In a NYT article esteemed NYU Stern professor Nouriel Roubini discusses the falling prestige of the dollar and the inevitable elevation of the Chinese RMB to the world’s de facto reserve currency. In attempting to adapt his explanations to the general public, he completely butchers his reasoning, and instead says something completely wrong.

He claims that “we have been able to issue debt in our own currency rather than a foreign one, thus shifting the losses of a fall in the value of the dollar to our creditors,” forgetting that an external cost such as currency exchange loss or gain is incorporated into the demand-and-cost calculations of the buyer and the seller, in expectation. That is, since foreign investors knew that there was a possibility of a currency loss, the demand was adjusted accordingly to the expected return with currency fluctuations priced in (plus some factors for risk aversion), so the seller (US Government) would be facing a weaker demand than would have been the case for a safer environment.

He then claims that “waving commodities priced in dollars has also meant that a fall in the dollar’s value doesn’t lead to a rise in the price of imports,” which is another form of the same mistake–forgetting that in expectation, the currency is just a veil. In economics terms, if it costs me 20 Pounds to produce a barrel of oil when teach dollar bought exactly a pound (making oil 20 dollars/barrel in cost for me), it does not still cost me 20 dollars/barrel when the dollar is worth 50 cents. Assuming other costs are constant, the cost of oil production in a local currency still being 20 Pounds/barrel, the cost has risen to 40 dollars/barrel.

Therefore, Americans are not immune to the effects of dollar devaluation and currency loss, as economics professor Nouriel Roubini claims.