Comments on: How the US may avoid inflation - The nuclear option http://www.capital-flow-watch.net/2009/05/15/how-the-us-may-avoid-inflation-the-nuclear-option/ Conservative economic commentary from the top-down Fri, 23 Jul 2010 19:34:57 -0400 http://wordpress.org/?v=2.9.1 hourly 1 By: John Schroyhttp://www.capital-flow-watch.net/2009/05/15/how-the-us-may-avoid-inflation-the-nuclear-option/#comment-184 John Schroy Sat, 16 May 2009 23:48:13 +0000 http://capital-flow-analysis.com/capital-flow-watch/how-the-us-may-avoid-inflation-the-nuclear-option.html#comment-184 Third World and Eastern Block countries usually default on dollar debt, <em>not in debt in their own currencies</em>. The US Treasury can pay its bonds (denominated in dollars) simply by issuing a check, which the Federal Reserve will make good by creating Federal Funds in a bank account. <br /> <br />  The Federal Reserve has an <strong>unlimited</strong> supply of dollars because it can create them at will. <br /> <br />  However, if the US had debt in Euros or Yen, then there could be a problem. But that is not the case. <br /> <br />  This is the big advantage of the dollar being the world's reserve currency. Third World and Eastern Block countries usually default on dollar debt, not in debt in their own currencies. The US Treasury can pay its bonds (denominated in dollars) simply by issuing a check, which the Federal Reserve will make good by creating Federal Funds in a bank account.

 

The Federal Reserve has an unlimited supply of dollars because it can create them at will.

 

However, if the US had debt in Euros or Yen, then there could be a problem. But that is not the case.

 

This is the big advantage of the dollar being the world’s reserve currency.

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