collapse of the American Dollar?

[autumnsolace 0]

trust me, i wouldn't want something like this to happen as much as the next American. I enjoy my life here in Washington state, and I wouldn't trade it for anything.

but with the disastrous moves of the Obama administration and the Federal Reserve to continually promote artificially low interest rates, debt spending and endless printing of money for the difference of the public debt, I feel like it's only a matter of time until the dollar is dropped as the reserve currency. when that happens, the recession the government has been trying to hold off for so long will happen, and inflation will skyrocket.

i still think that it is avoidable, but only if the right people make the tough decisions now. i also think a lot of senators and house reps who are only concerned about keeping their seats and playing the game of politics need to be kicked out and replaced with people who actually care about our country.

otherwise, we're on an unsustainable path. even the congressional budget office acknowledges this. but Bernanke keeps rolling his printing press, and Obama & Wall St. seem to be cheering him on as the dollar sheds more and more of its value.

suffice to say, i am a little pessimistic. but i know that no matter what happens, Americans will pull up their bootstraps and undo the disaster the greedy bankers and politicians did, no matter how long it takes. and I also believe in investing in precious metals and foreign currencies is a smart move for anyone who wants to make it through.

in any case, what do you think is going to be the fate of the American dollar?

[Duke87 1,070]

Inflation is going to continue out of control so long as the feds keep spending out of control.

I don't see it getting to Weimar Republic levels where you need wheelbarrows of money to buy a loaf of bread, but then again, crazier things have happened.

[belfastuniguy 18]

I welcome the lower dollar. Means I get my goods for cheaper when I buy online

The dollar has been an unstable currency for a long time it's not accurate to blame it solely on Obama and the Fed. Foreigners no longer value the currency as they once did. they don't trust it either.

[Shadow Assassin 336]

While it may be bad for Americans, it's far better for the rest of the world if the USD collapses... but if it goes too far, then there is a big problem.

[autumnsolace 0]

Originally posted by: belfastuniguy

I welcome the lower dollar. Means I get my goods for cheaper when I buy online

The dollar has been an unstable currency for a long time it's not accurate to blame it solely on Obama and the Fed. Foreigners no longer value the currency as they once did. they don't trust it either.quote>

It's untrusted because of the Fed, they control the flow of the money, the interest rates and the foreign lending. It's entirely their fault for anything that happens to the value of the dollar, and they have been destroying it since post-Great Depression times.

[halicem 16]

You do realize that... When the dollar falls, all the prices go up.. Like at least double the cost of a gallon of gas.. stuff like that.. In other words... inflation! Because inherently, the value of the dollar has gone down. There are two sides to this, and we only tend to focus on one side.

1) So you saved $20k in the bank. Today it can buy a honda accord, with inflation, a year or two from now, perhaps the most you can buy is a Kia Rio. That is money you have losing value.

2) So you took out a loan for $20k. Today the loan is able to buy a honda accord, with inflation, a year or two from now, the most you can get out of it is a Kia Rio.

The difference is perspective. IF you owe money, and inflation happens, you're going to look at it and think, wow, that loan was not too bad, compared to what I can buy now and what I earn, its very, very affordable! After all, the amount owed is NOT affected by inflation.

Now zoom out and think big! Voila, the same solution the Obama administration has come up with. Spend spend spend, crash the dollar, soon enough, we're going to look back and say wow, $8T in debt isn't so bad!

[autumnsolace 0]

i can't tell if you're being sarcastic or not, but the $8t debt is proportionate to the value of the dollar, because it's held in dollars. If inflation were to double, our debt would be $16t. and by that time, the compounded interest would probably make it around $20t.

[sneakeypete 16]

It was either spend or have a significant proportion of the country completely unemployed... i imagine.

However, we raised our interest rate by a quarter yesterday. We're doing bloody well.

[autumnsolace 0]

Originally posted by: sneakeypete

It was either spend or have a significant proportion of the country completely unemployed... i imagine.

However, we raised our interest rate by a quarter yesterday. We're doing bloody well.quote>

not like unemployment numbers are at 26-year highs or anything... sometimes you gotta swallow the medicine. it tastes bad, but you'll feel better later. economic stimulus through money printing and "jobless recoveries" (thank you robert gibbs) only hold off the inevitable until later. why wait until it's going to be worse?

[duack 14]

The reccession isnt going to get worst. The worst has already passed its improving now. And economic stimulus doesn't hold off the inevitable - the point of economic stimulus is to stimulate the economy to start having economic growth again sooner. Without stimulus, the economy ould be in reccession for longer and it would be much worst.

[Barbarossa 51]

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  Edited September 8, 2012 by Barbarossa  

[yamaneko 2]

I welcome the lower dollar. Means I get my goods for cheaper when I buy online

Actually, Belfastuniguy illustrates why some Americans look forward to a weak dollar.  My state depends on manufacturing and agriculture, and a weak dollar makes our goods cheaper.  If imports get more expensive, so much the better since Americans and others will buy more of the stuff we produce.  Indeed, one complaint levelled against China is that the central government artificially depresses the yuan so that China can export more and import less.

As for our foreign debt, US treasury bonds are denominated in dollars.  That means that if we inflate the currency, our debt burden falls.  

Domestically, the dollar is still too strong.  Over the last 12 months, the consumer price index fell 1.5%.  On this board we're probably familiar with postponing computer purchases since we can be sure that better, cheaper computers will be available in six months.  Right now in America, everything may be cheaper six months from now.  Similarly, why risk money in enterprises or mortgages when just keeping it in the mattress offers 1.5% effective interest.  Throwing it into a FDIC-insured passbook account at 0.02% is even safer. 

The classic way to banish deflation is to run a huge deficit.  This is what the Administration and Congress are doing. 

[(x+x 20]

yeah, the american dollar became cheaper, i think that give the chance to another countirs toshow up, as a new leaders, as china for exemple , it's one of the future leaders.

anyway, u.s.a., have many issues, i think that wars that the u.s. do and spend money on it, also the oil unstaible prises, the world changing climats, the terrosists attacks, that may be all planed before, sens bush left the whitehouse, america turned over behind, it's time for other great leading countries to show

whatever, the us dollar, toaday, is cheaper than the tunisian dinars, also the libyan dinars

the future is for asia and europe,

[A Nonny Moose 8,263]

Last week I watched an interview by Peter Mansbridge one-on-one with the Governor of the Bank of Canada.  The one idea that blew my mind in this conversation is the idea that inflation is good.  Yikes!  Where did they ever get this guy?  The Prime Minister is an economist, and he must be a worshipper of John Maynard Keynes.

Here are a few points to consider based on living through the last 70-odd years.

1. Inflation is bad.  When I was a kid, eggs cost twelve cents a dozen.  Inflation raises prices, which leads to a demand for higher wages (more pay for the same work), which is a positive feed-back loop.  This breaks any machine, sooner or later.
2. Commodity future trading is evil and dangerous.  It fattens the investors, and may leave some poor sod with a rail yard full of rotting lettuce.
3. With respect to 2, currencies are commodities.
4. The only standard for international payments must be something of intrinsic value.  Metals or gems?  Not someone's inflated currency.
5. Someone mentioned the Weimar republic.  Well the problem there was caused by the Treaty of Versailles.  You can't take people's livelihood away and not expect trouble.  The result was Hitler.  (Brrrr!)
6. Isolation is bad.  Look what happened to Japan.
7. Free trade is good.  If you want to tax something, do it at home, not at the border.\\

Well, that should give us enough to talk about in this thread.  Currencies don't collapse, they are maniplated to death.

[Yoman3 5]

It will probably never hold the amount of power it once did, but we'll invade Canada before it collapses.

[hamsterTK 93]

Haha, buy up a bunch of Kruggerands and give an African a steady job while your at it...

What I worry about is how the political process creates the whole spending and debt issue. Both sides do unproductive things, the libertarians are crazy in their own way- If things get bad they suggest we privatize all public schools and sell national parks, I might just become an immigrant in some far away place.

[astronelson 339]

With regard to spending:

The Australian government spent like crazy for our economic stimulus plan. As a result, our recession was a 0.4% growth. Unemployment dropped. The reserve bank has recently raised interest rates to 3.25%. The Australian dollar is trading at around 90 US cents.

Debts can be payed off much quicker if you still have an economy.

[krbe 193]

Originally posted by: autumnsolace

i can't tell if you're being sarcastic or not, but the $8t debt is proportionate to the value of the dollar, because it's held in dollars. If inflation were to double, our debt would be $16t. and by that time, the compounded interest would probably make it around $20t.quote>

If you owe someone 8 trillion USD and it loses half your value, you'd still owe that someone 8 trillions. Though the US TIPS bonds have an interest rate linked to the CPI.

[Barbarossa 51]

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  Edited September 8, 2012 by Barbarossa  

[Duke87 1,070]

Originally posted by: N_O_Body

Last week I watched an interview by Peter Mansbridge one-on-one with the Governor of the Bank of Canada.  The one idea that blew my mind in this conversation is the idea that inflation is good.  Yikes!  Where did they ever get this guy?  The Prime Minister is an economist, and he must be a worshipper of John Maynard Keynes.quote>

Well, counterintuitive as it may seem, few economists would refute that at least some inflation is a good thing.

The reason why is fairly simple: if the value of a currency never changes, then you really lose nothing by just stuffing money in your mattress (figuratively or literally). But when the value of a currency gradually declines over time, then doing that becomes against anyone's best interest and it becomes far more worthwhile to invest your money into something. People investing in things is vital for the success of a modren economy. Every major business project or idea has investors providing it with capital that it could not move forward without. And when business projects stop moving forward, productivity tanks and people lose their jobs.

Can this really continue ad infinitum? To some degree, yes, it absolutely can. True, it means that someday a dollar will be worth less than what a cent is now, but that's not really a big deal, the denominations of coins minted and bills printed will adjust accordingly. it's hapenned before. For instance, the Italian Lira. There was a time when there were L5 bills and one lira was divided into 100 centisimi (which there were coins for). By the time Italy abandoned the Lira and adopted the Euro, the smallest bill was L1000, the smallest coin was L50, and centisimi were but a memory.

The same sort of thing happened with the Japanese Yen. It's worth over a thousand times less than it was when it was introduced in 1871, and the sen and rin subdenominations are gone.

It's not outrageous to think that someday the dollar will be in that situation too, and cents won't exist anymore.

As for it creating a demand for higher wages.... eh, that's a flawed way of looking at it. What it does is make the cost of labor increase relative to the currency, just as it does with the cost of goods and services. The actual value does not change and if the median income goes up even after being adjusted, it is not in any way caused by inflation, it's caused by a more successful economy, and other factors like the introduction of labor laws and unions.

[autumnsolace 0]

Originally posted by: Barbarossa

Originally posted by: autumnsolace

i can't tell if you're being sarcastic or not, but the $8t debt is proportionate to the value of the dollar, because it's held in dollars. If inflation were to double, our debt would be $16t. and by that time, the compounded interest would probably make it around $20t.quote>

No, you have it wrong.  The debt is the debt.  If we owe $8T, then we owe $8T.  Fluctuations in currency do not impact a debt if the affected currency is the foundation of said debt.  It all comes down to terms and legal language.  If the US had debt in another currency, say the Euro, then it would be a problem for the US.  But if the deal was negotiated under the USD, then it is the other party that is losing money.

Barbarossa

EDIT:  But then, of course, I see this.  Go figure.

quote>

sorry ya, you are right. for some reason i was thinking about it the other way around.

Originally posted by: duack

The reccession isnt going to get worst. The worst has already passed its improving now. And economic stimulus doesn't hold off the inevitable - the point of economic stimulus is to stimulate the economy to start having economic growth again sooner. Without stimulus, the economy ould be in reccession for longer and it would be much worst.quote>

thank you, i am aware of the point of economic stimulus. however, you have to realize the "economic" stimulus money went to banks and wall st, not businesses. all it is doing is propping up toxic debt assets and bad loans.

and the worst has not already passed. just recently we lost 200,000+ more jobs and unemployment is at 9.8%. a more real-world estimate is probably around 17%. things will not get better for a while. the truth of the matter is that your statement is actually the opposite - if the American government keeps pumping borrowed money into a phony economy, the real recession gets put off until later, but it will be much worse when it comes.

as long as consumer confidence remains low and Americans keep saving instead of spending, we will get through this through sheer willpower. our economy is 70% consumer-based, it is unsustainable.

[edman2012 33]

i just think that the real issue in the u.s. is corruption with the insurance companies and banks and ths can add to it but i dont blam obama for trying, which is what some never do so if things get worse, it would've hapened anyways

[His Divine Hand 244]

It should also be pointed out that the U.S. dollar has been artificially maintained as a high value currency by several Asian countries through the purchase of treasury securities and bonds to keep their exported goods competitive in the American market. This effort was probably never truly sustainable, and just needed a large enough financial mess to collapse like the ponzi scheme it was.

[Meg 368]

Originally posted by: Barbarossa

Robert Heinlein, where are you?quote>

 

He is grumbling from his grave.

Originally posted by: Duke87

It's not outrageous to think that someday the dollar will be in that situation too, and cents won't exist anymore.

quote>

People already want to get rid of pennies because they cost more than a penny to produce.

[duack 14]

as long as consumer confidence remains low and Americans keep saving instead of spending, we will get through this through sheer willpower. our economy is 70% consumer-based, it is unsustainable quote>

Consumer spending is what drives all economies. This is a time when people should be spending more to stimulate the economy.

however, you have to realize the "economic" stimulus money went to banks and wall st, not businesses. all it is doing is propping up toxic debt assets and bad loans. quote>

Normally, I would say that stimulus money should go to consumers to increase consumer spending, as it did in Australia. However given the unique circumstances of this reccesion, funds were limited and banks were on the verge of collapse so the aim of bail-outs was to stop things getting worse rather than to try and make things better. There just wasn't enough money for that. Regardless, I stand by my opinion that the worst of the reccession has passed. Unemployment may rise slightly, but the economy has leveled off and growth is climbing out of the negatives.

  if the American government keeps pumping borrowed money into a phony economy, the real recession gets put off until later, but it will be much worse when it comes. quote>

What exactly do you mean by 'phony economy'?

Also, where do you get the idea of postponing the 'real reccession'?

[Barbarossa 51]

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  Edited September 8, 2012 by Barbarossa  

[Patricius Maximus 236]

In my economic reports on my blog here (see link in my sig), I've been talking about hyperinflation for months.

Every single central bank which has done what the Fed is doing right now to the USD has ended up with the currency destroyed, i.e. worthless, because of runaway money creation. Creating more money doesn't mean you have more money, it means that each individual note is worth less (think purchasing power), thus causing inflation.

The more shocking and intense the money-pumping is, the more shocking the hyperinflation will be. Bernanke has whispered about a nebulous exit strategy which will be completed by 2011. This is way too late. Even now may be too late. They will not take any deflationary measures to stem the rising tide of inflation, and it will thus spiral out of control.

The inflation may even come upon us next year (although I'm not making any predictions, I have a range of 2010-2013), so the exit strategy will come later than the catastrophic effects of the entry strategy .'

If the US Dollar is destroyed, in the US, expect the disintigration of the currency as a medium of exchange, and a great depression in the early 2010's, not recovering until circa 2020, and full recovery by 2028 (± 2 years).

Dire predictions, I know, but I am of the belief that like all depressions the Americans will come out of it better than when they went in it. After the depression, there is always a roaring recovery and associated bull market, so hang on through 2014, and I think better days are ahead from there.

At least I'm relatively safe here in Canada, where here we only had a mild recession, and no money-pumping .

[autumnsolace 0]

Originally posted by: duack

as long as consumer confidence remains low and Americans keep saving instead of spending, we will get through this through sheer willpower. our economy is 70% consumer-based, it is unsustainable quote>

Consumer spending is what drives all economies. This is a time when people should be spending more to stimulate the economy.quote>

no, this is not a time for more spending. look at where it has gotten our government - CBO estimates $9 trillion of public debt after Obama's first term.

consumer-based economies are unsustainable because you're constantly spending more than you make. this is what caused the mess we're in right now. low interest rates, people buying things they can't afford, ridiculous credit lines - don't you already know this? we hardly produce anything and we gobble up what everyone else makes - this is unsustainable. this is the folly of modern capitalism - every 20 or 30 years we get to this point and our economy has to reset itself while we put ourselves back in financial check. this time around it's going to be especially painful.

however, you have to realize the "economic" stimulus money went to banks and wall st, not businesses. all it is doing is propping up toxic debt assets and bad loans. quote>

Normally, I would say that stimulus money should go to consumers to increase consumer spending, as it did in Australia. However given the unique circumstances of this reccesion, funds were limited and banks were on the verge of collapse so the aim of bail-outs was to stop things getting worse rather than to try and make things better. There just wasn't enough money for that. Regardless, I stand by my opinion that the worst of the reccession has passed. Unemployment may rise slightly, but the economy has leveled off and growth is climbing out of the negatives.quote>

True that unemployment is a lagging indicator, but how can you say the worst of the recession has passed? This is duped pep talk straight out of the White House. Wall St. may be posting positive numbers, but based on the value of our currency it's actually gone pretty much nowhere. The Obama Administration's #1 concern is making Wall St. feel good, so they give them the cash they want to make it look like our economy is fine, while propping up banks that are "too big to fail." The truth of the matter is that the toxic assets are still there, interest rates are still near-zero, and our dollar has lost over 10% of its value this fiscal year. This "jobless recovery" is anything but the end of a recession.

  if the American government keeps pumping borrowed money into a phony economy, the real recession gets put off until later, but it will be much worse when it comes. quote>

What exactly do you mean by 'phony economy'?

Also, where do you get the idea of postponing the 'real reccession'?quote>

quote>

[duack 14]

I'll start by saying please don't use any subjective phrases in your argument.

no, this is not a time for more spending. look at where it has gotten our government - CBO estimates $9 trillion of public debt after Obama's first term quote>

Public debt is debt owed by the government. It is not caused by consumers.

consumer-based economies are unsustainable because you're constantly spending more than you make.quote>

Not neccassarily. In fact, most people actually spend within thier means.

Besides, economic growth is caused by 3 main things. Consumer spending, Investment and Exports. But Exports just mean another country is consuming and investment wouldn't exist if it weren't for consumer spending, as there would be no return. The point Im trying to make is that the subject of economics is all about consumer spending.

this is what caused the mess we're in right now. low interest rates, people buying things they can't afford, ridiculous credit lines - don't you already know this? we hardly produce anything and we gobble up what everyone else makes - this is unsustainable. this is the folly of modern capitalism - every 20 or 30 years we get to this point and our economy has to reset itself while we put ourselves back in financial check. this time around it's going to be especially painful quote>

So when was the last time this happened? Easy credit has only been around for about 20 years. Before that this cycle you mention would have been impossible.

True that unemployment is a lagging indicator, but how can you say the worst of the recession has passed? This is duped pep talk straight out of the White House. Wall St. may be posting positive numbers, but based on the value of our currency it's actually gone pretty much nowhere. The Obama Administration's #1 concern is making Wall St. feel good, so they give them the cash they want to make it look like our economy is fine, while propping up banks that are "too big to fail." The truth of the matter is that the toxic assets are still there, interest rates are still near-zero, and our dollar has lost over 10% of its value this fiscal year. This "jobless recovery" is anything but the end of a recession. quote>

A weakening dollar is not neccassarily a bad thing. Weaker currency makes imports more expensive and exports cheaper, which helps the balance of trade. There are also numerous effects - too many to go through but its not just bad if the dollar drops in value. Likewise, its not just good if its value rises.

On a side note, I'd just like to point out that you try to make economics seem so simple. It isn't. Please don't criticise the Federal Reserve and the government for how they're handling this reccession. Remember, it was started by the private financial sector so technically, the Federal reserve can just tell everyone 'you're scewed. We're not going to help you'. Obviously they wont, because the people in charge of this are some of the best economists in the country if not the world and if there was a major crash of the dollar on the horizon, then I'm pretty sure they would be the first to see it coming.

[LarksTonguesInAspic 28]

Originally posted by: duack

On a side note, I'd just like to point out that you try to make economics seem so simple. It isn't. Please don't criticise the Federal Reserve and the government for how they're handling this reccession. Remember, it was started by the private financial sector so technically, the Federal reserve can just tell everyone 'you're scewed. We're not going to help you'. Obviously they wont, because the people in charge of this are some of the best economists in the country if not the world and if there was a major crash of the dollar on the horizon, then I'm pretty sure they would be the first to see it coming.quote>

Of course, because inflation is caused by our currency system and the Fed Reserve is the source. Inflation is created by the Fed, in truth. Our system is based on fraudulent measures, period. In the words of Cong. Charles Lindbergh Sr.;

"... from now on, recessions and depressions will be scientifically created." When was that? 1913, during the debate over creation of the Fed. The current recession is no different. It was created and managed by the Fed, and resulted in major banks like Golden Sacks and Cititheft owning a huge swath of America's real estate. Can anyone else hear the echoes of the 1930s, when banks were the US' biggest landowners? The ones that didn't crash became the largest entities in global finance. And then, suddenly, here we are again.