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I'd make a small clarification: While it is true that everyone can't devalue at once in terms of relative exchange rates, everyone trying to devalue at once can
by fpgeek 12y ago
I'd make a small clarification: While it is true that everyone can't devalue at once in terms of relative exchange rates, everyone trying to devalue at once can still be useful. In that case you'd get worldwide inflation (arguably currencies devaluing vs goods), which is exactly what a depressed global economy would need.
- Lazare 12y agoMmm, that's a good point. Really, the bottom line is that countries routinely devalue when they get into trouble, and it serves them in good stead. Even during the great depression, there was a clear correlation between how soon the country dropped off the gold standard (and thus devalued) and how quickly they began to recover. (Britain did so quickly; the US did so slowly.)