Fed can not let dollar fall

[ByLoSellHi]

Deflating the dollar is the only way the fed can avoid defaulting on our national debt service obligations, given our slowing economic growth.

The fed will gladly conspire with Congress and the Executive branch to see holders of US IOUs screwed royally when the dollars, with interest, that they receive back are worth a fraction of what was loaned.

 

[9999]

Quote from thriftybob:

Its not known as the "dismal science" for nothing. You have some experts saying growth, some saying slowdown, and some saying recession. Who do you believe? Two will be wrong, one will be right. How can all of them be experts? You can pick your books depending on which outcome you want to hear.
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PS: I've heard Bernanke's favorite book is "A Monetary History of the United States, 1867-1960" by Milton Friedman and Anna Jacobson Schwartz. I have it, but haven't made it through it. I really like Milton Friedman's attitude towards things, though from the interviews I've seen.

You bring up good points, but I don't wanna hear any outcome. I'm just trying to understand things, that's why I need some basic books.
Thank you for your suggestions, I will look into them.

 

[billdick]

Sorry for delete here - see revised version that got posted instead of edit on other side of BuyLowSell High's reply to early version here while I was editing.

 

[ByLoSellHi]

Quote from billdick:

Just confirming: Your "Deflating" means making dollars less valuable. - I.e. issuing more T-bills or running the mints presses, etc. -Yes?
On your last point, I thought the currently "deflating" dollar already was more than canceling out the interest on US paper. - A large reason why central banks are getting out of dollars, but trying to do so without provoking a dollar collapse.
Comments?

Yes.

If you loan me 100k when the USD is worth 1 euro, and the note states I have to pay you back the 100k plus 7% interest on the 12th month after the loan date, and the USD is worth .76 euros on that due date, I am paying you back with dollars that are worth 24% less those I borrowed from you, at least compared to the relative value of the euro.

You're getting 76k back. Plus 7% interest, however that interest is structured.

 

[billdick]

Quote from ByLoSellHi:

Deflating the dollar is the only way the fed can avoid defaulting on our national debt service obligations, given our slowing economic growth.
The fed will gladly conspire with Congress and the Executive branch to see holders of US IOUs screwed royally when the dollars, with interest, that they receive back are worth a fraction of what was loaned.

Just confirming: Your "Deflating" means making dollars less valuable. - I.e. issuing more T-bills or running the mints presses, etc. -Yes? then I agree, but as not much of a trader (typical buy and hold guy) I have been buying TIPs - (I loaded up on ADRs about five years ago - average up now 300%, best is SBS, Sao Paulo's Water and sewer Co - up 700% and still paying nice dividends. My IBN has done well too - about 500% gain. but I am retired and for tax reasons can't get everything out of US quickly so US assets are mainly in TIPs now. What do you think of this? (Keep in mind, my objective was only to protect what I have, not grow it - but ironically it keeps growing as others are now doing the same.)

On your last point, I thought the currently "deflating" dollar already was more than canceling out the interest on US paper. - A large reason why central banks are getting out of dollars, but trying to do so without provoking a dollar collapse.
Comments?

 

[thriftybob]

Quote from 9999:

You bring up good points, but I don't wanna hear any outcome. I'm just trying to understand things, that's why I need some basic books.
Thank you for your suggestions, I will look into them.

Its not a basic book at all. I was reading on it today, and its pretty much incomprehensible because there is no overall view that I noticed, just page after page of footnoted detail.

Find a better book. Try searching Amazon for Economics and hunt a round seeing what books are liked by others, and why. That's what I'd do. Funny thing. How the heck did I learn all this stuff without ever reading a book on it? Perhaps its because I've suffered with it all these years.

go to this page. there are 2 books by friedman and one by hayek and one by smith. you can get all 4 there, used, delivered for less than $30

http://www.amazon.com/gp/product/0226264211/ref=pd_cp_b_title/002-1040985-6783244

To the guy looking at TIPS. Who do you think will be calculating the interest rate? Its not the figures that lie.

 

[billdick]

Quote from thriftybob:
...To the guy looking at TIPS. Who do you think will be calculating the interest rate? Its not the figures that lie.

I am well aware that the government can "fudge" the inflation correction. I expect they will to the extent that can be at all "justified" with a straight face. - This because the Social Security entitlements are corrected annual for inflation, and I think those payments will be much harder burden on every one not yet retired. (Frankly I think that these entitlements will be reputated above some level, when it becomes an impossible burden on the working stiffs. - But it will not be an easy change as then AARP will be getting everyone (Hell I may even return the "Join Now" they keep sending me. )

That said: Even a fudged correction is better than none - I would not touch a regular bond. In a total dollar collapse, they will serve as toilet paper.