$53 Trillion and Growing

[LegendKiller]

Originally posted by: lozina

Originally posted by: LegendKiller

Originally posted by: lozina

Originally posted by: RY62

Originally posted by: babylon5
No President/Congress will fix it, politically most Americans will not make the sacrifice. We want keep delaying it until it's too late.

We will sail our Titanic until it hit the ice and put a hole in our economy. And that is just the way most Americans-Like-It!

Just curious...when was the last time our government had a balanced budget and who was president at the time? Who controlled congress?

Basically, we only started getting persistent debt after the Federal Reserve was formed. Before that we had short term debts for wars. Then on top of that, since 1971 when the gold standard was abolished- well... just take a look at this chart to see for yourself:

http://www.cedarcomm.com/~stevelm1/usdebt.htm

Oh but Ron Paul and his economic ideas are crazy. :roll:

Yes, because the Fed controls Congress....

Keep your theories in scope.

No, because Congress has to indirectly borrow from the Federal Reserve instead of just issuing it's own money like it used to and the Constitution prescribed

There wouldn't be any difference. They'd tax and spend just the same. The Fed only represents the Treasury in issuance of FRNs, but as far as debt goes, it's still issued by the Treasury, which funds based upon the needs of the country. Congress doesn't borrow from the Fed, per say, and any amounts that the Fed holds in US debt and is paid to the Fed, are given back to the government. In essence, the Fed is nothing more than the grease of the system, not the system itself. Your portraying the Fed as the lender is misleading, since only a portion of the outstanding debt is held by the Fed, the remainder is held by everybody else.

The last thing you want is Congress having control of the monetary supply.

Place your blame where it belongs, with voters. Voters are the ones who want more services but less taxes. Voters vote in Congress, Congress passes spending which is signed by the voter designated president. Voters tell Congress not to raise taxes. Thus, the treasury only takes in X, but only has Y to fund it. X - Y = D, debt. Debt is issued by the treasury to fund the remainder of the liabilities.

The Fed only prints the dollars the represent those liabilities to a certain extent, since not all liabilities are represented through FRNs.

Furthermore, your measurement is in today's dollars. If you adjusted historical debt to today's dollars the graph would be a little different, not much granted, but different.

The real evil is in spend and not tax politicians. They treat our money as bargaining chips to maintain good favor with the populace. The populace doesn't care, since they aren't taxed for the goodwill, at least not yet.

A perfect example is the WoF, which has cost ~1Tr. Did the Fed cause the 1Tr in debt? Did the fact that Congress doesn't issue dollars directly affect whether 1Tr in debt was issued? No, the Fed has nothing to do with the situation.

Put blame where it belongs.

 

[SoundTheSurrender]

Ron Paul is talking about it. As far as I know he's the only one that's concerned about it.

 

[lozina]

Originally posted by: LegendKiller

Originally posted by: lozina

Originally posted by: LegendKiller

Originally posted by: lozina

Originally posted by: RY62

Originally posted by: babylon5
No President/Congress will fix it, politically most Americans will not make the sacrifice. We want keep delaying it until it's too late.

We will sail our Titanic until it hit the ice and put a hole in our economy. And that is just the way most Americans-Like-It!

Just curious...when was the last time our government had a balanced budget and who was president at the time? Who controlled congress?

Basically, we only started getting persistent debt after the Federal Reserve was formed. Before that we had short term debts for wars. Then on top of that, since 1971 when the gold standard was abolished- well... just take a look at this chart to see for yourself:

http://www.cedarcomm.com/~stevelm1/usdebt.htm

Oh but Ron Paul and his economic ideas are crazy. :roll:

Yes, because the Fed controls Congress....

Keep your theories in scope.

No, because Congress has to indirectly borrow from the Federal Reserve instead of just issuing it's own money like it used to and the Constitution prescribed

There wouldn't be any difference. They'd tax and spend just the same. The Fed only represents the Treasury in issuance of FRNs, but as far as debt goes, it's still issued by the Treasury, which funds based upon the needs of the country. Congress doesn't borrow from the Fed, per say, and any amounts that the Fed holds in US debt and is paid to the Fed, are given back to the government. In essence, the Fed is nothing more than the grease of the system, not the system itself. Your portraying the Fed as the lender is misleading, since only a portion of the outstanding debt is held by the Fed, the remainder is held by everybody else.

The last thing you want is Congress having control of the monetary supply.

Place your blame where it belongs, with voters. Voters are the ones who want more services but less taxes. Voters vote in Congress, Congress passes spending which is signed by the voter designated president. Voters tell Congress not to raise taxes. Thus, the treasury only takes in X, but only has Y to fund it. X - Y = D, debt. Debt is issued by the treasury to fund the remainder of the liabilities.

The Fed only prints the dollars the represent those liabilities to a certain extent, since not all liabilities are represented through FRNs.

Furthermore, your measurement is in today's dollars. If you adjusted historical debt to today's dollars the graph would be a little different, not much granted, but different.

The real evil is in spend and not tax politicians. They treat our money as bargaining chips to maintain good favor with the populace. The populace doesn't care, since they aren't taxed for the goodwill, at least not yet.

A perfect example is the WoF, which has cost ~1Tr. Did the Fed cause the 1Tr in debt? Did the fact that Congress doesn't issue dollars directly affect whether 1Tr in debt was issued? No, the Fed has nothing to do with the situation.

Put blame where it belongs.

I'd rather have the power in Congress whose operation is far more transparent and whose members are accountable to the people. There are only a few positions on the Fed which are held by [appointed-not elected like Congressmen] officials. The rest are members of member banks.

And with a gold standard it would not be possible to borrow infinitely as it is now

The Fed + the lack of a gold standard is the equivalent of a credit card. Now suddenly instead of having dollars in our pockets or gold in our vaults we can spend our hearts out. And there's virtually no consequences for it! Sure we have to pay this interest fee to the credit card company but who cares! I can buy that 45" LCD now!

 

[Jaskalas]

Topic Title: $53 Trillion and Growing

How is our debt 6 times our deficit?

 

[LegendKiller]

Originally posted by: lozina

I'd rather have the power in Congress whose operation is far more transparent and whose members are accountable to the people. There are only a few positions on the Fed which are held by [appointed-not elected like Congressmen] officials. The rest are members of member banks.

And with a gold standard it would not be possible to borrow infinitely as it is now

The Fed + the lack of a gold standard is the equivalent of a credit card. Now suddenly instead of having dollars in our pockets or gold in our vaults we can spend our hearts out. And there's virtually no consequences for it! Sure we have to pay this interest fee to the credit card company but who cares! I can buy that 45" LCD now!

Yes, Congress has shown such restraint and foresight into keeping the debt into managable levels that they should be given power over money. The Fed governors set policy for the Fed banks and control the rate at which the banks lend. Both the governors and the chairmen, are answerable to Congress. The remainder just carry out the policy.

Ahh yes, here we get down to the same old foolish argument. Don't you gold idolators ever get tired of this stupid thing? Don't you realize that gold cannot back all of the wealth generated in the past, present, and future of the world? Do you not realize that it has many more problems than solutations? Of course not, because you are wrong and no matter how many times you are told that, you go on believing foolish blogs and stupid conspiracies. Yet, I will in vain, try again!

1. The gold standard is deflationary by nature, deflation is even worse than inflation.

2. If we had as much gold as needed to fund even our current (forget debt) needs of currency, then there'd be no gold left in the world. Gold would be thousands per unit and industries would collapse.

3. Gold doesn't give you any ability to deftly manuver an economy out of inflation. Yes, inflation is caused by not just issuance of currency, but also by input influences, local disturbances, and other factors. If inflation were only caused by the removal of gold, then why was there inflation before we removed ourselves from gold? If inflation were only caused by a fiat currency, then why are some goods inflated faster than others? For example, why has milk increased in cost by more than cili powder?

This is where your gold idolism breaks down. YOu seem to think that the vast majority of inflationary pressures are caused by a monetary supply greater than the increase in population. You forget that inflation has dozens of variables, with monetary supply but being a minority cause.

Gold idolation is foolish and ignorant as to the reality of the situation. The reality is that a managable and steady rate of inflation is good. This is as opposed to wild inflation, deflation, and other instability. To maintain a steady economy and adjust for short-term issues, the ability to change the money supply (aka, adjust the rate of interest), is essential.

See, everybody in the first world and even 2nd and 3rd (who aren't despots like Chavez, or poorly run countries like what Argentina back in the 80s and 90s) has recognized this *fact* but conspiracy theorists and old-school gold idolators. They realize that modern economies must have stability and ease of transaction to maintain their ability to transact, ease in investments, and transparency. They also realize that if every economy backed it's currency by gold, then all of the gold in the world would be held by the biggest economies. In fact, the price of gold would be continually adjusted upwards, driving massive deflation and eventually turmoil in the markets as nobody would know the true value of goods.

Yet, somehow, you will have a 2 sentence, marginally witty, reply to this thorough and well researched analysis. I haven't included everything, nor do I remember all of the details, but it is a good summary. However, you'll not listen and you'll just ignore it, or move on, only to return to this discussion in a few weeks time. In which I will just copy and past this (date right now is 1-10-08 to mark the occasion) post in the attempt to squelch yet more unoriginal, ignorant, and contrived ideas.

You see, what I find immensely amusing about this situation is, I have done this dozens of times on many forums. Many supposedly enlightened RP bots post tripe and fail to back it up after I appear. That's because you, in reality, are not enlightened, but merely take your spoon fed trash from the internet, reading fringe Blogs and Ron Paul material, yet not even bothering to explore past that for a well-rounded viewpoint.

In essence, you attempt, in your zealous fervor, to "enlighten" the population, when, in fact, you are the one who needs to be enlightened.

 

[CitizenKain]

Hey, the gold standard argument again. No matter how many times people tell you its stupid, you keep bringing it back. What other countries are on the gold standard, and how many of them are first world countries? Nevermind that our economy outstrips all the gold that has been mined should be a clue that it wouldn't work. But here we go again.

 

[BoberFett]

lozina

The problem with a gold standard is that gold supplies are not controlled solely by the US. A monetary policy I've often wondered about would be using population to determine the ideal money supply.

 

[bamacre]

LegendKiller, what do you think about "competing currencies?"

I have heard Paul and others talking about this. Honestly, I don't understand how this works.

 

[bamacre]

Originally posted by: lozina
And hope your kids won't suffer a miserable fate if this all comes crashing down on them

They will. There is no way our country will exist as is 30 to 40 years from now, unless major changes are made.

 

[1EZduzit]

How about we go to the uranium standard? Then whoever was smart with there money would end up owning all the nuclear fissionable material and we could finally get a true global economy with little to no fear of nuclear war because it would be too valuable to waste.

 

[Slew Foot]

Something Ive never really quite grasped...

Why is deflation worse than inflation? It seems that as long as purchasing power is the same, neither one is particularly bad, its just different numbers tossed about.

 

[LegendKiller]

Originally posted by: bamacre
LegendKiller, what do you think about "competing currencies?"

I have heard Paul and others talking about this. Honestly, I don't understand how this works.

If you had a ton of money to invest and you were Japanese, would you go with a country/economic zone that had 1 currency, one central bank that controls that currency, one direction of the currency, one relatively transparent set of motivations and leadership, and one currency in which all goods are transacted, including investments, goods and services, and all of the "grease"?

Or

Would you go with a country/economic zone with "competing currencies" where informational gaps occur constantly, nobody knows all of the directions of the currency, arbitrage is rampant as people can buy a cow in Texas for 100 texans and sell it in Minnesota for 100 minnesotans, which is worth 110 texans and all other transactional costs = 1 and arbitrage profit = 9, where inflationary concerns are different, where any moron can start a currency, where the economy has no direction or major influence, since not one entity can control an interest rate to throttle the economy, where motivations can be good or bad, and where not one single currency dominates all transactions?


Ahh yes, you, as a foreign investor, would choose chaos. That's right, since chaos is ultimately the best way of running your country. Not organization, not one direction, but chaos! Perfect!

 

[1EZduzit]

Originally posted by: Slew Foot
Something Ive never really quite grasped...

Why is deflation worse than inflation? It seems that as long as purchasing power is the same, neither one is particularly bad, its just different numbers tossed about.

Try paying off a long term loan with a constantly deflating dollar.

 

[LegendKiller]

Originally posted by: Slew Foot
Something Ive never really quite grasped...

Why is deflation worse than inflation? It seems that as long as purchasing power is the same, neither one is particularly bad, its just different numbers tossed about.

The enemy is not really inflation or deflation, it is uncertainty of either one. However, it is much easier to get into a death spiral with deflation than it is with inflation. It's very very difficult to control deflation once it starts. Look at Japan, they had a essentially 0% interest rate but couldn't stop a deflationary spiral. They would have loved a 5% rate of inflation 5 or so years ago.

Inflation is *not* evil, provided, as you say, PP is maintained. As long as real wages, over the long-run and the relative wealth of the economy stay healthy, inflation is good, especially when it is maintained to a benign and steady level.

Certainty is the key. If businesses, which drive this economy, do not know what will happen tomorrow regarding inflation or the economy, they will not invest. The lack of investment will reduce goods needed, reducing workers needed, reducing growth.

 

[bamacre]

Originally posted by: LegendKiller

Originally posted by: bamacre
LegendKiller, what do you think about "competing currencies?"

I have heard Paul and others talking about this. Honestly, I don't understand how this works.

If you had a ton of money to invest and you were Japanese, would you go with a country/economic zone that had 1 currency, one central bank that controls that currency, one direction of the currency, one relatively transparent set of motivations and leadership, and one currency in which all goods are transacted, including investments, goods and services, and all of the "grease"?

Or

Would you go with a country/economic zone with "competing currencies" where informational gaps occur constantly, nobody knows all of the directions of the currency, arbitrage is rampant as people can buy a cow in Texas for 100 texans and sell it in Minnesota for 100 minnesotans, which is worth 110 texans and all other transactional costs = 1 and arbitrage profit = 9, where inflationary concerns are different, where any moron can start a currency, where the economy has no direction or major influence, since not one entity can control an interest rate to throttle the economy, where motivations can be good or bad, and where not one single currency dominates all transactions?


Ahh yes, you, as a foreign investor, would choose chaos. That's right, since chaos is ultimately the best way of running your country. Not organization, not one direction, but chaos! Perfect!

:laugh:

OK, that makes some sense. But what is the price we pay for our current system? The dollar is crashing, and it seems that we have to make some kind of change. Is it just a matter of congress spending less money, balancing budgets, and paying of the debt? Is the fact that we are not doing these things the main reason why the dollar is falling?

 

[LegendKiller]

Originally posted by: bamacre

Originally posted by: LegendKiller

Originally posted by: bamacre
LegendKiller, what do you think about "competing currencies?"

I have heard Paul and others talking about this. Honestly, I don't understand how this works.

If you had a ton of money to invest and you were Japanese, would you go with a country/economic zone that had 1 currency, one central bank that controls that currency, one direction of the currency, one relatively transparent set of motivations and leadership, and one currency in which all goods are transacted, including investments, goods and services, and all of the "grease"?

Or

Would you go with a country/economic zone with "competing currencies" where informational gaps occur constantly, nobody knows all of the directions of the currency, arbitrage is rampant as people can buy a cow in Texas for 100 texans and sell it in Minnesota for 100 minnesotans, which is worth 110 texans and all other transactional costs = 1 and arbitrage profit = 9, where inflationary concerns are different, where any moron can start a currency, where the economy has no direction or major influence, since not one entity can control an interest rate to throttle the economy, where motivations can be good or bad, and where not one single currency dominates all transactions?


Ahh yes, you, as a foreign investor, would choose chaos. That's right, since chaos is ultimately the best way of running your country. Not organization, not one direction, but chaos! Perfect!

:laugh:

OK, that makes some sense. But what is the price we pay for our current system? The dollar is crashing, and it seems that we have to make some kind of change. Is it just a matter of congress spending less money, balancing budgets, and paying of the debt? Is the fact that we are not doing these things the main reason why the dollar is falling?

The dollar is falling because a confluence of events that occured because a confluence of events. None of which can be directly attributed, but all of which contributed. None of which could have been ultimately prevented during the time, but now, in hindsight, could have been.

It's really that we grew a lot, a lot of it through credit, and now we have to protect ourselves from a massive drop off. They are trying to unwind the problem slowly, while keeping a watch on inflation. Because of that the demand for dollars is going down. It'll come back up eventually.

 

[lozina]

Originally posted by: LegendKiller
1. The gold standard is deflationary by nature, deflation is even worse than inflation.

Gold by nature is neither inflationary nor deflationary. It's all in how you manage the supply and it's fixed price. Just like saying fiat money is inflationary by nature is wrong as well. They are overly generalized statements. And saying deflation is worse than inflation is like Edison saying AC will kill you better than DC current, when the reality is they will both kill you. It's a matter of perspective. People who save money love deflation, for example. Employers who pay employees fixed wages love inflation, for example.

2. If we had as much gold as needed to fund even our current (forget debt) needs of currency, then there'd be no gold left in the world. Gold would be thousands per unit and industries would collapse.

This makes no sense. Gold's value would be set to what it is required to represent the size of the economy. And the only reason measures of our economy is so high in dollar figures is because of the rampant inflation those dollar figures have had in the passed several decades. (I.e. do you remember when a bottle of soda cost a nickel?) Wasn't too long ago...

3. Gold doesn't give you any ability to deftly manuver an economy out of inflation. Yes, inflation is caused by not just issuance of currency, but also by input influences, local disturbances, and other factors.

Any inflation outside of issuing more currency is negligible. A drop in the bucket.

If inflation were only caused by the removal of gold, then why was there inflation before we removed ourselves from gold? If inflation were only caused by a fiat currency, then why are some goods inflated faster than others? For example, why has milk increased in cost by more than cili powder?

Nice contradiction- you stated gold was deflationary. Now it is inflationary. See, it all depends on how you manage it.

And the rest of your post is some diatribe about how I'm wrong, you're right because I say so, along with some egoistic BS thrown into the mix for good measure as well.


I'd show you a great chart of how great our fiat money system is at creating inflation but I can't find the link right now since all my bookmarks are deleted and you'd probably not even look at anyway.

 

[lozina]

Originally posted by: LegendKiller

Originally posted by: Slew Foot
Something Ive never really quite grasped...

Why is deflation worse than inflation? It seems that as long as purchasing power is the same, neither one is particularly bad, its just different numbers tossed about.

The enemy is not really inflation or deflation, it is uncertainty of either one. However, it is much easier to get into a death spiral with deflation than it is with inflation. It's very very difficult to control deflation once it starts. Look at Japan, they had a essentially 0% interest rate but couldn't stop a deflationary spiral. They would have loved a 5% rate of inflation 5 or so years ago.

Wow, with such deflation surely Japan was on the gold standard? Oh wait. no it wasn't.

Inflation is *not* evil, provided, as you say, PP is maintained. As long as real wages, over the long-run and the relative wealth of the economy stay healthy, inflation is good, especially when it is maintained to a benign and steady level.

Well that's like saying deflation is not evil- provided PP is maintained. But that's the point. Inflation decreases PP while Deflation increases it. Inflation is good for borrowers and corporations but bad for most of us who earn a fixed salary. Deflation is good for people without debt and save money but is bad for borrowers and hence most businesses.

Neither of them are good really.

 

[LegendKiller]

Originally posted by: lozina

Originally posted by: LegendKiller
1. The gold standard is deflationary by nature, deflation is even worse than inflation.

Gold by nature is neither inflationary nor deflationary. It's all in how you manage the supply and it's fixed price. Just like saying fiat money is inflationary by nature is wrong as well. They are overly generalized statements. And saying deflation is worse than inflation is like Edison saying AC will kill you better than DC current, when the reality is they will both kill you. It's a matter of perspective. People who save money love deflation, for example. Employers who pay employees fixed wages love inflation, for example.

2. If we had as much gold as needed to fund even our current (forget debt) needs of currency, then there'd be no gold left in the world. Gold would be thousands per unit and industries would collapse.

This makes no sense. Gold's value would be set to what it is required to represent the size of the economy. And the only reason measures of our economy is so high in dollar figures lolis because of the rampant inflation those dollar figures have had in the passed several decades. (I.e. do you remember when a bottle of soda cost a nickel?) Wasn't too long ago...

3. Gold doesn't give you any ability to deftly manuver an economy out of inflation. Yes, inflation is caused by not just issuance of currency, but also by input influences, local disturbances, and other factors.

Any inflation outside of issuing more currency is negligible. A drop in the bucket.

If inflation were only caused by the removal of gold, then why was there inflation before we removed ourselves from gold? If inflation were only caused by a fiat currency, then why are some goods inflated faster than others? For example, why has milk increased in cost by more than cili powder?

Nice contradiction- you stated gold was deflationary. Now it is inflationary. See, it all depends on how you manage it.

And the rest of your post is some diatribe about how I'm wrong, you're right because I say so, along with some egoistic BS thrown into the mix for good measure as well.


I'd show you a great chart of how great our fiat money system is at creating inflation but I can't find the link right now since all my bookmarks are deleted and you'd probably not even look at anyway.

1. Gold is deflationary, it has a tendancy to be deflationary since the value is not set by a group, or a person, but by the market. It cannot be controlled by the market, but is left to it's own devices. As such, since it's usually in greater demand than supply and deflationary in the pricing.

2. Yes, "golds value will be set". Sorry, we don't set gold's value, the market does. As such, if everybody in the world bought gold to back their currency, then gold would increase infinitely. See, the problem is that gold's price can be much higher than anybody's price to pay for it. To acquire gold for the backing of currency you'd have to run everybody out of the market. Even if you revalued everything lower or pegged x dollars to y gold, you'd still have an ever-increasing amount of gold needed to contain the wealth generated. It's not that the dollar is inflated that is the problem, but you cannot contain infinity with a finite source. The amount of wealth that can be generated is constrained only by the rate at which it can be generated, not the length of that time. As such, eventually you will run out of gold, either that or you will drive the price up so far that industries that depend on it would go out of business. The primary users of gold would just be governments.

3. ROFL. This is where you guys fall apart. You somehow think that inflation is only contained within the amount of currency issued. Sorry, but did the issuance of dollars (inflation by your own standard) since March-07 cause milk to go up by 40% over the same time period? What about the continual input of services into the model? If somebody requires x% raise, then where does that raise come from? Perhaps an increase ni the price of the output?

What about minimum wage? Doesn't the increase in the manditory wage also cause an increase in the manditory price of output?

You see, any increase in an input that can be passed onto the consumer (depending on the elasticity of demand) will be passed onto the consumer, causing inflation. Now, if the rate at which the price of inputs increases does not keep pace with the pace of wages, then real wages decline.

This is where your nickel for a pop fails. How big was the pop back then? How much is it in adjusted dollars? What was your wage back then? Was your % of wage spent on the pop the same as now, less? More?

You people always talk in absolutes, yet never include adjustments for increased quality, decreased financing prices (risk spreads have improved dramatically due to the Fed and increased inflation and economic stability).

What's funny is that I did state that gold is deflationary, but what you missed completely was that even when gold was deflationary we had deflation *and* inflation. Thus, if gold cured all inflation, how did inflation exist? If inflation were 90% caused by a fiat currency, then how could it have existed, ever, in the past?

Yes, fiat currencies cause inflation, because it's *GOOD* to have a certain amount of it. A predictable amount of inflation keeps prices in check, which aids in the projection of goods and services needed. It also increases stability of the financial markets, economic growth, and the overall transparency of the economy. All of this spurs confidence in the system and knowledge that there will not be wild perturbations inside of the system. All of that causes good will and the willingness to spend and invest, both by foreigners and domestics.

*THAT* is one key reason why we have the strongest and longest running economy in the world. Not because we are smarter, or we have better strength, but because we have mastered the ability to administer our economy in a consistent, transparent, and robust way. Overall, in relative comparison to every other economy in the world, we have the most stable and transparent financial system ever.

That is why everybody has copied the system and realized that gold is antiquated and inefficient.

 

[lozina]

Originally posted by: LegendKiller

Originally posted by: bamacre

Originally posted by: LegendKiller

Originally posted by: bamacre
LegendKiller, what do you think about "competing currencies?"

I have heard Paul and others talking about this. Honestly, I don't understand how this works.

If you had a ton of money to invest and you were Japanese, would you go with a country/economic zone that had 1 currency, one central bank that controls that currency, one direction of the currency, one relatively transparent set of motivations and leadership, and one currency in which all goods are transacted, including investments, goods and services, and all of the "grease"?

Or

Would you go with a country/economic zone with "competing currencies" where informational gaps occur constantly, nobody knows all of the directions of the currency, arbitrage is rampant as people can buy a cow in Texas for 100 texans and sell it in Minnesota for 100 minnesotans, which is worth 110 texans and all other transactional costs = 1 and arbitrage profit = 9, where inflationary concerns are different, where any moron can start a currency, where the economy has no direction or major influence, since not one entity can control an interest rate to throttle the economy, where motivations can be good or bad, and where not one single currency dominates all transactions?


Ahh yes, you, as a foreign investor, would choose chaos. That's right, since chaos is ultimately the best way of running your country. Not organization, not one direction, but chaos! Perfect!

:laugh:

OK, that makes some sense. But what is the price we pay for our current system? The dollar is crashing, and it seems that we have to make some kind of change. Is it just a matter of congress spending less money, balancing budgets, and paying of the debt? Is the fact that we are not doing these things the main reason why the dollar is falling?

The dollar is falling because a confluence of events that occured because a confluence of events. None of which can be directly attributed, but all of which contributed. None of which could have been ultimately prevented during the time, but now, in hindsight, could have been.

It's really that we grew a lot, a lot of it through credit, and now we have to protect ourselves from a massive drop off. They are trying to unwind the problem slowly, while keeping a watch on inflation. Because of that the demand for dollars is going down. It'll come back up eventually.

This answer reminds of Donald Rumsfeld's famous quote

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.

You want to know why the dollar is falling? It's simple. It's our debt and the need to finance new debt. Iraq War and budget deficits of late are a major factor. It's too bad they stopped releasing M3 money supply data to the public back in 2003 so we can see how rampant they are increasing it.

More money supply = devalued dollar. = inflation It's very very simple and anyone trying to explain it otherwise is trying to fool you as well as themselves. Foreign countries don't want to hold their assets in a currency actively being devalued so they try to bail out on it which only further aggravates it's demise.

 

[LegendKiller]

Originally posted by: lozina

Originally posted by: LegendKiller

Originally posted by: Slew Foot
Something Ive never really quite grasped...

Why is deflation worse than inflation? It seems that as long as purchasing power is the same, neither one is particularly bad, its just different numbers tossed about.

The enemy is not really inflation or deflation, it is uncertainty of either one. However, it is much easier to get into a death spiral with deflation than it is with inflation. It's very very difficult to control deflation once it starts. Look at Japan, they had a essentially 0% interest rate but couldn't stop a deflationary spiral. They would have loved a 5% rate of inflation 5 or so years ago.

Wow, with such deflation surely Japan was on the gold standard? Oh wait. no it wasn't.

Inflation is *not* evil, provided, as you say, PP is maintained. As long as real wages, over the long-run and the relative wealth of the economy stay healthy, inflation is good, especially when it is maintained to a benign and steady level.

Well that's like saying deflation is not evil- provided PP is maintained. But that's the point. Inflation decreases PP while Deflation increases it. Inflation is good for borrowers and corporations but bad for most of us who earn a fixed salary. Deflation is good for people without debt and save money but is bad for borrowers and hence most businesses.

Neither of them are good really.

No, it wasn't on the gold system, but it didn't keep control of its economy very well. There are numerous problems with the banking system in that country, all of which caused the problem they were in. I never said that a fiat currency couldn't have deflation, unlike the gold backed currency, nor did I ever say that inflation was caused by a fiat currency (unlike you).

PP is not maintained by inflation or deflation. PP in maintained by the adjustment of currency relative to either of the two conditions and whether that adjustment is in line with the overall strength of the country.

I have stated several times that it's not inflation or deflation that is the true enemy, it's the uncertainty of either that is the problem. Uncertainty results in bunker mentality, which decreases growth. It's much better to have a certain amount of minimal inflation than manage to no inflation, but then have quick spurts of deflation since you didn't maintain enough cushion.

 

[LegendKiller]

Originally posted by: lozina

Originally posted by: LegendKiller

Originally posted by: bamacre

Originally posted by: LegendKiller

Originally posted by: bamacre
LegendKiller, what do you think about "competing currencies?"

I have heard Paul and others talking about this. Honestly, I don't understand how this works.

If you had a ton of money to invest and you were Japanese, would you go with a country/economic zone that had 1 currency, one central bank that controls that currency, one direction of the currency, one relatively transparent set of motivations and leadership, and one currency in which all goods are transacted, including investments, goods and services, and all of the "grease"?

Or

Would you go with a country/economic zone with "competing currencies" where informational gaps occur constantly, nobody knows all of the directions of the currency, arbitrage is rampant as people can buy a cow in Texas for 100 texans and sell it in Minnesota for 100 minnesotans, which is worth 110 texans and all other transactional costs = 1 and arbitrage profit = 9, where inflationary concerns are different, where any moron can start a currency, where the economy has no direction or major influence, since not one entity can control an interest rate to throttle the economy, where motivations can be good or bad, and where not one single currency dominates all transactions?


Ahh yes, you, as a foreign investor, would choose chaos. That's right, since chaos is ultimately the best way of running your country. Not organization, not one direction, but chaos! Perfect!

:laugh:

OK, that makes some sense. But what is the price we pay for our current system? The dollar is crashing, and it seems that we have to make some kind of change. Is it just a matter of congress spending less money, balancing budgets, and paying of the debt? Is the fact that we are not doing these things the main reason why the dollar is falling?

The dollar is falling because a confluence of events that occured because a confluence of events. None of which can be directly attributed, but all of which contributed. None of which could have been ultimately prevented during the time, but now, in hindsight, could have been.

It's really that we grew a lot, a lot of it through credit, and now we have to protect ourselves from a massive drop off. They are trying to unwind the problem slowly, while keeping a watch on inflation. Because of that the demand for dollars is going down. It'll come back up eventually.

This answer reminds of Donald Rumsfeld's famous quote

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.

You want to know why the dollar is falling? It's simple. It's our debt and the need to finance new debt. Iraq War and budget deficits of late are a major factor. It's too bad they stopped releasing M3 money supply data to the public back in 2003 so we can see how rampant they are increasing it.

More money supply = devalued dollar. = inflation It's very very simple and anyone trying to explain it otherwise is trying to fool you as well as themselves. Foreign countries don't want to hold their assets in a currency actively being devalued so they try to bail out on it which only further aggravates it's demise.

It must be nice to live in such a black/white world, where to think that the R^2 of one independent variable explains the complete movement of a dependent variable. From a financial perspective, I'd love to work at a job where i could say "Yup, it's just FICO score, FICO is the ultimate reason why people default". Ignore the ability to pay, or macroeconomic events, ignore down payment, length of the loan, collateral, rate of prepayment, interest rates. Fuck it, just pin it all to one thing.

You know what that reminds me of? It reminds me of how a child learns. A block fits into a block hole, not a round one. Fire = burn. Water = drown (not drink).

There are no other inputs into a system than those which you want out of it. I'd love that world, since I'd still get paid a shit-ton of money for almost no work.

How did inflation *ever* exist when we had the dollar pegged to gold?

You see, this is where you fail, and will continue to do so. You eat the shit that's fed to you on blogs, yet fail to realize that they dumb it down and misrepresent the problem.

It's like explaining securitization. I got tired of having to spend 20 minutes explaining what I do and still nobody understanding it. Eventually I just explained it as a secured credit card with a balance limited to the amount of security you put into it.

Then, one of my family mentioned to another person that I work in the credit card industry. What?

It's all how you frame the situation and the simplicy of the explanation. People love to frame inflation as money supply growing faster than the economy = inflation. However, that binary explanation completely fails when considering that inflation existed way before fiat currencies. Furthermore, they fail to acknowledge that economies grow infinitely while gold does not. They fail to say that populations and wealth are inifinte and monetary supplies growing with the economy is good and outripping to avoid deflation is even better.

Ahh, to live in a juvinile world such as yours. It'd be so much better.

 

[SSSnail]

Hey, why does it has to be gold? Gold is heavy and takes up too much space. Why can't we have a currency that's based on some other valuable minerals or metals? I personally prefer diamonds.

 

[LegendKiller]

Originally posted by: SSSnail
Hey, why does it has to be gold? Gold is heavy and takes up too much space. Why can't we have a currency that's based on some other valuable minerals or metals? I personally prefer diamonds.

Ahh yes, if you could find a more contrived market and price, I'd give you a kidney. Diamonds are perhaps the worst benchmark ever. Very limited value, very constrained supply, artificial demand.

If all of the diamonds in DeBeer's vault were released and the world mined just as many for the next million years, as it could, then diamonds would be worth as much as the beach sand that has the similar structure. there are many other gems which are far more rare on this planet and should be worth far more.

 

[bamacre]

Fed to print more money

And down goes the dollar.