But we do know what value the world places on a unit of usd in the forex markets.
We know that value today. We don’t know what that value will be tomorrow.
Longer term not investing in your country’s prosperity like infrastructure, education, health and the environment are what will erode any value if your currency. Austerity is what permanently erodes long term growth.
If only matters were that simple. They’re not. Currency values can also be eroded by large account deficits; we see that occurring around the world all the time.
There is a school of thought that says that the value of the USD is immune from both debt and deficit. I’m not a member of that school.
Austerity (sighs) has unfortunately become a buzzword that demands it be defined every time it’s used. I agree with you that long term austerity at the expense of long term investments in the key assets of infrastructure and human capital is detrimental to value. Over the long term. I would not agree that this general concept means that budgets should never be cut in the face of increasing deficits. The term “austerity” is being thrown around way too commonly as a pejorative these days, used against any proposal that even does so little as to decrease the growth rate of a pet project a politician likes.
Remember government debt is just the dollars in circulation.
I don’t know what that means. Government debt is the sum of all unpaid government liabilities; long term obligations (such as SS and Medicare) are generally omitted from the calculation. It has nothing to do with “dollars in circulation”.