantially over time. But you are seriously misled if you believe that they automatically create misery for the poor.

>>When,not if the US $ seriously depreciates,this means the great masses of poor and not so wealthy in the US will suffer serious losses in living standards<<

The point about an exchange rate is that it affects the price of what you buy from overseas. If it is more expensive to buy from China, this will encourage US companies to fill the gap, creating jobs and fuelling internal prosperity.

Which is a Good Thing, right?

The losers in all this will be the rich, who would find it more expensive to ski in Val d'Isère.

The sixties in Europe - especially Britain - are a fertile field for research into "what actually happens when a currency is devalued".

In fact, far more recently, Sterling lost 32% of its value during 2008. Was this i) a good thing ii) a bad thing iii) a necessary correction iv) just another result of Gordon Brown's loony-tunes economic policies?

Or was it those nasty evil people at the Fed?

Pericles the losers are hardly ever the rich.1% of the US pop own most of the wealth.The US Fed loaned trillions to the US Govt and then took it to bail out their mates charging the people interest to boot.Do you call that fair?Don't you remember the Alan Grayson interview with Elizabeth Coleman the Inspector General for the Fed Rep of the Govt.She didn't have a clue to where a $ one trillion of public money had gone.

By the way Ron Paul now has 285 Congressmen for bill HR1207 to audit the Fed.4 more and not even Obama or the senate can stop it.