Home > Off Blog, political-economy > A real time view of the crisis as it unfolds…

A real time view of the crisis as it unfolds…

September 22, 2010 Leave a comment Go to comments

Above is a currency strength heatmap created by Zero Hedge. This heat map shows the relative strength of the dollar to other currencies. The countries in green are seeing the dollar weaken against their currencies, while those of a more reddish hue are seeing the dollar strengthen against their currencies.

As you can see, the dollar is weakening against almost all other currencies.

Devaluation can be a means of gaining an advantage over your competitors. It can also be a means of defaulting on your debts, provided all of your debts are denominated in your own currency, by paying your creditors in cash that is worth less than it was when you incurred them. Finally, it can be a means of impoverishing your own population by depreciating the purchasing power of their wages.

As you can see from the map above, the US is impoverishing the entire planet by eviscerating the purchasing power of its currency. It is doing to every country what Greece, Spain, Ireland, etc., are doing to their own populations — squeezing them unmercifully. It alone can do this, among all countries, because its currency is the world’s default currency.

However, merely devaluing your currency is not enough — even if you own the world’s reserve currency. What is required is not merely a monetary devaluation, but a real devaluation — productive employment must collapse, factories must be mothballed, money capital must lie idle, the real prices of goods must fall.

Moreover, even this will not stem the crisis: beyond the collapse of productive activity, the actual waste of social resources — in the first place labor — must definitely increase. Hence, even as productive assets are devalued, speculative debt must increase even faster.

Finally, capital must be exported to those places — mostly shown in gray — where the market in labor power may have the greatest likely return on investment.

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