this just in - hard STOP in CA

[c1ue]

Re: this just in - hard STOP in CA

Excellent post c1ue, thanks. I have a hard time understanding how the US$ falls more than another 20% from here as long as it's competing with the Euro, Yen, et al, for least best currency. We better take over Canada so we've got some natural resources to sell...:rolleyes:

Certainly your viewpoint is very reasonable. The worst case scenario I outlined did not take into account cancellation effects - one principle one being that the US dollar's fall by 50% is only half due to relative currency issues, the other half being due to inflation.

On the other hand, in the 1970s Europe was hardly in great economic shape either. At that time the US had the dubious distinction of having the worst currency priced in oil.

http://www.history.ucsb.edu/faculty/...s/currency.htm

Source still: http://eh.net/hmit/
1970	DM 3.65
1971	DM 3.48
1972	DM 3.19
1973	DM 2.65
1974	DM 2.58
1975	DM 2.46
1976	DM 2.52
1977	DM 2.32
1978	DM 2.00
1979	DM 1.83
1980	DM 1.82
1981	DM 2.26
1982	DM 2.43
1983	DM 2.55
1984	DM 2.85
1985	DM 2.94

http://www.measuringworth.org/datase...und/result.php

1971	$2.44
1972	$2.50
1973	$2.45
1974	$2.34
1975	$2.22
1976	$1.80
1977	$1.75
1978	$1.92
1979	$2.12
1980	$2.33
1981	$2.02
1982	$1.75

Now I'm not a Europe expert, but I do know that Thatcher's ascension to the UK Prime Minister role in 1979 was pretty much the low point in the UK economy - with at least a decade of decline before. I haven't read anything about France and Germany in the 1971 to 1979 period, but in general I don't think anyone in Europe was doing great at this time.

The point being - just because the other competitors aren't Miss Universe doesn't mean they're not still better.

And while this time we're not coming off a break in the (virtual) gold standard, on the other hand it is safe to say we're going into fiat territory never before seen - an escalation of an escalation as it were.

[mcgurme]

Re: this just in - hard STOP in CA

Never for one minute forget that it was the neo-cons (the repukes) who put 2.7 million people in the American gulag---- a prison empire that stretched across the land and onto Cuba too. Never forget that the drug war was really a war on ordinary people; it was an excuse for the gulag to asault the freedom and independence of the American people. Never forget the nightly executions, the military trials, the forced confessions, the secret courts, the secret charges, and the torture techniques.

May I ask the neo-cons: Did Joseph Stalin ever imprison 2.7 million people, even in the darkest days of the Soviet Union?:rolleyes:

Did Stalin launch drug war on his people? What torture techniques did he develope?

Wow, Steve, you managed to write a post which I actually agree with in principle (though your facts are a little off). You didn't even say anything about "eco frauds"!

[touchring]

Re: this just in - hard STOP in CA

Some interesting news. Gosh, what on earth do they use to compare?? Maybe it's the real estate?

http://www.bloomberg.com/apps/news?p...d=aFlUscfOULvA
Survey results - http://www.eca-international.com/sho...ArticleID=6940
Asian Cities’ Cost of Living Jumps as Dollar Weakens, ECA Says

By Anna Kitanaka
June 10 (Bloomberg) -- Asian cities became more costly for living as the region’s currencies gained against the dollar, according to ECA International’s report on the world’s most- expensive cities for expatriates.
Tokyo surged to second place this year from 13th last year as the yen appreciated against the dollar, the report said. Hong Kong moved to 29th from 98th and Beijing jumped to 26th from 104th. European cities tumbled in the ranking, with Oslo, Norway, falling to seventh place from second. London didn’t make the top 50 this year or last.
Stronger currencies in Asia pushed up the cost of compensating staff that moved to the region, according to the report. That increase was offset by a reduction in payments for so-called ‘hardship postings’ as living conditions in Asian cities improved, the report said.
“The strengthening of Asian currencies is the dominant factor contributing to the region being more expensive for visitors than it was 12 months ago,” Lee Quane, ECA International’s regional director for Asia, said in a statement released today. “The yuan has continued to strengthen while the yen has appreciated by almost 8 percent against the U.S. dollar.”
In the same period, the sterling, euro and the Swiss franc have weakened, Quane said, meaning a “considerable difference” in costs for Europeans relocating to Asia.

[rogermexico]

Re: this just in - hard STOP in CA

Did the gold standard really end because the economy was growing too fast? If so doesn’t it mean that it is impossible to ever go back to the gold standard? ie. if it gold was scarce then it must be a hell of a lot scarcer now! If this is so then it has serious consequences for those who believe gold has a future as money!


My understanding is that countries were forced off the gold standard because they were fighting wars and running up costs that were incompatible with being on a gold standard, not because gold was scarce. You can use the gold standard / gold as money with any amount of gold, just the less you have the more you have to sub divide it and the more it is worth per unit mass.


I assume the ‘big problem’ with being on the gold standard is governments can’t run up debts as once they try people take the actual gold rather than the notes.

Monetarists believe the money supply must somehow match GDP, but even if an unbiased scientific measurement of such were possible (It's just a made-up government number), it is no constraint on real growth whatever to have the money supply grow more slowly than nominal GDP no matter how measured.

Goverments go off the gold standard so they can print to finance wars and to monetize their debt. There is no requirement whatever that the money supply grow with the economy. That is not why we or England left the gold standard. Nixon closed the gold window for foreigners (we were only on a partial gold standard since 1933) because our negative balance of payments was draining the country of gold.

John Connally to DeGaulle: "Our currency, your problem"

[rogermexico]

Re: this just in - hard STOP in CA

In part, yes. We really were seeing deflationary depressions in the late 1800's because of a shortage of money. This was especially a problem in America, which was growing rapidly.

Although we had a form of gold standard from the demise of the second Bank of United States until 1913, there was still the fraudulent practice of fractional reserve lending. So you had credit functioning as money even with the ability to exchange FRNs for gold. It is fractional reserve lending and creation of money not fully backed by specie that causes the artificial boom. When the boom reaches the end of its tether, there is a collapse or "deflationary depression". Just like we should be experiencing now, all the fake money disappears. There were many such booms and busts in the 80 years prior to 1913, but the net inflation rate was zero and a dollar held its value well over that time, as the fixed supply of gold would not only prevent the credit bubble from lasting too long, but the lack of FDIC insurance would eventually force the money supply back to a fixed ratio with gold.

Deflationary depressions were not caused by inadequate money supply, but by a sudden halt in the exponential expansion of credit artificially pumping the economy.

The idea that the deflationary bust is the problem and not the solution was and is propaganda by bankers. They claimed that a central bank as "lender of last resort" would solve the problem - the problem it was solving was that the bankers were constrained by the possibiity of "runs' from extending too much credit (creating too much money) and with a cartel and uniform reserve requirements, they could be guaranteed higher profits from creating more money. This is how and why we got the Federal Reserve in 1913.

Of course, the result was that we had an enormous boom fueled by consumer credit from 1920 to 1929 and the great depression was (IMO) the result of goverment interference with the severe unwinding of that boom, where consumer spending was an even higher % of GDP than we had in 2007.

So FDR took us off a domestic gold standard in 1933 to try to reinflate the artificial bubble.

Nixon took us off the remaining international gold exchange of Bretton Woods in 1971, so that we could continue to inflate without paying our bills.

Now we are having (trying to have) the correction of a 25 year bubble that was only allowed to run as long as it did because money has been 100% fiat or debt-based since 1971.

It is all a big experiment, but with the monetary base now mostly zeros on a computer and backed by literally nothing, it's hard to argue for anything but more inflation or the final collapse of fiat money.

http://mises.org/Books/mysteryofbanking.pdf

[ThePythonicCow]

Re: this just in - hard STOP in CA

Although we had a form of gold standard from the demise of the second Bank of United States until 1913, there was still the fraudulent practice of fractional reserve lending. So you had credit functioning as money even with the ability to exchange FRNs for gold. It is fractional reserve lending and creation of money not fully backed by specie that causes the artificial boom.

I think we are actually more or less in agreement, except for one element below. There certainly was some "cheating" on the gold based currency, using debt. Every form of currency I know of has some "flexibility" whether by shaving coins or fractional reserve lending or collateralized squared tranches of securitized underwater NINJA mortgages or whatever.

When I said that the more frequent deflations of the 1800's were due to the limited monetary base, I didn't mean to imply that the monetary base was absolutely fixed, just less "flexible". I intended to state (in a perhaps overly simplified fashion) what seems obvious, that a more rigid monetary base throttles the artificial creation of unbacked currency quicker.

It's like giving your teenage son a Corolla rather than a Ferrari. His natural tendency to accelerate past the limits of tire adhesion will be less constrained in the Ferrari, with its better traction. The sudden stops, when they do come, risk being more violent in the Ferrari. However either way, crashes will occur.

Well, on one element I would disagree with Mises, from what I understand of his position. A strong gold standard based currency is more like a Horse, not a Corolla. A solid gold based currency throttles growth of the currency base more than I'd consider optimum. Human civilization has been able to expand economic productivity over the last century faster than it has been able to expand its gold hoards. An optimum currency base would expand and contract with economic productivity.

On a pure gold international currency exchange standard, China would still be entirely stuck back on the peasant farm, as it has (at least until quite recently) lacked a sufficient gold hoard to support its great leap forward in manufactured exports.

Of course any sensible reader of my comments, given the choice of agreeing with Mises or with a Cow on matters economic, would be well advised to give far more weight to the writings of Mises.

[rogermexico]

Re: this just in - hard STOP in CA

Human civilization has been able to expand economic productivity over the last century faster than it has been able to expand its gold hoards. An optimum currency base would expand and contract with economic productivity.

On a pure gold international currency exchange standard, China would still be entirely stuck back on the peasant farm, as it has (at least until quite recently) lacked a sufficient gold hoard to support its great leap forward in manufactured exports.

I am more familiar with Rothbard's expansion on Mises. He argues quite persuasively that the money supply at any given level is not any constraint on real growth.

The Chinese trade their goods for things of value (or not in the case of US Treas) and to the extent we don't have an international gold standard and their currency is undervalued, they are accumulating a hoard of less value than they would otherwise.

Think of the converse, can the printing press create growth?

With productivity growth exceeding growth in the money supply, there is simply a natural price decline (some call this a natural deflation - not really the same) that reflects the delta between money supply growth and productivity growth.

[ThePythonicCow]

Re: this just in - hard STOP in CA

Think of the converse, can the printing press create growth?

Well, no. Nor can money create happiness. But profound poverty can be rather miserable.

(Yes, this latest reply is rather shallow -- I've run out of further insights here -- sorry ;) )

[santafe2]

Re: this just in - hard STOP in CA

John Connally to DeGaulle: "Our currency, your problem"

Sounds as if this may be true:

If the dollar fell by a third against the renminbi, according to Nouriel Roubini, an economist at New York University, the People’s Bank of China could suffer a capital loss equivalent to 10 percent of China’s gross domestic product.

http://www.hoover.org/publications/digest/2939401.html

[Starving Steve]

Re: this just in - hard STOP in CA

This is the logic of the Putz from Princeton. That is why we are in this mess now. De-valuation doesn't solve any problems; it creates problems.

Once the trust in the U.S. dollar evaporates, it will never come back. This hard-landing to the economy shows that no-one is fooled.

When we work, we expect to be paid. No more games.

[jiimbergin]

Re: this just in - hard STOP in CA

Treasurer says California runs out of cash in 50 days or less.:eek:

http://www.sco.ca.gov/Press-Releases...er06-10-09.pdf

[Jay]

Re: this just in - hard STOP in CA

I am more familiar with Rothbard's expansion on Mises. He argues quite persuasively that the money supply at any given level is not any constraint on real growth.

The Chinese trade their goods for things of value (or not in the case of US Treas) and to the extent we don't have an international gold standard and their currency is undervalued, they are accumulating a hoard of less value than they would otherwise.

Think of the converse, can the printing press create growth?

With productivity growth exceeding growth in the money supply, there is simply a natural price decline (some call this a natural deflation - not really the same) that reflects the delta between money supply growth and productivity growth.

If there is a natural decline in prices, which makes sense to me in that system, wouldn't people hold their cash and try and wait as long as possible to buy so they can get more for their buck? Hence slowing the growth of the economy?

[cjppjc]

Re: this just in - hard STOP in CA

If there is a natural decline in prices, which makes sense to me in that system, wouldn't people hold their cash and try and wait as long as possible to buy so they can get more for their buck? Hence slowing the growth of the economy?

Speaking to your wife maybe? It's over for you. You will buy soon.

[Jay]

Re: this just in - hard STOP in CA

Speaking to your wife maybe? It's over for you. You will buy soon.

My carefully laid plans blown up for roots!!!! Arghhh! ;)
Still holding strong, but weakening by the month....
And she knows we have a stinky pile of tax free casino cash from our last condo sale sitting in an account all lonely and all.
Well, it could be much, much worse.

[cjppjc]

Re: this just in - hard STOP in CA

My carefully laid plans blown up for roots!!!! Arghhh! ;)
Still holding strong, but weakening by the month....
And she knows we have a stinky pile of tax free casino cash from our last condo sale sitting in an account all lonely and all.
Well, it could be much, much worse.

Heads you win. Tails she wins. Either way you win.