What Timmy, Bernanke and Paulson are doing to us.

Is the dollar doomed ?  is the title of Market Tickers instructive post:  http://market-ticker.denninger.net/

Excerpt:

Bernanke, Geithner, Paulson and both administrations seem to believe that because The Dollar is the world's reserve and trading currency that they can ignore these lessons of history and get away with it.

I'm skeptical, for the simple reason that if you look at the issue in terms of what people are doing, as opposed to saying, they are all moving out of dollars and into other things. The dollar's reserve currency status isn't a function of The US "military might" (until and unless The US is willing to start flinging nuclear warheads around, which I more than somewhat doubt) it is a function of the US maintaining sustainable monetary and fiscal policies.

Again, for the mathematically-challenged, consider the following story.

Many years ago there lived a monarch in India who ruled that all of the people must store their 90% of their rice harvests with him for safekeeping, so in the event of famine there would be enough rice to eat. 

One year a famine hit but he refused to release the stored rice, fearing that he would run out and starve himself.

After a couple of months a clever girl came to the monarch and asked for one grain of rice, and for the next month to double it each day.

The Raja agreed, and shortly discovered the magic of exponents, much to his chagrin.

On the first day, he gave 1 grain of rice.
On the second, two.
On the third, four.
On the fourth, eight.
On the fifth, sixteen.
On the sixth, thirty-two.
On the seventh, sixty-four.
On the eight, 128.
On the ninth, 256.
On the 10th, 512.
On the 11th, 1024.
On the 12th, 2048.
On the 13th, 4096 (it was now taking a while to count!)
On the 14th, 8192
On the 15th, 16,384 (The Raja now knew he was in trouble)
On the 16th, 32,768
On the 17th, 65,536
On the 18th, 131,072
On the 19th, 262,144
On the 20th, 524,288
On the 21st, 1,048,576
On the 22nd, 2,097,152
On the 23rd, 4,194,304
On the 24th, 8,388,608
On the 25th, 16,777,216
On the 26th, 33,554,432
On the 27th, 67,108,864
On the 28th, 134,217,728
On the 29th, 268,435,456
And on the 30th, 536,870,912

Needless to say before the 30th day the village was quite-well fed and the Raja was the one who went hungry.

But I want you to pay special attention to the above table, which is why I reproduced it all - most renditions of this story do not.

Notice that on the 29th day the girl was due more rice than had been paid to her in all of the previous 28 days. This is also true for each day in the series - a fact that you need to think about for however long it takes to sink in.

This is the fundamental truth of all exponential (or "power") functions. It is a mathematical truth, not a theory or possibility...."