Aug. 2nd, 2011: Economic doomsday?

[TandemAssassin]

Yes, yes, I understand that every dollar must be backed by some guaranteed, stable value, else it's just worthless paper.

 

That was in the past - when every dollar printed was backed by its equivalent in gold reserves. Loosely termed the gold standard.

 

Now, the reason the dollar is worth money is because it is backed only by the credibility of the sovereign state. Essentially, it is an "I owe you" from the government. And the underlying premise, I suppose, is that if you really wanted to, you could hold the government to this promise. That is why you can use it to exchange for goods and services. It is like how businessmen factor or pass on their receivables to pay off their other debts.

 

The scary thing that many are just starting to realize is that many governments can't be held to that promise. Like Greece and almost certainly, the US. Meaning, their currency is worth a lot less in reality than its face value suggests. All is fine and dandy if the illusion can be kept up. But when the music stops playing; I guess we will all move back to barter trade?

 

Interestingly, according to the wikipedia entry on the gold standard, there are more US dollars in circulation today than the total value of all the gold that has ever been mined out of the earth.

[TandemAssassin]

Frankly If 1 country print more money then it is no good.

But if ALL countries print more money, like France, UK Germany, Greece, Japan, China, etc etc

This will help to rebalance everything in the world.

 

Heard the story of a Tourist came to a town and got into a Motel ? He place a refundable deposit of $1000 and want to check the town out before he decide to stay. The chain of events therafter is very interesting as this Virtual money help to ease the town debt woes.

 

So this way to resolve this global mess : Print money and everyone pay everyone else with their printed money.

 

I think I heard of the story, but I can't remember the ending. Did he stay on in the end?

 

If he didn't, then the town would definitely be in the same position it started with as he would get his deposit back. If he did, then it is just the spill on effects of "foreign investment" and the music will stop when he decides to pull out his deposit and go home.

 

Things will work slightly differently if the mayor decided to print $1000 to solve the debt woes instead as the money supply would have permanently increased by $1000.

[Redplanet]

Fascinating... this Fiat dollar.

[Tigerwoods]

I think I heard of the story, but I can't remember the ending. Did he stay on in the end?

 

If he didn't, then the town would definitely be in the same position it started with as he would get his deposit back. If he did, then it is just the spill on effects of "foreign investment" and the music will stop when he decides to pull out his deposit and go home.

 

Things will work slightly differently if the mayor decided to print $1000 to solve the debt woes instead as the money supply would have permanently increased by $1000.

In the end he did not stay. BUT the $1000 passed from Prostitute to Butcher to Baker and back to Motel Owner so the tourist did help ease the town's Round the robin debt of $1000.

 

Expand on this to the world and you might actually solve all debt problem...

Edited June 30, 2011 by Tigerwoods

[Good-Carbuyer]

History repeats itself? Recession, double dip recession, D...

[Yewheng]

You don't understand this theory. You cannot use the laws of economics. You have to think out of the box alittle.

If 1 country like African country print and print money, their money will experience exponential devaluation

But If all countries print money, no country will experience devaluation as it is meant to contra/neutralise their debt position.

 

Wait a minute you say the currency will neutralise their debt position.. but don't forget when print $, there is no taking back.. so if all country keep print $ to match.. than supposing all currency should be the same rate already.. and people salaries will also have to rise to match the rate of printing already.. It's not what currency neutralise.. it is when print more $.. the economy is going to become imbalance unless the salaries can catch up with it..

 

Take for example.. if all countries are like US.. so what will happen is will the price of a chicken rice cost $3 now? than how about average people salaires?? will it also increase that much? I mean if proportion increase than ok.. but if it is only 1 side increase the other side never increase much.. than who will benifit the most from printing of $ ?? The rich? and the rich will become richer? That's what I am trying to say.. as more $ floating around.. naturally the price of item will go higher..

Edited June 30, 2011 by Yewheng

[Yattokame]

I remember 2008. The whole world die die will not wish USA to die.

The whole world happily agree to what the USA wished to do.

Don't worry.

Banks and business will be bailed out, as usual to 2008 scenario.

Just accumulate cash to buy stocks on 3rd august onwards.

I miss out on the $1 citibank last time.

Now I am ready to pour on all my monies should a depression scare mongering happen again.

I learnt that this world will die die never let major countries go down!

 

I bought at $1. sold them a while ago about $5.

[Uncleo]

'We are the greatest nation on Earth'

 

No you r not!

[Tigerwoods]

Wait a minute you say the currency will neutralise their debt position.. but don't forget when print $, there is no taking back.. so if all country keep print $ to match.. than supposing all currency should be the same rate already.. and people salaries will also have to rise to match the rate of printing already.. It's not what currency neutralise.. it is when print more $.. the economy is going to become imbalance unless the salaries can catch up with it..

 

Take for example.. if all countries are like US.. so what will happen is will the price of a chicken rice cost $3 now? than how about average people salaires?? will it also increase that much? I mean if proportion increase than ok.. but if it is only 1 side increase the other side never increase much.. than who will benifit the most from printing of $ ?? The rich? and the rich will become richer? That's what I am trying to say.. as more $ floating around.. naturally the price of item will go higher..

I repeat pls cast the law of econs out of the window then you can think freely.

It is when you set the words like Accountability, Liabilty, Responsibility in your mind, this printing won't work.

Put that aside.

Lets say every country is guilty and the judgement/verdict is to pardon them.

OK lets remove Printing Money. Lets Print Big Cheque instead or Digital Money, to save the trees. Settle all debts between countries, Financial institutions.

No physical money flood the public, only Digital money...

 

The only debt left are those individuals who owe the banks, I think this one we let nature take its course or if the Banks are benevolent, they can restructure the loans or W/O part of it...

 

The mess current faced in the world cannot be resolved (I guestimate it will take 30 yrs) If we follow the strict complicated laws it will be only messier, so the only way to cut the pain is to neutralise the debt position, start from Square one.

 

[Donut]

I repeat pls cast the law of econs out of the window then you can think freely.

It is when you set the words like Accountability, Liabilty, Responsibility in your mind, this printing won't work.

Put that aside.

Lets say every country is guilty and the judgement/verdict is to pardon them.

OK lets remove Printing Money. Lets Print Big Cheque instead or Digital Money, to save the trees. Settle all debts between countries, Financial institutions.

No physical money flood the public, only Digital money...

 

The only debt left are those individuals who owe the banks, I think this one we let nature take its course or if the Banks are benevolent, they can restructure the loans or W/O part of it...

 

The mess current faced in the world cannot be resolved (I guestimate it will take 30 yrs) If we follow the strict complicated laws it will be only messier, so the only way to cut the pain is to neutralise the debt position, start from Square one.

 

 

Yeah, your argument has some logic.

 

BUT your argument is also a "wish for the heavens". It will never happen in the real world. We will never get every single country in the world to do the same thing.

 

It's NOT a monopoly game, you know......... you think, just pass the money around the boardgame??..... no way it will happen in the real world.

 

So get real and discuss this issue realistically.

 

[Greatbirdlegend]

In the end he did not stay. BUT the $1000 passed from Prostitute to Butcher to Baker and back to Motel Owner so the tourist did help ease the town's Round the robin debt of $1000.

 

Expand on this to the world and you might actually solve all debt problem...

 

http://www.newfamilyeconomics.com/lessons/...hey-had-it-all/

[Jamesc]

Money not backed by gold is just an IOU.

 

Can become toilet paper!

 

Hence only keep money backed by gold.

 

Real money like the Swiss franc.

[Jasonjst]

means what?

 

I think he is saying us need more money by Aug , if not doom ?

[Jamesc]

Its like the US max out their credit cards and now trying to get new cards.

 

Its 100% certain they will get it.

[OmOm]

Hi bro Tigerwoods,

 

Your words ring true as moral hazard has already been cast to the wind when governments began bailing out privately-owned financial institutions. It can only follow that governments will bail each other out given that the stigma of moral hazard is no longer in the picture.

 

The beneficiaries of this outcome will be those who are debtors. The inflationary effect of these measures will result in them gaining from their status as debtors as the present-day value of their debts continue to diminish rapidly.

 

Those who are penalised the most are the savers i.e. the ones who are holding their wealth in cash (specifically fiat currencies). The value of their holdings will fall dramatically over the next few years.

 

I repeat pls cast the law of econs out of the window then you can think freely.

It is when you set the words like Accountability, Liabilty, Responsibility in your mind, this printing won't work.

Put that aside.

Lets say every country is guilty and the judgement/verdict is to pardon them.

OK lets remove Printing Money. Lets Print Big Cheque instead or Digital Money, to save the trees. Settle all debts between countries, Financial institutions.

No physical money flood the public, only Digital money...

 

The only debt left are those individuals who owe the banks, I think this one we let nature take its course or if the Banks are benevolent, they can restructure the loans or W/O part of it...

 

The mess current faced in the world cannot be resolved (I guestimate it will take 30 yrs) If we follow the strict complicated laws it will be only messier, so the only way to cut the pain is to neutralise the debt position, start from Square one.

 

[Mockngbrd]

China wun let USA go under

[Jamesc]

,

 

 

 

Those who are penalised the most are the savers i.e. the ones who are holding their wealth in cash (specifically fiat currencies). The value of their holdings will fall dramatically over the next few years.

Serve them right for holding fiat currencies.

 

Should have bought gold or swiss francs.

 

Anyway the real problem is interest.

 

It enslaves the poor to the rich.

 

It should be banned.

[Xdeatel]

Now the problem is that with more $ print it only benifit the rich to become richer.. and the poor will face with more inflation.. and once $ is printed it cannot be taken back.. I mean as in whether economy is good or bad.. the $ still circulating around.. and to proper manage $ printing would be actually to print in relate to population increase and productivity and not print $ to buy things that is of non-productivity.. something like that..

 

Printing more money will cause the inflation to rise up if it is not backed by gold/currency bond and foreign currency reserves. So theoretically, in economic terms, the rich will actually "lose" more than the poor, because the rich have more money/dollar to lose than the poor have the money/dollar to lose. Basically if the rich have 100m and the poor has 10 dollar, the 100m will be effectively lose 5-6% in value due to inflation which amounts to 5-6m, while the poor will only have lost 0.5-0.6 dollar.

 

Plus, the government is able to "take out" currency to reduce the money supply in the circulation in three ways. I will just touch and go several methods.

 

First, the issuing of government bond. In this case, the government will issue a bond and "buy" dollar/money from the poeple, this effectively reduce the money in the system.

 

Secondly, the government can increase the reserve requirement amount. For e.g,the current reserve requirement is 10%, the bank that has 100m, needs to keep 10m in the required reserve. If government increases the reserve requirement to 20%, the bank needs to keep 20m in the required reserve (thats a 10m increase). Thus, the bank has 10m less to lend to people in the country. Which effectively reduce the money supply by 10m.

 

Thirdly, government can use foreign currency reserve and gold reserve to "buy back" the money from the market and thus effectively reducing the supply of the money.

 

 

These are just touch and go.