Our leaders are idiots

[bedub1]

The fed is going to buy treasury bonds. it crashed the value of the US dollar compared to the euro. Isn't that like borrowing money from yourself? Or buying your own debt? Or opening a checking account at different banks and writing checks from one to the other and then back again to cover the stuff? Why do they think crashing the dollar is helpful? Are they idiots?

[Snorri1234]

Most of the populace are idiots too.

[MeDeFe]

I'm rather enjoying the whole situation, I wouldn't mind seeing the world burn. Or at least get barbecued.

[Juan_Bottom]

Isn't that like borrowing money from yourself?

You're behind on your information. They've already been doing this without permission for at least a year now. They were calling these "test bonds" or something like that... they were dealing them out secretly to banks, and to the federal government. It's awefully dumb...
But yeah, wait till the global bond market crashes. If it hasn't already....

[b.k. barunt]

At least a year? Guess again. It all started way back when they had all the idiots turn in their gold - their patriotic duty of course. Then in the 60s our currency was no longer backed up by silver either. The Federal Reserve (which is neither federal nor a reserve) can print more money whenever it wants to, which is why inflation keeps going up at alarming rates.

It's not the ones running the government that are idiots, it's the ones who keep perpetrating the myth by voting and paying their taxes like good little droids.


Honibaz

[bedub1]

paying your taxes is like giving an alcoholic a beer

[Frigidus]

paying your taxes is like giving an alcoholic a beer

Or like giving the government money.

[InkL0sed]

Paying for gas is like giving the Taliban drug money.

Wait...

[MeDeFe]

Backing a currency by a limited resource like gold isn't exactly an ideal solution eaither.

[Frigidus]

Backing a currency by a limited resource like gold isn't exactly an ideal solution eaither.

Nuh uh, basing something with pretend value off of something else with pretend value is the safe solution.

[MeDeFe]

Backing a currency by a limited resource like gold isn't exactly an ideal solution eaither.

Nuh uh, basing something with pretend value off of something else with pretend value is the safe solution.

And what happens when there isn't enough gold to cover for the money that's being circulated?

[Juan_Bottom]

At least a year? Guess again. It all started way back when they had all the idiots turn in their gold - their patriotic duty of course. Then in the 60s our currency was no longer backed up by silver either. The Federal Reserve (which is neither federal nor a reserve) can print more money whenever it wants to, which is why inflation keeps going up at alarming rates.

It's not the ones running the government that are idiots, it's the ones who keep perpetrating the myth by voting and paying their taxes like good little droids.


Honibaz

Oh yes, absolutly. I was just talking about this whole "secret bond" issue. The part tied in with the economic crisis.
But on a related note, the IMF and Englans are also going to start printing more money.
http://www.bloomberg.com/apps/news?pid= ... refer=home
http://www.telegraph.co.uk/finance/fina ... asing.html
"Global quantative easing."

[Juan_Bottom]

And on another related note, the UN is saying that the world should ditch the dollar. It's volitile ands unstable. You win Iran.... till the bomb drops.

http://www.reuters.com/article/newsOne/ ... CY20090318

[b.k. barunt]

Backing a currency by a limited resource like gold isn't exactly an ideal solution eaither.

Nuh uh, basing something with pretend value off of something else with pretend value is the safe solution.

And what happens when there isn't enough gold to cover for the money that's being circulated?

Umm, i think that was the point of having gold as a basis - so they wouldn't print more money than what was backing it up. Too simple?


Honibaz

[Snorri1234]

Backing a currency by a limited resource like gold isn't exactly an ideal solution eaither.

Nuh uh, basing something with pretend value off of something else with pretend value is the safe solution.

And what happens when there isn't enough gold to cover for the money that's being circulated?

Umm, i think that was the point of having gold as a basis - so they wouldn't print more money than what was backing it up. Too simple?


Honibaz

The problem with gold-backed currency is that you're backing an infinte thing with someting finite.

[GabonX]

Yes, because infinite currency is exactly what we want

As sad as it is, it seems like the chief economists are with you on that one

[Snorri1234]

Yes, because infinite currency is exactly what we want

Infinite currency is not the problem, it's the infinite productions of us. The number of goods increases exponentially. Either you would regress into very small fractions of money (like 1/100 of a cent) or you can go the other way and back money with the idea that pieces of paper are worth anything.

Money is not and never has been anything with any value, we give them value to make trade easier. Backing it up with a gold-standard is useless since you're assigning worth to something with no worth but a finite amount. Every single person (except for Ron Paul) knows a gold standard is a terrible idea since it does not work.

As sad as it is, it seems like the chief economists are with you on that one

Actually, every single economist is with me on this one since it's one of the first things you learn in economics.

[GabonX]

Yes, because infinite currency is exactly what we want

Infinite currency is not the problem, it's the infinite productions of us. The number of goods increases exponentially. Either you would regress into very small fractions of money (like 1/100 of a cent) or you can go the other way and back money with the idea that pieces of paper are worth anything.

Money is not and never has been anything with any value, we give them value to make trade easier. Backing it up with a gold-standard is useless since you're assigning worth to something with no worth but a finite amount. Every single person (except for Ron Paul) knows a gold standard is a terrible idea since it does not work.

Well a standard of just gold may not be the answer but wealth should be backed up with more than just perception. Gold, silver, copper, labor, industry, all of these things should be used to back up the value of any given currency.

Luckily the United States has the most powerful military in the world and bullets are the most universally accepted form of currency.

As sad as it is, it seems like the chief economists are with you on that one

Actually, every single economist is with me on this one since it's one of the first things you learn in economics.

And they've done a stunning job

In all seriousness I don't ever think I'll take their advice again.

[Juan_Bottom]

Luckily the United States has the most powerful military in the world and bullets are the most universally accepted form of currency.

Every single person (except for Ron Paul) knows a gold standard is a terrible idea since it does not work.

That's DR. Ron Paul to you buddy.

[b.k. barunt]

Yes, because infinite currency is exactly what we want

Infinite currency is not the problem, it's the infinite productions of us. The number of goods increases exponentially. Either you would regress into very small fractions of money (like 1/100 of a cent) or you can go the other way and back money with the idea that pieces of paper are worth anything.

Money is not and never has been anything with any value, we give them value to make trade easier. Backing it up with a gold-standard is useless since you're assigning worth to something with no worth but a finite amount. Every single person (except for Ron Paul) knows a gold standard is a terrible idea since it does not work.

As sad as it is, it seems like the chief economists are with you on that one

Actually, every single economist is with me on this one since it's one of the first things you learn in economics.

I'm not an economist, so i can't respond to your abstract reasoning, but maybe that's the problem. You guys (and the economists have complicated a simple issue. You have 2 billion in gold - print 2 billion worth of currency. As long as you do you have a finite amount - i don't know what this infinite shit is, but it's unacceptable as it results in ever escalating inflation.
Keep the currency to match the gold backing it up and you have a finite amount - why won't that work? I don't spend more than i have so it works for me. And no, i don't use credit cards.



Honibaz

[Fruitcake]

Yes, because infinite currency is exactly what we want

Infinite currency is not the problem, it's the infinite productions of us. The number of goods increases exponentially. Either you would regress into very small fractions of money (like 1/100 of a cent) or you can go the other way and back money with the idea that pieces of paper are worth anything.

Money is not and never has been anything with any value, we give them value to make trade easier. Backing it up with a gold-standard is useless since you're assigning worth to something with no worth but a finite amount. Every single person (except for Ron Paul) knows a gold standard is a terrible idea since it does not work.

As sad as it is, it seems like the chief economists are with you on that one

Actually, every single economist is with me on this one since it's one of the first things you learn in economics.

I'm not an economist, so i can't respond to your abstract reasoning, but maybe that's the problem. You guys (and the economists have complicated a simple issue. You have 2 billion in gold - print 2 billion worth of currency. As long as you do you have a finite amount - i don't know what this infinite shit is, but it's unacceptable as it results in ever escalating inflation.
Keep the currency to match the gold backing it up and you have a finite amount - why won't that work? I don't spend more than i have so it works for me. And no, i don't use credit cards.

Honibaz

Guys...the so called 'Gold standard' was left behind years ago. As for backing a finite amount of moolah with a stack of bars in Fort Knox, The Fed reserve or anywhere else, it was never going to work once global asset values started to rise inexorably during the 20th Century.

Taken simply, and I mean simply but it does give a basic insight into the root of it all, look at this example: A builder buys a piece of land for £1,000,000 using his moolah. Next up he borrows 5,000,000 to develop said land. Bank gets this dosh via a bond with Bank of England who effectively 'print' the cash. Now for a while here, there is 5,000,000 more in circulation than there is asset values. However, on completion this asset (land once worth 1,000,000) is now worth 10,000,000 as a developed area. People arrive and start buying properties. How do they do this....they go and get a loan (you can see where I am going with this by now I hope). They put there own cash in to the value of 2,500,000 and borrow 7,500,000. Where from? Banks etc. These august institutions borrow from the wholesale market (which originates from central banks) meanwhile the developer pays off his 5,000,000. In the end we now have an asset worth 10,000,000 with loans against it worth 7,500,000 all fine and dandy.

Now extrapolate this (simplistic but easy to understand) across the whole damned spectrum. Now imagine a time when enough borrowings against these asset values started to default because the effortlessness with which those loans were available became so easy everyone was rushing to buy said assets. At this point the basic rule that every child/pupil learns about economics kicks in. That is the law of supply and demand. All of a sudden demand vanishes overnight because the loans which underscored those very assets are suddenly unavailable.

The circle is now complete. loans not repaid-Loans unavailable-assets not sold--assets diminsh in value....at some point this downward motion hits a point where assets are viable as an investement because their price is not overstretching the income of those who need to borrow. This floor has yet to be reached. All the Govts the world over are trying to do is ensure this is as soft a landing as possible. (I use the word soft advisedly, this would be a lot harder if they did not do what they are doing. Soon enough (a year, perhaps 2) these assets will arrive at touchdown point and then the wheel will start again. However, as with all things we will have learnt a huge amount. The spin off effects are that for the next 25-50 years there will be a tax burden, this will dissapear from peoples consciousness over the years, but it will be there. (But that's another story and I need to go out)

[dewey316]

That is the whole issue fruitcake. The value of the dollar, has no real value, beyond what you are able to purchase with it. With electronic money, and the ability to print cash money, you end up with issues like this. What we are seeing now is mearly a process of the artificial values of certain assets being reset to be more inline with their real value, and the dollar is being revalued against other currency. What you explained is a pretty good example of some of what happened. The issue comes down to the fact, that the property that people bought wasn't worth what they paid for it. The tragidy of it is, that they are now finding out what the real value of the assets they purchased are, and it is in most cases significantly less that what they paid, and now they owe morgages that are in many cases way beyond the value of their purchase. They won't be able to sell that property for many years, and the whole system slows down.

No matter what the government does, this is going to happen, we can't keep riding the wave of borrowing and borrowing, and fixing prices of assets at an artificialy high price. Eventualy the whole system blanaces itself, and we are seeing the scale tilt the other direction now, to rebalance asset values to match back up with income and inflation.

What scares me the most now, is that governments are doing what the private sector did, and got us here. They are borrowing money they can't pay back, they are trying to manipulate asset values, and keep the status que of the bubble going. I fear that we saw happen to millions of family's in the US, is going to catch back up to the governments that are involved in both the lending and borrowing of the bogus assets. If (or when) that happens, things will get bad, very fast.

[Fruitcake]

No matter what the government does, this is going to happen, we can't keep riding the wave of borrowing and borrowing, and fixing prices of assets at an artificialy high price. Eventualy the whole system blanaces itself, and we are seeing the scale tilt the other direction now, to rebalance asset values to match back up with income and inflation.

You are correct. Govts. Throughout the capitalist system have tried to stem tides only to find to their horror that they are pretty meaningless in the face of the natural laws of the market. We experienced it last during the 1990s when the Conservative (in power) Govt upped interest rates momentarily to a staggering 15% in defence of the Pound. naturally this puny defence buckled within hours as the markets made mincemeat of the whole idea and the pound crashed out of the, then, EMU (European Monetary Union)...history has shown that this huge correction in the value proved to be highly beneficial....further evidence if it was needed of the crass stupidity of most politicians who got it completely arse about face in their predictions.

Once asset values are in line with real wealth (incomes) then things will settle. Unfortunately many will be shredded during this painful process.

What scares me the most now, is that governments are doing what the private sector did, and got us here. They are borrowing money they can't pay back, they are trying to manipulate asset values, and keep the status que of the bubble going. I fear that we saw happen to millions of family's in the US, is going to catch back up to the governments that are involved in both the lending and borrowing of the bogus assets. If (or when) that happens, things will get bad, very fast.

The Governments have to borrow, simple as that. If they did not do so and let market forces resolve the issue completely, the natural law of nature would take place with the weakest literally not surviving the implosion. However, you are correct to concern yourself. Here are some interesting facts:

1) Since the interest rates have been reduced to 0.5% in the UK savers have simply taken their assets (cash) out of savings accounts across the financial world and placed them in....where else! Government Savings schemes paying 3-4%. Now the historical financial base model is that the savers provide the resources to lend to the borrowers in a financial Inst. This is rapidly disappearing due to these interest rate cuts. So the Banks etc then need to go to the Govt to get the cash to lend. The Govt takes those savings from National savings and uses it to lend to the Banks. QED the Government now has control of the situation because the Banking system is reliant on them now for funding.

2) The Govts are making a fundamental error of judgement. The Bond markets are pretty crazy right now with the PIGs (Portugal, Italy, and Greece) Bonds being issued at some 250 points (2.5% interest rate) above the German Bunds. This means they have to borrow at around 5% min. The UK Bond market is rupturing as the spread increases from around 20 base points to 40 odd and increasing weekly. The PIGs (with Ireland, Spain and a few others not far behind) are not even able to issue anything beyond a few months such is the lack of confidence in them as sovereign state backed cash. So we are left with just Germany, USA and maybe Japan able to issue Bonds to raise funds to lend to the markets at anything like a real interest rate or to subsidise their spending programs. Meanwhile in the EU the clamour for the German Bunds to subsidise the rest of the Euro market is increasing daily, but the German Politicians (rightly inmo) are trying to avoid this as it basically means the German people will end up subsidising the whole of the EU zone!

3) Look at a simple fact. I will use the UK as an example. The latest figures I have possession of are that The Govt borrowing requirement will top £800 odd billion by the end of this year. I forecast this may well top £1 trillion by the end of 2010. OK so what...well the interest on that will now be some £30 billion as of now, with more bonds adding at a higher rate of interest. Now remember this is £30,000,000,000 interest a year (a UK billion being one thousand million). The expected income from tax receipts has collapsed from an expected 45 billion to an estimated 38 billion. It does not take a rocket scientist to work out that the figures don't stack up. Take off the forecasted 30 billion interest payment and you are left with a measly sum of 8 billion in the kitty compared to a forecast 40 billion requirement just to keep the country on its feet. QED the borrowing gets higher again. This can be extrapolated across most of the developed world in varying degrees (I won’t go into the US but point you to my thread last year on this page: viewtopic.php?f=8&t=46703&hilit=mammon )
In essence 53 trillion of US Govt debt becomes due and payable in 3 years now (I wrote the original article a year back) There is nil in the pot for this.

People keep trying to talk us out of this problem.....I have bad news....things are going to get worse still before the light dawns.

I made a forecast of a 30% correction in global asset prices early last year, I have now upped that to 50% (yes that means assets will settle at just half what they were worth)

(meanwhile I'm off to watch the Rugby!)

[MeDeFe]

Yes, because infinite currency is exactly what we want

Infinite currency is not the problem, it's the infinite productions of us. The number of goods increases exponentially. Either you would regress into very small fractions of money (like 1/100 of a cent) or you can go the other way and back money with the idea that pieces of paper are worth anything.

Money is not and never has been anything with any value, we give them value to make trade easier. Backing it up with a gold-standard is useless since you're assigning worth to something with no worth but a finite amount. Every single person (except for Ron Paul) knows a gold standard is a terrible idea since it does not work.

Well a standard of just gold may not be the answer but wealth should be backed up with more than just perception. Gold, silver, copper, labor, industry, all of these things should be used to back up the value of any given currency.

I put two of the things you mentioned in bold, that's (at least part of) what currencies got based on after the gold standard was abandoned. The system adopted after WW2 was based on the assumption that the USA could stay ahead economically indefinitely, the US dollar would be backed by gold and most other currencies were set at a fixed rate to the dollar. When other economies grew strong in relation to the USA, people started to wonder why they had to pay 3 times as much for an American hamburger (just as an example) as for one purchased in their own country.
The system couldn't work, the US had to keep buying gold to back their currency and keep it strong, for this they needed money, to get this money they had to sell gold. Maybe Keynes was right and money really should lose its value over time...

Oh, well, but the future may well be one without physical money, there are a few projects out there that work on developing completely decentralized currencies.

[dewey316]

I think we agree on a lot of the stuff there...so I'm not going to comment on the first part.

What scares me the most now, is that governments are doing what the private sector did, and got us here. They are borrowing money they can't pay back, they are trying to manipulate asset values, and keep the status que of the bubble going. I fear that we saw happen to millions of family's in the US, is going to catch back up to the governments that are involved in both the lending and borrowing of the bogus assets. If (or when) that happens, things will get bad, very fast.

The Governments have to borrow, simple as that. If they did not do so and let market forces resolve the issue completely, the natural law of nature would take place with the weakest literally not surviving the implosion. However, you are correct to concern yourself. Here are some interesting facts:

Why does the Government have to borrow? I know that there is presidence for not wanting a government to have a surplus budget, but there is no reason that our debt is approching the level of our GDP (speaking for those of us in the States). This is an asinine level of debt. In the last 50 years, the US went from the largest creditor nation (you would expect this, from an economic super-power), to being the largest debtor nation. Plain and simple we went on a speculative spending spree (speculating that our economy would continue to grow at a rate that we could somehow manage the debt), the magnatude the world has not seen before. The simple truth is, the debt our government racked up in the last 50 years (dems, and pubs combined) will take generations worth of taxation to pay back. I do not see how the idea of spending more money, can do anything for the situation. The only options either a)hyper-inflate the dallor to make the debt worthless to the creditors, which will also trash our ability to do business anywhere in the world, and plunge us into a depression ala Zimbabwe. or b) we cut back governement spending, we come up with a balance budget, and start actualy paying back some of our debt, and hope that the next generation doesn't make our same mistakes.