Tequila,
That is a solid answer to the question of why they do this. Indeed, it pretty much the ONLY credible explanation that economists can come up with these days. It is just economic intertia, the natural coninutation of an unbalanced economic policy until it blows up on somebody.
This state of affairs continues at the moment because of their desire for "stability." Because no dollar crisis has erupted, it is assumed by the government that this can just continue forever. Taking preventative measures would likely cause some pain, and better to shift that onto the next guy who follows along, if it is in fact, needed at all.
Allow me to use an analogy here. Picture a tranquil Alpine setting. All the towns and villages are down in the valley. Snow keep falling and falling in the mountains in the higher elevations. Alert people down below are nervous about this and warn of a massive avalanche if things continue. They are scoffed at by the others, "Don't you see it is different this time because (fill in your own explanation). And everyone goes about their business. Bold weathermen have attempted to climb up higher to measure the snowpack to try to measure how much can be accumulated before the avalanche triggers, but even they admit that this is impossible because there are too many variables and unknowns involved to confidently predict the breaking point. But from merely looking at historical examples, they know such a point exists, and we are past points where it has occured in recorded history. Down in the valley, it all seems great... except for these irritating worry-wart weathermen who seem to be crying wolf all the time about the record snowfalls up in the mountains.
Doesn't this end in a dollar crisis? And then the Federal Reserve has to either allow the value of the dollar to crash against foreign currencies and gold, or ratchet up interest rates to very high levels to defend the value of the currency? Pick your poison, so to speak. That's where these sort of circumstances always led in all the economic classes I ever took. The crazy thing is that we have seen this movie before in the runup to the collapse of the Bretton Woods system. Hello 1970s all over again?
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