3 ms·

Krugman: "Is This the [U.S. dollar's] Wile E. Coyote Moment?"

26 points by chris123 17y ago

chris123 17y ago
This is from 2007, but the question is still valid: "[O]ne of these days there will be a Wile E. Coyote moment for the dollar: the moment when the cartoon character, who has run off a cliff, looks down and realizes that he’s standing on thin air – and plunges."
- jacquesm 17y ago
  I think that's a valid question, but the scope of it is a lot larger than just the US dollar. For investors to get 'out' of one thing they have to be able to get 'in' to another thing, and most other currencies don't feel a whole lot more solid than the greenback. Here is a hint of what might be going on: http://goldprice.org/charts/history/gold_1_year_o_usd.png http://goldprice.org/charts/history/gold_1_year_o_usd.png
  - chris123 17y ago
    I think we're all on the same page there :) A rise in any price (gold, for example) quoted in any currency (the dollar, for example) is as much about that currency losing value as it is about that commodity rising in value. Said another way, if you flood the world with anything (the dollar, for example), all things equal, then each unit of that anything becomes worth less. In our dollar vs. gold example, it takes more dollars to buy the same amount of gold. The dollar is worth less. Potential Wile E. Coyote. Yada, yada, yada.
davidw 17y ago
For fairness' sake, I'll post this here, too, since the mises.org fans were irritated that it wasn't attached to this article as well. http://news.ycombinator.com/item?id=885138 http://news.ycombinator.com/item?id=885138
- chris123 17y ago
  Good point.
steveplace 17y ago
I'll play the contrarian on this one. 1. Article from 2007, we're currently 5% (or so) above those lows. 2. Currently, there is no suitable replacement for a reserve currency. 3. The dollar is the world's largest effective long position. Countries, central banks, and individuals all have skin in the game. I could easily play the other side, but the sentiment for a dollar "collapse" is a little strong in the short term.
- jeromec 17y ago
  > I could easily play the other side, but the sentiment for a dollar "collapse" is a little strong in the short term. That is a huge point. It's unfortunate that the value assigned to non-backed currency like the dollar is largely psychological. If enough people believe its value is going down they will shed it and the domino effect makes that outcome a self-fulfilling prophecy. For that reason I think we need to focus, as you have done, on reasons the dollar remains a safe bet.
RyanMcGreal 17y ago
> I could say that I saw this coming; the problem is that I’ve been seeing it coming for several years, and it keeps not arriving (and I don’t know if this is really it, even now.) This is me as well (not that I would compare my predictive prowess to that of a Nobel prize-winning economist). I started predicting the 2008 recession in 2004 (I was right about the reasons, but obviously waaaay off on my timelines). Naturally, it wasn't until I gave up on trying to predict a time for the recession to hit that it finally hit. Likewise, I've been predicting a permanent drop in the dollar's value since around 2005, when I started paying attention to the quiet movement to diversify oil transactions away from the petrodollar system. I'm at the point now where I'm reduced to the unhelpful punt: it will happen if and when it happens. So of course the point at which I give up trying to predict when petrodollar hegemony fails would make a fine time for it actually to happen.

26 points by chris123 17y ago

This is from 2007, but the question is still valid: "[O]ne of these days there will be a Wile E. Coyote moment for the dollar: the moment when the cartoon character, who has run off a cliff, looks down and realizes that he’s standing on thin air – and plunges."

jacquesm 17y ago
I think that's a valid question, but the scope of it is a lot larger than just the US dollar. For investors to get 'out' of one thing they have to be able to get 'in' to another thing, and most other currencies don't feel a whole lot more solid than the greenback. Here is a hint of what might be going on: http://goldprice.org/charts/history/gold_1_year_o_usd.png http://goldprice.org/charts/history/gold_1_year_o_usd.png
- chris123 17y ago
  I think we're all on the same page there :) A rise in any price (gold, for example) quoted in any currency (the dollar, for example) is as much about that currency losing value as it is about that commodity rising in value. Said another way, if you flood the world with anything (the dollar, for example), all things equal, then each unit of that anything becomes worth less. In our dollar vs. gold example, it takes more dollars to buy the same amount of gold. The dollar is worth less. Potential Wile E. Coyote. Yada, yada, yada.

davidw 17y ago

For fairness' sake, I'll post this here, too, since the mises.org fans were irritated that it wasn't attached to this article as well. http://news.ycombinator.com/item?id=885138 http://news.ycombinator.com/item?id=885138

chris123 17y ago
Good point.

steveplace 17y ago

I'll play the contrarian on this one. 1. Article from 2007, we're currently 5% (or so) above those lows. 2. Currently, there is no suitable replacement for a reserve currency. 3. The dollar is the world's largest effective long position. Countries, central banks, and individuals all have skin in the game. I could easily play the other side, but the sentiment for a dollar "collapse" is a little strong in the short term.

jeromec 17y ago
> I could easily play the other side, but the sentiment for a dollar "collapse" is a little strong in the short term. That is a huge point. It's unfortunate that the value assigned to non-backed currency like the dollar is largely psychological. If enough people believe its value is going down they will shed it and the domino effect makes that outcome a self-fulfilling prophecy. For that reason I think we need to focus, as you have done, on reasons the dollar remains a safe bet.

RyanMcGreal 17y ago

> I could say that I saw this coming; the problem is that I’ve been seeing it coming for several years, and it keeps not arriving (and I don’t know if this is really it, even now.) This is me as well (not that I would compare my predictive prowess to that of a Nobel prize-winning economist). I started predicting the 2008 recession in 2004 (I was right about the reasons, but obviously waaaay off on my timelines). Naturally, it wasn't until I gave up on trying to predict a time for the recession to hit that it finally hit. Likewise, I've been predicting a permanent drop in the dollar's value since around 2005, when I started paying attention to the quiet movement to diversify oil transactions away from the petrodollar system. I'm at the point now where I'm reduced to the unhelpful punt: it will happen if and when it happens. So of course the point at which I give up trying to predict when petrodollar hegemony fails would make a fine time for it actually to happen.