Dollar slowly collapsing

[jojo69]

http://science.slashdot.org/story/12/10/02/2246242/super-bacteria-create-gold

misleading title is misleading

gold is created in stars, the bacteria just precipitates gold out of a gold salt

[1713492696]

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[tiberiandusk]

I know. Just trolling I guess.

[odolvlobo]

Or maybe he's trying to soften the deflation.  Nothing kills a consumerist economy like falling prices.

I think the consumer electronics industry would strongly disagree with this statement. This industry has grown for decades at an incredible rate despite (and, in fact, due to) massive deflation. Nope. No "deflationary spiral" here!

[justusranvier]

If "economy" is defined as "the ability of banks to extract a percentage of every income stream on the planet via interest payments on revolving credit" then yes, deflation kills the "economy".

[jojo69]

If "economy" is defined as "the ability of banks to extract a percentage of every income stream on the planet via interest payments on revolving credit" then yes, deflation kills the "economy".

bullseye

[scatha]

We can't audit the Fed, so we can't prove they are insolvent.  They can continue to trade as if they are solvent and nobody can prove they don't have the funds to back up their positions.

The FED can never go insolvent because they create the money.

They also have the US military/policing power backing up their position. You can foist any amount of crappy currency or ideas on anyone if you have a big enough army.

Yes.

Why is it when shit hits the fan ppl still race to the dollar? That aint goin to change in our lifetimes.

I see them rather racing into JPY and CHF, currencies which are considered most stable because a) there's a low interest rate since ages, which means they do not have to rely on inflation to keep it going because b) their keepers have acknowledged that there can't be infinite growth

If "economy" is defined as "the ability of banks to extract a percentage of every income stream on the planet via interest payments on revolving credit" then yes, deflation kills the "economy".

deflation kills the economy ONLY with debt currencies (which all "mainstream" currencies are) - because you always need more money to pay off the debt, and that has to be "printed" - so the system can ONLY be kept going with a certain rate of inflation

[mhughes]

Not sure if any article on The Trumpet is a good place to start a conversation.

http://rationalwiki.org/wiki/The_Philadelphia_Trumpet

[Etlase2]

deflation kills the economy ONLY with debt currencies (which all "mainstream" currencies are) - because you always need more money to pay off the debt, and that has to be "printed" - so the system can ONLY be kept going with a certain rate of inflation

You don't always need more money to pay off the debt, you need to ensure that the currency circulates. The worry is that even a small amount of deflation can lead to a cycle of reduced spending, more deflation, job losses, etc. This isn't magically solved by a non-debt based currency. The debt has very little correlation to the inflation rate. This can be easily seen by historical inflation rates and historical debt rates. Either government raises taxes to spend or government sells securities to spend (debt), either way the government is spending and the effects are similar.

Inflation is caused on purpose by the Fed and what it charges for credit. It does this to avoid deflation, no more, no less. Unfortunately the way it does this is by gifting banks at the theft of the people.

[BrimStone]

deflation kills the economy ONLY with debt currencies (which all "mainstream" currencies are) - because you always need more money to pay off the debt, and that has to be "printed" - so the system can ONLY be kept going with a certain rate of inflation

You don't always need more money to pay off the debt, you need to ensure that the currency circulates. The worry is that even a small amount of deflation can lead to a cycle of reduced spending, more deflation, job losses, etc. This isn't magically solved by a non-debt based currency. The debt has very little correlation to the inflation rate. This can be easily seen by historical inflation rates and historical debt rates. Either government raises taxes to spend or government sells securities to spend (debt), either way the government is spending and the effects are similar.

Inflation is caused on purpose by the Fed and what it charges for credit. It does this to avoid deflation, no more, no less. Unfortunately the way it does this is by gifting banks at the theft of the people.

This is a major flaw with fiat currencies.  A different twist can occur with commodity backed currencies as well.  If you don't have a backing for a currency the government or government entities can manipulate the currency for their own aims.  With commodity backing the supply and demand of the commodity can cause issues with the money supply on top of the supply and demand of labor.

I have been advocating a basket of commodities as a backing for currency to try and get the best options.  I don't like the fact a central bank can use its "power to print" to rob laborers of the value of their work.  (Currency is representation of the value of labor over time).  Devaluation of currency via printing is the same as a wage cut and if you have savings it cuts your wages from the PAST!

[notme]

deflation kills the economy ONLY with debt currencies (which all "mainstream" currencies are) - because you always need more money to pay off the debt, and that has to be "printed" - so the system can ONLY be kept going with a certain rate of inflation

You don't always need more money to pay off the debt, you need to ensure that the currency circulates. The worry is that even a small amount of deflation can lead to a cycle of reduced spending, more deflation, job losses, etc. This isn't magically solved by a non-debt based currency. The debt has very little correlation to the inflation rate. This can be easily seen by historical inflation rates and historical debt rates. Either government raises taxes to spend or government sells securities to spend (debt), either way the government is spending and the effects are similar.

Inflation is caused on purpose by the Fed and what it charges for credit. It does this to avoid deflation, no more, no less. Unfortunately the way it does this is by gifting banks at the theft of the people.

Except savings and CDs have been neutered to the point that they only way for repaid debt to reenter circulation is for it to be lent out again.  Unless something changes, you do need more printing to pay down the total debt.  Banks hold tight to their money these days.

[foggyb]

They can continue to trade as if they are solvent and nobody can prove they don't have the funds to back up their positions.

They also have the US military/policing power backing up their position. You can foist any amount of crappy currency or ideas on anyone if you have a big enough army.

For how long?

Even a nuclear arsenal requires wealth to maintain. A slow slide into bankruptcy can accomplish some of the same results as a sudden military strike. See the former USSR.

[notme]

They can continue to trade as if they are solvent and nobody can prove they don't have the funds to back up their positions.

They also have the US military/policing power backing up their position. You can foist any amount of crappy currency or ideas on anyone if you have a big enough army.

For how long?

Even a nuclear arsenal requires wealth to maintain. A slow slide into bankruptcy can accomplish some of the same results as a sudden military strike. See the former USSR.

But they only went bankrupt because they wasted a decade fighting the mountain people in Afghanistan... oh wait...

[Etlase2]

Except savings and CDs have been neutered to the point that they only way for repaid debt to reenter circulation is for it to be lent out again.

This is not strictly true in any sense. Banks have employees and shareholders that get paid via the interest returns on loans. Although some people believe if all debts were paid there would be no money, this is not true. There are two types of money, base money and credit money. Base money is what the fed "prints" into its computer, credit money is what banks create. Base money can't disappear.

Unless something changes, you do need more printing to pay down the total debt.

Paying down the (national) debt means private citizens hold more money and less securities. To pay for the securities you need money to start with. You do not need to print more money. The Fed does "print" money to buy securities and holds a significant portion of them, but this is not a necessary thing with a balanced budget.

Banks hold tight to their money these days.

This is the problem of credit money. Banks have all the power, and they can shrink the effective supply of money very easily.

[notme]

Banks hold tight to their money these days.

This is the problem of credit money. Banks have all the power, and they can shrink the effective supply of money very easily.

Right, and when they do that, there is not enough money to pay the interest that is due and we will soon start to have waves of bankruptcies unless some miracle jump starts the economy.

[Etlase2]

Right, and when they do that, there is not enough money to pay the interest that is due

Again, not strictly true. The same dollar can pay off multiple debts as long as it is spent back into circulation.

[notme]

Right, and when they do that, there is not enough money to pay the interest that is due

Again, not strictly true. The same dollar can pay off multiple debts as long as it is spent back into circulation.

But the point I keep repeating is that it's not getting spent back into circulation.  It is only being loaned.

[Etlase2]

Credit money, when paid back, disappears until a bank decides to create a new loan. There is nothing to loan until the bank decides to loan. If banks, as a whole, decide to reduce the amount of credit money in circulation, yes there will be bankruptcies and such, but there should also be deflation and things will eventually work itself out if the central bank does not intervene. Interest has very little to do with the situation. Loaning money into circulation puts money in circulation. It doesn't matter how it got there as long as it's circulating. And interest can go on indefinitely without printing money as long as the employees/shareholders of the bank spend money at some point, but this is true for anyone who comes into possession of money.

[pretendo]

There will be no glamorous and hollywood-esque "dollar death", but instead a slow decline of standard of living and purchasing power. If the malinvestment policies keep up at their current pace, we may have the first reversal in our otherwise monotonic real wage growth of the last ~70 years.

[notme]

Credit money, when paid back, disappears until a bank decides to create a new loan. There is nothing to loan until the bank decides to loan. If banks, as a whole, decide to reduce the amount of credit money in circulation, yes there will be bankruptcies and such, but there should also be deflation and things will eventually work itself out if the central bank does not intervene. Interest has very little to do with the situation. Loaning money into circulation puts money in circulation. It doesn't matter how it got there as long as it's circulating. And interest can go on indefinitely without printing money as long as the employees/shareholders of the bank spend money at some point, but this is true for anyone who comes into possession of money.

There are reserve requirements though, so when the money comes back, it allows them to loan that much more back out.  Before it comes back they can't loan it out if they are already at the limit.  But, a lot of banks are aren't at the limit.  They are just holding large reserves and being ultra conservative... reducing the amount in circulation and steering us toward waves of bankruptcies.  Sure, they can fight the deflation with money printing, but they still haven't solved the problem of getting the money out of the financial sector.  Right now, they are giving wall street exactly the powder they need to hold the dollar hostage.

There will be no glamorous and hollywood-esque "dollar death", but instead a slow decline of standard of living and purchasing power. If the malinvestment policies keep up at their current pace, we may have the first reversal in our otherwise monotonic real wage growth of the last ~70 years.

We will have falling wages, but purchasing power per dollar will increase.

[pretendo]

We will have falling wages, but purchasing power per dollar will increase.

why would purchasing power per dollar increase due to inflationary policies? Even with real economic growth, purchasing power per dollar falls due to inflation