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Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,259 posts, read 24,763,471 times
Reputation: 3587
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The fact is that the real problem here IS The Fed. That is why this problem cannot be solved by The Fed. Unlike other times when The Fed could cut rates and flood the banks with cash, the reason all their "cures" are not working this time is because people are beginning to realize that all the billions of dollars rolling off the Fed printing press are not worth much.
It is like somebody writing a "hot check" that will bounce later. That is why oil- for example is at $100 plus a barrel. Oil is NOT higher priced than it was a year ago BUT the dollar has lost so much value that, to get the same price, you have to charge more dollars. I am actually surprised that OPEC has not shifted to the Euro- I guess it is because of the close relationship the Saudis have with the Bush family and I think after November they may decide to switch to the Euro which is a more stable currency.
Yea, I wonder why I pay off all my debt every month. Sometimes I think that having a mortgage and credit card debt might not be such a bad idea while cash is so unstable. Spend it now while it's worth anything at all, as if we go to the Euro, the cash one owes will be worthless anyway. If I bought a house or a car, and the dollar became worthless, what would happen to my debt? Would the creditors take a bath for making the deal with US dollars?
Inflation benefits debtors, but adjustable rates will go through the moon soon enough. If you have fixed rate debt amortized out for many years, DON'T pay it off. Inflation will soon take care of it for you.
Of course, most of us are paid in these paper things and get it mailed to us in the form of government and pension checks.
The dollar is pretty much in a freefall but the options available to the FED are not good; too much money in the market or a crash of the financial markets.
It won't be until the credit / liquidity crisis is stabilized that the FED can go back on inflation watch. Meanwhile the Treasury should defend the dollar using agreements with other central banks.
The reason we are in this spot is that we allowed a housing bubble to burst that was built on a shaky mortgages which were packaged and passed off as investment grade paper. You can put the blame on a lot of organizations, but not just the FED.
Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
16,259 posts, read 24,763,471 times
Reputation: 3587
Quote:
Originally Posted by cdelena
The dollar is pretty much in a freefall but the options available to the FED are not good; too much money in the market or a crash of the financial markets.
It won't be until the credit / liquidity crisis is stabilized that the FED can go back on inflation watch. Meanwhile the Treasury should defend the dollar using agreements with other central banks.
The reason we are in this spot is that we allowed a housing bubble to burst that was built on a shaky mortgages which were packaged and passed off as investment grade paper. You can put the blame on a lot of organizations, but not just the FED.
My view is that the Fed ought to let the stock market fall and try and head off inflation. If the stock market fell- even by 20%, the pain would be short term and affect far fewer Americans less severe than allowing the return of double digit inflation will. And I am old enough to remember the high inflation of the 70s and the nasty recession that followed in the early 80s. I would rather not repeat that.
My view is that the Fed ought to let the stock market fall and try and head off inflation. If the stock market fell- even by 20%, the pain would be short term and affect far fewer Americans less severe than allowing the return of double digit inflation will. And I am old enough to remember the high inflation of the 70s and the nasty recession that followed in the early 80s. I would rather not repeat that.
A crash of the financial markets has a much broader impact than a drop in the market. Banks would fail, business would curtail operations for lack of capital, jobs would be lost, the drop in the stock market could easily exceed 50%, and with a huge drop in the dollar inflation would rage. You really don't want to see that happen.
What really distresses me is that we cannot redeem the FED "notes" for gold or silver. This has bothered me for over 20 years.
We have not been on the Gold Standard since around 1971. You are welcome to purchase gold and silver. Hell, more than a few people are even engaging in panning for it these days.
We have not been on the Gold Standard since around 1971. You are welcome to purchase gold and silver. Hell, more than a few people are even engaging in panning for it these days.
Yes and then as it increases in value it becomes a capital gain, subject to tax. If that is not unconstitutional, I do not know what is.
Yes and then as it increases in value it becomes a capital gain, subject to tax. If that is not unconstitutional, I do not know what is.
No tax on assets held... it can go up a 1000 times and no one cares until you sell.
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