Some more discussions from my facebook page, a reply posted to my previous post:
1. When the market skyrockets, people feel wealthier and that has a positive effect on the economy. QE is working because the market wants it to work. Also, perceptions matter more than reality. The stock market is like a beauty contest.
2. The US dollar has a lot of value. Everything you can imagine is priced in dollars for reference. If you want to know how much something is worth, you price it in dollars. If you priced it in gold or seashells, you would only have an understanding by first converting the weight in gold or seashells to dollars. If I give you 3 oz. gold or 29 bitcoins in exchange for a good or service, you’re not going to blindly accept it without first converting the gold and bitcoins to dollars in order to determine whether what you’re giving up is worth what you’re getting in return.
3. Yes, the dollar has lost purchasing power. But maybe it was worth it for all the growth that we’ve had post WWII. You have to consider all factors before denouncing the dollar.
1. Sure, you can argue that and I’ll partially agree that “bright expectations” lead to “bright output”. But there’s not many who are in favorable standing of the economy or the stock market. If you’re going to take a socio-economic stance on this, then I suggest you read deeper into this than what YOU feel that “people” feel.
QE isn’t working because the market wants it to. QE is working because the small group of banks which hold a very large portion of the market in their portfolios, especially those very few cherry picked stocks on the DOW, want it to work. Because the alternative is death for them.
The reality is that the people that control most of the money on Wall Street don’t even have faith in the growth of wall street, where ever you’re getting your mythical anecdotal information from, I don’t care.http://www.zerohedge.com/…/what-do-insiders-know-you-dont
2. That’s because you’re an american living in america. If you were a Russian in Russia or Chinese in China, you’d price goods in respective currency. Try to go to another country and buy something with a dollar. It’s hard, bordering on impossible. What was once an easy transaction is no longer so. People don’t want dollars anymore. The only reason nations play along is because of military and foreign-aid agreements. Other than that, many countries have already started to move off of the dollar and are designing and implementing their own reserve currencies.
Besides, all prices are relative to purchasing power. When you get paid in dollars or when you set prices in dollars, you look at your costs and expected spending and then factor in time and labor and you price accordingly. It’s not some genius concept that you also compare between currencies as well.
You’re also not used to pricing out services in gold or bitcoin just like you’re not used to pricing out goods and services in euros. When you pay someone in Germany $500 euros for his product, do you think he cares what your dollar is worth in America? No, he simply cares that he gets his asking price, 500EU in exchange for his product. What that’s worth in dollars is little to no concern to him. Just like when you sell from America to a poor nation, do you wonder how many cars or meals your product is worth? No. Because it’s inconsequential.
If you’re selling a car for $200,000 to an Armenian business man, it doesn’t matter if that price can buy 10 houses in Armenia. You wouldn’t lower your price to meet his relative costs.
And this is why some nations are poor and some are rich. Some have created products that can extract higher prices, relative or not, and other nations lack the money to purchase these goods and also lack the ability to produce equivalents. If you can’t afford the latest medical technology and you can’t figure out how to build it, you’re doomed to stay poor until you figure out a way to do so.
3. Growth of wealth and growth of currency value are two different things. Zimbabwe once had quadrillions of dollars in currency, yet they were poor as poor can be. Money has nothing to do with wealth. Wealth is a measure of ability and resources.
Anonymous asked: S&P 500 futures up 0.2%. Let's see what happens this week...If the FED "surprises" the market on Wednesday by not reducing bond purchases from $75B to $65B, the market will shoot back up. That's all it takes. They will NEVER allow the market to fall by even as much as 5%. Don't bet against the Fed.
I got this question via another social media account and I just wanted to post it and my reply on here.
That’s the point, sir. The more they pump into the system, the higher stock prices go. The “growth” of stocks no longer has anything to do with actual growth in production or increase in efficiency or the creation of value and wealth. It’s all nothing more than a giant pump & dump.
The fed can say that QE is going to go up to $100 billion a month and the market will skyrocket. But is it actually “worth” more or is it simply the price that’s higher and the value of those dollars lower?
Based on inflation adjustment, the market isn’t up, it’s actually below the “peak” and that “peak” was artificial as well, based on Fed and govt policy to dump money all into the housing market. The prior peak was also artificial, based on the Fed’s shift into the tech market and dumping funds and investments into it. etc, etc, ad nauseam.
Now, can the Fed do this forever? Of course they can. Money is digital and based on nothing. They don’t even have to print tangible notes anymore. And as a contained system, the dollar can dilute down as infinitely as the Fed wants to, with interest rates artificially pinned at near-zero forever. The entire American dollar-based system can grow forever as a self-contained monster.
But that’s the catch, it’s not a self-contained monster. The dollar STILL relies on external loans, it still depends on bond/t-bill purchases, it still depends on consumption of American goods and services and it’s 100% depends on all of that happening on a dollar based reserve currency. Without such, the dollar is worthless to the outside world.
And that’s the dangerous part. Sure, we can pretend we’re rich as fuck for as long as you want, but if we’re no longer producing things we need (which America isn’t producing as much as it once did and no where near what it NEEDS) and if we aren’t able to buy and import what we do NEED (since our dollars inflate away value and slip into worthlessness), then what? You have a billion dollars in the bank and I have a trillion dollars in the bank, the dow is at 15,000,000,000 and yet, we can’t buy a single thing. We’re now an African nation with worthless money and little to no means of obtaining products that we want and need.
That’s what real wealth is, being able to purchase. The “value” of money on paper is pointless. The number of zeros to your bank account are worthless. It’s what you can buy with those dollars that matters.
Over the last 40, 80, 100 years (Nixon, FDR, Wilson), the dollar has lost 98% of it’s value. Lucky us, most idiot countries have gone to fiat currency as well. But that’s ending soon. Countries are slowly moving back to gold or shifting to their own currency. What then? We’re stuck. We’re either going to go to war for all the gold others are holding or we’re going to go to war to force others to stay on the dollar system. This isn’t a prediction, this is reality. This is exactly what the wars in Iraq, Libya, Afghanistan, conflicts in Iran, Africa and butting heads with Russia and China and Brazil are all about: Currency Conflicts.
And if you don’t see or have a problem with this system, then I am disgusted.
The Krug finally tells the truth.
The minimum wage in 1955 was $1.00/hr.
That would be four quarters, back when quarters were made with silver. The melt value of those four quarters (in today’s money) is about $20.gee I wish this had a source..
you can literally google every aspect of this post.
1995 minimum wage, silver content in US quarters pre-1964, spot price of silver
These are not hard pieces of information to find. Not everything needs to be injected directly into your thick skull from somebody else in order for you to know about it.
I mean honestly. Are you that fucking dumb?
I hate lazy people who want a source for everything as if Google doesn’t exist on your computer, phone, playstation and tv.
All of the info in the world, right there at your fingertips and you are too lazy to search or to comfortable with your skepticism that you refuse to do so.
Someone yesterday asked me “If IP law hurts individuals, why isn’t there anything written about it?” I wanted to cut my neck with a pencil, pull my brains out with a toothpick and jam them down my throat so I could suffocate to death.
Minimum Wage in 1955 to 1956: $1/hour (via Dept of Labor)
Price of an ounce of Silver in 1955: $0.95/ounce (via The Silver Institute)
What $1 in 1955 is worth in 2013 dollars: $8.23 (via Bureau of Labor Statistics)
Price of an ounce of Silver in 2013 (3/28/13): $28.82 (via MonEx)
The US dollar literally lost $20.59 or 71.4% of it’s value since 1955 due to inflation.
Next time don’t be so damn lazy.
Have you ever read Confessions of an Economic Hitman?
Did it change your political beliefs? Did it flip your world view upside down and inside out?
I mean Bernanke isn’t the Keynesian that Krugman is.
If anything, I’d put him up there with Mankiw and honestly Mankiw isn’t as insufferable as Krugman is.
But yeah I mean Bernanke is just mainstream. It’d be wrong to say he’s as Keynesian as other popular economists are.
Bernanke is a typical consumption-and-debt based Keynesian. Borrow money, spend money, don’t save too much, manipulate rates to get desired results.
Krugman is borderline insane. Create bubbles to off-set previous bubbles? Economic impact of natural disasters is good? We need to prepare for an alien invasion that doesn’t exist in order to revive the economy?
Krugman probably drives around smashing windows and slashing tires just to try and raise the GDP. The dude’s a radical.
Bernanke is the first academic to be the head of the Fed in a long time. That alone is a plus.
Interest rate targeting is basically what you do with central banks anymore. You can’t target the money supply and inflation expectations can be held nearly constant so long as no one fucks up (oops QE2,3,4).
Yeah, Krugman is insane. He also gets paid by the NYTimes to spread his lunacy, which is worse.
Yea, I agree. I don’t think Bernanke is the evil tyrant of the world as so many libertarians see him as. He just does what his job is supposed to be, control rates and drive different financial actions via asset purchases and liquidity changes.
Now, the existence of the fed, that’s an issue for me. But as far as what Bernanke has done while at the helm, it’s no different than what any other knowledgeable Keynesian would do.
I mean, ending the Fed isn’t that high on my priority list as a libertarian. The world we live in right now means we need a Fed, and we certainly benefit greatly from having the US Dollar.
I don’t think I agree.
If you think about the inter-connectivity of the Fed, the fiat dollar, the world’s reserve currency, the petrodollars and the wars we fight to maintain the hierarchy and value of the dollar, you realize that all of it is connected right back to how the dollar and it’s valuation is the foundation of our imperialism.
But I agree that as American citizens, we do, somewhat, benefit from the US Dollar.