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What's with the US dollar?!

  • #141
  • Apr 3, 2011 5:33am Apr 3, 2011 5:33am
Quoting nanningbob
You cant place this on the Vietnam War even thought it is a cause, the cause would have happened anyway. In other words if you didnt have the Vietnam War there just would have been another cause. Gold is in limited supply but you have increase in population (and other causes like increases in economic activity) and therefore a need for more currency to be put into play. If you set the price at 6000 per ounce then you would still have the same problem. Nations would demand payment in gold for your currency eventually drying up your gold reserves....
I still think that what you are saying is questionable. Gold standards have worked well during long periods of history. But I don't think that is the interesting question here. The thread started with the question "What's with the US dollar?!" and it would be more interesting to discuss that than to speculate about gold standards or Austrian economics.

After all, the idea of a global currency backed by gold is likely to remain a distant vision. In the near future, fragmentation and chaos is more likely than anything else. And what could possibly emerge out of the chaos is perhaps a bit too early to speculate about.

But speculations about the ensuing chaos have some touch of reality, it seems: http://www.globalresearch.ca/index.p...t=va&aid=18529
  • #142
  • Edited 8:11am Apr 3, 2011 6:48am | Edited 8:11am
Wow, I can't believe that this thread grows so quickly just in a few days. I enjoy all of your thoughts here so much that I decide to jump in the discussion.
What Naningbob said about Donuts example is just short term spike in price due to unbalanced of Supply and demand. However, that short spike in price is often short live, and when market recognizes it, price will fall back to balance. But, what we have in the US back from 1930 to recently is a long period of consistently inflate in price. The two links below are what I find to support my argument.
http://www.usinflationcalculator.com...flation-rates/
http://www.dollartimes.com/calculators/inflation.htm
Back to the inflation argument, I think that everybody here agree that a dollar 50 years ago was worth more than it is today. Even though today we can buy something that offers a better value and quality than we could 50 years back. For example, electronic stuffs are much cheaper today than they are 10 or 20 years ago. However, we use the basket of goods to calculate the rate of inflation and that tells us how prices have increased for many years.

So, what cause inflation? 1. Supply and demand imbalance can move price. 2. The increase in money supply that depreciates the values of the dollar. I think it is safe to say that as the US population is growing, demands for all goods would increase, but so do supplies. So overall, supplies and demands would be in balance in the long term. So, we can conclude that the main cause of our long term inflation is the increase in money supply. Everyone know that our government debts has been ballooning through many year. How could the government finance its debts--> Printing money + Increase taxes...

I hope that I make my points clear here. Please forgive for my poor grammar.
  • #143
  • Apr 3, 2011 7:34am Apr 3, 2011 7:34am
There's a great alternative to both gold standard and fiat currencies. It's called free money or freigeld. Unfortunately there's very little information available on the subject and the reasons are well understood. Here's the story of the Worgl experiment.

The year was 1932; the world was gripped by the greatest economic depression that it had ever known. One man in a small town decided to try something new to help the people of his community. In doing so the town made economic history. The town was Worgl in the Bavarian province of Germany. To understand the Worgl experiment you have to understand the man behind it. The towns mayor Michael Unterguggenberger.

Michael Unterguggenberger


Michael was born into an old Tyrolean peasant family. He lived the life of a poor European without falling into the mental trap of heavy blue-collar work. He apprenticed himself to a master mechanic. After apprenticeship he became a journeyman mechanic. At the age of twenty-one he had his first post at the Worgl railway station. His striving for social justice jeopardized his personal advancement. In taking a stand for his fellow workers as a trade union man, he was not promoted any higher. In 1912 he was elected representative for the union of Innsbruck Rail Engineers in the committee for personnel. Yet to the officials of the Austrian Railroad network he was seen as the person who represented the concerns of the workers against the moneyed interests of the railroad. Later Alex von Muralt would write that Michael Unterguggenberger always stressed that he was not a Marxist.


Wörgl

Worgl was a small town that had grown rapidly in the early 1900’s. Then came the crash of 1929, which quickly spread, into Europe. Michael was town councilor, he soon became deputy mayor. In 1931 he was elected mayor of Worgl. As mayor he had a long list of projects he wanted to accomplish. Projects like repaving roads, street lighting, extending water distribution across the entire town and planting trees along the streets. But in the midst of the depression out of the towns population of 4,500, 1,500 were without a job and 200 families were penniless.


Silvio Gesell

Michael read and re-read “The Natural Order” by Silvio Gesell. He talked with people in the town and convinced the members of the Worgl Welfare Committee to hold a session on July 5, 1932. In this session he gave a short summary and then proposed a “Distress Relief Program”. He stated that slow circulation of money is the principal cause of the faltering economy. Money as a medium of exchange increasingly vanished out of working people’s hands and accumulates into the hands of the few who collect interest and do not return it back to the market. He proposed that in Worgl the slow-circulating National Bank currency would be replaced by “Certified Compensation Bills”. The council would issue the Bills and the public would accept the Bills for their full nominal value. Bills would be issued in the denominations of 1, 5 and 10 shillings. A total issue of 32,000 Worgl “Money Bills” was printed and put into circulation.

Worgl Money

On July 31, 1932 the town administrator purchased the first lot of Bills from the Welfare Committee for a total face value of 1,800 Schillings and used it to pay wages. These first wages paid out were returned to the community on almost the same day as tax payments. By the third day it was thought that the Bills had been counterfeited because the 1000 Schillings issued had already accounted for 5,100 Schillings in unpaid taxes. Michael Unterguggenberger knew better, the velocity of money had increased and his Worgl money was working.

Worgl money was a stamp script money. The Worgl Bills would depreciate 1% of their nominal value monthly. To prevent this devaluation the owner of the Bill must affix a stamp the value of which is the devaluation on the last day of the month. Stamps were purchased at the parish hall. Because nobody wanted to pay a devaluation (hoarding) fee the Bills were spent as fast as possible.

The reverse side of the Bills were printed with the following declaration: “To all whom it may concern ! Sluggishly circulating money has provoked an unprecedented trade depression and plunged millions into utter misery. Economically considered, the destruction of the world has started. - It is time, through determined and intelligent action, to endeavour to arrest the downward plunge of the trade machine and thereby to save mankind from fratricidal wars, chaos, and dissolution. Human beings live by exchanging their services. Sluggish circulation has largely stopped this exchange and thrown millions of willing workers out of employment. - We must therefore revive this exchange of services and by its means bring the unemployed back to the ranks of the producers. Such is the object of the labour certificate issued by the market town of Wörgl : it softens sufferings dread; it offers work and bread.”

Worgl Success

Over the 13-month period the Worgl money was in circulation, the mayor carried out all the intended works projects. The council also built new houses, a reservoir, a ski jump, and a bridge. The people also used scrip to replant forests, in anticipation of the future cash flow they would receive from the trees.

Six neighboring villages copied the system successfully. The French Prime Minister, Eduoard Dalladier, made a special visit to see the 'miracle of Wörgl'. In January 1933, the project was replicated in the neighboring city of Kirchbuhl, and in June 1933, Unterguggenburger addressed a meeting with representatives from 170 different towns and villages. Two hundred Austrian townships were interested in adopting the idea.


One eyewitness report was written by Claude Bourdet, master engineer from the Zürich Polytechnic. "I visited Wörgl in August 1933, exactly one year after the launch of the experiment. One has to acknowledge that the result borders on the miraculous. The roads, notorious for their dreadful state, match now the Italian Autostrade. The Mayor's office complex has been beautifully restored as a charming chalet with blossoming gladioli. A new concrete bridge carries the proud plaque: "Built with Free Money in the year 1933." Everywhere one sees new streetlights, as well as one street named after Silvio Gesell. The workers at the many building sites are all zealous supporters of the Free Money system. I was in the stores: the Bills are being accepted everywhere alongside with the official money. Prices have not gone up. Some people maintained that the system being experimented in Wörgl prevents the formation of equity, acting as a hidden new way of exploiting the taxpayer. There seems to be a little error in that view. Never before one saw taxpayers not protesting at the top of their voices when parting with their money. In Wörgl no one was protesting. On the contrary, taxes are paid in advance; people are enthusiastic about the experiment and complain bitterly at the National Bank's opposing the issuing of new notes. It is impossible to dub it only a "new form of tax" for the general improvement of Wörgl. One cannot but agree with the Mayor that the new money performs its function far better than the old one. I leave it to the experts to establish if there is inflation despite the 100% cover. Incidentally price increases, the first sign of inflation, do not occur. As far as saving is concerned one can say that the new money favors saving properly so-called rather than hoarding money. As money lost value by keeping it at home, one could avoid the depreciation by depositing in the savings bank.

Wörgl has become a kind of pilgrim shrine for macro-economists from a variety of countries. One can recognize them right away by their learned expressions when discussing the beautifully maintained streets of Wörgl while sitting at restaurant tables. Wörgl's population, proud of their fame, welcomes them warmly."

The Central Bank

The Central Bank panicked, and decided to assert its monopoly rights by banning complimentary currencies. The case was brought in front of the Austrian Supreme Court, which upheld the Central Banks monopoly over issuing currency. It then became a criminal offence to issue “emergency currency”. Worgl quickly returned to 30% unemployment. Social unrest spread rapidly across Austria. In 1938 Hitler annexed Austria and many people welcomed Hitler as their economic and political savior.

Germany was headed towards WWII and with the aftermath of the war much of what happened in pre war Germany just like what happened during the war was suppressed by the world. Germany was being rebuilt in the West’s image. The Worgl experiment was relegated to history.


http://alt-money.tribe.net/thread/70...a-b789d1757037
  • #144
  • Apr 3, 2011 7:40am Apr 3, 2011 7:40am
Quoting seagreen
There's a great alternative to both gold standard and fiat currencies. It's called free money or freigeld. Unfortunately there's very little information available on the subject and the reasons are well understood. Here's the story of the Worgl experiment....
This is already happening: http://www.berkshares.org/
  • #145
  • Apr 3, 2011 10:14am Apr 3, 2011 10:14am
Quoting LasVahGoose
......... Wash Rinse Repeat.

6000 thousand years of recorded history, same shit over and over again.
Reason for boom/bust economies.
  • #146
  • Apr 3, 2011 11:07am Apr 3, 2011 11:07am
Quoting medici
The only time the US has been in a worse situation was at the end of WW2. Then, being one of the few industrial countries unharmed by the war, and with all currencies backed by gold, "overcoming" was easy.
The depression after the Civil War was more damaging, and actually went global.

Read up on the "Panic of 1873".

It's a fairly interesting commentary on today's issues.
No way I'll wreck this... It's a beer truck!
  • #147
  • Apr 3, 2011 11:28am Apr 3, 2011 11:28am
Quoting Bruce Flea
The depression after the Civil War was more damaging, and actually went global.

Read up on the "Panic of 1873".

It's a fairly interesting commentary on today's issues.
That wasn't a sovereign debt crisis. After the Civil War, federal debt-to-GDP was around 30%.
  • #148
  • Apr 3, 2011 11:31am Apr 3, 2011 11:31am
inflation wont be an issue until banks around the world stop denominating their holdings to usd when a new reserve currency is chosen the end game for usd in its current form is near
  • #149
  • Apr 3, 2011 11:46am Apr 3, 2011 11:46am
Quoting CindyXXXX
Yes and money is only worth less relative to prices... Meaning for example what could be bought yesterday for $1 today costs $1.05 = Inflation measured by consumer price index... As we know

Long story short inflation is purely a consequence of demand... When people have more monies to spend there will be a greater demand for goods and services this in turn drives up prices as firms realize they can get more money for their products which in turn means that employees demand higher incomes to cope with the rising day to day expenses of living which...
I have not read all this thread so it may be said else where.

Inflation is not completely demand driven.

The US started spending too much. It got into an expensive war it lost in Vietnam. Nixon took the dollar off the gold standard. Remember when US coins actually had silver in them. Currencies were no longer backed by anything. There was a time when there were bars of gold backing up the money. There was a time when the money was gold and silver.

Now there is nothing to support the USD. The Fed can just print money and they have printed and printed. All this easing business is about is printing money and making it easy to borrow.

When any country prints more money, this cannot do anything other than devalue it.

Germany after WWI had to pay back the allies. They did not have the means to do this. So they sold all their gold and after than they just printed the money and then they printed lots more. The Mark ended up with no value. It was worth less than the paper it was printed on.

Mugabe has wrecked Zimbabwe. Because the country is bankrupt and is printing money like no tomorrow, inflation has gone through the roof. There is no more demand for the likes of food but there is massive massive inflation.
  • #150
  • Apr 3, 2011 11:49am Apr 3, 2011 11:49am
Quoting sidhujag
inflation wont be an issue until banks around the world stop denominating their holdings to usd when a new reserve currency is chosen the end game for usd in its current form is near
If China and the Arabs said no more USD's the end game would be here instantly.
  • #151
  • Apr 3, 2011 12:23pm Apr 3, 2011 12:23pm
Quoting medici
That wasn't a sovereign debt crisis. After the Civil War, federal debt-to-GDP was around 30%.
But it WAS a monetary crisis, as the greenback was a fiat currency.

It has some interesting parallels.
No way I'll wreck this... It's a beer truck!
  • #152
  • Apr 3, 2011 12:23pm Apr 3, 2011 12:23pm
Quoting six gun
I have not read all this thread so it may be said else where.

Inflation is not completely demand driven.

.
Yeah we've been there and done that but thanks...
Time hides Nothing
  • #153
  • Apr 3, 2011 12:24pm Apr 3, 2011 12:24pm
Quoting six gun
If China and the Arabs said no more USD's the end game would be here instantly.
And suicide financially for both.

Tangled web this world is in...
No way I'll wreck this... It's a beer truck!
  • #154
  • Apr 3, 2011 12:45pm Apr 3, 2011 12:45pm
Quoting six gun
Now there is nothing to support the USD. The Fed can just print money and they have printed and printed......
Well not entirely true.

If our debtholders, which includes US citizens, were to asked to be paid in gold or other hard transferable assets the US government couldn't pay.

But Fort Knox still does hold the most gold of any one spot on the planet.

Not to mention the Fed on Maiden Lane in NYC having much of the gold held in trust for central banks of the world - which we could grab in a heartbeat since we have the most powerful military and close proximity.

But WWW3 would erupt seconds later. Not a good thing.

So it will be interesting to see whether or not this country will get its act together ..... in time.
  • #155
  • Edited 1:12pm Apr 3, 2011 12:56pm | Edited 1:12pm
Quoting SunTrader
Well not entirely true.

If our debtholders, which includes US citizens, were to asked to be paid in gold or other hard transferable assets the US government couldn't pay.

But Fort Knox still does hold the most gold of any one spot on the planet.

Not to mention the Fed on Maiden Lane in NYC having much of the gold held in trust for central banks of the world - which we could grab in a heartbeat since we have the most powerful military and close proximity.

But WWW3 would erupt seconds later. Not a good thing.


So it will...
Yeah... but they are many forces at work preventing an audit aren't there. Federal Reserve notes are not redeemable in anything other than Federal Reserve notes, which the present course and recent actions (as far as history is concerned) dictate a huge devaluation.

Disclaimer, that is not a trade recommendation.
  • #156
  • Apr 3, 2011 12:57pm Apr 3, 2011 12:57pm
Quoting SunTrader
...since we have the most powerful military
Humility would be good for americans, since every major war they fought ended in a catastrophe for the military itself. Iraq, vietnam, afghanistan,...

But let's not make this a political discussion. Just thinking that the all powerful US has a serious self-perception problem.
  • #157
  • Apr 3, 2011 1:05pm Apr 3, 2011 1:05pm
Quoting Noloqy
Now two things are happening. Due to excessive debt, fears emerge on the United States's capabilities to repay this debt. These fears can be destructive for any country, as debt refinancing becomes expensive. But for a reserve currency this is totally unacceptable, as such a currency should be based on fundamental stability. (Funny enough many Central Banks in the developed countries have price targets, whereas the Fed has (to a certain extent mutually exclusive) price- and output targets.
As these fears emerge, Asian countries are looking at investment...
I agree with you that in the long term, the dollar will lost its status as the world reserve currency, and it means dollar depreciation. I was puzzled by what happened on Friday when the EUR and GBP gained strength against the USD. It all proved that investors were looking for short term raise of the EUR despite all of the bad news about Eur member countries. SO, the question would be how much could the EUR rise before investors turn their focus back to Europe debts.
  • #158
  • Apr 3, 2011 1:13pm Apr 3, 2011 1:13pm
Quoting mtrader87
I agree with you that in the long term, the dollar will lost its status as the world reserve currency, and it means dollar depreciation. I was puzzled by what happened on Friday when the EUR and GBP gained strength against the USD. It all proved that investors were looking for short term raise of the EUR despite all of the bad news about Eur member countries. SO, the question would be how much could the EUR rise before investors turn their focus back to Europe debts.
The writing is on the wall. If the strongest NFP report since the crisis and slews of Euro-negative news can't give the dollar a boost, what could?
  • #159
  • Apr 3, 2011 1:17pm Apr 3, 2011 1:17pm
Quoting medici
The writing is on the wall. If the strongest NFP report since the crisis and slews of Euro-negative news can't give the dollar a boost, what could?
yeah, investors obviously can already smell the rotten fish. I think it just takes a trigger event to catapulte the dollar lower. But let's see, just assumptions at this point.
  • #160
  • Apr 3, 2011 1:18pm Apr 3, 2011 1:18pm
Quoting Bruce Flea
But it WAS a monetary crisis, as the greenback was a fiat currency.

It has some interesting parallels.
Do you mean to say that the Coinage Act - reducing money supply - was unwise policy, but that today's Fed policy is sounder?
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