The Federal Reserve's Explicit Goal: Devalue The Dollar 33%

[Parker2112]

http://www.forbes.com/sites/charleskadlec/2012/02/06/the-federal-reserves-explicit-goal-devalue-the-dollar-33/2/

[Winehole23]

The purchasing power of Americans will diminish, and so will the cost of the national debt. Basically, we're trading quality of life for easier repayment -- or more accurately, a bipartisan weak dollar policy has made the trade-off on our behalf.

[ElNono]

Plus, the gold standard days are pretty much over. I don't even think the US could switch back to it if it wanted to.

[Parker2112]

Inflation tax is going to hit the middle and lower class like a sledge. It's already started.

[greyforest]

Plus, the gold standard days are pretty much over. I don't even think the US could switch back to it if it wanted to.

there's not enough gold on earth to have a gold standard. too much money exists to be tied to any standard, really.

[ElNono]

there's not enough gold on earth to have a gold standard. too much money exists to be tied to any standard, really.

Exactly.

[Winehole23]

Hmm....couldn't any fractional amount be used as backing in principle?

[cheguevara]

Well the dollar is pegged to oil and that is diminishing resource by the minute.

end the motherfucking fed

[cheguevara]

there's not enough gold on earth to have a gold standard. too much money exists to be tied to any standard, really.

You fix the price of gold, and you don't convert overnight. You temporarily handle 2 currencies and gradually switch to the new gold backed notes.

Sounds tough but the current path we are on is taking us to the financial cemetery

[ElNono]

Inflation tax is going to hit the middle and lower class like a sledge. It's already started.

When?

[ElNono]

Hmm....couldn't any fractional amount be used as backing in principle?

Fractional backing is still fiat.


Well the dollar is pegged to oil

It is?


You fix the price of gold, and you don't convert overnight. You temporarily handle 2 currencies and gradually switch to the new gold backed notes.

You could do that, but arguably, there's simply not enough supply.


Sounds tough but the current path we are on is taking us to the financial cemetery

The "financial cemetery" being what exactly?

[Wild Cobra]

This is something that has needed to be done a long time ago. Some of you may remember I am an advocate of devaluing the dollar. Imported goods will cost more and our exports will become less expensive for other nations. It will bring back some manufacturing as the balance changes.

Is 30% enough... I say not enough and 20 years is too long.

[ElNono]

It will take a hell of a lot more than 30% devaluation to be able to work and live with just $120/month or so... better enjoy our standard of living now, until things "balance out".

[cheguevara]

You could do that, but arguably, there's simply not enough supply.

what do you mean? you know exactly how much total gold there is, you derive a note based on this amount.

So it could turn out $100 or $1,000 fiat dollars = $1 gold dollar. I fail to see the issue.



The "financial cemetery" being what exactly?

Argentina 2000-2002

[ElNono]

what do you mean? you know exactly how much total gold there is, you derive a note based on this amount.

So it could turn out $100 or $1,000 fiat dollars = $1 gold dollar. I fail to see the issue.

You can't do that without effectively devaluing the fiat dollar. Why not just devalue the fiat dollar and be done with it?


Argentina 2000-2002

Can't happen with the dollar.

The Argentinian Peso back then was artificially pegged to the US dollar, and that's what caused the bust. The US Dollar is a free floating, sovereign currency (as wisely pointed out by 2centsworth in the other thread)

[cheguevara]

You can't do that without effectively devaluing the fiat dollar. Why not just devalue the fiat dollar and be done with it?


not necessarily. if you introduce the new notes gradually over time(5 year notes).



Can't happen with the dollar.

The Argentinian Peso back then was artificially pegged to the US dollar, and that's what caused the bust. The US Dollar is a free floating, sovereign currency (as wisely pointed out by 2centsworth in the other thread)

was referring to the results, not the source of the problem.

[cheguevara]

It is?


Oil is traded in dollars. Therefore the supply/demand of oil will affect the dollar value more than pretty much anything else.

[greyforest]

what do you mean? you know exactly how much total gold there is, you derive a note based on this amount.

So it could turn out $100 or $1,000 fiat dollars = $1 gold dollar. I fail to see the issue.

The problem with re-tying the dollar to gold is that the instant that happens, anyone with a modicum of intelligence will call the bluff and exchange billions of their dollars for gold. USA will be unable to provide the gold to back it to the tied amount.

The USA needs to constantly expand its money supply in order to pay interest on debts, and to sustain a growing population and economy. Too many people would foresee this and exchange their dollars for gold immediately.

This exact scenario already happened in 1970 when Nixon untied the dollar from the gold standard.

http://en.wikipedia.org/wiki/Nixon_Shock

Switzerland, then France both saw that the USA was printing up lots of money. They called the bluff and exchanged massive sums of US dollars for gold. "OH SHIT" says the USA. "We can't do this anymore". The USA can print money but can't print gold. With an exponentially expanding economy and population, and exponentially decaying rates of gold discovery, fiat money was the only option.

The problem with all fiat currencies is that invariably they will return to their intrinsic value.

[cheguevara]

The problem with re-tying the dollar to gold is that the instant that happens, anyone with a modicum of intelligence will call the bluff and exchange billions of their dollars for gold. USA will be unable to provide the gold to back it to the tied amount.

The USA needs to constantly expand its money supply in order to pay interest on debts, and to sustain a growing population and economy. Too many people would foresee this and exchange their dollars for gold immediately.

This exact scenario already happened in 1970 when Nixon untied the dollar from the gold standard.

http://en.wikipedia.org/wiki/Nixon_Shock

Switzerland, then France both saw that the USA was printing up lots of money. They called the bluff and exchanged massive sums of US dollars for gold. "OH SHIT" says the USA. "We can't do this anymore". The USA can print money but can't print gold. With an exponentially expanding economy and population, and exponentially decaying rates of gold discovery, fiat money was the only option.

The problem with all fiat currencies is that invariably they will return to their intrinsic value.

again, you don't switch overnight. You do it gradually with limited issue of gold dollars.

[CosmicCowboy]

again, you don't switch overnight. You do it gradually with limited issue of gold dollars.

You can only lose your virginity once. There's no going back now.

[Wild Cobra]

It will take a hell of a lot more than 30% devaluation to be able to work and live with just $120/month or so... better enjoy our standard of living now, until things "balance out".
Again... you discount something that needs done because it doesn't fix something 100%.

Why are you always so short sighted? There are other steps that need done also. No single change will be -the- solution alone.

[NewcastleKEG]

The purchasing power of Americans will diminish, and so will the cost of the national debt. Basically, we're trading quality of life for easier repayment -- or more accurately, a bipartisan weak dollar policy has made the trade-off on our behalf.
More decline in quality of life in America?

European middle class continues to ROTFL @ American middle class

[CosmicCowboy]

More decline in quality of life in America?

European middle class continues to ROTFL @ American middle class

:lmao

Have you not noticed the riots everywhere in Europe as the governments accept financial reality and cut back on the perks and bennies?

[ElNono]

was referring to the results, not the source of the problem.

:lol the results have everything to do with the problem.

You can't get to that result with the US Dollars because that problem doesn't exist for the US.


Oil is traded in dollars. Therefore the supply/demand of oil will affect the dollar value more than pretty much anything else.

So it's oil that's pegged to the dollar, not the other way around. The supply/demand of oil affects the price of oil.


again, you don't switch overnight. You do it gradually with limited issue of gold dollars.

Limiting "gold dollars" only creates an artificial bubble in the value of gold. There's nothing stopping the average joe to simply buy gold instead.

[NewcastleKEG]

:lmao

Have you not noticed the riots everywhere in Europe as the governments accept financial reality and cut back on the perks and bennies?
Yes. When will Americans grow a spine and riot?

Americans = Occupy & then told by ''free'' government to get the f out

[ElNono]

Again... you discount something that needs done because it doesn't fix something 100%.

I didn't discount it.

[phxspurfan]

Damn yo, so Ron Paul was right?

[CosmicCowboy]

Yes. When will Americans grow a spine and riot?

Americans = Occupy & then told by ''free'' government to get the f out

Hopefully never.

The best track to prosperity is still to work hard, work smart, and don't spend more than you can afford. The world is not as hopeless a place as liberal spurstalkers like to paint it.

[cheguevara]

:lol the results have everything to do with the problem.

You can't get to that result with the US Dollars because that problem doesn't exist for the US.

2 different problems can yield the same result. My point is that dollars will be worth a LOT less, thus ppl will hardly be able to afford anything. That's what ultimately happened in Argentina.



So it's oil that's pegged to the dollar, not the other way around. The supply/demand of oil affects the price of oil.

this makes no sense. Supply and demand affects price of any product. This is not what I meant, Supply/demand of oil affects the dollar price. Thus dollar is pegged to oil. "Petrodollar"



Limiting "gold dollars" only creates an artificial bubble in the value of gold. There's nothing stopping the average joe to simply buy gold instead.

Anybody can buy gold. Even now. That won't change with gold standard, it's not suppossed to.

[Wild Cobra]

Yes. When will Americans grow a spine and riot?

Americans = Occupy & then told by ''free'' government to get the f outHopefully never.

The best track to prosperity is still to work hard, work smart, and don't spend more than you can afford. The world is not as hopeless a place as liberal spurstalkers like to paint it.
I say our congress needs to grow a spine and dramatically reduce the subsidies to the poor. It's costing us too much, and then the poor act as if it's the rich people's fault, not giving them enough money!

[Wild Cobra]

I didn't discount it.
It sure sounded like it, or was that echos of your constant negativity towards anything I post? What was that $120 bit anyway. makes no sense.

[FuzzyLumpkins]

It sure sounded like it, or was that echos of your constant negativity towards anything I post? What was that $120 bit anyway. makes no sense.

You suck at the martyr card too.

You get constant negativity from everybody because you say stupid, inane and downright contemptible things over and over again. You claim that everyone who disagrees with you is the 'peanut gallery.'

Maybe just maybe we have a point, huh?

[greyforest]

I say our congress needs to grow a spine and dramatically reduce the subsidies to the poor. It's costing us too much, and then the poor act as if it's the rich people's fault, not giving them enough money!

it is the rich people's fault for not providing middle-class jobs.

what people in charge know (and you don't) is that if you start starving the unemployed masses they will riot.

what needs to happen is there needs to be an incentive for these unskilled/uneducated people to work, because they get paid about the same whether they do or don't.

i think there are a few solutions. one, there shouldn't be incentive for people to breed just to get a larger welfare check; infact, there should be the opposite. lifetime pension for sterilization.

second, the government is stupid for just dolling out the same amount to an unemployed person as mcdonalds would. this provides no incentive for an unemployed person to work a minimum wage job instead of sitting on their ass. government should subsidize low-paying jobs by adding a percentage.

[Winehole23]

i think there are a few solutions. one, there shouldn't be incentive for people to breed just to get a larger welfare check; infact, there should be the opposite. lifetime pension for sterilization.An apparent point of agreement with WC

[greyforest]

it's fucking shameful...so many humans are brought in to the world by people who cannot support them at all, an action which is rewarded.

[Wild Cobra]

it is the rich people's fault for not providing middle-class jobs.

I can somewhat agree with that. However, the rich who provide jobs are having a hard time competing against free trade agreements in place. Still, that isn't reason to increase the percentage of the marginal rate, or add surtaxes. Get rid of most or all tax deductions instead.


what people in charge know (and you don't) is that if you start starving the unemployed masses they will riot.

I'm not talking about starving them. I'm talking about reducing subsidies to the point they can't buy flat screen TVs, Bluray players, expensive Nike shoes, etc. Luxuries are for those who can afford them on their own.


what needs to happen is there needs to be an incentive for these unskilled/uneducated people to work, because they get paid about the same whether they do or don't.

Incentives and deterrents. Deterrants can cvome in many ways to make them want to get work instead of using the US issued hammock.

i think there are a few solutions. one, there shouldn't be incentive for people to breed just to get a larger welfare check; infact, there should be the opposite. lifetime pension for sterilization.

LOL... Careful... people will say you are as extreme as the call me.


second, the government is stupid for just dolling out the same amount to an unemployed person as mcdonalds would. this provides no incentive for an unemployed person to work a minimum wage job instead of sitting on their ass. government should subsidize low-paying jobs by adding a percentage.

I don't know about that. That is an insurance, not a welfare type subsidy. A person making good money and losing a job shouldn't suddenly not make enough to pay the important bills. Now instead of the normal 6 months worth of benefits over a year, what about reducing the benefit after the first six months, every month reducing a little less until it's something like 80% of what a minimum wage job would pay.

Now I agree they should work any job, but while on unemployment, they say you can't properly look for work while working full time, and will drop your benefits.

[Wild Cobra]

i think there are a few solutions. one, there shouldn't be incentive for people to breed just to get a larger welfare check; infact, there should be the opposite. lifetime pension for sterilization.


An apparent point of agreement with WC


it's fucking shameful...so many humans are brought in to the world by people who cannot support them at all, an action which is rewarded.
I'm not the only one to believe this. Just the only one here who doesn't give a shit about political correctness and will elaborate...

[RandomGuy]

The purchasing power of Americans will diminish, and so will the cost of the national debt. Basically, we're trading quality of life for easier repayment -- or more accurately, a bipartisan weak dollar policy has made the trade-off on our behalf.

Basically the Fed announced an inflation target. :sleep

Which is taken as prima fascae evidence of a giant conspiracy by certain segments of the population.

[RandomGuy]

The author of the OP has this gem to support his thesis:


The Fed’s most recent experience with Quantitative Easing also belies the entire notion that monetary manipulation can spur the economy. Between November 2010 and June 2011, the Fed tried to spur economic growth by purchasing $600 billion in Treasury securities, flooding the banking system with reserves and keeping interest rates low. In response the economy, which had been growing at a 3.4% annual rate, slowed to a 1% annual rate in the first half of 2011. Once, the Fed stopped supplying all of that liquidity, economic growth in the second half of the year accelerated to a 2.3% annual rate.

http://www.nizkor.org/features/fallacies/post-hoc.html


Fallacy: Post Hoc

--------------------------------------------------------------------------------

Also Known as: Post Hoc Ergo Propter Hoc, False Cause, Questionable Cause, Confusing Coincidental Relationships With Causes

Description of Post Hoc
A Post Hoc is a fallacy with the following form:


1. A occurs before B.
2. Therefore A is the cause of B.

The Post Hoc fallacy derives its name from the Latin phrase "Post hoc, ergo propter hoc." This has been traditionally interpreted as "After this, therefore because of this." This fallacy is committed when it is concluded that one event causes another simply because the proposed cause occurred before the proposed effect. More formally, the fallacy involves concluding that A causes or caused B because A occurs before B and there is not sufficient evidence to actually warrant such a claim.

[ElNono]

2 different problems can yield the same result. My point is that dollars will be worth a LOT less, thus ppl will hardly be able to afford anything. That's what ultimately happened in Argentina.

No, that's not how it works at all. Argentina couldn't issue pesos without having reserves in other currency (Euros, Dollars, etc). It's similar to what China is doing. The US doesn't have that problem.


this makes no sense. Supply and demand affects price of any product. This is not what I meant, Supply/demand of oil affects the dollar price. Thus dollar is pegged to oil. "Petrodollar"

You're still confused. It's the other way around: Oil is traded in US dollars, thus it's pegged to it. Supply and demand of oil simply affects the price of oil. From a currency standpoint, such trades are handled by the Fed and central banks. The Fed has no limit to provide the necessary dollars to conduct those transactions.


Anybody can buy gold. Even now. That won't change with gold standard, it's not suppossed to.

Sure it would. Right now gold is simply a traded commodity. You would be turning that into the official backer of your currency. That mean there needs to be enough gold to back up the money that's circulating out there. IE: you're creating a new demand for it.

[ElNono]

It sure sounded like it, or was that echos of your constant negativity towards anything I post? What was that $120 bit anyway. makes no sense.

I don't care what it sounded like. Apparently, you're the only one complaining about it.

The $120/month is what your average Chinese employee makes today. It makes complete sense when you're discussing bringing back manufacturing to this country.

[cheguevara]

No, that's not how it works at all. Argentina couldn't issue pesos without having reserves in other currency (Euros, Dollars, etc). It's similar to what China is doing. The US doesn't have that problem.

once again you are talking about the problem. I was talking about the results which were regular folk lost a lot of their "wealth"



You're still confused. It's the other way around: Oil is traded in US dollars, thus it's pegged to it. Supply and demand of oil simply affects the price of oil. From a currency standpoint, such trades are handled by the Fed and central banks. The Fed has no limit to provide the necessary dollars to conduct those transactions.

makes no sense at all. This is like saying price of potatoes is pegged to the dollar. Not at all, price of potatoes(or any other product) is tied to supply/demand.

I mean increases/decreases of oil affect dollar price in much the same way gold used to affect dollar back under gold standard. Thus, dollar price is pegged to oil



Sure it would. Right now gold is simply a traded commodity. You would be turning that into the official backer of your currency. That mean there needs to be enough gold to back up the money that's circulating out there. IE: you're creating a new demand for it.

there is already the biggest demand for gold in the history of the world. A controlled gradual move to gold standard would not affect the deman more than a total economic meltdown would.

[Winehole23]

Basically the Fed announced an inflation target. :sleep

Which is taken as prima fascae evidence of a giant conspiracy by certain segments of the population.Not sure how this is a response to me.

Do you disagree that American purchasing power has been on the wane for at least a decade and that a weaker dollar makes repayment of our debts easier?

[ElNono]

once again you are talking about the problem. I was talking about the results which were regular folk lost a lot of their "wealth"

That's basic economics. Inflation has been here all the time, the only problem the US faces is to keep inflation at a respectable rate. Anything below 5% is probably "normal" inflation, much like it's been throughout US history. What you also want to avoid is getting into a deflation.


makes no sense at all. This is like saying price of potatoes is pegged to the dollar. Not at all, price of potatoes(or any other product) is tied to supply/demand.

:lol That example basically agrees with what I said: The price of oil is dependent on supply/demand of oil.


I mean increases/decreases of oil affect dollar price in much the same way gold used to affect dollar back under gold standard. Thus, dollar price is pegged to oil

No it doesn't, because unlike the gold standard, where issuing of the dollar was dependent on the gold backing (and importers could ask their dollars be converted into gold), the current fiat dollar doesn't have or need that backing. And importers can't ask for their money in gold. The Fed can simply provide more dollars when needed to meet the market demand, and it can take them away whenever it wants to also.

This is a central difference between the gold standard vs the current system.


there is already the biggest demand for gold in the history of the world. A controlled gradual move to gold standard would not affect the deman more than a total economic meltdown would.

But there's not enough supply to convert our monetary base. Current gold investments come in many forms, including Gold futures. That's useless for the purposes of backing the currency. You need actual gold reserves.

[RandomGuy]

Not sure how this is a response to me.

Do you disagree that American purchasing power has been on the wane for at least a decade and that a weaker dollar makes repayment of our debts easier?

It wasn't.

No, and no.

[Winehole23]

my bad, RG

[cheguevara]

No it doesn't, because unlike the gold standard, where issuing of the dollar was dependent on the gold backing (and importers could ask their dollars be converted into gold), the current fiat dollar doesn't have or need that backing. And importers can't ask for their money in gold. The Fed can simply provide more dollars when needed to meet the market demand, and it can take them away whenever it wants to also.

not talking about issuing dollars. Talking about the value of the dollar. Let's think about it. If all countries trade oil in dollars(which is the case today), just that sole fact increases the value of the dollar immensely. Why? because there is high demand for these petrodollars. With me so far?

Now if you think for a bit and think of the price of oil. The price of oil will affect that petrodollar demand. Why? If the demand for oil goes down, means less people need the dollars to buy oil, which means dollar value goes down. And vice versa. That is why the value of dollar is pegged to oil.



But there's not enough supply to convert our monetary base. Current gold investments come in many forms, including Gold futures. That's useless for the purposes of backing the currency. You need actual gold reserves.

exactly why I talked about having 2 currencies. Obviously the current currency we are not would not be converted to gold dollars. We would have to create a brand new currency, that is what I said since post 1.

[cheguevara]

Nono here is some better explanation how trade of oil in dollars helps dollar value. Maybe I'm not explaining correctly :lol


The valuation of the U.S. dollar was rather shaky after August 1971 when the Nixon had to “de-link” the dollar from the $35 per oz. “gold standard.” According to Dr. David Spiro’s research on this issue, in 1973-74 the Nixon administration sought to alleviate this situation by negotiating assurances from King Saud of Saudi Arabia to price oil in dollars only, and to invest their surplus oil proceeds in U.S. Treasury Bills. <7> In return the U.S. would protect the Saudi regime. These agreements created the phenomenon known as “petrodollar recycling,” and ensured a steady flow of oil and dollar denominated investments from Saudi Arabia. The U.S. prints billions of fiat dollars that U.S. consumers provide to other nations via trade when we purchase their imported goods. Hundreds of billions of these dollars become ‘petrodollars’ when used by nations to purchase oil/energy from OPEC producers. Approximately $600 to $800 billion petrodollars are annually re-cycled from OPEC sales and invested back into the U.S. via Treasury Bills or other U.S. dollar-denominated assets. This recycling bolsters the dollar’s international “liquidity” value.

The fact that all buyers of oil must first buy dollars to pay for the oil supports the U.S. dollar as the world’s reserve currency, and eliminates our currency risk for oil. Oil priced in “petrodollars” and the dollar as the world’s reserve currency has supported the value of our currency which by normal economic logic, given America’s trillions of dollars in trade deficits over the past decade, should have much less purchasing power than it currently possesses. An enlarged E.U. and a strong euro are challenging this arrangement.

However, as long as the dollar remains the monopoly oil transaction currency, its “storage of wealth” is theoretically derived from the simple fact that it purchases between 1.5 and 1.9 gallons of crude oil. (Using OPEC price range of $22-$28 per barrel, and 42 gallons in a production barrel). No other hard currency in the world can be used to directly purchase the most valuable commodity in the world – oil. This unique geo-political agreement with Saudi Arabia has worked to our favor for the past 30 years by eliminating any fluctuation (currency risk) in our oil purchases in relation to the dollar’s valuation, raising the entire asset value of all dollar denominated assets/properties, and facilitating the Federal Reserve in creating a truly massive debt and credit expansion (or `credit bubble' in the view of some economists). In effect, global oil consumption via OPEC “petrodollar recycling” provides a subsidy to the U.S. economy.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x1101

[ElNono]

not talking about issuing dollars. Talking about the value of the dollar. Let's think about it. If all countries trade oil in dollars(which is the case today), just that sole fact increases the value of the dollar immensely. Why? because there is high demand for these petrodollars. With me so far?

Nope, not with you. You still think the US Dollar is this "limited" commodity. This very likely comes from the gold standard way of thinking. I really suggest you go read that book 2centsworth linked in the other thread.


Now if you think for a bit and think of the price of oil. The price of oil will affect that petrodollar demand. Why? If the demand for oil goes down, means less people need the dollars to buy oil, which means dollar value goes down. And vice versa. That is why the value of dollar is pegged to oil.

It isn't. Not since the gold standard. As a matter of fact, that's a good reason not to go back to the gold standard.


exactly why I talked about having 2 currencies. Obviously the current currency we are not would not be converted to gold dollars. We would have to create a brand new currency, that is what I said since post 1.

I understood you clearly since post 1. It's the same thing. This "new" currency would be backed by gold, and fluctuate very much the same way gold fluctuates. Since I know for a fact that you'll be converting progressively to the gold backed currency and you're going to need gold to do that, the obvious reaction is to go buy gold, since it's going to become more scarce (and thus more valuable) during your conversion process. At the same time, the market will saturate with old currency, and thus depreciate, reinforcing the demand for gold.

[ElNono]

Nono here is some better explanation how trade of oil in dollars helps dollar value. Maybe I'm not explaining correctly :lol

The fact that all buyers of oil must first buy dollars to pay for the oil supports the U.S. dollar as the world’s reserve currency, and eliminates our currency risk for oil. Oil priced in “petrodollars” and the dollar as the world’s reserve currency has supported the value of our currency which by normal economic logic, given America’s trillions of dollars in trade deficits over the past decade, should have much less purchasing power than it currently possesses. An enlarged E.U. and a strong euro are challenging this arrangement.



This is exactly what I was pointing out in my previous post. The fact that the Fed handles the entire trade in dollars means the value of the dollar is (relatively) unaffected from the oil trade. As that bolded part says, if we were under the gold standard and the US Dollar would be a "limited" commodity, then "by normal economic logic, given America’s trillions of dollars in trade deficits over the past decade, should have much less purchasing power than it currently possesses."

[cheguevara]

Nope, not with you. You still think the US Dollar is this "limited" commodity. This very likely comes from the gold standard way of thinking. I really suggest you go read that book 2centsworth linked in the other thread.



It isn't. Not since the gold standard. As a matter of fact, that's a good reason not to go back to the gold standard.

check my post above. I give up on you :lol



I understood you clearly since post 1. It's the same thing. This "new" currency would be backed by gold, and fluctuate very much the same way gold fluctuates. Since I know for a fact that you'll be converting progressively to the gold backed currency and you're going to need gold to do that, the obvious reaction is to go buy gold, since it's going to become more scarce (and thus more valuable) during your conversion process. At the same time, the market will saturate with old currency, and thus depreciate, reinforcing the demand for gold.

Newsflash, gold is already scarce and already being bought and sought after. Newsflash, a burst of the dollar bubble will exponentially increase the price of gold, even more so than a gradual conversion to gold standard.

[cheguevara]

The majority of Americans are not cognizant to the fact that the ‘strength’ of our current economy is founded on the dollar’s two pivotal advantages following the ’Bretton Woods Conferences’ of 1944-45. First is the dollars role as the world’s dominant international reserve currency, which affords the US market with its “safe harbor” international status. The second crucial factor is the dollar’s role as the fiat and sole currency for global oil transactions.

See there. Dollar has 2 main advantages. And one of them is the "dollar's role as sole currency for oil"

You take that 1 factor away, and poof goes the dollar.

So saying dollar is pegged to "it's role as sole currency for oil trade" is a fair statement IMO.

[Winehole23]

so you assume. seems doubtful to me. with Europe tanking the smart money will seek safer refuges -- such as the USA.

[ElNono]

check my post above. I give up on you :lol

What you posted is in agreement with what I said. It's funny though you don't even understand what you quote :lol


Newsflash, gold is already scarce and already being bought and sought after. Newsflash, a burst of the dollar bubble will exponentially increase the price of gold, even more so than a gradual conversion to gold standard.

:lol what "dollar bubble"?

[cheguevara]

The euro was doomed from the beginning. The yen on the other hand, at least it will get a better shot at prime time.

[ElNono]

See there. Dollar has 2 main advantages. And one of them is the "dollar's role as sole currency for oil"

You take that 1 factor away, and poof goes the dollar.

So saying dollar is pegged to "it's role as sole currency for oil trade" is a fair statement IMO.

On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully 'fiat currency,' backed by nothing but the promise of the federal government."

Bretton Woods system (http://en.wikipedia.org/wiki/Bretton_Woods_system)

[Winehole23]

The yen on the other hand, at least it will get a better shot at prime time.why so, forex sensei?

[cheguevara]

On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully 'fiat currency,' backed by nothing but the promise of the federal government."

Bretton Woods system (http://en.wikipedia.org/wiki/Bretton_Woods_system)

Reading comprehension :rolleyes

by "following the Bretton Woods" means AFTER

The majority of Americans are not cognizant to the fact that the ‘strength’ of our current economy is founded on the dollar’s two pivotal advantages following the ’Bretton Woods Conferences’ of 1944-45. First is the dollars role as the world’s dominant international reserve currency, which affords the US market with its “safe harbor” international status. The second crucial factor is the dollar’s role as the fiat and sole currency for global oil transactions.

[cheguevara]

why so, forex sensei?

my bad. I meant yuan:

The Yuan’s Road to Becoming a Reserve Currency
http://blogs.wsj.com/chinarealtime/2012/02/07/the-yuans-road-to-becoming-a-reserve-currency/

[ElNono]

Reading comprehension :rolleyes

:lol you need to keep reading. The fact that the entire world decided to allow the US to be their trade accountant is the reason the value of the US dollar is basically locked up (asserting my point).

It's not just oil that's traded under those rules. Pretty much everything else is. And since 1971, countries can't take their dollars away from the Fed other than by buying US goods or services.

It's really a nice scam, but one countries agreed to when they put their money in the Fed. The quicker you stop thinking in gold standard (or home) equivalences, the faster you're going to understand how nice a scam they have set up for themselves.

[CosmicCowboy]

The link between oil and the dollar is fragile. China, Iran, Russia, etc. are all doing oil deals now that don't involve the dollar. It will just get worse and not better. Formalizing Iran not to be able to clear dollars for oil WILL drive them to other currencies sooner...They are still going to produce and sell oil...it just won't be for dollars.

[ElNono]

The problem with the Yuan is that it's value is artificially pegged to the US dollar in order to keep them competitive, and so it needs to constantly absorb US dollars in their reserves to keep that going.

[Wild Cobra]

I don't care what it sounded like. Apparently, you're the only one complaining about it.

The $120/month is what your average Chinese employee makes today. It makes complete sense when you're discussing bringing back manufacturing to this country.
So that doesn't relate well to the market cost. Labor is typically a small percentage of a product price. So many items would be cheaper to make with the US cost of labor is our dollar was devalued. If it was worth ~70% of what it is now, imports would cost ~40% more. That should be more than enough to make up for labor cost differences in most cases.

[ElNono]

So that doesn't relate well to the market cost. Labor is typically a small percentage of a product price. So many items would be cheaper to make with the US cost of labor is our dollar was devalued. If it was worth ~70% of what it is now, imports would cost ~40% more. That should be more than enough to make up for labor cost differences in most cases.

Let me know when you move the goalposts back and want to talk again about bringing back manufacturing jobs.

[greyforest]

I'm not talking about starving them. I'm talking about reducing subsidies to the point they can't buy flat screen TVs, Bluray players, expensive Nike shoes, etc. Luxuries are for those who can afford them on their own.

Flat screen TVs are startlingly cheap, especially when inflation is taken in to consideration. Big screen TVs are not very luxurious now.

Health care, however, is luxuriously expensive. Raising middle class children is luxuriously expensive.

[TDMVPDPOY]

lowering the dollar, what happens if china wants you to pay in another currency...lol increasing ur debt obligation when conversion

[ElNono]

Flat screen TVs are startlingly cheap, especially when inflation is taken in to consideration. Big screen TVs are not very luxurious now.

Health care, however, is luxuriously expensive. Raising middle class children is luxuriously expensive.

His crusade is against the poor... or so he thinks...

[Winehole23]

On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. As a result, "[t]he Bretton Woods system officially ended and the dollar became fully 'fiat currency,' backed by nothing but the promise of the federal government."

Bretton Woods system (http://en.wikipedia.org/wiki/Bretton_Woods_system)

Students of economic history are in for a treat. An official studying deep in the bowels of the US Treasury library has recently uncovered a prize of truly startling proportions – an 800 page plus transcript of the Bretton Woods conference in July 1944 (http://en.wikipedia.org/wiki/United_Nations_Monetary_and_Financial_Conference), the meeting of nations which established the foundations of today's international monetary system.

Bizarrely, this extraordiary manuscript has never before come to light.

Professor Steve Hanke of John Hopkins University, whose former student it was who discovered the document, is now dashing to publish it in full in conjunction with his friend, Jacque de Larosiere. The first stage of the process, transcribing the type-written document into digital form is now complete, though it is not yet available. It's hoped eventually to produce a hard copy, book version.
http://blogs.telegraph.co.uk/finance/jeremywarner/100015182/bretton-woods-uncovered-a-scoop-of-sorts/?utm_source=twitterfeed&utm_medium=twitter

[boutons_deux]

If the dollar drops really low, then imported products, esp oil, are cheaper, but exports get a huge boost.

If the policy is to inflate America out of its deficit (as was done after WWII), then all those blood-thirsty, other-peoples'-troops, suckered, flag-wavers who loved invading Iraq will finally start paying for the deficit caused by the war and by dubya's tax cuts for the wealthy and UCA.

[RandomGuy]

my bad. I meant yuan:

The Yuan’s Road to Becoming a Reserve Currency
http://blogs.wsj.com/chinarealtime/2012/02/07/the-yuans-road-to-becoming-a-reserve-currency/

That has got to be one of the most thinly argued bits I have read in a while.


It’s far behind on others: Its exchange rate doesn’t trade freely (as other reserve currencies do). China still maintains extensive capital controls, limiting the yuan’s trading in global markets. And the country still has “relatively shallow and underdeveloped” bond markets, the study says.

China will not become a reserve currency in my lifetime. (presumedly 20-40 years or so).

The barriers to China's currency assuming that role will not be surmounted by the current form of government, namely transparency in their financial markets.

The corruption and rot at the heart of their state form of capitalism is far worse than ours.

I will take all of that back the instant you can trust the balance sheets of the companies trading on their markets.

That won't happen quickly, and the forces preventing that are profiting far too much.

Erk. Now I sound like a conspiracy nut. Dammit.

(edit)

The Economist did a rather long article in just this subject.

[ElNono]

Dollar bubble!!!1!1

[cheguevara]

:lmao coming back with a response after a week :lmao

and with Nono piggybacking :lol

[cheguevara]

since you were so kind to bump this thread...

Ron Paul: "Mr. Bernanke do you do your own shopping?... ok so you are aware of prices" :lmao :lmao

H4uL6CSiGrU

[cheguevara]

r5LTHuLgNH0

[boutons_deux]

What's Randian fantasist Paul's point?

And what specifically is policy alternative to what BB is doing now?

[boutons_deux]

Randian Paul needs to go after the financial sector that fucked us up, yet again, just like Swiss train on time, rather than fiat money, which, like Paul himself, ain't goin nowhere.

[ElNono]

It's coming!!!1!1

Any time now!!!1!

[cheguevara]

Real estate bubble is coming!!!1!1

Any time now!!!1!

[ElNono]

So 6 years? Is that what we're looking at chestradamus?

No bump of this thread is valid until then?

[Winehole23]

it was clear by the end of August 2007 the bubble was about to burst, but this is a quibble. a revisit in six years would be fine by me.

[ElNono]

I think we can revisit this anytime we want. It's a forum...

Dollar bubble!!!1!!1 Everybody run!!!!1!

[cheguevara]

Real Estate bubble!!!1!!1 Everybody run!!!!1!

[ElNono]

crofl still thinking in gold standard terms...

It's over Che... Much like Ron's run for presidency...

[Winehole23]

I think we can revisit this anytime we want. It's a forum...

Dollar bubble!!!1!!1 Everybody run!!!!1!Not that they would ever be observed, but I don't see what prevents us from drawing a few hard and arbitrary lines. For predictions some span of time should be chosen. If the seer fails to specify, his audience may recommend. as you did upstream, carrying my second.


(This thread ain't so great it needs regular updating JMO.)

[cheguevara]

oops

China's Holdings of Treasuries Drops for First Time on Record

China, the largest foreign U.S. creditor, reduced its holdings of U.S. government securities last year for the first time since the Treasury Department began compiling the data in 2001.

The world's second-largest economy held $1.15 trillion Treasuries as of Dec. 31, down from $1.16 trillion at the end of 2010

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/03/01/bloomberg_articlesM06BAW0UQVI901-M06HK.DTL#ixzz1oGlKeGrl


China's Sale of U.S. Debt -- Beginning of the End?

The dollar's share of China's huge cache of currency reserves has been slashed to a record low, the Wall Street Journal reports, to which it adds the world hasn't ended as a result.

But more recent data showing outright sales of U.S. securities by China suggests a less cavalier attitude would be in order. It isn't the end of the world, just a portent of what can happen when the biggest buyer of America's biggest export -- its IOUs denominated in dollars -- stops buying.

That would leave the Federal Reserve as lender of last resort to the U.S. government to fill the gap left by its biggest creditor. Think this Zimbabwe style of central-bank monetization of an unsustainable government debt can't happen in one of the world's major industrialized democracies? Well, it may be starting in Japan.

http://online.barrons.com/article/SB50001424052748704097904577257030958775246.html?m od=BOL_GoogleNews

[CosmicCowboy]

China is also settling for lower yields by buying shorter term debt to hedge against the inevitable inflation and interest rate increases...

[ChumpDumper]

So someone else bought the debt?

Wow.