Conspiracy Theory The death of the dollar

[evo]

All I can say Bloods is that I've been trading currency and bonds most my adult adult life; and from studying the flow of 'money' the only thing I conclude is that one day it will all come a severe cropper-what you've said above is an illusion that has been sold by 'modern' economists'(yes I know I'm sounding like some sort of Christian revelationist).

It's already well beyond the point of no return.The only i thing I can really hope for is it doesn't happen in my life time.

The numbers are now mind boggling.I suspect it one of those things even bankers and traders either don't want to understand or just want to forget about it ie.make hay while the sun shines.

Anyway,you might find this interesting from wiki,or not.

Alternative interpretations of business cycles

[edit] Austrian School
The Austrian School of economics rejects the suggestion that the business cycle is an inherent feature of an unregulated economy and argues that it is caused by intervention in the money supply. Austrian School economists, following Ludwig von Mises, point to the role of the interest rate as the price of investment capital, guiding investment decisions. In an unregulated (free-market) economy, it is posited that the interest rate reflects the actual time preference of lenders and borrowers. Some follow Knut Wicksell to call this the "natural" interest rate.[1] Government control of the money supply through central banks and regulations allowing Fractional-reserve banking disturbs this equilibrium such that the interest rate no longer reflects the real supply of and demand for investment capital. Austrian School economists conclude that, if the interest rate is artificially low, then the demand for loans will be higher than the actual supply of willing lenders, and if the interest rate is artificially high, the opposite situation will occur. This misinformation leads investors to misallocate capital, borrowing and investing either too much or too little in long-term projects. Periodic recessions, then, are seen as necessary "corrections" following periods of fiat credit expansion, when unprofitable investments are liquidated, freeing capital for new investment.

The Austrian theory also predicts that the imposition of artificially low interest rates, and the resulting increase in the supply of fiat credit, generates (is) inflation, which obliges the central bank to increase the supply of credit yet further to maintain the artificially low interest rate, thus prolonging the "boom" and worsening the inevitable "correction." In Austrian theory, depressions and recessions are positive forces in-so-much that they are the market's natural mechanism of undoing the misallocation of resources present during the “boom” or inflationary phase. Austrian School economists point to the dot-com investment frenzy as a modern example of artificially abundant credit subsidizing unsustainable overinvestment.

 

[TheBloods]

I don't necessarily entirely disagree with the Austrian school of economics, however I also don't agree with the extreme school of thought that fiat money is inherently bad. It has a multiplier effect like bank lending does. If kept within control then it is beneficial.

 

[Corpuscles]

Fiat currency encourages more monetary growth relative to the gold standard and hence through greater lending increasing the growth of a country's economy. Too much speculative investment and the minimal risk of hyperinflation in a first-world country is the result of poor monetary management, but also occurs as a natural cycle, not because of the use of fiat currency, which is the standard in every modern economy in the world.

I realise it is not what you meant but how is the USD$ fairing against Gold?

But even what you meant... it is spending money you ain't got... hoping/gambling for the system via multiplier and interest to come out net infront... it hasn't in the USA.... for a long long time!

The privately owned Fed!!!, cleans up.!!!!!!!

Meanwhile it finances invasions of other countries and bases in 130 others and racks up over a $trillion offshore debt.....whilst New Orleans carcass is cremated, the world chokes in the smoke!!!!!.... and the "unwanted" parts of domestic finance (and others)sector goes belly up!

put & call ....the ultra powerful win both ways!

 

[TheBloods]

It's creating money backed by general tax revenues. If managed properly it is no worse than it being backed by gold. In many ways it is better as it arguably has a more meaningful linkage to the economy.

You talk about fiat money as if only the US uses it - every first world country has a fiat currency. What countries do they invade and set up bases in? That is a ridiculous strawman argument.

 

[medusala]

If growth is predicated on creating money unfettered,then it's not real growth is it.

No and look at how often the countries of South America have to change the name of their currencies.

Ireland and Spain stand every chance of learning a very harsh lesson on this topic

 

[medusala]

The numbers are now mind boggling.I suspect it one of those things even bankers and traders either don't want to understand or just want to forget about it ie.make hay while the sun shines.

I am sure you got great amusement out of this:

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing." – Charles Prince, CEO, Citigroup

Should have gone to the bar Chuck.

http://www.baltimoresun.com/business/bal-bz.citi28dec28,0,2534031.story


NEW YORK - When Citigroup warned last month that it was likely to write down its portfolio $8 billion to $11 billion in the fourth quarter because of exposure to bad loans, investors recoiled at the size of the losses. Some now say those early estimates appear drastically understated.

Citigroup Inc. could write off as much as $18.7 billion in the fourth quarter, wrote Goldman analysts William F. Tanona, Betsy Miller and Neil C. Sanyal in a note to investors late Wednesday

 

[TheBloods]

We're definitely in an inflated cycle at the moment caused by low interest rates and high monetary growth - we're bound for a deep recession as a result of not accepting a proper recession in 2000.

Still doesn't suggest we need to go back to the gold standard though. After all there were spectacular crashes in the past too. The Great Depression and the huge recession in the 1890s both could have been reduced with greater liquidity.

 

[evo]

I am sure you got great amusement out of this:

"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing." – Charles Prince, CEO, Citigroup

Should have gone to the bar Chuck.

http://www.baltimoresun.com/business/bal-bz.citi28dec28,0,2534031.story


NEW YORK - When Citigroup warned last month that it was likely to write down its portfolio $8 billion to $11 billion in the fourth quarter because of exposure to bad loans, investors recoiled at the size of the losses. Some now say those early estimates appear drastically understated.

Citigroup Inc. could write off as much as $18.7 billion in the fourth quarter, wrote Goldman analysts William F. Tanona, Betsy Miller and Neil C. Sanyal in a note to investors late Wednesday

The mere fact that Citigroup will be able to brush off an $18 billion write down and come back in a year or so just as strong as ever(just as they always have in the past) speaks to what a "license to print money" a license to print money really is.

 

[evo]

It's creating money backed by general tax revenues. If managed properly it is no worse than it being backed by gold. In many ways it is better as it arguably has a more meaningful linkage to the economy.

It's not backed by anything mate.The only thing tax revenue 'backs' is the ability to pay interest on bonds.The numbers are way bigger than any governemnt could cover if the shite ever hits the fan.

You talk about fiat money as if only the US uses it - every first world country has a fiat currency. .

Well this is true.It's doesn't make it an anymore stable system, though.It just means every currency is weakening together; creating the illusion all is well.

 

[TheBloods]

It's not backed by anything mate.The only thing tax revenue 'backs' is the ability to pay interest on bonds.

Directly yes, but indirectly a Government's ability to generate tax revenue domestically also supports their local obligations. The expansion of money supply provides a catalyst and support for growth in the real economy. However it can't substitute for real growth and the Government or Central Bank needs to recognise when money supply is growing too strongly and when a downturn is needed to be allowed to occur. This has been a problem in the past decade and why we are currently looking at a big problem.

The numbers are way bigger than any governemnt could cover if the shite ever hits the fan.

Well this is true.It's doesn't make it an anymore stable system, though.It just means every currency is weakening together; creating the illusion all is well.

Currencies can't all go down as they are priced against each other. However, economies can and there will be an element of that globally, although I think it will be mainly in the developed world.

 

[medusala]

The mere fact that Citigroup will be able to brush off an $18 billion write down and come back in a year or so just as strong as ever(just as they always have in the past) speaks to what a "license to print money" a license to print money really is.

I dont think those boys will be able to brush it off. They will have to look for capital and slash their dividend.

 

[medusala]

The Great Depression and the huge recession in the 1890s both could have been reduced with greater liquidity.

Wasnt the only factor in play.

Idiotic protection played a rather large part.

 

[medusala]

http://www.theglobeandmail.com/servlet/story/LAC.20080102.IBCURRENCY02/TPStory/Business

Venezuela seeks price stability with new bolivar
JORGE RUEDA

Associated Press

January 2, 2008

CARACAS -- Venezuela launched a new currency with the new year, lopping three zeros off denominations in a bid to simplify finances and boost confidence in a currency that has been losing value because of high inflation.

President Hugo Chavez's government said the new currency - dubbed the "strong bolivar" - will make daily transactions easier and cure some accounting headaches. Officials also say it is part of a broader effort to contain rising prices and strengthen the economy.

 

[evo]

Socialism is all fun,until the bills have to be paid.

I wouldn't wory though med,this is the 'strong bolivar'

 

[medusala]

Socialism is all fun,until the bills have to be paid.

Good old Gordon Brown is about to find that out. Running a decent deficit after years of growth and about to have a sharp slowdown.

This is where people start to realise that not only did all the spending on health and education achieve stuff all but left them very exposed down the track.