>I hypothesized that if the dollar were devalued, our debt would
>become less expensive, but I was just stupidly translating what
>happens when other currencies are devalued into our own case.
>
>Thinking about it a little more closely, since our debt IS measured
>in dollars, it wouldn't be affected by the devaluation per se, but
>it would be affected if interest rates climb in order to halt
>capital flight. In that case, financing the debt would become more
>expensive, right?
Yup.
And, as Ed "Newsboy" Hyman put it this morning, "What a box! Fed tightening [which would be the orthodox way of defending the currency - ed.] might be perceived to weaken the recovery and therefore have the perverse impact of weakening the dollar."
Doug