Devaluation

The time is right, or at least almost right. We're going in the right direction, but we're not there YET...

• Last week headlines told us that China is cautiously starting to sell off their US$-currency stock,
• It gets clearer by the day that the US-government debt (too big a number to pronounce) the US-government deficit (33%, compare that with the so much criticised dutch deficit around 5%), the US-trade deficit (nearly 31 bln US$ per october 2009), unemployment (the US says 9.5%, I say 15-20% counting 6-10% of people constantly on the road, moving from one job/place to another)

Much more figures could be given but this is sufficient: The US is headed in the direction of a (much) lower creditworthiness. And what happens when that happens? Right, one starts to think about devaluation... Beware, we're talking double digit devaluation here. I would expect something in the range 20%-40%!

As world trade and the US$ are so intertwined that disentangling the resulting knot would require the number crunching potential of all existing computers globally (let alone the programming and data part of this problem) that noone can tell what the consequences of such an act might be. Sure, the US$ would lose part of its value, sure, US-debts can be repayed easier and also: sure, every foreign investment in the US must be capitalized at a much lower value than before (e.g. in Euros).

Is this the most probable scenario? It would be like a massive Marshall plan in reverse at the expense of US-foreign millions of savers and investors. Therefore: I don't think so (and, planners and decision makers beware: there will be instant civil/global war against you if you decide not to act).

What will happen of course is the instant devaluation of Euro, Yen, British Pound and Yuan, exactly equal to the devaluation of the US$. In this way (practically) nobody will be worse off, everything stays the same (financially) and the US still has to think of a better way to deal with the fact that they overconsumed, overspent, undertaxed etcetera for the last 50 years. It would be pathetic if their answer would be: Yes, we can...