That's what the Reserve Bank of Australia's head of International Department Chris Ryan told the Westpac & Global Pensions Currency Forum in Sydney yesterday.
Sounds like a thrilling event, wish we could have been there. But never mind. So, when you buy a US dollar are you really getting a US dollar? It's a bit of an abstract concept and we don't claim to be smart enough to give the definitive answer.
Despite that, something about the comment - and granted it was probably just a throw-away line - doesn't quite ring true.
The front of a US paper note claims that "This note is legal tender for all debts, public and private."
The problem is that even though the supply of money in the US has increased exponentially in recent times there is still not enough actual cash in circulation to come anywhere near paying off its debts.
If you add together currency, demand deposits, and cash held at financial institutions in checking and savings accounts the total amount comes to about USD$5.5 trillion. Give or take a few billion here or there.
That's compared to a government debt level of over USD$10 trillion. And that doesn't even take into account private sector debt in the US. For that you need to add on about another $45 trillion.
In other words, for all the 'cash' that is floating around in the form of US dollars (and its equivalent) there is about ten times as much in the form of liabilities. You only have to look at bank balance sheets to see the confirmation of that, where bank liabilities almost equal their assets.
So in very (and we do mean very) basic terms, when you buy a US dollar you aren't really getting an asset. You are in fact buying a leveraged bank note. A note that is leveraged to the tune of 10 to 1.
In other words, when you buy a US dollar, in actual fact you're getting about 10 cents!
What does that mean to you? For a start it probably means that in the long term holding US dollar assets isn't such a smart move.
Take a look at the table below...
It gives you a good picture of how much the US dollar has been devalued in its own terms over the years. Now let's not worry about going all the way back to 1774, that's about as useful as the long term investment charts showing how much you would have made if you had bought shares in 1898.
But take a look at how the currency has been devalued in more recent timeframes. Since 1980 the US dollar has been devalued by 62%.
More recently between 1990 and 2008 it has been devalued by 40%. And since as recently as 2000 it has been devalued by over 20%.
That's a direct result of the erosive qualities of inflation. And remember that inflationary policies are what the US government and Australian government is promoting now by encouraging a spend, spend, spend attitude when consumers and markets are trying to preserve the value of capital.