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Old 11-08-2013, 12:59 PM
 
Location: Waiting for a streetcar
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Originally Posted by Frihed89 View Post
The market doesn't provide free lunches, but it does come up with solutions that policy makers dread: inflation. Hang onto your hats. But first we'll have to go through a more painful round of a stronger and stronger dollar thanks to the ECB.
Nutcases have been sounding the hyperinflation alarm for HOW LONG now? Since long before gold crashed at least. So, when will it happen? Just around the corner seems never to get here.
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Old 11-08-2013, 01:05 PM
 
Location: Waiting for a streetcar
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Originally Posted by Larry Caldwell View Post
The problem the IMF (and everyone else) faces is how to eliminate 90% of the value of the dollar without having the world come apart at the seams.
Come on. The value of the dollar is set by the volume of real goods and services being output by the US economy. If you want the dollar to collapse, pray for a comet impact that cripples our productive capacity. Otherwise you are babbling absolute nonsense.
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Old 11-08-2013, 01:19 PM
 
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Originally Posted by fairlaker View Post
Come on. The value of the dollar is set by the volume of real goods and services being output by the US economy. If you want the dollar to collapse, pray for a comet impact that cripples our productive capacity. Otherwise you are babbling absolute nonsense.
A comet would certainly kill off our productive capacity and then the value of the USD. But our output is only part of the equation. For instance if the Fed decides to raise interest rates tomorrow, the value of the USD would suddenly rise without one bit more of output.

50 Factors that Affect the Value of the US Dollar – Currency Trading.net
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Old 11-08-2013, 02:51 PM
 
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Originally Posted by fairlaker View Post
Nutcases have been sounding the hyperinflation alarm for HOW LONG now? Since long before gold crashed at least. So, when will it happen? Just around the corner seems never to get here.

Give them credit for making unfalsifiable statements . The various end of the world cults that don't set dates and saying "soon" makes for a much better model. Looking back , I must say that my debt deflationary statements in 2008 were recklessly offered, putting my reputation for accuracy on the line.
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Old 11-08-2013, 02:51 PM
 
Location: Waiting for a streetcar
1,137 posts, read 1,179,490 times
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Originally Posted by Hoonose View Post
A comet would certainly kill off our productive capacity and then the value of the USD. But our output is only part of the equation. For instance if the Fed decides to raise interest rates tomorrow, the value of the USD would suddenly rise without one bit more of output.
Currency markets do not determine the value of the dollar. They determine the exchange rates at which dollars trade against other currencies that are similarly valued on the basis of the real goods and service produced within their own national economies. A ten-dollar bill ater all is simply an IOU -- it is a claim on the real output of the US economy. There is nothing more to it than that. It is the strength and output of the US economy that supports both its currency and its debt. Basic economics.
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Old 11-08-2013, 02:57 PM
 
Location: Waiting for a streetcar
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Originally Posted by gwynedd1 View Post
Give them credit for making unfalsifiable statements . The various end of the world cults that don't set dates and saying "soon" makes for a much better model. Looking back , I must say that my debt deflationary statements in 2008 were recklessly offered, putting my reputation for accuracy on the line.
Did you learn anything from the experience? There is no substantive fear of inflation to be had here. It will not happen. The Fed can literally flip a switch and shrink away all those excess reserves that banks and others are sitting on in the unlikely event that such an action would become warranted. It is much easier to rein in an economy than it is to get one to run. Ask Paul Volcker about the early 1980's.
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Old 11-08-2013, 03:01 PM
 
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Originally Posted by fairlaker View Post
Currency markets do not determine the value of the dollar. They determine the exchange rates at which dollars trade against other currencies that are similarly valued on the basis of the real goods and service produced within their own national economies. A ten-dollar bill ater all is simply an IOU -- it is a claim on the real output of the US economy. There is nothing more to it than that. It is the strength and output of the US economy that supports both its currency and its debt. Basic economics.
So, as our economy grows the USD continues to get stronger? And yet in Japan after natural destructive disasters, the Yen seems to strengthen.
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Old 11-08-2013, 03:41 PM
 
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Originally Posted by fairlaker View Post
Did you learn anything from the experience? There is no substantive fear of inflation to be had here. It will not happen. The Fed can literally flip a switch and shrink away all those excess reserves that banks and others are sitting on in the unlikely event that such an action would become warranted. It is much easier to rein in an economy than it is to get one to run. Ask Paul Volcker about the early 1980's.

No, I keep correctly stating the case by doing research, and citing historical and empirical evidence which takes a lot of work. Its much easier to appear intelligent with skepticism and make certain that no statement can be falsified. If I were you , I would do the same. Read their palms and tell them its buried near the water.


Though I am afraid we will disagree on Volcker. I am in a small minority camp that believes he helped cause it with cost push inflation. The problem with "high interest rates" are all the bond holders drawing say, 20%. In the aggregate its a placebo effect because high interest creates bond cash flows to those who own them. Same reason why the low rates do little. The bond market sucks today so lots of people feel poor. High Treasury yields and high CD rates make a certain class of people feel rich.


Basically the economic model I adhere to sees little difference between increasing or decreasing interest rates in the aggregate. It shifts bias away from fixed income to equity but the whole remains the same. I also use a model that sees little difference between Treasuries and cash. I consider them both money. Thus the government prints money with deficits and destroys it with a surplus. Next time the government runs a surplus, I'd sell into it unless bank credit is going bananas.



What stopped inflation was the new oil supplies.

To stop inflation dead in its tracks, just raise taxes....bang! dead in no time.
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Old 11-08-2013, 04:07 PM
 
17,751 posts, read 15,654,137 times
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Originally Posted by Hoonose View Post
So, as our economy grows the USD continues to get stronger? And yet in Japan after natural destructive disasters, the Yen seems to strengthen.



Everyday can one hear the bindings crack a thousand times to the pages of the efficient market hypothesis as if money were a stable claim against the economy behind it, only to observe that Yen would be hoarded even as the real economic output shrunk. Then there is currency carry trade. We saw the unraveling of the Yen carry trade event strengthening the Yen in shock fashion. Had nothing to do with Japan per se. Money does not mimic a perfect barter model economy.
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Old 11-08-2013, 04:28 PM
 
Location: Waiting for a streetcar
1,137 posts, read 1,179,490 times
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Originally Posted by Hoonose View Post
So, as our economy grows the USD continues to get stronger? And yet in Japan after natural destructive disasters, the Yen seems to strengthen.
In your world, it would depend on what other economies were doing. If ours were growing but other significant economies were growing a little faster, our currency would have a tendency to weaken despite its having this greater backing. But what you are talking about in your world, is little teeny tiny pertubations at the margins of value. The dollar has massive value in any and all cases because the US economy produces about 22% of all the real goods and services produced anywhere in the world in a given year. That macro level fact is what determnines the dollar's actual value, and to imagine that the currency's value can somehow plunge without a corresponding plunge in GDP is delusionary.
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