Is the collapse of the dollar inevitable?

ARealConservative said:

Inflating the way out of a banking panic isn't that different though. If the only way to protect your money is to make it worth 10 cents on the dollar, is your life savings actually being protected, or is it simply being eroded?

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On this point, I strongly agree with you. Resorting to the printing press would be a disastrous exercise. It would fuel economically-destabilizing inflation. It would undermine foreign lending to the U.S. at a time when the U.S. is continuing to run enormous current account deficits and a growing federal budget deficit. Such an approach would also undermine economic growth in numerous developing countries that peg their currencies to the U.S. dollar and potentially shatter the dollar's role as the world's reserve currency. That development would have profound and substantial negative global consequences.

So where's the $85B coming from? Did we suddenly discover a pot of gold somewhere? What's backing the bailout?

American said:

So where's the $85B coming from? Did we suddenly discover a pot of gold somewhere? What's backing the bailout?

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The same thing that has backed every new expenditure since taxes were slashed earlier this decade: debt.

American said:

So where's the $85B coming from? Did we suddenly discover a pot of gold somewhere? What's backing the bailout?

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The $85 billion came from the Fed's own balance sheet, on which there was about $480 billion available for loans immediately prior to the agreement to provide credit to AIG. The $700 billion package will be financed by borrowing (mainly short-term Treasuries).

Warm up the presses.

Iriemon said:

The same thing that has backed every new expenditure since taxes were slashed earlier this decade: debt.

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I recall even as far back as the early 80’s the Grace Commission reported that internal revenue does nothing but service the interest on our debt.

And to go a step further, our monetary system itself is based on debt, although I know the preferred mainstream term is it is based on credit…..from my perspective it matters little.

ARealConservative said:

I recall even as far back as the early 80’s the Grace Commission reported that internal revenue does nothing but service the interest on our debt.

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I'd have to see the report. it was not true at the end of the 90s. It is true now, where $1/2 trillion deficits are equated to $1/2 trillion interest expense.