CEPR - Center for Economic and Policy Research

Multimedia

En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Washington Post Makes Debt Default Sound Attractive

Washington Post Makes Debt Default Sound Attractive

Print
Tuesday, 08 October 2013 04:45

According to the Washington Post, a debt default would have some clearly positive outcomes. Specifically it told readers that it would weaken the United States position as a financial safe haven for the rest of the world.

This would have two beneficial effects. If less money flowed from elsewhere in the world to the United States this would reduce the value of the dollar relative to other currencies. This has in fact been a stated goal of both the Bush and Obama administration, which both claimed that they wanted to end "currency manipulation." Currency manipulation means that other countries are deliberately buying up dollars to raise the value of the dollar against their own currency.

The effort to end currency manipulation is an effort to lower the value of the dollar. If investors stop buying dollars because it is no longer a safe haven, then this would lower the value of the dollar in the same way that if foreign central banks stopped buying dollars to "manipulate" the value of their currency, it would lower the value of the dollar. In other words, people who would applaud the end of currency manipulation should also applaud the ending of the dollar as the world's safe haven currency.

The other positive part of this story is that such a shift would lead to a downsizing of the financial industry in the United States. This would allow the resources in the sector to be reallocated to more productive sectors of the economy. It would also reduce the power of the financial industry in American politics.

A debt default may still be a bad story, but the vast majority of people in the United States have little to fear from the ending of the dollar as a safe haven currency.

Comments (6)Add Comment
Bad
written by Last Mover, October 08, 2013 6:57
The other positive part of this story is that such a shift would lead to a downsizing of the financial industry in the United States.


If you think the financial crisis is bad ...

If you think the great recession is bad ...

If you think government shutdown is bad ...

If you think debt default is bad ...

If you think currency manipulation is bad ...


... then you don't know what bad is.

Downsizing the financial sector of the United States of America.

Not that's bad.
If I Crash My Car, I Can Save Money on Gas!
written by Paul Mathis, October 08, 2013 12:26
Have teenagers taken control of the WaPo?

Is John Boehner really Homer Simpson?

Inquiring minds want to know.
If I Quit My Job, I Won't Have to Commute to Work.......
written by widgetmaker, October 08, 2013 1:05
If I Put My Children Up for Adoption, I No Longer Have to Feed Them and Pay for Their Education........

If I Commit a Crime, I Can Go To Prison and Don't Have to Support Myself......

If We Abolished the Government, We Would No Longer Have to Deal with Those Pesky Regulations........



...
written by watermelonpunch, October 08, 2013 1:44
I guess this shows who the Washington Post writes for...
The big wigs in the financial sector.
But They're Liberal!
written by Bart, October 08, 2013 6:40

Justice Scalia is still living in the Bradlee era with respect to the Post.
...
written by watermelonpunch, October 08, 2013 11:33
@ Bart

Many Democrats are big wigs in the financial sector, and many in the financial sector are Democrats.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.

busy
 

CEPR.net
Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

Archives