Posts Tagged ‘dollar’
For a long time, gold standard advocates in the United States have had differing viewpoints about whether a new gold standard system might take place with existing institutions, such as the Federal Reserve, or whether it would take place with new institutions, and the Federal Reserve would in effect be disbanded or rendered irrelevant.
Read more by Nathan Lewis at Forbes.com
The whole idea that a bunch of bureaucrats in Washington scans lots of data plus some anecdotal ‘evidence’ every month (with the help of 200 or so economists) and then ‘sets’ interest rates, astutely manipulates bank refunding rates and cleverly guides various market prices so that the overall economy comes out creating more new jobs while the debasement of money unfolds at the officially sanctioned but allegedly harmless pace of 2 percent, must appear entirely preposterous to any student of capitalism.
There should be no monetary policy in a free market just as there should be no policy of setting food prices, or wage rates, or of centrally adjusting the number of hours in a day. But the question here is not what we would like to happen but what is most likely to happen. There is no doubt that we should see an end to ‘quantitative easing’ but will we see it anytime soon?
Read more at ZeroHedge.com
The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.
–SNIP– an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.
The Fed’s zero interest rate policy accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits. In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years.
Read more by Charles Kadlec at Forbes.com
Economists, Military Strategists and Others Warned Us … Long Ago
We’ve known for 4,000 years that debts need to be periodically written down, or the entire economy will collapse. And see this.
We’ve known for 2,500 years that prolonged war bankrupts an economy.
We’ve known for 1,900 years that rampant inequality destroys societies.
We’ve known for thousands of years that debasing currencies leads to economic collapse.
We’ve known for hundreds of years that the failure to punish financial fraud destroys economies, as it destroys all trust in the financial system.
We’ve known for hundreds of years that monopolies and the political influence which accompanies too much power in too few hands is dangerous for free markets.
Read more at WashingtonsBlog.com
Inflation is treated as a threat by policymakers, but some analysts say higher inflation can benefit the economy by reducing the debt burden.
Wars and other crises have a way of remaking your oldest enemies into your best friends (and vice versa — just look at the history of U.S.-Soviet relations from 1939 to 1945).
Given the depth and persistence of the financial crisis here and in Europe, isn’t it time to embrace one of our oldest economic foes, inflation?
–SNIP– The discussion focuses on how inflation reduces the debt burden. Debt is a head wind against recovery right now. But if you’re a debtor paying a fixed rate of interest, like many homeowners, inflation is good for you — as prices, and hopefully your wages, rise, your mortgage burden falls relative to your income. On the other side of the coin, though, your lender is getting paid back with dollars lower in value than the ones he lent you.
Read more by Michael Hiltzik at LA Times
The economic establishment in this country has come to the conclusion that it is not a matter of “if” the United States must intervene in the bailout of the euro, but simply a question of “when” and “how”. Newspaper articles and editorials are full of assertions that the breakup of the euro would result in a worldwide depression, and that economic assistance to Europe is the only way to stave off this calamity. These assertions are yet again more scare-mongering, just as we witnessed during the depths of the 2008 financial crisis. After just a decade of the euro, people have forgotten that Europe functioned for centuries without a common currency.
The real cause of economic depression is loose monetary policy: the creation of money and credit out of thin air and the monetization of government debt by a central bank. This inflationary monetary policy is the cause of every boom and bust, yet it is precisely what political and economic elites both in Europe and the United States are prescribing as a resolution for the present crisis. The drastic next step being discussed is a multi-trillion dollar bailout of Europe by the European Central Bank, aided by the IMF and the Federal Reserve.
Read more by Cong. Ron Paul
Just as the call for patriotism is often the last refuge of scoundrels, so the charge of “rising protectionism” is often the last desperate cry of globalists who don’t understand that it is raw mercantilism that is turning their free trade dream into a nightmare.
–SNIP– We do not live in a world of free trade and free financial markets. Rather we live in a world that is divided. It is half free trade and half mercantilist. China, the world’s second largest economy, strictly manages the its yuan to be dramatically under-valued versus the dollar. It also manages the types and conditions of both domestic and foreign investment and often makes access to its markets conditional on the transfer of technology, investment, and jobs. Because China’s yuan is not allowed to appreciate, capital flows to Brazil where the real is soaring and thereby making Brazilian production for both foreign and domestic markets uncompetitive. In effect, China is exporting unemployment to Brazil. Nor is China alone. Many others have also adopted the strategic, export led, neo-mercantilist growth strategies pioneered by Japan after World War II.
Read more By Clyde Prestowitz at ForeignPolicy.com
This week in history was a bad week for the private ownership of gold. On August 28, 1933, President Franklin Delano Roosevelt issued an executive order prohibiting the “hoarding” of gold by Americans. Private citizens were required to surrender any “gold coin, gold bullion, and gold certificates” they owned. The order also placed limits on the export of precious metals.
–SNIP– The printing presses have never stopped since.
Read more by Chip Wood at Personal Liberty
Forty years ago yesterday, President Richard Nixon suspended gold convertibility, and the U.S. (and the world) went onto a “paper dollar standard.” Two pieces yesterday on the fortieth anniversary of Nixon’s announcment, by Lew Lehrman in the Wall Street Journal and Jeffrey Bell in the Washington Examiner, explore the consequences of that decision and make the case for considering a return to the gold standard.
They’re well worth reading (along with their recent pieces in TWS, and Judy Shelton’s, on the same broad topic). The current crisis is monetary as well as fiscal. It began, after all, with a housing bubble and a financial crash that were far more related to monetary than fiscal policy (the budget deficit was small and coming down in 2007). The way out may well end up requiring as thorough a rethinking, and as radical a reorientation, of monetary policy as of budget policy. But the monetary debate has lagged behind the fiscal debate. It’s time to begin to catch up. And the good news is that the solution rests on the same broad principles: the restoration of limits and standards for the federal government’s printing and spending of money.
Read more by William Kristol, 8/16/2011 at The Weekly Standard
Former Federal Reserve Chairman Alan Greenspan on Sunday ruled out the chance of a US default following S&P’s decision to downgrade America’s credit rating.
“The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default” said Greenspan on NBC’s Meet the Press.
“What I think the S&P thing did was to hit a nerve that there’s something basically bad going on, and it’s hit the self-esteem of the United States, the psyche” said Greenspan.
By Patrick Allen, CNBC, 8/07/2011
Read more at http://www.cnbc.com/id/44051683
In his latest letter, Kings of the Wild Frontier, crushes the optimism of all those, roughly 4 altogether in the entire world whose combined IQ barely breaks into triple digit territory, who believe that the debt ceiling “compromise” does anything at all for US spending patterns, weather it is for total marketable debt, or the $66 trillion in NPV of future liabilities. Gross, however, does show us the 5 ways (well, 4 plus default) that the “debt man walking”, aka Uncle Sam and his tens of trillions of future liabilities, plans to rob from you: dear taxpayer, in order to minimize the present value of these unmanageable future liabilities. To wit:
1. Balance the budget and/or grow out of it
2. Unexpected inflation
3. Currency depreciation
4. Financial repression via low/negative real interest rates
All of these guarantee that investor pocketbooks will be dramatically affected… Adversely. Let’s dig in…
from zerohedge.com on 8/02/2011
From the article “Kings of the Wild Frontier” from PIMCO at http://www.pimco.com/EN/Insights/Pages/Kings-of-the-Wild-Frontier.aspx
* Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit.
* In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at “net present cost.”
* Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.
Debate over the debt ceiling has reached a fever pitch in recent weeks, with each side trying to outdo the other in a game of political chicken. If you believe some of the things that are being written, the world will come to an end if the U.S. defaults on even the tiniest portion of its debt.
by Ron Paul, bloomberg.com, 7/22/2011
In strict terms, the default being discussed will occur if the U.S. fails to meet its debt obligations, through failure to pay either interest or principal due a bondholder. Proponents of raising the debt ceiling claim that a default on Aug. 2 is unprecedented and will result in calamity (never mind that this is simply an arbitrary date, easily changed, marking a congressional recess). My expectations of such a scenario are more sanguine.
The U.S. government defaulted at least three times on its obligations during the 20th century.
Did you see Federal Reserve Chairman Ben Bernanke on 60 Minutes the other night? Bernanke portrayed the Federal Reserve as the great protector of the U.S. economy, he claimed that unemployment would be 15 percent higher if the Federal Reserve had sat back and done nothing during the financial crisis and he even started laying the groundwork for a third round of quantitative easing. Unfortunately, 60 Minutes did not ask Bernanke any hard questions and did not challenge him on his past record. It was almost as if they considered Bernanke to be above criticism.
But someone in the mainstream media should be taking a closer look at this guy and his record. The truth is that the incompetence that Bernanke has displayed over the past few years makes the Cincinnati Bengals look like a model of excellence. Bernanke kept insisting that the housing market was stable even while it was falling apart, he had absolutely no idea the financial crisis was coming, he declared that Fannie Mae and Freddie Mac were in no danger of failing just before they failed, his policies have created asset bubble after asset bubble and the world financial system is now inherently unstable. But even with such horrific job performance, Barack Obama and leaders of both political parties continue to publicly praise Bernanke at every opportunity. What in the world is going on here?
Americans’ savings and retirement funds are being destroyed, and they are being systematically impoverished by depreciating or debased nominal dollars.
by Bob Livingston, personalliberty.com, 7/11/2011
Nominal dollars are the everyday paper dollars that we think of and call money. These dollars change every day (depreciate). The value of these dollars goes down constantly as the money printers continue to debase our currency.
The point is that Americans don’t know the difference. They don’t know that their savings and their retirement are being destroyed, and they are being systematically impoverished by depreciating or debased nominal dollars. If this is not all important, I don’t know what is.
Nominal dollars, or depreciating currency, are destroying America. America is a giant Ponzi scheme, no different from Enron. As with Enron, we are locked into an economic death spiral. The U.S. national debt will never be paid off.