Dollar Collapse

[MorkandMindy]

There is a lot on the Internet about this, including the alarmist statement that the dollar will collapse on October 1st.

Rand Paul or Ron Paul said something like the dollar will collapse on May 28 2016 which did not happen.

After watching a number of discussions with the treasury secretary and others I had to conclude that Ron Paul would have failed his very first economics exam, basically he doesn't even understand what money actually is.

But despite that shortcoming he does know that if you keep spending it you will run out and people will stop lending it to you.

He hasn't got the time frame right, nor the complete set of options that exist or all possible scenarios, but he is right that change is on the way and fairly soon too.

Donald Trump said much the same thing about the 'bubble', and though he is not the sharpest chisel in the set, he does know some people who are good enough to see what is happening.

 

[MorkandMindy]

I'd like to mention that there are two possible futures from this point, so we know how stupid the route we appear likely to take actually is.


We have the technology and the understanding of human nature and needs to all have fulfilling interesting productive lives, each productive in the way we find the most fulfilling. Automation has advanced to the point where we should be able to work one year and then opt to take the next to learn to read the N.T. in the original Greek, for example.

Yet up against this fantastic opportunity, we also have the rich and powerful taking a huge share of wealth and power and wanting ever more, to the point of producing misery and war. Demented and unimaginative they are, but they are a reality we will have to deal with somehow to get to where we want to be.

 

[MorkandMindy]

People usually like to hear the bad news first, so here it is:

There have been a lot of sensational predictions about the collapse of the US dollar and World War 3, and yes there is may be a connection.

The favourite version going around is that China is now almost as powerful as Russia and is the workshop of the World, pretty much, so to continue to feed our own consumerism, the US destroys Russia after producing some response from Russia to justify it, and then sells the oil and other assets of Russia to China thereby fixing our trade deficit. Putin is trying to kick up a fuss about this which you can find on youtube.

I find the WW3 hypothesis repugnant and believe we would be happier producing our own goods and leaving the rest of the World alone but there is an infrastructure for causing trouble that needs to be fed so they will most likely take their own prefered action.

A million of us sitting in the Lotus position meditating or on knees praying can not stop a minority from pushing the button. Ten thousand days not pushing the button are outweighed by the one day when it is pushed. We are powerless. Maybe Bernie can do something (the Super Bernie hypothesis).

But this is a pretty extreme possibility, I'm not sure that now that the plan is out in the open that WW3 is all that viable an option. They only got away with WW2 because the public had no idea what was going on, and same with WW1.

As you may have noticed there is a variant rumour going on that we start WW3 a lot sooner, in October.

Anyway that's the baddest possible immediate future.

 

[iluvatar5150]

There is a lot on the Internet about this, including the alarmist statement that the dollar will collapse on October 1st.

Rand Paul or Ron Paul said something like the dollar will collapse on May 28 2016 which did not happen.

After watching a number of discussions with the treasury secretary and others I had to conclude that Ron Paul would have failed his very first economics exam, basically he doesn't even understand what money actually is.

But despite that shortcoming he does know that if you keep spending it you will run out and people will stop lending it to you.

He hasn't got the time frame right, nor the complete set of options that exist or all possible scenarios, but he is right that change is on the way and fairly soon too.

Donald Trump said much the same thing about the 'bubble', and though he is not the sharpest chisel in the set, he does know some people who are good enough to see what is happening.

I gotta say - when I saw a thread titled "Dollar Collapse", I didn't expect to agree with the very first claim, i.e. that Ron Paul doesn't know wth he's talking about.

Technically speaking, if you're a nation with a fiat currency, money can't really run out - since you can keep printing more, so to speak. But that can cause its own problems, so let's say for the sake of argument that the money can truly run out. And yes, people will stop lending to you at some point. But those aren't really immediate things where on Monday, everything is fine and on Tuesday, everything is shut off. There would be warning (and likely plenty of it) that the US is 1.) printing too much money and 2.) starting to worry investors. Whether or not we've printed too much money is indicated by inflation, which is still pretty low. Whether or not our creditors think we're a risk is indicated by the interest rates we pay, which are also really low.

So, IOW - we're fine. It's good to be mindful of things, but there's no imminent threat.

 

[MorkandMindy]

The present value of a currency depends on what it can be changed into now and in the immediate future. The immediate future depends on it's own immediate future, so although it might seem the total future is taken into account, it is heavily discounted so nothing beyond a few years is going to make much difference.

I don't think of the US dollar at present as being a 'fiat currency'. A person or country with a surplus of US dollars can trade them for another currency or for commodities. If the surplus is so huge it might drive down the dollar or attract unwanted attention then it can be used to buy US property of some sort. Allegedly the rich and powerful in the US now own the National Parks and of course any oil or other resources in them, the Bush family a lot of Texas and so on.

The idea that it is OK to transfer the wealth of everyone to the top 0.1% which seems popular in the US, is a fallacy because the top 0.1% are internationalists having homes in several or many countries and have no allegiance to any of them, just to an extent to each other. In every war the rich and powerful sit back while everyone else kills each other, and make money at every opportunity.

 

[MorkandMindy]

...So, IOW - we're fine. It's good to be mindful of things, but there's no imminent threat.

The first problem is the US is losing it's empire, lets call them 'trading partners' or 'allies', and there will be defaults on loans made to dictators we got installed in those countries, leaders we like rather than leaders they like: 'populist leaders'.

The US stands to lose a lot in the loans taken out for dubious reasons. And the US has been 'throwing good money after bad' bombing countries that are no longer cooperating. Too many are doing things we don't like it to keep up, we couldn't invade Venezuela because we already had invasions running in Afghanistan and Iraq.

One problem is of course they know that and with lots pulling out of special trading relationships with big US companies at the same time it won't be possible to stop them. And part of the reason for leaving is that if they do need financial help they can get a better deal from China.

Bad news could snowball into the US Dollar progressively losing it's position as the main reserve currency, and redeeming dollars in circulation abroad will lead to an oversupply of dollars and consequently a further drop in value, this is the feedback mechanism people are afraid of.

The US dollar has been losing value at a fairly steady rate for a long time due to the cost of wars and economic decline, basically the country is has a military orientation. This is partly understandable because the US made money out of WW1 and a ton of money from WW2, but the wars themselves have been losing money ever since, and the threat of war which has made some money is now also running in the red.

Basically the US has to move out of the 1960s and into the present.

 

[aieyiamfu]

There is a lot on the Internet about this, including the alarmist statement that the dollar will collapse on October 1st.

Rand Paul or Ron Paul said something like the dollar will collapse on May 28 2016 which did not happen.

After watching a number of discussions with the treasury secretary and others I had to conclude that Ron Paul would have failed his very first economics exam, basically he doesn't even understand what money actually is.

But despite that shortcoming he does know that if you keep spending it you will run out and people will stop lending it to you.

He hasn't got the time frame right, nor the complete set of options that exist or all possible scenarios, but he is right that change is on the way and fairly soon too.

Donald Trump said much the same thing about the 'bubble', and though he is not the sharpest chisel in the set, he does know some people who are good enough to see what is happening.

I disagree that Ron Paul does not understand economics, although his predictions fail.his basic premise is solid. Ron wants us to get away from fractional reserve banking.which essentially allows banks to create currency with very little backing. The Fed controls this currency creation with interest rate controls, for example when there is too much money they raise interest rates, too little lower them. The problem we run into beyond our currency having no backing other than the confidence of those using it is that when interest rates go up it stagnates the economy because there is less money because less people borrow. The whole system is leveraged by those at the top for their own gain and those of us who are the majority have little control over the havoc this can cause.

That being said our dollar should have failed long ago but foxing oil producing nations to trade in the dollar has allowed us to offshore our inflation for a very long time, it is unlikely this will last forever but you can bet our leaders will start a war to avoid the end of that little shell game, that may be your ww3. I would no be so pompass as to set dates but I do not think we are a long way off from it all coming to a head.

 

[MorkandMindy]

I disagree that Ron Paul does not understand economics, although his predictions fail.his basic premise is solid.

Yes I think we are in agreement, he does understand the most important fundamentals such as that if you keep spending it you are going to run out, or if you keep printing eventually people will either use it to buy everything you have, and after it's all been sold they will stop accepting the dollar and it will only be useable inside the nation and with any other countries willing to accept it.

Again with his question to Ben Bernanke 'is gold money?' it is an elementary fail, as everyone knows corrie shells are real money. My best answer is that money should be equivalent to a particular basket of commodities, the reason being that if the economy grows a lot faster than the gold supply then the gold used as currency will be a rapidly deflationary currency and the economy will consist of lots of people sitting on gold waiting for it to continue to rise.

But paper money if backed by nothing in particular is likely to be inflated by the host country as a kind of tax on people using it.

From here we go two ways

Short term transactions - the US dollar is great for those because although the currencies of many countries may suddenly collapse such as if the US invades or threatens to invade the host country, or bribes and threatens the President so he sells the nationally owned companies and assets for a fraction of their value as has happened in a number of countries, the US Dollar may lose a certain percent per year but won't suddenly lose a lot while you are in the middle of a transaction. The yearly loss isn't much over the time a market trade takes and you can think of as just a tiny fee for using it.

Over the long term it erodes the money of small savers.

And as it impacts the economy, well you said it a lot better:

That being said our dollar should have failed long ago but foxing oil producing nations to trade in the dollar has allowed us to offshore our inflation for a very long time, it is unlikely this will last forever but you can bet our leaders will start a war to avoid the end of that little shell game, that may be your ww3. I would no be so pompass as to set dates but I do not think we are a long way off from it all coming to a head.

 

[MorkandMindy]

Well I raised the issue with someone else and he said he didn't think WW3 was going to happen,

but agreed with the basics of this discussion that if the US doesn't stop wasting a fortune on stupid wars and military projects and change to a less military footing and start leaving other countries alone, then we will gradually sink into the mire of falling incomes, while the rich by diverting money into their own pockets make off with pretty much everything and leave the sinking ship.

We are losing as much money to 'our own' rich as to Germany and China. I know if we don't kill Iraqi children they will 'take our freedoms' but if they do then they will have too much freedom and I guess they will sell some back at a knock-down price because they don't really want that much. At a more immediate level, obviously anything we type here is stored and could be used against us, so be careful what you write. Not that we are worried the Chinese or Iranians will get it but our own government. That's the freedom our servicemen fought to preserve for us.

The excuses given for starting wars don't usually stand up to much debate.

 

[variant]

The dollar will not collapse on October 1.

There are many currencies in this world with a lot less going for them than the dollar and they are not collapsing as we speak.

The dollar has actually been more conservative than the EURO or Yen for instance in central banking policy, so, you would expect those currencies to collapse BEFORE the dollar, if your argument were rational.

Your argument is not rational.

 

[MorkandMindy]

I did not agree with the October 1st statement pointed out an elementary misunderstanding of economics Ron Paul appears to be pursuing.

I also think the US has taken more than one role in the World economy.

Immediately after WW2 it would be beneficial for trade to have a World reserve currency. One way to do that would be to print lots of dollars and import a lot from other countries, as was done. A restricted money supply would not have provided a World reserve currency. And no, I'm not of the 'gold is money' camp. If the assets of a country or planet grows rapidly and the gold supply does not then the currency will deflate and that is not helpful.

But the opposite error is also made when a country can simply print more money. I would like to see the currency tied to a whole basket of commodities to both limit inflation and prevent restricted quantity of gold from restricting liquidity. If the nation's money was restricted to just gold then I would guess people would add another form of money to get around the limit so I would think it better to have a more flexible money supply denominated according to a basket of commodities.

The size of the money supply? Well this is where I think Ron Paul has another problem. While it is true the currency has inflated in past there seems to be pretty good control of the money supply right now.

So just as the risk of the faith in the dollar leading to many dollars coming home and needing to be redeemed, and the potential for some kind of snowball there (I learned that one from the movie Mary Poppins) there is an equal and opposite situation where the dollar supply is closely regulated and continues to have a low rate of inflation, or zero, and this has an equal and opposite self reinforcing effect as the dollar remains the World Reserve currency as is happening at present.

 

[joshua 1 9]

Rand Paul or Ron Paul said something like the dollar will collapse on May 28 2016 which did not happen.

You don't really notice. The prices get higher and it cost more to live. Your paycheck does not go as far, but the change is slow and gradual. When you run out of money to borrow then they have to inflate the money. We were paying 10.5 cents for Electric. Now we are paying 11 cents. Half a penny does not seem like much but over time it can add up to quite a bit. I changed over to LED bulbs so the higher rate does not really effect me that much. Which is what they recommended.

 

[MorkandMindy]

Owing to the total failure of my previous thread which I thought was on a fundamental and amazingly important topic, I took the observation that people are motivated by fear and money and titled this one 'Dollar Collapse'

and proceeded to run through the scare tactics being used and why I don't believe it is a problem at present, but mention some things that would improve the domestic economy which is actually a separate issue and is actually a problem.

The currency can be kept stable while a tiny minority run off with all the wealth which seems to be what the public want.

 

[MorkandMindy]

You don't really notice. The prices get higher and it cost more to live. Your paycheck does not go as far, but the change is slow and gradual. When you run out of money to borrow then they have to inflate the money. We were paying 10.5 cents for Natural Gas. Now we are paying 11 cents. Half a penny does not seem like much but over the winter it can add up to quite a bit.

True, I oversimplified a bit by stating that inflation is low or zero, it really depends on which commodity you are looking at, but food price inflation would be a problem to people way down at the bottom of the economy like myself. I'm not aware though that the inflation rate is enough to badly impact the use of the US dollar as a reserve currency and compared with other currencies the USD is pretty good. It certainly isn't about to go 'bang'.

Inflating a World Reserve currency is a form of tax, in that money is then made by coinage increasing the money supply, and if the money supply increases beyond the requirements then it will lose value, that is to say prices will inflate.

But a key fact is the value of the dollar as a reserve currency is not the same as the health of the domestic economy, but is related only to the ability to support the reserve currency, such as by redeeming dollars by selling assets. A US with none of it's 150 trillion in assets sold could keep the value of the dollar stable and so could a US with say 70% of them sold. True, once the country is about to run out of assets then things change, but for most of the time while running a deficit the currency can stay uninflated.

Currency and economy are not linked in a proportional way.


But I do agree that the inflation that has been going on is affecting the small savers and people on a fixed or almost fixed income, and it is small and not all that noticeable but it affects those of us at the bottom of the economy more than anyone else, basically, spot on Joshua.

 

[joshua 1 9]

True, I oversimplified a bit by stating that inflation is low or zero, it really depends on which commodity you are looking at, but food price inflation would be a problem to people way down at the bottom of the economy like myself. I'm not aware though that the inflation rate is enough to badly impact the use of the US dollar as a reserve currency and compared with other currencies the USD is pretty good. It certainly isn't about to go 'bang'.

Inflating a World Reserve currency is a form of tax, in that money is then made by coinage increasing the money supply, and if the money supply increases beyond the requirements then it will lose value, that is to say prices will inflate.

But a key fact is the value of the dollar as a reserve currency is not the same as the health of the domestic economy, but is related only to the ability to support the reserve currency, such as by redeeming dollars by selling assets. A US with none of it's 150 trillion in assets sold could keep the value of the dollar stable and so could a US with say 70% of them sold. True, once the country is about to run out of assets then things change, but for most of the time while running a deficit the currency can stay uninflated.

Currency and economy are not linked in a proportional way.


But I do agree that the inflation that has been going on is affecting the small savers and people on a fixed or almost fixed income, and it is small and not all that noticeable but it affects those of us at the bottom of the economy more than anyone else, basically, spot on Joshua.

It all has to do with GNP. If people do not get up and go out and produce then your economy well be weak and you can have no economic growth. Even the welfare people that want to plunder the produce of others will have nothing to plunder if someone does not go out and produce a product or provide a service.

Democrats claim they will steal from the rich and give to the poor. But far to often they steal from the poor in order to give to the rich. Obama has been more guilty of this more then others. Esp with his energy credits he gives money to rich people to buy their car yet there are over a million poor people that can not afford to buy any sort of a junk car. The poor are the ones needing the help and he was blowing up their engine and destroying their car and driving up the prices for worthless junk transportation.

 

[Inkfingers]

All currencies collapse eventually; people just have to keep predicting it often enough and eventually one prediction will be right.

That said, at the moment the global economy is none too stable for a variety of reasons.

 

[MorkandMindy]

It all has to do with GNP. If people do not get up and go out and produce then your economy well be weak and you can have no economic growth. Even the welfare people that want to plunder the produce of others will have nothing to plunder if someone does not go out and produce a product or provide a service.

I'm not convinced because productivity is now well over twice what it was in 1970, even if a few do no work, as was also the case then, we should all be able to buy two houses and four cars if the wealth distribution remained the same.

Democrats claim they will steal from the rich and give to the poor. But far to often they steal from the poor in order to give to the rich. Obama has been more guilty of this more then others. Esp with his energy credits he gives money to rich people to buy their car yet there are over a million poor people that can not afford to buy any sort of a junk car. The poor are the ones needing the help and he was blowing up their engine and destroying their car and driving up the prices for worthless junk transportation.

I think you've got it there. I've also noticed the lack of significant difference between Republicans and Democrats on foreign policy, both want to maintain the American sphere of influence throughout the Free World (some just say 'American Empire' though that is heavily frowned upon).

There is or perhaps was difference in tax structure, that Republicans are more prone to let huge incomes pay little tax so the multi millionaires can have the money to buy foreign luxury items, and transfer more money to other countries and live there if they want.

 

[MorkandMindy]

I think of the World as consisting of farmers and cattle. We non 0.1% ers are the cattle. We live in fields with fences, the farmers are internationalists and run everything. The farmers find it convenient to have a few cattle with long sharp horns at their command to keep order within each field and sometimes these dangerous cattle are sent to inflict harm on cattle in other fields.

When the farmers in the field we are in take our milk it doesn't remain ours simply because the farmers happen to be in our field at the time and it does not remain ours. The money 'our' 0.1% have taken is just as much gone as the money that goes to Germany or China.

 

[Vylo]

The dollar isn't showing any signs of collapse, in fact it is considerably stronger than it has been in years.

The biggest issue is uncertainty due to the election, this often causes economic ripples.