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Because the dollar is FAR from dead. Every time there is financial crises (including the one we are in) people flock to the dollar. Why do you think the bond rates were at record lows back in the darkest days of January? Because folks were willing to buy up the dollar even at interest rates of near zero. Now the "doom and gloom" crowd is crying "no one wants the dollar" because the bond rate has crept up close to 4%.
Such folks are clueless. Any idea what the bond rate was under Reagan? Try 15%+. Even at 4% bond rates are incredibly LOW. Is the dollar likely to lose it's position as the worlds' currency? Of course it is - eventually. But that's not coming anytime soon. The fact is, there is no viable candidate to replace the dollar - not one. The Euro? Not likely, Europe has worse economic problems than we do. The Yuan? That's not going to happen either. The Chinese don't want their currency to float upwards because a strong Yuan means their cheap exports become pricey - thus threatening their growth.
So what's it going to be? There is no viable candidate to replace the dollar right now - and as long as the dollar is the "worlds' currency" it's in NO ONE'S advantage - not the Russians, not the Chinese, not the Japanese, not the Arabs, not the Europeans - to have the dollar get too weak, so it's not going to happen.
This is just more panicky "the sky is falling" BS meant to get folks to buy gold and other commodities.
Ken
Reagan inherited 12% inflation from Carter, and todays inflation rate is negative 1.28%. Care to explain the five point spread?
No buddy, currency traders are very concerned about the USD's future. When BO starts spending that monopoly money we've buying our own debt with, depressed housing prices that are driving deflation will rebound and inflation will be back with a vengeance thanks to our brand spankin' new housing bubble. Care to guess what happens next?
You left out one group who do want a weak dollar. That group is the Democrats in Congress and the current administration. But not yet. They have to time this just right to coincide with the 2010 election cycle. See, if that "stimulus money" is dumped on the private sector too soon, inflation will be high before the mid-term elections. If they wait too long, the "jobs" created directly by the government and indirectly by weak-dollar exports won't be around to give the voting public a reason to think the Democrats can create jobs.
BO did provide clever cover for himself by insisting on that ridiculous and unachievable 35 mpg CAFE standard. Now when our new weak dollar is made even weaker by currency traders dumping dollars and we are chasing Saudi oil at record price levels with $6.50 a gallon gas, BO can be the Münchhausen by proxy hero who saw it coming. Don't worry about the MSM media pointing this inconvenient truth out to the public because they won't and the public wouldn't understand if they did.
Tex... I'll just add-- if you've been watching the market long view, not just dramatic blips, there was a steady run up in the price of gold just before turn of century-- land, antiques & metals in general it almost didn't matter what it was. Post 911 had a huge market surge- its all driven by fear since prior to new century. Fears amplify, prices go up. It's a marketing tool manipulating people for well over a decade now. Even Mish, who has a tendency to be very reactionary, is selling ad space to these fear mongering gold peddlers. The more hammy drama queen he gets (Kramer ring a bell?), the more hits he gets, nice and cozy. I think he's got great insights but his ego is in the way too often.
The price of gold isn't so different than the price of diamonds when it comes to mine owners deciding how much product is available (DeBeers strategy), but as far as US gov't having the power to control worldwide market... did the price of gasoline flatter republicans? It really is beyond their reach but they needed proactive solutions before things got so out of hand. Laissez fair attitudes only allowed the fire to be an inferno. Our gov't jurisdiction is dwarfed by ill thought out global policies, and executive/ legislative needs to be more aware of the potential damage those external market manipulations have as global reach. Bottom line, the whole world needs a better deal because current arrangements are not sustainable (and actually harm 3rd world grievously).
We, among all industrialized nations, were hemorrhaging for years over the price of fuel. Extreme transfers of wealth already happened on a multi trillion scale from that alone. This was not the oil companies directly, but they most certainly did profit wildly, so had no incentive to fess up who the players were. They produced less and got paid more, just in time to settle out their exxon lawsuit delayed for nearly 30yrs for a republican appointed supreme court and to make big moves into green technology knowing the cyclical nature of politics. I posit we've had economic warfare waged upon us (and all industrialized nations) for quite some time, but none are very willing to acknowledge that as factual. Sorry, it was far too elegant to call it coincidence. We were skunked big time, put aside your pride America.
The problem with investing in gold just now is that when everyone is thinking the same, the demand driving the price higher, you'll over pay for it. Unless you can afford to sit on it for 30 yrs to break even, you'll wind up cashing it out at much less than you paid for it. Buy high sell low is textbook warning. Current example consider those early boomers attempting to live on a 401k plan that wasn't properly shifted over to bond market in time before real estate market crash started rolling-- anyone with a 401k 80% in stocks now attempting to cash it in is seriously screwed. Leave that harvest alone, get a side job to cover the phone bill. Ordinary Americans of modest means not stuck in credit problems I can only suggest they purchase their needful durable goods now while deflation is in effect. You are very much in tune with what a bargain price looks like in the retail market place- use that to your advantage. Debtors- unless it's locked into ridiculously modest fees, pay it off now or it will be harder later on. Credit industry regs are getting hammered out, but knowing their ethics, they're already trying to figure out a way around, or undermining through dilution, any law created. Caveat emptor absolutely applies.
If the material printing presses start rolling vs the electronic column shifting going on as we speak, inflation has the potential to get ugly down the road hobbling your spending power. Ron Paul warnings are not unfounded, they do have real potential right now, so pay attention. The treasury knows this and will avoid it as much as possible. Distracting the treasurer with nuisance complaints is akin to clinging onto the fireman demanding he save you but obstructing his job. Stakes are very high in this poker hand and some mean to see us fail. The resolution gets brokered wrong, thats when things get unstable all over again. There's equal potential for optimistic solutions, particularly when the whole world has a stake in a fair deal keeping civilization stabilized. Obama is much smarter a strategist than most give him credit. To some degree we have to put some faith in him, and actively relay concerns by addressing through proper channels in the system we've got.
Don't take my word for it, do your homework, and if you see another way around this situation I'm all ears. I honestly cannot see another way for ordinary folks to manage so huge a global force affecting their lives and hope to see people empowered to help themselves more. Anti trust situations related to global trade need to be addressed if we ever mean to get the wheels turning at a good clip without going off the rails again. I'm no wall st expert, but that's my view based on the reading I've followed for years. Again, if there's a better idea that's reasoned well without fear, I'd love to hear it. Fear makes people irrational spendthrifts- avoid this if nothing else, it will do the most damage to you personally.
anhd thyen get ready for ww3.i like history and this same thing was happening in germany in 1930-40.i have seen picture where german kids were playing with bricks of german marks.so get ready for ww3
Reagan inherited 12% inflation from Carter, and todays inflation rate is negative 1.28%. Care to explain the five point spread?
And your point is?
Do you even have one?
Quote:
Originally Posted by momonkey
No buddy, currency traders are very concerned about the USD's future. When BO starts spending that monopoly money we've buying our own debt with, depressed housing prices that are driving deflation will rebound and inflation will be back with a vengeance thanks to our brand spankin' new housing bubble. Care to guess what happens next?
And which housing bubble is that?
Quote:
Originally Posted by momonkey
You left out one group who do want a weak dollar. That group is the Democrats in Congress and the current administration. But not yet. They have to time this just right to coincide with the 2010 election cycle. See, if that "stimulus money" is dumped on the private sector too soon, inflation will be high before the mid-term elections. If they wait too long, the "jobs" created directly by the government and indirectly by weak-dollar exports won't be around to give the voting public a reason to think the Democrats can create jobs.
BO did provide clever cover for himself by insisting on that ridiculous and unachievable 35 mpg CAFE standard. Now when our new weak dollar is made even weaker by currency traders dumping dollars and we are chasing Saudi oil at record price levels with $6.50 a gallon gas, BO can be the Münchhausen by proxy hero who saw it coming. Don't worry about the MSM media pointing this inconvenient truth out to the public because they won't and the public wouldn't understand if they did.
Damn them Democrats are sooooooo smart aren't they - just manipulating the entire world economy that way.
Damn them Democrats are sooooooo smart aren't they - just manipulating the entire world economy that way.
jews manipulate economies around the world and they want nwo.and that is the reason why they want to destroy usa,because if they keep usa as sole economic power then they can not have nwo.they already tryed that with un . but america still hold to much economic power.so their new idie is to destroy american economy so every country would run to un
anhd thyen get ready for ww3.i like history and this same thing was happening in germany in 1930-40.i have seen picture where german kids were playing with bricks of german marks.so get ready for ww3
Clearly you know NOTHING about history - or perhaps more accurately - just enough to look foolish.
German hyperinflation wasn't in the 1930s.
It was in the early 20's and peaked in 1924. By 1925 it was all over and the new currency was in place with an exchange rate of about 4 marks to the dollar.
Ken
Last edited by LordBalfor; 07-05-2009 at 05:28 PM..
Here is an article by Gary North who has consistently been spot on in regards to economic issues and his thoughts on the deflation/hyperinflation debate. If deflation is coming sell your gold. If you are a follower of Rothbard and Mises, you already know that inflation is an increase in the money supply, not just your personal biased selection of price indexes. We know this through simple observation, people don't buy a price index. You buy a specific product or service. It does not matter what the price index says if you can't afford to buy much.
As an aside, economists like Krugman make this mistake, when they use calculations that lead them to believe the average family has 3.14 members, instead of a priori whole numbers since all American families do not have carved up human parts for children.
Making sense of monetary data
M0 is cold hard cash.
M1 is M0 + checking accounts.
M2 is M1 + savings accounts, small money market funds, and small time-deposits (wherein your money is irretrievable for a period of time, like a CD).
MZM is liquid (meaning immediately usable) money and things that can (supposedly) be turned into money immediately - i.e money market accounts. Or M2 - time deposits + all non-M2 money market funds. MZM money of zero maturity chart
M3 is M2 + large money market funds, large time-deposits, and things like interbank repurchase agreements.
Of these M1 provides the best indication of future prices. Fred graph M1 money stock
This chart speaks for itself really, prepare accordingly.
If the FED buys more Treasury debt to swap for AAA- rated paper held by banks and financial institutions, then it will have to abandon its anti-inflation policy.
Then again, the FED could keep the game going a while longer. It could sell its other major asset: gold. This of course assumes that the FED still is sitting on physical gold. If it is, it can sell it. For accounting purposes, it is held at $42.22 per ounce.
If it hikes the price by 20 to one before selling, this will increase the monetary base, just as surely as the purchase of a comparable quantity of T-bonds would.
As for debt going down: 'the' debt isn't going down. That's just Fed holdings of government debt. The debt is still there and the government still owes it and the tax-slaves are still on the hook for it; it's just that the Fed has swapped the banks' toxic mortgage debt for (historically - though this will someday (soon) be challenged) better government debt. The missing 261 (800-539) billion is now payable to banks, not to the Fed.
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