[testing22321]

> They are not worth less in dollar terms. The same number of dollars will still settle next months mortgage bill, or tax bill regardless of what it may or may not exchange into Euros

By that logic you are saying if the US dollar to Euro went 10 to 1 or even 100 to 1 there would be no impact because the same number of dollars will still settle the mortgage or tax bill.

Surely there is a flaw in your logic.

[neilwilson]

Then explain the flaw.

We have a floating exchange rate. Explain how it gets to your disaster scenario given the flows.

The outcome has to come from the operation of the system doesn't it. So run through it.

[testing22321]

I didn’t say my disaster scenario was going to happen, I’m using it as an example to show that if it does, surely there will be an impact.

Like when you graph something and you say, ok, what happens as it approaches zero or infinity. We learn from the extreme cases and use that to inform our understanding of the middle ground.

In concrete terms, the US is not an island. It does not manufacture, grow and produce everything it needs. Many things are imported. If the US dollar keeps going down, all of those things get more expensive. The dollar number of the mortgage won’t go up (until it is renewed) but everything coming from outside the country will.

Currencies go up and down all the time, making things more or less expensive.