Weak Dollar.....What Is Wrong With It ?

[achilles28]

Quote from gnome:



If the government showed that kind of restraint and didn't run budget deficits, a gold standard would be completely unnecessary... our currency would be backed by the Gummint's authority to tax the citizenry... and that would be enough.

But of course... such restraint would take half of the fun (and most of the thievery) out of being a federal politician... they'd never go for that.

You got it.

There are superior ways to manage money supply. But the commodity-backed standard is the only one that Government cant cheat.

 

[forextrades]

Quote from achilles28:

You got it.

There are superior ways to manage money supply. But the commodity-backed standard is the only one that Government cant cheat.

But what happens when the government prints more money than the commodity backed standard?

It has happened in every society in history at some point.

 

[KeithOmalley]

Quote from achilles28:



Both countries cited in your example are export-dependent economies which mitigate inflation to some extent by selling more to outsiders. America is a net importing nation - largest one on the planet - so the effects of inflation on GDP are not offset by exports. IOW, because America exports far less than it imports, the effect of inflation cutting GDP will be far greater...

I'm probably wrong but cant name any country that is not "export-dependent" outside the USA and EU

 

[Kanzei]

Quote from libertad:

http://www.cnbc.com/id/25486214

There is a case.....a weak dollar may be the only solution to keep US wages from falling to very low levels....

Perhaps one would call it a form of equilibrating to other countries who have been beating the US labor with an axe handle for years...

Perhaps two can place this game....

A country offers low labor costs....ok...the US Dollar equilibrates wages.....

Or is Wilbur Smith.....a US billionaire....going through flawed thinking ? Perhaps a lower dollar is a solution for keeping high US domestic wages possible.....

Perhaps it is best for the middle class to get really domestic....

With free trade globalization there is a supposed benefit of lower priced manufactured goods (untrue, unless you are labor theory of value like Marx and Riccardo). The trade off is a major trade deficit (for the more advanced country) and reduction in real wages because of the shared division of labor.

But with the currency being devalued, you lose any hope of cheaper goods even under socialist labor theory of value; commodities surge in price and everything becomes MORE expensive than it would have been with protected trade (protectionism) or even autarky (no trade).

 

[achilles28]

Quote from forextrades:

But what happens when the government prints more money than the commodity backed standard?

It has happened in every society in history at some point.

Money has to be pegged, by Constitutional Amendment, to some fixed weight per dollar unit.

The systemic problems you've eluded to can only be solved through grassroots Re-education and Restoration of the Country's Founding Principles. Otherwise, we're done.

2012 is shaping up as a big year. North American Integration and AMERO by then....

 

[achilles28]

Quote from KeithOmalley:

I'm probably wrong but cant name any country that is not "export-dependent" outside the USA and EU

Which underscores why a recession led by the Worlds economic Superpowers will prove especially severe.

Devaluation isn't the end of the World when done in moderation. China hasn't crushed the Yuan, but rather kept a steady peg against the Dollar... And predictably, their economy is undergoing massive fundamental strain from that commitment.

Japan is a better example. Pull a USDJPY chart from 1986 onward.

Their dollar devaluation cut the exchange rate in half, created a massive RE bubble, which the BOJ unsuccessfully tried to inflate out of. Sound familiar?

When fiat booms push RE, prices, commodities and wages into ridiculous territory, they must move back to fundamental value before the economy can make another REAL push forward. Otherwise, we'll do 1970's Stagflation.

Most commodities are priced in USD, not YEN or EURO.....