Why the dollar is going to collapse • Hacker News Board

Re: Why the dollar is going to collapse

#31

Post by angusdavis » Fri, Jul 31, 2009, 10:10 PM UTC

I am not saying inflation should not be a serious concern, however the article fails to mention that the Fed changed the rules so they can now pay interest on these reserves. That's a massive change in law and policy and is the Fed's primary answer to articles like this one, so it's weird the author completely misses that point.

Here's what FRB NY's Dudley said this week - from Reuters article:

"Dudley argued that the Fed's large and growing balance sheet is nothing that prevents the Fed from controlling inflation once the economy corrects. 'It is not the case that our expanded balance sheet will inevitably prove inflationary,' he said.

Specifically, Dudley said the Fed's new ability to pay interest on excess reserves is a critical tool it uses to keep banks from lending these reserves and thereby creating new credit and boosting inflation. 'Thus, through the IOER rate (interest on excess reserves), the Federal Reserve can effectively retain control of monetary policy,' he said, noting that the Fed can increase the IOER rate if banks begin to find it more profitable to lend these reserves."

http://www.forbes.com/feeds/afx/2009/07/29/afx6714000.html

Re: Why the dollar is going to collapse

#32

Post by graphene » Fri, Jul 31, 2009, 10:21 PM UTC

tjogin wrote: post #27

socratees wrote: post #10

Earlier quoted context omitted.

But technically EU isn't a country right?

Does it absolutely have to be a country to be relevant? The EU share the same currency. I don't know for sure, but I can't quite think of a reason why economies absolutely have to be countries.

Eurozone != EU

When you sum the GDPs of Euro using countries, you get 12.23 trillion dollars, or slightly less than the USA's GDP (http://www03.wolframalpha.com/input/?i=eurozone+gdp+vs+USA+g...).

How the size of an economy correlates with its resillience remains an entrirely different question IMHO.

Re: Why the dollar is going to collapse

#33

Post by Confusion » Fri, Jul 31, 2009, 10:43 PM UTC

anigbrowl wrote: post #29

You seem obsessed with this topic, but I question the quality of your sources and analysis. Of course if there were an exponential rise in money supply or similar absent a different fiscal, monetary and regulatory climate then this would be deeply alarming. But I feel you're making a meta-version of the same mistake many economists did, of over-extrapolating from a short trend. Massive policy changes inevitably resul…

Of course if there were an exponential rise in money supply

Then it still wouldn't matter. Some things only make sense when they are plotted on a log or log-log scale. These graphs are pointless.

Re: Why the dollar is going to collapse

#34

Post by northwind » Fri, Jul 31, 2009, 10:54 PM UTC

As an interesting (as in "odd") exercise, go to the root node of the blog (http://angloaustria.blogspot.com/) and notice the phrase "Curse of Maturin Towers".

After asking yourself "WTF does that mean?", do a Google search for the aforementioned phrase (http://www.google.com/#hl=en&q=Curse+of+Maturin+Towers); hmm, no useful results (that is, we could not find a definition).

Now do a Google search for "Maturin Towers" as an exact phrase (http://www.google.com/#hl=en&q=Maturin+Towers) and notice we have 300+ hits for a rather odd exact phrase; all of which point to, or are directly related to, the AngloAustria blog (http://angloaustria.blogspot.com/).

Could this be an well crafted SEO blog designed to tell people what they want to hear?

Re: Why the dollar is going to collapse

#35

Post by stuffthatmatter » Fri, Jul 31, 2009, 11:17 PM UTC

anigbrowl wrote: post #29

You seem obsessed with this topic, but I question the quality of your sources and analysis. Of course if there were an exponential rise in money supply or similar absent a different fiscal, monetary and regulatory climate then this would be deeply alarming. But I feel you're making a meta-version of the same mistake many economists did, of over-extrapolating from a short trend. Massive policy changes inevitably resul…

there's one incorrect logic in your statement:

You assume US can just slam on the brakes and the brakes would stop the car completely. When in fact, with the massive amount of baby boomers retiring/draining SS and medicare, the disappearance of our manufacturing sectors, the increasing commodity (food, oil) prices, and the need to pay back 100T+ debt owed to foreign countries and to ourselves, I suggest that it is impossible.

Re: Why the dollar is going to collapse

#36

Post by nostrademons » Fri, Jul 31, 2009, 11:21 PM UTC

jwb119 wrote: post #21

i think the point here is that for the first time in quite a while the dollar has a legitimate _chance_ at hitting a doomsday scenario. whether or not that happens remains to be seen, but the odds are greater than they have been historically. keep in mind that during the depression we were on the gold standard, thus there was none of the inflationary/deflationary risk of a fiat currency..

"i think the point here is that for the first time in quite a while the dollar has a legitimate _chance_ at hitting a doomsday scenario. whether or not that happens remains to be seen, but the odds are greater than they have been historically."

The odd thing is that for most of that time period, there were always folks saying that we not only had a chance of hitting the doomsday scenario, it was virtually certain. The first time I encountered people saying that the Fed was destroying the money supply and we would all be doomed to hyperinflation and a survivalist existence, it was 1991 and I was 10 years old (it probably would've been earlier, but my dad wouldn't let me read his newsletters before then). And folks were certain it would happen by the end of Clinton's first year in office...no wait, by 1997...no, at the Millenium...no, by 2005...no, by fall of 2006...no, 2007 will surely be it...YES, finally it's 2008 and the world's falling apart, except it's going to get a lot worse by 2010!

Kinda like the boy who cried wolf.

"keep in mind that during the depression we were on the gold standard, thus there was none of the inflationary/deflationary risk of a fiat currency.."

Then why did it deflate so much from 1929-1932, or inflate so much from 1932-1937?

Re: Why the dollar is going to collapse

#37

Post by barrkel » Fri, Jul 31, 2009, 11:23 PM UTC

stuffthatmatter wrote: post #35

anigbrowl wrote: post #29

You seem obsessed with this topic, but I question the quality of your sources and analysis. Of course if there were an exponential rise in money supply or similar absent a different fiscal, monetary and regulatory climate then this would be deeply alarming. But I feel you're making a meta-version of the same mistake many economists did, of over-extrapolating from a short trend. Massive policy changes inevitably resul…

there's one incorrect logic in your statement: You assume US can just slam on the brakes and the brakes would stop the car completely. When in fact, with the massive amount of baby boomers retiring/draining SS and medicare, the disappearance of our manufacturing sectors, the increasing commodity (food, oil) prices, and the need to pay back 100T+ debt owed to foreign countries and to ourselves, I suggest that it is im…

The US govt has ~11T in debt, not 100+T. I think you're mistaking gross debt positions with net position?

Re: Why the dollar is going to collapse

#38

Post by barrkel » Fri, Jul 31, 2009, 11:26 PM UTC

jacquesm wrote: post #3

I looked through your submissions and the other pages on that blog for a bit, interesting collection. Stuff that matters indeed. In the interest of full disclosure, do you still hold dollars or have you completely converted to gold now ?

Of course, in the case of a true doomsday situation, gold will also inflate - people will be desperate, and increasing amounts of gold required to get anywhere. Without a functioning economy, everything is scarce => expensive.

Re: Why the dollar is going to collapse

#39

Post by nostrademons » Fri, Jul 31, 2009, 11:27 PM UTC

stuffthatmatter wrote: post #35

anigbrowl wrote: post #29

You seem obsessed with this topic, but I question the quality of your sources and analysis. Of course if there were an exponential rise in money supply or similar absent a different fiscal, monetary and regulatory climate then this would be deeply alarming. But I feel you're making a meta-version of the same mistake many economists did, of over-extrapolating from a short trend. Massive policy changes inevitably resul…

there's one incorrect logic in your statement: You assume US can just slam on the brakes and the brakes would stop the car completely. When in fact, with the massive amount of baby boomers retiring/draining SS and medicare, the disappearance of our manufacturing sectors, the increasing commodity (food, oil) prices, and the need to pay back 100T+ debt owed to foreign countries and to ourselves, I suggest that it is im…

"massive amount of baby boomers retiring/draining SS and medicare"

This is deflationary, at least in asset markets. Retiring baby boomers = pulling their money out of the stock market = falling stock prices.

"the disappearance of our manufacturing sectors"

Deflationary in consumer markets, inflation in asset markets, at least to the extent that it results in job losses and concentration of wealth among a professional/capitalist class. Wealthy people tend to spend a lower fraction of their income.

"the increasing commodity (food, oil) prices,"

This is an effect, not a cause. Saying that higher prices cause inflation (while somewhat true...see wage/price spiral) is circular reasoning.

"the need to pay back 100T+ debt owed to foreign countries and to ourselves"

Deflationary. Debt increases the money supply; paying back that debt reduces it. This is a large part of why the Fed's actions haven't triggered inflation: they're compensating for destruction of money as homeowners default in droves.

Re: Why the dollar is going to collapse

#40

Post by stuffthatmatter » Fri, Jul 31, 2009, 11:27 PM UTC

barrkel wrote: post #37

stuffthatmatter wrote: post #35

Earlier quoted context omitted.

there's one incorrect logic in your statement: You assume US can just slam on the brakes and the brakes would stop the car completely. When in fact, with the massive amount of baby boomers retiring/draining SS and medicare, the disappearance of our manufacturing sectors, the increasing commodity (food, oil) prices, and the need to pay back 100T+ debt owed to foreign countries and to ourselves, I suggest that it is im…

The US govt has ~11T in debt, not 100+T. I think you're mistaking gross debt positions with net position?

I said "100T+ debt owed to foreign countries and to ourselves"

For a brief summary, check this link http://www.usdebtclock.org/

The link doesn't include US company debts (10T), or derivatives owed to other countries (200T)