/biz/ - Business & Finance

>>1474806
dollar devaluation. The dollar is a reserve currency because it's stable and foreigners hold huge dollar reserves as a result. This can easily create a feedback loop, where a devalued dollar leads to even greater inflation, since foreigners have no implicit need for dollars and will dump them if it looks bad.The timeline could look something like this:

>Recession
>Fed launches QE4, which they've already said will be 2-4 trillion
>Doesn't work, so they bail out the banks and drop interest rates negative
>Meanwhile inflation starts to spike, at this point they will have printed 1/4 of GDP within about a year, Foreign holders are beginning to sell off dollars as the trend becomes apparent.
>Federal funding dries up as new treasury auctions have no buyers. Direct debt monetization by the Fed begins in order to keep the lights on.
>They're faced with a choice: Raise interest rates to control inflation and force the government to default on it's debt since it can't even afford to service the it above 2.5% or just stay the course and inflate the debt away. "inflationary escape".
>At this point, it doesn't matter which option they choose, the dollar is worthless as both the direct default or gradual inflation have the same final effect.