U.S. Dollar Discussion

[resipsa]

More inflation. Thats what i think will happen and continue to happen for the next 6 months. I'm hopeful resipsa is right that we're not about to hit the Weirmar Republic action of hyper-inflation, but it's a real enough chance (slim, may it be) that it doesn't hurt to hedge some in stores of value instead of fiat currency.

"More" inflation? Inflation is obviously the long term concern with deficit spendings, but let's at least recognize that inflation hasn't been an issue in recent years and 2009 has actually shown consistent decreases in CPI from month to month (the CPI is typically the index used to measure inflation).

[Jeremy]

Personally, I opted out of participating in the recession many months ago. China, Russia, the dollar, inflation, whatever.......

Bottom line is that the majority of Americans (non politicians), both republicans and democrats think that our leaders are leading the country in the wrong direction.

The unanswerable question still lingers out there on all the reckless spending, How is it going to be paid for? If everyone agrees that "this spending is unsustainable", then is it unreasonable to ask "What if" or "Why"?

What if countries abandon our currency as a reserve in the coming years because of unsustainable debt? This is not fear mongering, it's a simple matter of accountability and questioning our elected officials on how they are managing the American peoples tax dollars. My god, if you even mention the word hyperinflation it is seen as fear mongering. Also name me one economy in the history of the world that has recklessly printed money and incurred debt amounts at the same % to GDP as America whose currency hasn't eventually collapsed.

Being a concerned citizen and asking questions in a free country shouldn't have the stigma of labeling people as extremists or conspiracy theorists.

[Spry]

inflation isn't a real issue? prices for nearly everything are way more expensive than they were even 4 years ago, (with notable exception of real estate.)

prices of food, gas, energy, clothing, precious metals... all up due to inflation. Value of the dollar compared to the other currencies over the past 4 years... i haven't looked recently but i'm betting the us dollar is on a loosing / downward trend. i mean it wasn't toooo long ago that the us dollar was at parity w/ the Canadian Looney - the Looney for christ sakes! (hahaha, just kidding my Canadian friends )

[resipsa]

inflation isn't a real issue? prices for nearly everything are way more expensive than they were even 4 years ago, (with notable exception of real estate.)

prices of food, gas, energy, clothing, precious metals... all up due to inflation. Value of the dollar compared to the other currencies over the past 4 years... i haven't looked recently but i'm betting the us dollar is on a loosing / downward trend. i mean it wasn't toooo long ago that the us dollar was at parity w/ the Canadian Looney - the Looney for christ sakes! (hahaha, just kidding my Canadian friends )

Inflation rates have consistently been between 2-3%/year for this decade (and most the 90s I believe as well) with probably a negative 1-2% rate for this year. That's a pretty low level and not really an inflationary economy. Look back at what inflation rates were like in the 70s for an example of when inflation was a real issue.

The value of the dollar dropping is a problem because of the potential to lead to inflation, so I don't disagree that this is a concern to be worried about but I think you overstate the extent of the threat by misrepresenting where we stand currently.

[PokerDude]

Although our government claims to have a "strong dollar stance", the devaluing of the dollar means that our national debt effectively becomes smaller, through cheaper dollars. This could be one strategy to combat the national debt, which is rumored to be increasing by $ 140,000 per minute.

On the other hand, it is well known that a significant portion of our debt is held by China, and China would love their currency to become the world standard. What is really scary, is that China could decide to "dump the dollar", which would cause our currency to spiral downward, even further. This is truly scary stuff.

In regard to hedging against dollar disaster, I think it's imperative to have a portion of your portfolio contain commodities such as gold, silver, etc. As the dollar plunges, these commodities will rise in value. The hard thing to do in this environment is to go out and purchase these commodities now, at their all-time highs. There is always the question of whether or not they will go though a correction, after a tremendous run-up. Do you want to be caught purchasing Gold at $ 1,000+ per ounce, only to see it correct to $ 700/ounce ? This could happen - only the market forces know where things are going in the short-term.

Not to get on my soapbox, but the last decade has seen absolute reckless finance through poor budgeting, the endless spending on 2 superfluous wars (not to mention the death of our poor soldiers), the credit crisis debacle (which is far from over), etc. The current administration inherited a hell hole, but doesn't appear to be doing any better a job, of containing the runaway spending. Not to sound dire, but I see nothing but major problems ahead.

[Spry]

actually i don't disagree with you resipsa, it is very possible that I am stating the U.S. dollar is way farther down the road than we really are. I hope that is the case, but I do think it is the road we are on. I also think that's by design but i'm also one of those crazy conspiracy theorists. FTR i do not expect hyperinflation within 6 months.

also good points pokerdude.

[resipsa]

Bottom line is that the majority of Americans (non politicians), both republicans and democrats think that our leaders are leading the country in the right direction.

That has to be a typo, right? I think people have less faith in elected leaders than ever. Even the die hard partisans out there seem to have a lot less faith in their own party as progressives are pissed that their leaders are compromising on issues they regard as fundamental and nut jobs on the right are starting to sound like all government is evil.

Also name me one economy in the history of the world that has recklessly printed money and incurred debt amounts at the same % to GDP as America whose currency hasn't eventually collapsed.

Sorry, I don't have historical GDP numbers for all countries throughout history...as far as I can tell that data is really only available after 1947. But if you can find GDP numbers for the US in the 18th century, I'd really be curious to see how that compares to our debt levels at that time, I'm guessing its a lot higher percentage than now and probably the same thing for the UK right after WWII. This is exactly the type of fallacious arguments that I would consider fear mongering. Rather that realistically addressing the issue, you assume a collapse is inevitable with specious historical references.

Being a concerned citizen and asking questions in a free country shouldn't have the stigma of labeling people as extremists or conspiracy theorists.

Sorry, but when you open with the assumption that everyone in government is corrupt and working to benefit some secret "international banking cartel" that "is looting and dismantling our economic and political system as we know it" it seems pretty difficult to have a meaningful public policy debate. To be fair those quotes aren't from this thread, but from other threads including the one re: the Alex Jones film and similar comments that have been made frequently. Am I mischaracterizing your position?

[Jeremy]

Yea that was a typo actually. And yes my position is that government is corrupt and that our economy is being looted by International bankers. I don't believe that it is a conspiracy either. The government indeed is corrupt and trillions of our U.S. dollars are unaccounted for courtesy of the private Federal Reserve.

The beauty of America however is that we can disagree and debate all this in a public forum, at least for the time being.

[NickM]

Sorry, I don't have historical GDP numbers for all countries throughout history...as far as I can tell that data is really only available after 1947. But if you can find GDP numbers for the US in the 18th century, I'd really be curious to see how that compares to our debt levels at that time, I'm guessing its a lot higher percentage than now and probably the same thing for the UK right after WWII. This is exactly the type of fallacious arguments that I would consider fear mongering. Rather that realistically addressing the issue, you assume a collapse is inevitable with specious historical references.

A couple charts to check out:



One that goes back a bit farther, but only goes to 1999. If you the chart went to the present, you would see the right side of the graph surpass our peak in 1945:



This is the one that is the scariest:



Note in the historical debt to GDP charts that the only times our national debt has been close to zero was in times that we had no wars, and most importantly, no national bank. When people talk about paying off the national debt, this can only happen when we print our own money, not a private bank. Since we are loaned every new dollar we print, that inherently comes with interest, which means that we will always have more debt than money available. So we print more money to pay off the debt, which incurs even more future debt. The Fed must be abolished before we can have a serious discussion about reducing debt levels, and also get the fuck out of these stupid wars, which are inherently the biggest waste of money in the history of the planet. Let's spend billions of dollars on stuff to go blow shit up! That creates value!

Unless the Fed can figure out how to reign in this explosion of money before we need to print more, this looks like the base of an exponential curve to me. Since we are so deep in this at the moment, it may be difficult to see the forest through the trees, but there are some amazing forces at work here.

The average rate of inflation since 1989 is 2.995%. In that same period of time the average cost of a loaf of bread has more than doubled from $0.65 per loaf to $1.40 per loaf. That is a 115% increase in the price over only 20 years in an economy of less than a 3% inflation rate.

Don't be fooled by small rates of inflation. The purchasing power of the dollar in your pocket will be worth $0.97 next year as long as the Treasury and Fed can keep fooling people into thinking that "investors" are actually buying treasuries.

The Fed has been the biggest buyer of treasuries this year. Where does the Fed get money to buy U.S. debt? The printing press.

[Jeremy]

Not to re-ignite this thread but has anyone noticed the massive gains in gold and silver today? Lots of hedging against fiat currency going on.

I can already see Spry lighting up a cigar and saying I told you so. He's been preaching about gold and precious metals forever. GG dollar.