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For the Love of Money Is the Root of All Evil
During credit scarcity and debt defaults, the man with spend able pocket cash is king, while others barter, beg, borrow and steal. Unlike the US Dollar, neither the Peso nor Ruble was a world reserve trade currency, and was thus easier to repudiate.
Generations of experience show credit and debts defaulted first with higher interest rate usury people could not afford or service. This led to the sale of assets to pay bills and debts and raise cash. The sale of assets leads to lower prices and more defaults in all but cash owners.
Currencies hyperinflated and devalued much later, as failed attempts to restart failing economies.
The gold standard confiscation and 69% overnight currency devaluation of 1933 saw just a 3% temporary blip in falling cost of living. The 86% devaluation of the US Dollar from 2001 to 2008 relative to gold saw a much lower 1.8% increase in the cost of living led by a 4.1% increase in the price of energy. Both times there were widespread official denials of devaluation and deflation. It took years before people realized unemployment was increasing and they were in depression, not recession.
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
http://www.bls.gov/news.release/cpi.nr0.htm
After recent private and public warnings from surplus trade partners holding US currencies and Treasury IOUs, any further attempts to devalue the dollar would result in severe global consequences. Having seen Steel Trade problems, the Federal Reserve Chair and Treasury Secretary know this, although they are unlikely to admit it publicly for fear of any more quicker market corrective declines.
http://en.wikipedia.org/wiki/List_of_countries_by_current_account_balance
The irony is that a quicker market correction repudiating bad debts is just what our economy needs to correct and recover, although masters of the universe with economic PhDs or Nobel Prizes may be loathe to admit it. How ironic that they most advocated central planning and least trust free markets while giving them lip service.
