Yeah, I don't really get that either. If push comes to shove and we (the US) devalue our currency, then all the other foreign debt holders are left holding the bag while we just suffer through a couple years of recession.
Exchange rates are indeed set by markets, but then all a central bank has to do to devalue its currency is to sell its own currency for another (or buy assets denominated in another currency, which is essentially the same thing with extra steps)
At the crudest level, what do you suppose would happen if the U.S. Treasury/Federal Reserve suddenly decide that every dollar-denominated account of $n got a "stimulus payment" of $2n?
That’s a very indirect way to devalue a currency for foreign exchange purposes. Sure, you’d be massively increasing that supply, but it’s doesn’t necessarily follow that said supply would flow directly into forex markets.
Usually beneath the veneer of such questions it seems to be some sort of libertarian/crypto fan/anti fiat currency ideologue. Rarely based on sober analysis.
I think it would represent a fairly strong change in global power structures, but like you I don’t think the sky would fall.
It's quite a long read, but I can tell you it doesn't come from a libertarian perspective. It does touch on Bitcoin, but near the end in one of a few theoretical "where things could go" perspective.
>"I think it would represent a fairly strong change in global power structures, but like you I don’t think the sky would fall."
Agreed, it would be shocking but life would go on. We would just have to live with a new international monetary paradigm.
I’ve read Alden’s analysis before. I can’t say that I have found any particular weaknesses with it.
But as she says, such a change could take place in different ways, with different implications. If it were to happen suddenly it would be a shock, but that isn’t necessarily the case.
Most signs point to a multipolar world order isn’t he future, and outside a complete internal political collapse, the US would in all likelihood be one of those poles.
Against what, and by what means?
(Perhaps naively) I'd always assumed the markets decide the exchange rates of (most) Western currencies against each other.
Obviously with a dollop of central bank intervention here and there(!)