EPThttp://www.abc.net.au/reslib/200903/r351112_1609778.asx
![[image loading]](http://www.bullnotbull.com/img2007/b52-ben.jpg)
The Goddamn Economy: A Civilized Version - Page 40
| Forum Index > General Forum |
|
fight_or_flight
United States3988 Posts
http://www.abc.net.au/reslib/200903/r351112_1609778.asx | ||
|
MC9876
Netherlands82 Posts
On March 20 2009 13:39 fight_or_flight wrote: The government just printed up $440 billion. I guess thats what happens when you can't lower the interest rate anymore. Wow, that's 1400 bucks per person, everyone is getting rich  | ||
|
floor exercise
Canada5847 Posts
| ||
|
gedanbarai
United States64 Posts
| ||
|
fight_or_flight
United States3988 Posts
http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html | ||
|
MC9876
Netherlands82 Posts
On March 24 2009 15:09 fight_or_flight wrote: China stepping up its rhetoric about getting rid of the dollar. My guess would be they don't like recent actions of the fed (see my post above). http://www.ft.com/cms/s/0/7851925a-17a2-11de-8c9d-0000779fd2ac.html I think it's a good idea, and I can understand China wories a bit about what's gonna happen with the dollar, having so many of them. The timing of this proposal is interesting I would say.... | ||
|
Choros
Australia530 Posts
I am not trying to suggest that this is actually what will happen, the point is that if Bernanke continues to expand money supply at the current rate then this outcome is inevitable. The fact that the Federal Reserve has actually stopped releasing statistics regarding the true extent of money supply certainly has not gone unnoticed by many people around the world in the places that actually count. | ||
|
Choros
Australia530 Posts
On March 20 2009 23:31 floor exercise wrote: I'm curious what kind of effects that will have around the world if it results in significant inflation. Tons of countries, China specifically, float below the american dollar to make their good attractive. Does this mean American is seen as a bad investment if they can't just continue borrowing? I'm not an economist but this seems like putting a bandaid on a festering wound The main concern of the Chinese is that the value of their holdings in American currency (some two trillion) looses value at the rate of inflation. If inflation is running at 5% per year than the Chinese currency holdings will loose 5% of their value in real terms per year. If inflation rises then the amount of currency value deterioration rises along side it. If the American currency collapses then that money will be worthless. | ||
|
achap54
United States49 Posts
| ||
|
baal
10486 Posts
On March 24 2009 21:53 Choros wrote: The main concern of the Chinese is that the value of their holdings in American currency (some two trillion) looses value at the rate of inflation. If inflation is running at 5% per year than the Chinese currency holdings will loose 5% of their value in real terms per year. If inflation rises then the amount of currency value deterioration rises along side it. If the American currency collapses then that money will be worthless. The scary thing here is if the Chinese decide to cut their losses and sell, the dollar will collapse even harder. | ||
|
Ecael
United States6703 Posts
On March 25 2009 02:20 baal wrote: The scary thing here is if the Chinese decide to cut their losses and sell, the dollar will collapse even harder. And why would they do that? They probably understand their position well enough, after all, we did screw over the Japanese in similar fashion in the 80s. The fallout of them actually bailing out on the Dollar is going to be catastrophic to the whole world, even with China being a much stronger economy now than it used to be, bringing down the US doesn't do anything for them. They are already on a path to prominence, there is no point hurting themselves now to accomplish the same goal. The suggestion imo is much more of a posture they've adopted as a way of gaining greater leverage and importance in the international community. | ||
|
fight_or_flight
United States3988 Posts
But what happens when the demand for government debt isn't enough to account for all spending? In that case, the government buys its own debt, which is what the $440 billion was about. It is paying for government operations by devouring the value of money itself. Are they doing this because they are out of options? Will future demand for treasuries be enough to keep our government going? http://en.wikipedia.org/wiki/Monetize#Debt_monetization Choros maybe you can explain it to me. | ||
|
The Storyteller
Singapore2486 Posts
That's what you get when you rely on an export driven economy and manipulate your currency. | ||
|
Savio
United States1850 Posts
On March 24 2009 22:45 achap54 wrote: We had the seventh largest percentage gain in the Dow Jones Industrial average yesterday. What do you suppose that means? I don't think it means much. The market was a little bit excited by current political events (stimulus bills and banking bills), and it is starved for good new and perhaps was correcting for an unrealistically low outlook on the current situation. But I still think this recession will be long and slow coming out. I don't think that stimulus bills will have much effect so we will pass them, change nothing and then have to pay off a trillion dollars compounded by interest at some future point. | ||
|
PobTheCad
Australia893 Posts
you can't call bottom until after the event , at the least there needs to be a raft of good news ; something we have not seen for a long time now | ||
Jibba
United States22883 Posts
On March 25 2009 12:16 The Storyteller wrote: China is a bloody hypocrite. They didn't buy American bonds because they looked like good investments, they bought American bonds because they wanted to keep the yuan undervalued relative to the dollar. Now they're crying about the value of their investments. Well, if they are so concerned, they can go ahead and sell them befroe the situation gets worse. But they won't do that because that would cause the dollar to crash and the yuan the shoot up in value and that would hurt their exports. That's what you get when you rely on an export driven economy and manipulate your currency. They have every right to complain, but they simply have no choice. There's still no one else they can buy from. The whole AIG thing is absolutely ridiculous. Krugman needs to shut up when he isn't asked about international trade and everyone in congress should be castigated for their actions, and Obama deserves criticism too. Congress knew what AIG was going to do, AIG had plenty of reasons to do what they did, everything they did was legitimately handled and retroactively taxing their extensions is FUCKING UNCONSTITUTIONAL. Obama has to know that. The entire thing is so clearly a political move to distract from the entire crisis, except that there isn't even a fucking election for 1 1/2 years. It boggles my mind that they could move so quickly on an amount of money so insignificant in terms of the entire rescue plan, and the media (as they always do) deserve blame for taking the bait. The entirety of congress, both dems and reps, are being irresponsible with this thing. It's almost as bad as if they took half a year to discuss baseball. >.> | ||
|
HeadBangaa
United States6512 Posts
In reality, the AIG bonuses finaggle could've been handled months ago when stipulations were being considered. They decided against it. Now they realize it was a mistake. Which public serviceman is going to step forward and accept responsiblity for being retarded? Nobody, because they're ALL retarded. They're passing laws faster than they can read them or think about them whatsoever. It's insane. | ||
|
Choros
Australia530 Posts
On March 25 2009 11:58 fight_or_flight wrote: I have a question. How are they going to pay for all these government initiatives? Obama has proposed trillions of dollars in spending. In the old days, they would use taxes to pay for government operations. However, when taxes weren't enough the government would sell debt which was backed by its ability to collect taxes (future taxes). But what happens when the demand for government debt isn't enough to account for all spending? In that case, the government buys its own debt, which is what the $440 billion was about. It is paying for government operations by devouring the value of money itself. Are they doing this because they are out of options? Will future demand for treasuries be enough to keep our government going? http://en.wikipedia.org/wiki/Monetize#Debt_monetization Choros maybe you can explain it to me. Well yeah they can simply buy their own debt (debt monetization). Its just a tricky way to say your basically printing money. The federal reserve can continue to loan money to the federal government indefinitely but ofcourse there is some finite limit to how much borrowing the government can endure and only so much money you can print before you trigger serious inflation. The United States today is sitting at around 70% debt to GDP ratio, which is not that much in a relative sense. Japan today has around 250% debt to GDP and they can still borrow, Britain used to have 200% debt to GDP as well so theoretically America can borrow trillions more if need be. They are doing this because they are out of options. However if the demand for Government bonds disappears, i.e no one has confidence in the ability of the United States to repay their debt (so far the demand for govt bonds has actually risen) which will happen eventually if the current situation continues then people will loose confidence in the value of the dollar that the dollar will then loose all value rendering the United States government bankrupt. What will actually happen if this does eventuate is hard to say. There has never been a developed economy which has actually 'gone bankrupt' that I am aware of. But if I were to hazard a guess what we would see is the United States actually creating a new currency and basing its value of something like American gold reserves (there are many trillions worth I believe) and then backing that up with tax revenue and everything should work its self out kinda like in Germany in the 30's who did this, (they created a new currency the Reichsmark and based its value of German land). But really this is untested waters. I really do not like the Obama rescue plan for the banks because basically what they are doing is guaranteeing private purchases of worthless assets so if the people buying those assets loose money the Govt will pay them back up to 85% of their losses. The problem is that these 'assets' have no value. They are literally buying mortgages of people who have already been foreclosed on, there cannot be any return on this investment in the long run. This could end up costing the tax payer trillions of dollars they cannot afford. At the end of the day America's fate will be determined by what happens in the real economy and thus far has been insufficient attention to this area for me to have much confidence. | ||
|
Choros
Australia530 Posts
The Chinese could possibly pull out the of American currency and trigger currency collapse as Baal mentioned. American demand for exports has already collapsed so a yuan revaluation making their exports less competitive really wont make much difference to anything. That said its not like the Chinese are actually going to do it unless they have no a choice, i.e if it is apparent the currency is going down regardless they will try to get whatever they can for their currency reserves there holding on. And this whole AIG thing is basically irrelevant scapegoating but last I heard they are not going to do the tax thing anyway. | ||
|
gchan
United States654 Posts
On March 25 2009 11:58 fight_or_flight wrote: I have a question. How are they going to pay for all these government initiatives? Obama has proposed trillions of dollars in spending. In the old days, they would use taxes to pay for government operations. However, when taxes weren't enough the government would sell debt which was backed by its ability to collect taxes (future taxes). But what happens when the demand for government debt isn't enough to account for all spending? In that case, the government buys its own debt, which is what the $440 billion was about. It is paying for government operations by devouring the value of money itself. Are they doing this because they are out of options? Will future demand for treasuries be enough to keep our government going? http://en.wikipedia.org/wiki/Monetize#Debt_monetization Choros maybe you can explain it to me. Like the government has in the past, they are paying for these initiatives by expanding money supply (printing money, causing inflation) and by selling treasuries. However, because they are doing it to a very large extent, inflation is relatively high and the bonds are relatively cheap. The accumulated effect of this is that it becomes harder to sell USDs and treasuries, which in turn puts pressure on the USD. To answer your second question, the Fed bought treasures for three primary reasons: (1) to lower public debt at tradeoff of more inflation, (2) to push down the long term yield of treasuries, and (3) to increase the value of privately held treasuries. 1 happens because you are printing money to buy up debt--less overall public debt, more usd floating around. 2 & 3 happens because by buying treasuries, there will be less supply of treasuries being sold. Less supply of treasuries will mean currently held private treasuries will be worth more (3). Consequently, when the value of bonds goes up, yield goes down. This also has the double effect of making future issued treasuries less desirable so banks and investors will purchase non-treasury assets. Bernanke did this specifically to target long term yields so that long term assets (like homes, cars, etc) will be a lot cheaper to buy. In theory, this would spur demand for these items in the short term (which are at the core of the problem of the recession), but it would mean much higher levels of inflation in the future. | ||
| ||
