A lot of countries have run a 2 currency system when their own becomes worthless.
Currently, Zimbabwe does with Zim dollars (worthless) and US dollars.
The soviet union was the best example. If you had a free market, the ruble was worthless. So they rationed goods to keep inflation down. That is you had a lot of money/rubles and it could buy stuff, but only a certain rationed amount and only certain goods. So inflation was “controlled”.
Now if you wanted more stuff, you needed US dollars.
When liberalization occurred in 1998, the ruble became worthless “overnite” (actually, it was worthless all along but it was disguised as having value by rationing).
So now the US may follow the same road with US dollars to buy rationed stuff domestically (think ruble), and these import certificates (us dollars in the old soviet union) to buy imported stuff like crude oil, or electronics.
Hi Staytrue, and thanks for your reply.
Russia and Zim are good examples.
But has a government ever exploited its own currency collapse to reduce financial debt accrued by commercial entities? Why else would 0 & Geithner agree to the Chinese proposal to abandon the dollar.
If the Banks swap dollars for some other currency before the collapse, they can pay down their debt for cents on the dollar after exchanging their new currencies for deflated dollars. Maybe the new administration is agreeable with this.
The problem with this scenario is that the Chinese paper is in US dollars, and they’ll take a hit. So the theory is problematic.
And like I say, I’m pretty ignorant of this and just trying to get wise.