From: fierro@uts.amdahl.com (Doug Fierro)
Newsgroups: sci.econ,misc.invest
Subject: need details on devaluating U.S. currency
Date: 3 Sep 92 01:48:08 GMT
Reply-To: fierro@amdahl.uts.amdahl.com (Doug Fierro)
Distribution: usa
Organization: Amdahl Corporation, Sunnyvale CA


  Can someone help me out with some specifics on devaluation of the
U.S. dollar.  It is my impression that only the U.S. can devaluate
U.S. currency. 

  1) How exactly does the government devaluate the dollar?  Do they make
     some sort of announcement that $1 is now worh $0.80 or do they 
     "print" (buy debt) or circulate more dollars into the economy?
     If the Treasury just puts more dollars into circulation, do they
     announce a target percentage devaluation or is it decided then by
     the world market?

  2) When was the last time the dollar was officially devaluated? Was it
     in the early '70s (under Nixon)?

     2a) Did any countries follow suit and devaluate their currency as well
         during that time?

     2b) Do you think the U.S. might do it again in the near future (after
         the November election)?

     2c) will this push the price of gold up?


  3) What are the chances that the U.S. will collect existing currency and
     re-issue new currency if a devaluation were in fact to take place?  I 
     only ask this because my Mom heard Nth hand that a friend who works for 
     the Treasury says that they are bulk ordering a new ink that might be 
     used for new bill circulation (she gets these ideas.. :-).  I'm sure 
     this is a wild rumor but it would be interesting to know if the U.S. has
     done something like this in the past- like leaving the gold standard?
     I'm not sure what issuing new bills would accomplish since the dollar
     is a truly fiat form of currency with no real worth without the backing
     of the government (and confidence of consumers).


  It seems to me that devaluation of the dollar doesn't affect people much
if they are not buying anything outside of this country- i.e. their salary,
car loan, mortgage, etc. won't appear to change much, but if they want to
buy that Mercedes or French wine or round-trip ticket to Tokyo the cost
will be much more than before the devaluation took place.  So if this is
true, then if other leading countries decide to devaluate their currency
as well, does that defeat the purpose and can it lead to a devaluation war?
I can see that devaluating one's currency makes their products more attractive
to purchase by foreigners, but the trade-off is foreigners will not want
to invest much in that country, and I don't believe the U.S. can afford to
start discouraging foreigners from buying our debt in our current situation.
But then again, if the U.S. can cut it's debt enough by devaluating the
dollar, it might be an acceptable trade-off.  If this is not entirely correct
let me know- details of course where I went wrong :-)


  Thanks for any info!


   Doug
-- 
                                                     Doug Fierro
                                      |\             UTS System Software
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Newsgroups: sci.econ