Devaluation is like the weather

Texas oilman and once-aspiring politician Clayton Williams got into trouble for joking that rape is like the weather: “As long as it's inevitable, you might as well lie back and enjoy it.”

Well, devaluation is like the weather. It's inevitable, so you might as well do what you can to prepare for it.

That was the point of my July 2010 post, Devaluation is the only way out.

This past weekend, that post received angry comments:
You know, I like the blog but sometimes you go off the reservation, way off. [...]

Money for nothing and your chicks for free only works for rock stars. Money is a medium of exchange and, to a lesser extent, a store of value. That's all it is. Please note the Paul Krugman agrees with you wholeheartedly and the best real life example to support his thesis (by his own admission) is...wait for it...Argentina.
I'm not advocating irresponsible monetary policy, just saying it's inevitable. No country in the history of the world has ever gotten back from this point without devaluation (see, for example, the US post-WWII). Once Obama started running serial deficits of 8% - 10% of GDP and we crossed 100% debt/GDP, devaluation was inevitable.   Lie back and enjoy it.


Doo Doo Econ said...

It does seem a probability. Consider that both gold and silver are rising at the same time the stock market is climbing. It may make one think that it is actually the dollar decreasing.

W.C. Varones said...


An astute observation, and one ZeroHedge noticed too.

And check out the S&P vs. gasoline!

Anonymous said...

Spot on and anyone who thinks there is an alternative hasn't spent anytime looking at the myriad examples of how severe over indebtedness is ultimately cleansed. The real question I continue to have is how will it take shape? Will persistently low rates simply exhaust the earnings power of the USD, as we watch the steady creep up in commodity prices? Will Keynesian defenders try stealth price controls? Will the executive branch simply ignore Congress and monetize liabilities, forcing the hand of the Federal Reserve? I am fairly confident that what we won't see is a sudden news splash one day that announces the USD is now worth 15% less. It will continue to seep into the system until the cost of labor in the US is sufficiently competitive with other major manufacturing countries. For this reason, I tend to think in terms of decades, not years, much less months.

Anonymous said...

Lie back and enjoy it? Sounds like goldbuggery to me. Ironically, the dollar has already been devalued and it has not had the impact sought after by the Keynesians and their fellow blog-writing travelers.

Please do not confuse anger with annoyance. What is there to be angry about? Because somebody is wrong on the internet? (That the "outhouse macro" piece made the Greatest Hits list does, however, indicate a lack of quality control.)

As to whether the price of oil is a result of Bernanke's attempted devaluation, that's debatable. What is not debatable is that the current prices are not even remotely comparable to what happened in Zimbabwe or any other hyper-inflationary sovereign incident.

SarahB said...

if people want to close their eyes to the inevitable, their loss. Just make sure you invest in a good home protecting firearm and large dog while you stock up on precious metals....cause the haters will come a callin'

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