The USD

[The Omega Concern]

Debaser,

How isn't government monetary policy tied to unregulated Banking? Hello????? It's that keynsian philo that has so many up in arms about the deregulation. It's about the Banks being in that Moral Hazard area of: If they fuck up massively the government will be there to bail them out. Ergo, what's the incentive to not fuck up? So they run all the hedge funds and come up with complete bullshit terms for stealing like derivatives and monetizing debt and on and on it goes without so much as a hand slap from the government.

That original 700 billion bail-out when Bush was in office was the Fed coercing, nay, extorting, and then threatening a complete shutdown of the economy inducing Martial Law that had congressmen and women running for cover to vote for the original bailout when 90% of the people said no.

It's this 'too big to fail' b.s. that the government has adopted for these banks that is the very monetary policy that is failing the economy at present and going foreward.


Another thing Debaser:

Gold isn't just some metal. You gotta suspend your disbelief here and read some Zachary Sitchin: Gold when sprayed as a mist into the atmosphere acts as a protectorant for the Ozone layer. Let your imagination run wild as to where all the gold is or isn't and the motives therein.

[The Omega Concern]

that said:

thinking outside the box and trying to give the current administration some leeway here...though I don't really know how much the puppet Obama really has any control over the big decisions, not when Kurrency Killer Goerge Soros is in his ear:

There's a school of thought that suggest the U.S. is purposely tanking the dollar for the very purpose of trashing the world economy into peril and basically set the Russians and Chinese back a few decades economically.

Yes, that would hurt the U.S. as well, however, the alternative is to wait another decade while China and Russia will be in a much better position militarily to throw their weight around on the U.S. So instead of an actual war 10 years from now or so, better to have this currency war now and let the chips fall where they may; American ingenuity will eventually pull that country out of trouble while China and Russia issues will keep them behind economically and militarily.

I would like to think this is the case...

[jczeroman]

Originally Posted by Debaser

oh and c) worrying about inflation is like worrying about driving too fast when the car has yet to be pulled out of the ditch by the tow truck.

But that car's engine (in order to get it out of the ditch) has been continually revving up past 10,000 rpm and as soon as the tow truck comes, is going to hit the road at that speed.

[Debaser]

Originally Posted by The Omega Concern

Debaser,

How isn't government monetary policy tied to unregulated Banking?

no. you have confused monetary policy with fiscal policy. or maybe don't know the difference.

[Debaser]

Originally Posted by jczeroman

But that car's engine (in order to get it out of the ditch) has been continually revving up past 10,000 rpm and as soon as the tow truck comes, is going to hit the road at that speed.

maybe, maybe not. not sure if history bears that out.

But let's not hit the car brakes while it's still attached to the tow truck. That will only hurt the tow truck's ability to pull us out, or worse. See the year 1937.

[Debaser]

Originally Posted by The Omega Concern

It's that keynsian philo that has so many up in arms about the deregulation. It's about the Banks being in that Moral Hazard area of: If they fuck up massively the government will be there to bail them out. Ergo, what's the incentive to not fuck up? So they run all the hedge funds and come up with complete bullshit terms for stealing like derivatives and monetizing debt and on and on it goes without so much as a hand slap from the government.

That original 700 billion bail-out when Bush was in office was the Fed coercing, nay, extorting, and then threatening a complete shutdown of the economy inducing Martial Law that had congressmen and women running for cover to vote for the original bailout when 90% of the people said no.

It's this 'too big to fail' b.s. that the government has adopted for these banks that is the very monetary policy that is failing the economy at present and going foreward.

Look. I don't really disagree with this. But that is not monetary policy (i.e. setting interest rates, controlling the supply of money, the value of the dollar). It's fiscal policy (borrowing money, increasing the deficit, to bail out the banks).

[Debaser]

Originally Posted by The Omega Concern

that said:

thinking outside the box and trying to give the current administration some leeway here...though I don't really know how much the puppet Obama really has any control over the big decisions, not when Kurrency Killer Goerge Soros is in his ear:

There's a school of thought that suggest the U.S. is purposely tanking the dollar for the very purpose of trashing the world economy into peril and basically set the Russians and Chinese back a few decades economically.

Yes, that would hurt the U.S. as well, however, the alternative is to wait another decade while China and Russia will be in a much better position militarily to throw their weight around on the U.S. So instead of an actual war 10 years from now or so, better to have this currency war now and let the chips fall where they may; American ingenuity will eventually pull that country out of trouble while China and Russia issues will keep them behind economically and militarily.

I would like to think this is the case...

The U.S. military budget = $663,700,000,000
China = $70,308,600,000
Russia = $39,600,000,000

The United States spends 6 times over the combined budgets of Russia and China. You really think that they will ever threaten the U.S. militarily? You really think that the leaders of these countries plan that that far ahead for potential wars that won't even happen until they are long out of office?

[Debaser]

Gold is the new investment bubble.

David Frum: Beware the gold bug

[jczeroman]

Originally Posted by Debaser

maybe, maybe not. not sure if history bears that out.

But let's not hit the car brakes while it's still attached to the tow truck. That will only hurt the tow truck's ability to pull us out, or worse. See the year 1937.

History is irrelevant. You can't create trillions of dollars of new money with no capital to back it and not expect inflation. That is the definition of inflation: an increase in the money supply. You cannot increase the money supply and not have inflation.

[jczeroman]

Originally Posted by Debaser

Gold is the new investment bubble.

David Frum: Beware the gold bug

Agreed.

Well, I didn't click the article - but gold is in a bubble - that's not rocket science. However, that bubble will easily be superseded by the run to gold when the inflation of the past few years begins having an effect.

[I'm Hardcore]

the world gains no benefit whatsoever from the monetary system

[sppunk]

The run to the Euro will be interesting to me. What will happen to the GBP?

[jczeroman]

Originally Posted by sppunk

The run to the Euro will be interesting to me. What will happen to the GBP?

I think it will fall along with the dollar, but not as radically as the dollar.

[sppunk]

I would not be too surprised if it fell further than the USD - it has never done so in its history but Britain has never quite been so unimportant* in world affairs as it is currently.

* Not a slam to the UK, just stating Britain's world status is a molecule of its former self at this moment.

[I'm Hardcore]

Originally Posted by Debaser

The U.S. military budget = $663,700,000,000
China = $70,308,600,000
Russia = $39,600,000,000

fucking sickening

instead of putting people through college, instead of subsidising medicine/healthcare, the US government is more interested in sending its own citizens off to die, whilst bolstering the coffers of certain corporations. Awesome.

remind me again what the national debt is?

[ATS]

70 trillion is a lot considering china does everything 50 times cheaper than we do

[Debaser]

Originally Posted by jczeroman

History is irrelevant. You can't create trillions of dollars of new money with no capital to back it and not expect inflation. That is the definition of inflation: an increase in the money supply. You cannot increase the money supply and not have inflation.

I do expect inflation. Just not anytime soon. 10% unemployment, stagnant wages -- not exactly a breeding ground for inflation, moreover, it's actually a warning sign for deflation.

I don't see how inflation will somehow act as a sneak attack. It will be dealt with (higher taxes, higher interest rates) as it comes. but it hasn't.

[Debaser]

The convenient obsession with the dollar
Daniel Drezner

OK, let's be as plain as possible about this - as a reserve currency, the dollar is not going anywhere. Really.

The dollar's slide in value has been predictable, as the need for a financial safe haven has abated. By and large, a depreciating dollar helps the U.S. trade balance (though it would help much more if the Chinese renminbi got in on the appreciation).

Even the Chinese, who have spoken like they want an alternative to the dollar as a reserve currency, are in point of fact not doing much to alter the status quo. Why? To paraphrase Winston Churchill, the dollar is a lousy, rotten reserve currency - until one contemplates the alternatives.

Because all of the alternatives have serious problems. The euro, the only truly viable substitute for the dollar, is not located in the region responsible for the largest surge of growth. It would be unlikely for the ASEAN +3 countries to agree to switch from the dollar to a new currency over which regional actors have no influence (the Europeans wouldn't be thrilled either, as it would lead to an even greater appreciation of the currency). Oh, and the European Union has no consolidated sovereign debt market. The euro is worth watching, but it's not going to replace the dollar anytime soon.

The other alternatives are even less attractive. Most other national currencies beyond the euro - the yen, pound, Swiss franc, Australian dollar - are based in markets too small to sustain the inflows that would come from reserve currency status. The renminbi remains inconvertible. A return to the gold standard in this day and age would be infeasible - the liquidity constraints and vagaries of supply would be too powerful. There's the using-the-Special-Drawing-Right-as-a-template-for-a-super-sovereign currency idea, but this is an implausible solution. As it currently stands, the SDR is not a currency so much as a unit of account. Even after the recent IMF authorizations, there are less than $400 billion SDR-denominated assets in the world, which is far too small for a proper reserve currency.

So, what's really going on here with the dollar obsession? I suspect that with the Dow Jones going back over 10,000, Republicans are looking for some other Very Simple Metric that shows Obama Stinks. The dollar looks like it's going to be declining for a while, so why not that? Never mind that the dollar was even weaker during the George W. Bush era -- they want people to focus on the here and now.

The thing is, I'm not sure this gambit is going to work. People who already think Obama is a socialist will go for it, sure, but that's only rallying the base. I'm not sure how much fence-sitters care about a strong dollar, however. If anything, populist movements tend to favor a debasing of the currency rather than a strengthening of it.

Still, I'm just a political scientist -- I'm sure that, "theories on political behavior are best left to CNN, pollsters, pundits, historians, candidates, political parties, and the voters."

So, have at it, readers! Will the falling dollar be a source of populist outrage if Drudge links to it enough?

[jczeroman]

Originally Posted by Debaser

I do expect inflation. Just not anytime soon. 10% unemployment, stagnant wages -- not exactly a breeding ground for inflation, moreover, it's actually a warning sign for deflation.

I don't see how inflation will somehow act as a sneak attack. It will be dealt with (higher taxes, higher interest rates) as it comes. but it hasn't.

*slaps hand against head*

THERE ALREADY IS INFLATION. INFLATION IS AN INCREASE IN THE SUPPLY OF MONEY.

The effects will come, because they are quantitatively linked to the supply of money and not the tax rates, employment, interest rates or anything else. Those things can mask the effects of inflation for a time, but in time, even those will not be able to stop natural market corrective forces from occurring because "inflation is always and everywhere a monetary phenomenon."

Inflation will probably come as a sneak attack because so many people, even "experts" seem to think that inflation is just some accidental, random feature of the economy.

[Debaser]

Originally Posted by jczeroman

THERE ALREADY IS INFLATION. INFLATION IS AN INCREASE IN THE SUPPLY OF MONEY.

This is simply a divide between Austrian theory vs conventional/Keynesian theory. I subscribe to the latter and view your statement as simply untrue. You're switching correlation with causation and ignoring productivity/resources (or assuming they're fixed). At the basic econ 101 level, inflation is "too many dollars chasing too few goods". Hyperventilating about the too many dollars (which I won't deny is happening) part is just half the equation.

[jczeroman]

Originally Posted by Debaser

This is simply a divide between Austrian theory vs conventional/Keynesian theory. I subscribe to the latter and view your statement as simply untrue. You're switching correlation with causation and ignoring productivity/resources (or assuming they're fixed). At the basic econ 101 level, inflation is "too many dollars chasing too few goods". Hyperventilating about the too many dollars (which I won't deny is happening) part is just half the equation.

I am doing no such thing, and I don't think you entirely understand the division between schools here. I deliberately quoted a monetarist standard work (Friedman and Schwartz) (Bernanke is a monetarist as is the economic mainstream) and not an Austrian work.

Quantity theory of money, to which I am referring, is ultimately an economic axiom formulated by a monetarist (Irving Fisher) (though it has been hijacked at times by empiricists).

That said, there is no question that there are two sides to the equation, but you are ignoring that very fact. One side of the equation (MV=PQ) suddenly is pushing a ton of pressure for price rises, the other side of the equation will have to equalise - which puts pressure on the price levels. That pressure does not disappear, regardless of ANYTHING that happens on the other side of the equation. The other side now much OVERCOME that pressure. But what it does only covers up that pressure, it cannot actually jump over to the other side and reduce the initial pressure by money supply increases.

Agreed, price rises (an effect of inflation which every mainstream school acknowledges - even Keynesianism) may not appear over the surface because of a sudden burst in productivity or something else. But the fact remains that the inflationary pressure exists and was caused by monetary policy.

[Nimrod's Son]

Originally Posted by I'm Hardcore

fucking sickening

instead of putting people through college, instead of subsidising medicine/healthcare, the US government is more interested in sending its own citizens off to die, whilst bolstering the coffers of certain corporations. Awesome.

remind me again what the national debt is?

You mean instead of letting people keep their own money so they can afford to pay for college and medicine, but the government prefers to leave you with little so that you have to come to them for them to provide these things for you.

[Nimrod's Son]

Originally Posted by Debaser

This is simply a divide between Austrian theory vs conventional/Keynesian theory. I subscribe to the latter and view your statement as simply untrue. You're switching correlation with causation and ignoring productivity/resources (or assuming they're fixed). At the basic econ 101 level, inflation is "too many dollars chasing too few goods". Hyperventilating about the too many dollars (which I won't deny is happening) part is just half the equation.

[I'm Hardcore]

Originally Posted by Nimrod's Son

You mean instead of letting people keep their own money so they can afford to pay for college and medicine, but the government prefers to leave you with little so that you have to come to them for them to provide these things for you.

not getting into this with you. but yes, in a nutshell. Call me "idealistic", but hey, I'm all for the improvement of society as a whole!

[dudehitscar]

Originally Posted by Nimrod's Son

You mean instead of letting people keep their own money so they can afford to pay for college and medicine, but the government prefers to leave you with little so that you have to come to them for them to provide these things for you.

[Nimrod's Son]

Originally Posted by dudehitscar

You're right, the federal government doesn't like gaining additional power and control. What was I thinking?

[Debaser]

Originally Posted by jczeroman

I am doing no such thing, and I don't think you entirely understand the division between schools here. I deliberately quoted a monetarist standard work (Friedman and Schwartz) (Bernanke is a monetarist as is the economic mainstream) and not an Austrian work.

Quantity theory of money, to which I am referring, is ultimately an economic axiom formulated by a monetarist (Irving Fisher) (though it has been hijacked at times by empiricists).

That said, there is no question that there are two sides to the equation, but you are ignoring that very fact. One side of the equation (MV=PQ) suddenly is pushing a ton of pressure for price rises, the other side of the equation will have to equalise - which puts pressure on the price levels. That pressure does not disappear, regardless of ANYTHING that happens on the other side of the equation. The other side now much OVERCOME that pressure. But what it does only covers up that pressure, it cannot actually jump over to the other side and reduce the initial pressure by money supply increases.

Agreed, price rises (an effect of inflation which every mainstream school acknowledges - even Keynesianism) may not appear over the surface because of a sudden burst in productivity or something else. But the fact remains that the inflationary pressure exists and was caused by monetary policy.

Colin, in my head, you're "the austrian economics guy" so I made a snap judgement to label your assertion as originating from them, but you're absolutely right, this really is a monetarist vs keynesian arguement...(austrians don't subscribe to the monetarist side? or do they?)


MV = PQ.

Monetarists like to assume that a) V is stable and b) M doesn't affect Q.
Keynesians completely disagree with both of those notions.

The inflationary pressure of increasing M, is canceled out when everybody decides to save their money - which is what exactly is happening as the savings rate in this country has sky rocketed. The keynesian view is that by increasing M will lead to an increase in Q.

[Debaser]

del

i rather nip it in the bud

[dudehitscar]

Originally Posted by Nimrod's Son

You're right, the federal government doesn't like gaining additional power and control. What was I thinking?

whatever you were thinking it was sure simplistic and dumb. Thanks for sharing.

[jczeroman]

Originally Posted by Debaser

(austrians don't subscribe to the monetarist side? or do they?)

Austrians can have convenient alliances with monetarists, but in general they do not agree with them. Monetarists still believe that the business cycle can be controlled via central banking, whereas Austrians argue that it cannot be controlled (it will have spillover effects) and attempts to control will lead to the business cycle (the chief spillover effect).

Originally Posted by Debaser

The inflationary pressure of increasing M, is canceled out when everybody decides to save their money - which is what exactly is happening as the savings rate in this country has sky rocketed. The keynesian view is that by increasing M will lead to an increase in Q.

But this is the EXACT reason we have a problem now (and is why the Austrian theory on the business cycle is so important). That saved money looks like capital - but it isn't capital (that is, real wealth) it is printed money. That creates a boom as entrepreneurs and business people start spending that "capital" on all kinds of projects. However, it is an illusion and soon the real capital (some fraction of the illusionary capital) actually runs out and suddenly there is a dramatic crash in whatever sectors of the economy spent that fake capital.

That "savings rate" that has "sky-rocketed" is not actually real savings (most of it anyway). It is merely an increase on bank balance sheets that has literally been created by the Fed adding zeros to their accounts. It's just creating another bubble. And this time, there appears to be no other industry to shove this money into to keep the dollar from tanking. In other words - the final bubble in a regime of currency manipulation by a central bank is the currency itself.