Project Syndicate/Kenneth Rogoff/11-10-2020
“Core dollar exchange rates have so far been surprisingly stable during the pandemic, most likely because major central banks’ policy interest rates are effectively frozen at or near zero. But although the current stasis could last awhile, it will not last forever.”
USAGOLD note: Another component to the real rate equation along with declining rates is rising inflation, or even rising inflation expectations. The fact of the matter is that it is not just the dollar we need to worry about but the value of fiat money across the boards and the fiat money system itself. “The current stasis,” says Rogoff, “will not last forever.” He reminds us that “A parallel problem eventually led to the breakup of the post-war Bretton Woods system of fixed exchange rates, a decade after the Yale economist Robert Triffin first identified it in the early 1960s.” His full analysis at the link is worth a visit.
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