Zeev's Turnips Patch-No Politics (ZEEV)

[ardent jd]

Dan,

Although I'm a fan of Russell, I've never understood this argument of the unwinding of the debt bubble being good for the dollar. If debtors have a synthetic short position in the dollar, why aren't creditors also long, and don't these positions have to be unwound together?

OTOH, when and if the debt begins to be repaid, it would be deflationary (since credit is money), which should theoretically be good for the dollar. But the dollar's reserve currency status guarantees that debt outside of the US would also decline, eliminating the positive effect on the dollar.

I'm still betting the dollar goes down and gold goes up...BWDIK.