[Foundation-l] OT: The economics of debt and exchange rates (Was: Relocation announcement)

Thomas Dalton thomas.dalton at gmail.com
Sat Sep 22 19:53:38 UTC 2007


> > That's a good point. Nevertheless, it's still a short term
> > consideration - purchasing power and exchange rates will converge over
> > time (and then diverge again, of course, but there's no way to know
> > which direction they'll go in next time).
> That's not a given.  It depends on getting the economic fundamentals
> right at the national level, like not depending on debt to fuel
> spending.  It will work as a short term tactic, but cannot be sustained
> as a long term strategy.  Exchange rates merely reflect purchasing
> power, and that in turn is a composite of a number of factors.  Some
> countries have gone bankrupt in the past, and the old currency became
> worthless.

The modern world economy is based almost 100% on debt. Pretty much
every unit of currency in existence exists because someone lent it to
someone else (ie. all money is in the form of an IOU and is not backed
by anything - the gold standard went the way of the dodo years ago).
There is nothing wrong with debt, it's just unserviceable debt that's
a problem. The current economic difficulties were caused by banks in
the US giving mortgages to people that couldn't afford to pay them
back. If they'd been able to pay them back, there wouldn't have been a
problem.



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