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[–]evilnight 5ポイント6ポイント  (4子コメント)

So I have to ask - is there some reason that the fed can't just delete the money as easily as they created it?

[–]roconnor 4ポイント5ポイント * (3子コメント)

There is no reason. Most of that money has been created by a series of fixed-term loans (terms on the order of 6 months). In fact, the money will automatically start being deleted when the FED stops renewing these term loans.

[–]evilnight 2ポイント3ポイント  (2子コメント)

Ok, so... presuming they follow through with that, doesn't that put our hyperinflation/collapse risk right back to where it was (more or less) before they started?

[–]RonPaul2112 2ポイント3ポイント  (1子コメント)

yes.

[–][deleted] -1ポイント0ポイント * (0子コメント)

No.

Because there will have been more malinvestment created on the basis of the current 0.25% interest.

[–]Atomics 6ポイント7ポイント  (6子コメント)

You also have the dollars held in reserves by other countries. If the dollars currently held in reserve at the Fed start moving, those foreign reserves will start moving as well. So a worst case scenario would be pure slaughter for the US economy.

But I do like how the Keynesians and statists like to play games with the well-being of the people. And that is all this is. A huge gamble on whether or not the economy recovers. If it does, woohoo. If not, learn to beg effectively.

[–]_red 4ポイント5ポイント  (5子コメント)

You also have the dollars held in reserves by other countries. If the dollars currently held in reserve at the Fed start moving, those foreign reserves will start moving as well.

This is exactly what most Keynesian believers either fail to understand or intentionally ignore; We have effectively been exporting our inflation due to the dollar reserve status.

Not only are the demand for dollars artificial (due to most commodities being priced in them), but there are lots of economies that are dollar based. (Panama, El Salvador, Liberia, etc).

Once all those dollars start coming home we will see the full ramifications of our printing-press crazy Fed.

Oh look...the Dow is back up to 9000 (even though revenues are down across the board and unemployment is still rising). Looks like some of those chickens are coming home already.

[–]api 2ポイント3ポイント  (3子コメント)

The dollar's reserve status is what has allowed Keynsian policies to "work." They "work" because we levy an imperial tax on the world by exporting our inflation.

If we had to go it alone, they would not even seem to work. They would create stagflationary depression.

[–]49rows 0ポイント1ポイント  (2子コメント)

So... Keynesian policies would not appear to work for countries whose currencies are not used as foreign reserves? Better tell them.

[–]api 0ポイント1ポイント * (0子コメント)

It's a matter of degree. I don't think Keynesian policies work, but it doesn't do too much damage if you do them a little bit. If you look at the rest of the world, most of them do them "a little bit" compared with our insane debt leverage rampage. For example, compare Canada's stimulus to ours. It's like comparing an extra glass of wine to a fraternity binge drinking contest.

[–][deleted] -1ポイント0ポイント  (0子コメント)

I've come to the conclusion that printing money is ok, providing you only print up to what value you actually produce in the economy.

A gold standard sort of enforces this, but imbalances in trade ruin countries that run deficits (hint: Nixon in 1971).

We monetized a bunch of treasuries this last week. Look at the Bid-to-cover of 1.2 on Tuesday. The primary dealers ate 80% and offloaded to the Fed. WE ARE PRINTING LIKE ZIMBABWE. NOT SOON. NOW.

[–][deleted] 0ポイント1ポイント  (0子コメント)

In the case of the Gulf states. Our inflation is causing them extreme discomfort.

[–]PuP5 1ポイント2ポイント  (3子コメント)

two things i don't understand.

first, from where do all the reserves come? if it's indeed all the fed spending, couldn't they just call in those loans once the economy heats up? yes, the banks are using those reserves now to make money, but at some point wouldn't they be healthy enough to pull those funds back? imo, we should be breaking up those titans now so we don't have a repeat (i.e. we can't call in the loans because the same systemic fear persists).

second, isn't everyone assuming that foreign countries will start dumping dollars? why would that be in their best interests? why couldn't each country just open a counter for domestic dollar demands? they'd then fulfill these exchanges as they are needed (i.e. as domestic companies desire to transact in dollars)... that way there's no extreme oversupply as every country dumps.

it just seems that everyone is fearing an intentional dump, but the only reason people would do this is if they intend to crash our currency... but anything close to that will have boomerang reverberations.

[–]monximus 0ポイント1ポイント  (2子コメント)

the only reason people would do this is if they intend to crash our currency... but anything close to that will have boomerang reverberations.

It'll simultaneously crash every major world fiat currency. That's the lesson of LTCM. And the social breakdown repercussions would be far more severe in foreign nations than in the US. It would be like Exxon Mobil reporting a collapse in profits; it will effect the prices for other oil companies, or in this case, other fiat currency producing governments.

[–][deleted] 0ポイント1ポイント  (1子コメント)

Exxon did just report a collapse in profits. And nothing much happened.

Unless you discount this morning when the dollar dropped, oil dropped, gold gapped and bonds went all crazy for a bit.

Don't worry, nothing to see here.

[–]monximus 0ポイント1ポイント  (0子コメント)

XOM is off 25% from it's high price. Who's predicting that the business of producing and delivering oil to market is going to suddenly not be subjectively valued?

[–][deleted] 0ポイント1ポイント  (17子コメント)

Why is the dollar not going to collapse:

Most safe currency (ie euro and Yen) that could replace the dollar are in worst shape that the dollar is. Canadian and Australian dollar just don't have supply for the world to use.

[–]sfultong 2ポイント3ポイント  (13子コメント)

I really think that we're headed for a post-currency world economy.

There's no particular reason why trade should be standardized on a particular currency, except its convenient for people in evaluating the relative worth of particular goods. We could easily price everything by a basket of commodities and allow people to pay for goods by whatever investments are convenient.

We have the technology for this. Much of the complexity of trade can be handled through computers so that the average person doesn't have to think about this. There's no reason that this system can't be as easy as paying by credit card is now.

[–]sh33ple 0ポイント1ポイント  (11子コメント)

The values of commodities are extremely volatile, based as they are on fluctuations in global demand. While national currencies fluctuate versus other currencies they are relatively stable within their own nation. Personally I don't fancy having to gamble on whether platinum will outperform corn over the next few weeks when deciding what form I want my paycheck to come in.

[–]sfultong 2ポイント3ポイント  (10子コメント)

Well, that's why I said basket of commodities. If your basket is diverse enough, volatility shouldn't be much of an issue.

You wouldn't have to choose what form your paycheck came in, either. Whatever form it came in could be automatically exchanged for your preferred investment.

[–]Ra__ 2ポイント3ポイント  (9子コメント)

China is establishing direct currency swaps with numerous countries, which effectively eliminates the need for any reserve currency. So far Macau, Hong Kong, Argentina, Brazil, Singapore, Malaysia and South Korea have begun bypassing the dollar.

It's an end run.

[–]neuromonkey 1ポイント2ポイント  (8子コメント)

Yeah. I think a lot of people have been waiting for the US to start showing signs of faltering so they could get away from the dollar. Various countries have been threatening to trade oil in other currencies for years. We fell apart. The smart investor pounces on the opportunity.

[–]Ra__ 3ポイント4ポイント  (7子コメント)

We invaded Iraq 6 months after Saddam began trading in currencies other than the dollar. That was the real reason for the war. Iran has now opened their own oil bourse and are beginning to do the same. We would have already invaded them if they didn't have such strong support from Russia. Our next victim will be much more conveniently placed... Venezuela.

[–]neuromonkey 1ポイント2ポイント  (6子コメント)

Man. I can't figure out how we're going to sell the idea of invading fucking Venezuela.

I've got to go get back to work on my bathtub cold fusion reactor...

[–]Ra__ 3ポイント4ポイント * (5子コメント)

This is why we have begun demonizing them in preparation and acting as if they are abusing the severely corrupt Colombians.

Once the dollar collapses and we can't afford to buy oil from anyone, we'll simply take it from nearby Venezuela, in the name of National Security. China and Russia will make a little noise and will be appeased by a secret deal allowing them to takeover Taiwan and the Ukraine.

[–]neuromonkey 0ポイント1ポイント  (4子コメント)

begun demonizing them

Huh. I hadn't realized we'd started with that.

[–]RonPaul2112 0ポイント1ポイント  (0子コメント)

There's no particular reason why trade should be standardized on a particular currency, except its convenient for people in evaluating the relative worth of particular goods.

seems like a good enough reason to me.

[–]mliving 2ポイント3ポイント  (1子コメント)

WTF are you smoking!

The ONLY reason the US has such a GIGANTIC supply of greenbacks is because your government is printing as fast as they can.

[–][deleted] 0ポイント1ポイント  (0子コメント)

Obviously you're not an economics major or didn't quite understand supply and demand concept. I am guessing you are not much of an investor either.

the (chinese) demand is still there (and will be there) even with the over supply. The demand is there because other foreign currency/economies are in worst shape then the US. (perhaps, on the surface, except china, but I think it is a sand castle economy)

Even with the chinese whining about it, they admitted that the US dollar is they only safe place for their investments. Chinese cannot sink the value of the US dollar because they would be sinking the value of their (massive)investment. Because they did not diversify their investment, they are now stuck supporting the dollar because it is such a huge part of their portfolio.

Same rational applies with oil producing countries.

The US dollar may fluctuate up and down on the market, but there will (at least for next few years) be a foreign buyer to keep it from crashing to protect their investment.

Proof of that was last week when the US issued more treasuries and the interest rate didn't fluctuate much.

[–][deleted] 0ポイント1ポイント  (0子コメント)

Simple solution is to price commodities in producer country currency.

Note: We invaded Iraq to stop exactly this practice.