I wouldn't say it lost a ton, at around 2% losses, but it rightly has moved as expected. It has also understandably weakened more against the NZ dollar and Norwegian krone. It probably still has some ways to go down.
However, look at what happened to the Pound after the UK introduced QE. It has made a comeback. There aren't any 'safe' currencies to run to.
Prices don't immediately rise with the expansion of money, it takes a while to work through. Saying it's not a problem to be creating the money because the effects aren't immediately clear to you is pretty dumb. It's like saying it's okay to give alcohol and car keys to your 15 year old because nothing bad has happened several moments after you did so. It's an obvious consequence you have the power to prevent, so do it.
That didn't work so well for Argentina. When you burn your creditors/producers by consuming with the loans and defaulting, they tend not to want to make further loans. We don't produce the bulk of what we buy, and when the dollar collapses against the Yuan, what used to be consumed by Americans on credit will be consumed by the former creditors themselves. At that point, we have no other option but to create our own savings with which to finance the creation of what it was we used to be able to afford by borrowing from abroad.
There is absolutely nothing beneficial in China buying excess treasuries from a country who uses them to run trade deficits. PRODUCTS are better than PAPER, you do not export products for the sake of exporting, you export to be paid with imports or buy the stuff domestically. What you're suggesting is practically slavery. They are now left holding 1 trillion paper IOUs that they don't know what to do with and are facing the the prospect of having 3 trillion more within the next few years. They could very easily cut their losses now rather than face ?x the losses later, whereby ? is an ever-increasing number. This is dirt simple to understand, they may as well be investing with Madoff.
The gold standard gave both Britain and America record growth, it guaranteed stable low interest rates, it facilitated balanced trade by physically preventing one country from consuming more than it was producing for any substantial period of time. Those unavoidable disciplines are now shattered and the fallout from the false prosperity we've built under fiat is going to dwarf any correction experienced under a gold standard in length and intensity. You can't mortgage the farm to buy milk and then a few years before the default/hyperinflation claim that things are sounder than they've ever been. Madoff could have claimed the same thing at the height of his scheme, he certainly had 20 years of unrivaled prosperity. Now he's in a cell the size of my bathroom sharing a bunk with Elmer Fudd.
All things considered, I still don't think it is that much. (Now the trade weighted average is a bit different, as earlier referenced). The USD had risen a bit about an hour ago, but is falling again. We will see if it stays above $1.3635 today.
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Lifer
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China is set to make a ton of money from this, they're not worried about the U.S. going bankrupt and neither should anyone who is sane. One worried comment from the Chinese doesn't exactly prove they're about to dump T-bills, mostly because it would be incredibly stupid for their economic growth prospects, which they still want to keep at 8% this year. They don't benefit from it. So despite the fact that you think "products" are always better than "paper" (as if that layman shit is relevant), fact is that deficit spending has its place and always will, it has been part of the American way of life since we first borrowed millions from the French/Netherlands during the Revolution, with the whole country as collateral. Deficits will hopefully get under control and we'll be back to a more responsible debt load in the future.
Except you have no independent monetary policy with a fixed exchange rate, whether it's to gold or another nation's currency. History shows this conclusively, specifically with ridiculous and unnecessarily painful recession/depression like we saw in 1921 (20% unemployment and the highest deflation in U.S. history) and again in most of the 30's, with 15%-25% unemployment and near record deflation. Layman excuses about how the Fed caused those disasters don't fly (since they're not actually true), but plenty of other examples abound, specifically the 1907 run on banks, the worst run in U.S. history, 6 years before the Fed was created. We had no way of avoiding those disasters, and were therefore subject to complete financial meltdowns, which is why we never had a generation that had the confidence, willingness, or expectations of stability in the market until essentially the 1960's and not entirely until the late 70's and early 80's. Investment per capita now, even in a severe recession dwarfs any other period of equity investment in U.S. history before the 60's because no one had any confidence in the stability of the market place. As it turns out, equity has consistently returned 6.5% compounded annually since 1802, so their confidence wasn't necessarily well placed in some respects. Of course, you're the same guy that didn't know what compound interest was until I told him last week.
halik
Lifer
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There actually were periodic financial crisis every 10 years until the early 20th century, after which they got much less regular *. Much like the rest of von Mises / Austrian economics, what the o/p said is at odds with empirical evidence - if central banking system was the cause of financial crisis, you'd see the exact opposite.
*See Manias, Panics and Crashes : A History of Financial Crisis, it's in the second chapter
wiki:
1893
1837
Because it causes hyperinflation which makes my dollar valueless and probably collapse the economy! Of course, you being a liberal does not see anything wrong about BHO on a spending binge because you are thinking the GOP's spent almost $800B for the Iraq war. But geez, BHO has spent more than that in less than 2 months! Not to mention the next budget which is more than $3T! Did you see oil price shot up above $50+/bl today? Or the price of gold?
StageLeft
No Lifer
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Commodities are shooting up. It appears some investors are looking past the short horizon of deflation and thinking about what all this means. I've yet to come across a salient argument that contradicts the many others, basically a universal chorus, that say significant inflation is the ultimate end result of what the government is doing now. It appears currency traders agree, too.
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Lifer
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Depends what you mean by "significant". If inflation can be kept at 2-4% during a recovery/boom within a year from now, the Fed can raise interest rates to dampen inflation and cool off excessive borrowing. If we're transferring our debt financing to other countries, this can work in the long run as we collect more taxes, raise taxes marginally, and then legalize the 12M illegals currently working within U.S. borders. Assuming substantial population growth (barring a pandemic, pretty much guaranteed), we should see a significant reduction in national debt within 5-10 years. We'll always be leveraged in the trillions though, but that was never the issue, the issue was over-leveraging relative to GDP. At the current rate, we'll be leveraged at 100% of GDP with 12-18 months.
Right and I'm sure you where saying the same crap the last time the Fed thought it was a good idea to cut rates 1%.
They're not worried about a formal default, they're worried about us inflating away our debt obligations to them now and in the future. Seeing as how 0% of the trillions we are asking them for are going towards reducing our trade deficit with exportable production, there is every reason to be worried about continued and expanded purchase of our treasuries.
Irrelevant? Irrelevant? That's the whole fucking point of trade. An unbacked dollar is an IOU, it is a supposed placeholder for a future product. If we are showing no signs of ever creating an exportable product, of what value to the Chinese worker is continuing to accumulate them? Trillions of paper promises that stay promises does a Chinese laborer no good at all. They'd be far better off consuming their own production or loaning it to a country that produces something they lack.
Deficits is not a black/white thing, there is a huge disparity between what we did then and now with the borrowed money. Historically, we always borrowed to PRODUCE, now we borrow mostly to CONSUME, and our "growth" has become a function of how much debt we can increasingly incur to consume. If everyone borrowed to consume, there would eventually be mass poverty, we can't all ride in the cart, someone has to push it. You are so unbelievably brainwashed, you don't even understand that money's purpose is to better facilitate the exchange of goods. Goods. Goods. Goods. Beat it through your head, that's what ultimately makes money important, ease of exchanging goods. To the extent that money facilitates that, that's what makes money important. Gold is better than paper because it can't be conjured into existence by an issuer, all gold is guaranteed to be backed by the labor and materials required to obtain it, just like the products whose trade it is facilitating.
What is that supposed to mean? No one in international trade can substitute promises for products in perpetuity when money is based on a product? Wow, what a horrible, terrible thing.
The 1921 bust was caused by an inflationary bubble that preceded it due to WWI. Many countries went off gold to finance the war, which wouldn't have gone on so long if international players had accepted the debt currency in place of it. Subsequently, there was mass repudiation of debt obligations as countries began devaluing and leaving the standard completely. The great inflation of 1921-1930 by Fed Chairman Strong was an idiotic decision to prop up the devalued Pound, leading to a large bubble whose bust was not allowed to play out like the 1921 bust, or else it would have lasted a mere 2 years as well. Prior to the Great Depression, there was little government interference and they were not allowed to draw out the misery by thinking it could help, the market always delivered the shortest correction possible.
The natural consequence of inflation that preceded it. Recurring theme: when gold "fails" countries are printing way more notes than they have gold to back them.
Fractional Reserve banking sucks and creates runs, it's just fraud on the private level. When you create redeemable notes for which no metal exists and loan it out at interest, you are no longer solvent, and that insolvency can be exposed through runs. I agree with you, it definitely creates disasters to allow this practice in the banking industry and it should have been stopped instead of backstopped.
This has nothing to do with anything. Confidence is a bad thing when it is put into the incorrect activity. Madoff's victims were supremely confident and it was stable for 20 years. It's a meaningless attribute, what matters is how prosperous we are and whether or not we are sacrificing future prosperity in order to achieve it.
I know what compound interest is and it takes effect on the current principal, not on the principal at the beginning. If you pick the wrong stocks or the wrong buy and sell time in these inflationist bubbles of ours, compound interest won't fucking matter because the principal will get wiped out. It's incredibly easy for you to pick an interval in hindsight. And as the world's largest debtor nation, compound interest works against us, we service those debts through future taxes and inflation. To the extent that people have no additional money from wage debasement to even invest because of this should concern you, but it doesn't.
yes, it woudl cause inflation in their own economies, and theri currency woudl depreciate relative to ours.
If the price of oil rises dramatically, then the price of just about everything will rise, since nearly everything is tied to the price of oil in one way or another. Although I can see how raising the prime rate cuts demand for loans and monetary expansion, I don't understand how it would have any impact on consumer prices. People don't take out loans to buy groceries, fill their car with gas, etc.
I'm not saying you're wrong, I'm just trying to make sense of this. If the 70's inflation was caused primarily by disruptions to the supply of oil, then consumer prices should skyrocket, and I don't see how a very high prime rate would remedy that. It seems the only cure would be for OPEC to loosen its embargo restrictions.
and communism gave the soviet union the greatest surge of economic development of any country ever. clearly, they should bring commmunism back. The only difference with this analogy is that the soviets were largely responsible for their economic transformation, gold at best was neutral to growth.
therer have been three major gold reserves currencies, the pound pre- ww1, the pound in the 20's and the dollar after ww2. Two of those three were brought down by trade imbalances. The other was brought down by a world war.
the period of the gold standard saw at least 2 other depressions to equal the great depression and another half dozen worse than any we're had since. you, as always, are clueless.
like i said, prices are controlled by contracts which take time to adjust, causing a slower price spike, or inflation if you will.
increasing the primes rate cuts demand (people have less money and there is less credit to be had), which in turn reduces prices.
No it didn't, the Soviet Union collapsed. Growth is something you keep, it's not something you gain in the short term at the expense of greater future loss.
Already addressed, gold "fails" when countries depart from its discipline to finance wars, which usually end up being useless or indirectly caused by socialist policies in the first place. The Civil War wouldn't have happened without protectionist tariffs, WW1 the same, WWII couldn't have happened without Weimar hyperinflation, Korea & Vietnam & Iraq were pointless. The subsequent corrections experienced by such departures aren't the fault of gold, it's the fault of departing from it. Historically, we always went back to it after bouts of inflationary war, that finally ended with Vietnam.
Total bullshit, no bank run or recession prior to the Great Depression came close to it in magnitude. You also don't seem to understand that a nation which allows fractional reserve banking isn't technically on a 100% gold standard, its pushing notes around for which no metal exists and trying to do so as much as possible without experience a run on the actual, real deposits. This is why it's pure god damned hilarity watching Democrats run around screaming "regulation," because they don't understand the basic, fraudulent way in which banks operate. How exactly do you suppose we can centrally resolve the risks created by allowing fraud, murder, theft, etc? It's not something whose effects need to be regulated, it's something that has to be disallowed entirely.
there is not significant risk of inflation.
jesus christ :facepalm;
the us doesn't export tshirts and plastic shit to china, clearly we make NOTHING. Idiot.
the gold standard loonie calling someone else brainwashed huh? maybe you should go watch some more you-tube videos. You are correct that the value of the goods a country produces are a major contributor to the true value of a currency, which is fortunate since the united states still produces far more than any other country other than the aggregated EU. China's currency is worth what it is only because its backed up by us debt.
as we have been over already, the value of a currency is based on its ability to produce goods and repay its debts. the gold standard is based on a valueless chunk of metal.
correct, the fed underwent a period of inflation and loose credit to prop of the gold standard (the gbp) which promptly failed anyways, inspite of massive efforts by the central banks of the united states and great britain.
nonsensical answer. deflation occurred in the 30's because the fed acted to 'defend' the value of the dollar.
without fractional reserves you don't have banking. thats the entire point.
[/quote]do you even know what the words you type mean? judging by you posting, i would say no.
the soviet union went free a feudal society to a country that was able to go toe-to-toe with the most industrialism country on earth and win in 15 years. The fastest development of any country ever.
so what you are saying is that ever gold standard eventually fails,m because it isn't able to react to real life.
holy shit you really are as ignorant as you seem. fractional reserve banking is the only banking and there is nothing fraudulent about it. Watch more you-tube videos.
Ben Bernake and Obama and his economic team are clueless. They are eventually going to decimate the USD and lead our economy and the worlds into chaos. It is funny we had some people on these boards laughing and being ignorant against the people pointing out the first signs of the government printing came out. These same people believe in the failed Keynesian polices and logic. Keynesian system is a failing ponzi scheme... I am sure we will see the history books stating this years later after the worlds economies are decimated.
ORLY? This thread is about the Fed announcing exactly that. Conjuring up new money is inflation, and it will cause each dollar unit to decrease in scarcity relative to goods.
So we are not running a $70,000,000,000 a month trade deficit? You aren't intellectually cut out for this debate, it's not that we don't export anything, it's that we don't export enough to balance our imports, requiring us to perpetually borrow the difference and service the compounding interest obligations.
Hahahhahahahahaha.
Great, then you are basically admitting that the dollar should be abandoned by the world because we're not repaying them, we're merely taking on bigger and bigger new loans to pay off old loans. Ponzi scheme with a counterfeiting element.
Britain needed to decrease the number of pounds relative to gold, by allow interest rates to rise. Instead, we lowered ours. They were the ones who inflated vast amounts in WWI, they simply did not have the same currency status after that. It's like two brothers agreeing to a race and one of them is drunk, so to make it fair, the other gets drunk. There's a better way to equalize: the drunk one gets sober.
Deflation succeeds inflation. It's like withdrawal symptoms from a high, it's not supposed to be resisted by shooting up with more. Capital is misallocated in inflationary bubbles and the unemployment window is a necessity to shift workers from bubble sectors to legitimate ones. The Fed did the wrong thing in the 20s and the right thing in the 30s. The government did the wrong thing in the 30s by reallocating capital to the public sector instead of letting it reallocate in the private sector.
That is incorrect.
Lack of a rebuttal usually means the confusion is on your end. You deny that compound interest doesn't work against us as a debtor nation? What is hard to understand about that, am I speaking in Mandarin?
You don't have to watch a video describing it, you can read any book or article on the matter, the practice is subtle and simple. This is a granted exception to one industry, anyone else does it and they'd be thrown in prison. Go ahead and try it yourself, create and trade redeemable certificates of products you don't have. If you don't think it's fraudulent, there shouldn't be a problem.
More like humanity fails for understanding they need government, but not what for.
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