Recent article I published at Associated Content:
The recession appears to have relaxed on us, but more problems are on the way. The dollar is now making up only 37% of new reserve purchases. Worldwide US dollar reserves are at a record low 62.8% (at the end of the 3rd quarter) as foreign central banks look to the Euro and Yen with more confidence. This is very troublesome as having the world reserve currency is one of the major reasons why the US is still a 'superpower' nation.
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Comments: 30
But it won't happen soon. Obama says credit is needed and no one cares that the dollar devaluation is slaughtering us faster than the any time in decades. If they tighten up interest rates, the government won't have money to toss at all these new programs.
The Fed has a lot of control over the US and world economy due to the dollar, you'd think they would raise rates so they could keep that control. They are boxed into a real tough corner, it will be interesting to see what they do.
The Administration needs the inflation device to keep spending, that Keynesian crap spendathon did nothing and now they are in a panic. Without the printing press and a willing media, they'd have to stop ALL their program plans-without those, they have no change (LOL)
They certainly have shown willingness to have a weak dollar so they can get the money to do their garbage. There's not much wiggle room left anymore and this all could very easily could backfire on them.
em>but I think once we see inflation like the Carter/Reagan years, You hit the nail on the head! We haven't seen anything yet! The fed is keeping it loose until they get this health-care thing through, then the skids will go on and all H will break lose.
Too many voters simply do not even try to understand what a runaway printing press will do to an economy.
That is so sadly SO true. Most just want to know what they will get today, with no thought for tomorrow!
If our money was fully backed by gold, for instance, inflation and deflation would still be possible but it would look nothing like today's scenarios.
People would have to work to inflate the gold currency (mining gold). Unlike today's money where no work is needed to make endless amounts of 'money'.
On the other side of the coin, inflation is going to turn out worse than deflation. We're in a different situation having the world's reserve currency. If other central banks believe they are loosing too much purchasing power by holding dollars they will dump them. You know what that would lead too. It would be worse than deflation.
These bills would go a long way towards simple but effective monetary reform.
If we were on the gold standard, how would things be any different? Obviously there is not enough gold for us to use coins instead of paper to buy lunch. So we would keep that gold in vaults and use paper to represent it. So how could you tell if they were printing the right amount of paper? What would prevent their giving you debased coins? (It's been done before.) Rome and other classical civilizations had all the same kind of problems economically that we have. Inflation and deflation were common in those times as well. (As was government tinkering with the currency.)
No monetary reform in history has had long term success. It always fails. It's the very nature of the kind of money we have used. It cannot succeed.
True. Gold would not be the only widely accepted medium of exchange. Silver would be another.
So how could you tell if they were printing the right amount of paper?
We would be able to redeem the paper for gold at any time.
What would prevent their giving you debased coins?
The coins would need to be regularly checked by the people as we exchanged them.
Today most people are too trusting of their money. They don’t realize there are ways to steal your purchasing power, and thus they are not on the lookout for it.
We pay attention to the quality of homes and cars; we should also pay that kind of attention to the quality of our money.
Rome and other classical civilizations had all the same kind of problems economically that we have. Inflation and deflation were common in those times as well.
Despite this gold has been pretty stable over thousands of years.
There will never be a perfect system. Someone will always try to find a way to cheat. It's pretty easy for the government to do that today because everyone has their guard down.
Please address the issue of loans. According to the economists, loans increase the money supply and paying off or defaulting on loans reduces the money supply. Given that people borrow a lot of money and then we have an economic crash and lots of loans are not paid off and such, how would a gold standard prevent inflation and deflation?
I think if a loan is made the lender should have the full amount of money in his pocket; it should not be created money, thus no inflation. Of course that would completely change the nature of loans and mortgages from what they are today; there would be a lot fewer loans, but that’s fine, as a lot of our debt today is completely unnecessary. Going into debt to buy consumer goods, big cars, and over-sized homes is not a fiscally responsible thing to do, period.
A problem with your theory of money contraction = unemployment is that the inverse of that SHOULD mean expansion = increased employment. Even if true, the resulting inflation harms far more than any possible employment increase. Statistically, expansion of the money supply, especially at current rates does not support the idea.
When a loan is made, the depositor of the money still has that much in his account. The borrower has some of that money also. Therefore, the supply of money is increased. This amount of increase is sometimes slowed by regulations saying the bank cannot loan more than, say, 70% of the money deposited as opposed to 90 or 95%. But the mere fact of money being loaned increases the money supply. It isn't that the bank is loaning money they don't possess.
This increase and decrease of money supply was observed in ancient Rome as well when only metal coins were used for money.
Inflation is generally associated with increased employment. In fact, economists get uneasy when there is too little unemployment because it is a signal of an "overheated economy." (I think the idea that almost everyone that wants to work has a job is a good thing, myself.)
Inflation and deflation are both harmful. Do you know of any nation which isn't experiencing one or the other to one degree or another? In fact, inflation is considered "normal" these days by most economists. If you look at times when the U.S. has been most productive you will find those times to have been during inflation.