Anyone willing to bet on a devaluation of the dollar when all the debt bubbles burst?

[Bad Dog]

Right now, with X hitting 50+, student loans, and mortality are coming up, in addition to the usual suspects of real estate, consumer debt, and financials.

I'm guessing about 2030 for the fun to start there. 

10:1 at least.

[Galen]

(05-19-2016, 01:00 AM)Bad Dog Wrote: Right now, with X hitting 50+, student loans, and mortality are coming up, in addition to the usual suspects of real estate, consumer debt, and financials.

I'm guessing about 2030 for the fun to start there.

Inflation with a corresponding fall in the value of the dollar is inevitable as the petrodollar system continues to break down.  Judging from the large number of financial graphs that have gone parabolic in the last year or so I would say it is closer than you think.  This year is not out of the range of possibility.

[Kinser79]

Are you betting that the dollar won't be devalued? If so I'll take the bet. If not, no thanks I don't like losing my ones and zeros.

[Galen]

(05-19-2016, 03:30 AM)Kinser79 Wrote: Are you betting that the dollar won't be devalued?  If so I'll take the bet.  If not, no thanks I don't like losing my ones and zeros.

I am certain that it will, only the precise timing is uncertain.  The only thing the Fed knows how to do is print money.

[Odin]

(05-19-2016, 12:01 PM)Galen Wrote: I am certain that it will, only the precise timing is uncertain.  The only thing the Fed knows how to do is print money.

But yet the hyperinflation you ideologues claim is just about to happen mysteriously never materializes.

[pbrower2a]

(05-19-2016, 04:45 PM)Odin Wrote:

(05-19-2016, 12:01 PM)Galen Wrote: I am certain that it will, only the precise timing is uncertain.  The only thing the Fed knows how to do is print money.

But yet the hyperinflation you ideologues claim is just about to happen mysteriously never materializes.

The troublesome debt is private debt -- not public debt.

Uncle Sucker (ultimately US taxpayers) could be stuck guaranteeing the student loans to those who attended worthless vocational schools.  The bulk of the student loan debt isn't to people who went to first-rate colleges or to modest programs that teach hairdressing or clerical skills; it was to the rip-off institutions that charged students attending suspect 'career training' as if they were attending first-rate schools.

We Americans are going to pick up the tab one way or the other. The George W. Bush Administration pushed such education heavily in the belief that such schools would perform miracles. Those schools generally failed badly.

I had an extensive thread on the old T4T  Forums about such schools.  They were designed for 'non-traditional students', which meant the sorts of people who did not ordinarily attend traditional four-year or community colleges. These schools advertised heavily on schlock daytime television such as the Maury Povich Show and the Jerry Springer Show or the awful reality shows. This is below the washday weepers and game shows.

Here are some hints on the demographics:

1. The people watching such shows are either unemployed or have a night-time job and hate it.

2. People who watch large amounts of daytime television  don't generally, and generally have not gone to or are not attending college. (It is a general pattern that well-educated people watch little television anyway). People who watch schlock television -- the sort in which chairs might fly -- are generally close to the low end in intellectual ability, anyway, and are unlikely to do well in any academic setting.

...The schools got their money up front from the federal government as loans. There was little quality control. The schools had marketing costs as a big part of their expenses. In case you wondered: Harvard University spends little on marketing. It doesn't have to. Neither does the University of Michigan, nor for that matter most state colleges. If you are a Catholic kid of above-average intelligence you know about Notre Dame University and even know what exit to take to it off the Indiana Toll Road. Corinthian Colleges, which owned several of the for-profit educational institutions that have very poor records for their students earning enough to pay off the loans, spent heavily on marketing.

The Obama Administration practically shut those schools down. That was the responsible thing to do. The regulation of college debt is now much tighter.

[Bad Dog]

Deflation's tend to have even more negative consequences than inflation's. I'm not projecting hyper-inflation- just a recognition of the loss of value in purchasing power.

[Galen]

(05-19-2016, 04:45 PM)Odin Wrote:

(05-19-2016, 12:01 PM)Galen Wrote: I am certain that it will, only the precise timing is uncertain.  The only thing the Fed knows how to do is print money.

But yet the hyperinflation you ideologues claim is just about to happen mysteriously never materializes.

So far the Fed has at every crisis tried to resolve it by printing money which sets the next boom-bust cycle into motion.  This will be what set a gigantic price inflation in motion as the dollar loses reserve currency status around the world.  It is the ability to export inflation to the rest of the world that has prevented that from happening.

In the unlikely event that the Fed and Federal government choose not to inflate then in that case the debt is can not be paid and then it will become obvious to Treasury holders that the debt is can not be payed.  Treasury prices will fall and cause interest rates to rise.  In this scenario deflation is likely.

Things continuing has they have for the last sixty years is increasingly unlikely as Saudi Arabia and China continue to sell Treasuries.  I don't think that the dollar will remain a safe haven in this fourth turning with the US being the biggest debtor the world has ever seen.

[Odin]

(05-20-2016, 02:28 AM)Galen Wrote: So far the Fed has at every crisis tried to resolve it by printing money which sets the next boom-bust cycle into motion.  This will be what set a gigantic price inflation in motion as the dollar loses reserve currency status around the world.  It is the ability to export inflation to the rest of the world that has prevented that from happening.

In the unlikely event that the Fed and Federal government choose not to inflate then in that case the debt is can not be paid and then it will become obvious to Treasury holders that the debt is can not be payed.  Treasury prices will fall and cause interest rates to rise.  In this scenario deflation is likely.

Things continuing has they have for the last sixty years is increasingly unlikely as Saudi Arabia and China continue to sell Treasuries.  I don't think that the dollar will remain a safe haven in this fourth turning with the US being the biggest debtor the world has ever seen.

This is the same kind of rationalization Fundamentalists use when their latest prediction of Jesus coming back fails, or orthodox Marxists who think the revolution is right around the corner, for that matter.

[Kinser79]

(05-19-2016, 05:33 PM)pbrower2a Wrote: The troublesome debt is private debt -- not public debt.

Indeed, and it isn't even just Student loans. I am suspicious of all unsecured debt (naturally this would exclude auto loans and mortgages as those are secured with a durable consumer good) and have been debt free for over 10 years. Of course because I'm thrifty I have almost no credit, but I could care less there is very little I wish to buy that I actually need credit for.

Quote:Uncle Sucker (ultimately US taxpayers) could be stuck guaranteeing the student loans to those who attended worthless vocational schools.  The bulk of the student loan debt isn't to people who went to first-rate colleges or to modest programs that teach hairdressing or clerical skills; it was to the rip-off institutions that charged students attending suspect 'career training' as if they were attending first-rate schools.

Quite possible, and to liquidate these debts, the federal government would have to take on more public debt because it would have to assume not only the principle but also the interest. This means that the federal government would have to spend all that extra money into existance and financial institutions would seek to put that money to work somewhere--blowing up a bubble somewhere.

We Americans are going to pick up the tab one way or the other. The George W. Bush Administration pushed such education heavily in the belief that such schools would perform miracles. Those schools generally failed badly.

Quote:1. The people watching such shows are either unemployed or have a night-time job and hate it.

As someone who worked overnight for years, if they work at night they aren't watching washday weepers. They are in bed sleeping in a room that has been totally blacked out in some way. I generally reccomend aluminum foil taped to the windows--blue painter's tape works great for this.

So the persons watching such shows are likely unemployed.

Quote:2. People who watch large amounts of daytime television  don't generally, and generally have not gone to or are not attending college.

Citation needed.

Quote: (It is a general pattern that well-educated people watch little television anyway). People who watch schlock television -- the sort in which chairs might fly -- are generally close to the low end in intellectual ability, anyway, and are unlikely to do well in any academic setting.

Again citation needed. Talk shows are not my particular cup of tea but it is possible that those with a university degree might find amusement in low brow entertainment. Just because you happen to be a snob doesn't mean everyone else is.

Quote:...The schools got their money up front from the federal government as loans. There was little quality control. The schools had marketing costs as a big part of their expenses. In case you wondered: Harvard University spends little on marketing. It doesn't have to. Neither does the University of Michigan, nor for that matter most state colleges. If you are a Catholic kid of above-average intelligence you know about Notre Dame University and even know what exit to take to it off the Indiana Toll Road. Corinthian Colleges, which owned several of the for-profit educational institutions that have very poor records for their students earning enough to pay off the loans, spent heavily on marketing.

Generally speaking good schools do not need to market they have built-in marketing in the success of their alumni, however this is not always the case. I've hired several bakers who attended Le Cordon Bleu which does advertise on tee-vee (that is a culinary school that works with many 'community colleges') and they were quite highly skilled for just having gotten culinary degrees in pastry work. That being said they are simply not on the level of someone who went to Culinary Institute of America but that institute is incredibly difficult to get into.

Quote:The Obama Administration practically shut those schools down. That was the responsible thing to do. The regulation of college debt is now much tighter.

But not tight enough. The US is one of the few countries that views education as a luxury. Many other developed countries offer school without tuition--particularly to those who need it the most, IE the highly intelligent but poor people. Tuition costs could be lowered even at top level state schools by getting rid of bloated administration, cutting off white elephant projects and reducing the focus on sport to in some schools.

[pbrower2a]

(05-20-2016, 09:31 AM)Kinser79 Wrote:

(05-19-2016, 05:33 PM)pbrower2a Wrote: The troublesome debt is private debt -- not public debt.

Indeed, and it isn't even just Student loans.  I am suspicious of all unsecured debt (naturally this would exclude auto loans and mortgages as those are secured with a durable consumer good) and have been debt free for over 10 years.  Of course because I'm thrifty I have almost no credit, but I could care less there is very little I wish to buy that I actually need credit for.

Quote:Uncle Sucker (ultimately US taxpayers) could be stuck guaranteeing the student loans to those who attended worthless vocational schools.  The bulk of the student loan debt isn't to people who went to first-rate colleges or to modest programs that teach hairdressing or clerical skills; it was to the rip-off institutions that charged students attending suspect 'career training' as if they were attending first-rate schools.

Quite possible, and to liquidate these debts, the federal government would have to take on more public debt because it would have to assume not only the principle but also the interest.  This means that the federal government would have to spend all that extra money into existance and financial institutions would seek to put that money to work somewhere--blowing up a bubble somewhere.

We Americans are going to pick up the tab one way or the other. The George W. Bush Administration pushed such education heavily in the belief that such schools would perform miracles. Those schools generally failed badly.

Quote:1. The people watching such shows are either unemployed or have a night-time job and hate it.

As someone who worked overnight for years, if they work at night they aren't watching washday weepers.  They are in bed sleeping in a room that has been totally blacked out in some way.  I generally reccomend aluminum foil taped to the windows--blue painter's tape works great for this.

So the persons watching such shows are likely unemployed.  

Quote:2. People who watch large amounts of daytime television  don't generally, and generally have not gone to or are not attending college.

Citation needed.

Quote: (It is a general pattern that well-educated people watch little television anyway). People who watch schlock television -- the sort in which chairs might fly -- are generally close to the low end in intellectual ability, anyway, and are unlikely to do well in any academic setting.

Again citation needed.  Talk shows are not my particular cup of tea but it is possible that those with a university degree might find amusement in low brow entertainment.  Just because you happen to be a snob doesn't mean everyone else is.

Quote:...The schools got their money up front from the federal government as loans. There was little quality control. The schools had marketing costs as a big part of their expenses. In case you wondered: Harvard University spends little on marketing. It doesn't have to. Neither does the University of Michigan, nor for that matter most state colleges. If you are a Catholic kid of above-average intelligence you know about Notre Dame University and even know what exit to take to it off the Indiana Toll Road. Corinthian Colleges, which owned several of the for-profit educational institutions that have very poor records for their students earning enough to pay off the loans, spent heavily on marketing.

Generally speaking good schools do not need to market they have built-in marketing in the success of their alumni, however this is not always the case.  I've hired several bakers who attended Le Cordon Bleu which does advertise on tee-vee (that is a culinary school that works with many 'community colleges') and they were quite highly skilled for just having gotten culinary degrees in pastry work.  That being said they are simply not on the level of someone who went to Culinary Institute of America but that institute is incredibly difficult to get into.

Quote:The Obama Administration practically shut those schools down. That was the responsible thing to do. The regulation of college debt is now much tighter.

But not tight enough.  The US is one of the few countries that views education as a luxury.  Many other developed countries offer school without tuition--particularly to those who need it the most, IE the highly intelligent but poor people.  Tuition costs could be lowered even at top level state schools by getting rid of bloated administration, cutting off white elephant projects and reducing the focus on sport to in some schools.

A few comments:

1. Working people are better off with one union card than with one credit card.  People with adequate incomes can pay cash for significant purchases. Credit cards were originally designed for people who spend money on legitimate business activities -- like travel on behalf of an employer. That is where American Express, Carte Blanche, and Diner's Club operated in the old days. A traveling salesman from Chicago checking into a motel in Louisville so that he can make a sales call in Louisville isn't going to be hurt with his credit card.

Banks used credit cards to meet the competition of finance companies. Taking an overpriced vacation on a credit card is unwise.

2. Education is worth borrowing for if it makes one a better or more skilled worker. Borrowing a huge amount of money to matriculate through med school makes sense because physicians earn huge incomes. Med school is difficult enough that one does not want a promising physician to waste time on paying work. Borrowing a small amount to become a hairdresser makes sense because one likely gets a job.  Getting a bachelor's degree that allows one to be a schoolteacher isn't a bad idea (the sorts of schools that have 'education' as a major are usually inexpensive. One attends the mediocre Western Michigan University, and not the great University of Chicago, to get a teaching degree. But if you attend the University of Chicago, you probably have a very good life awaiting you.

Attending a bad technical school and going into debt as if one were attending a great university but without financial aid is a huge blunder. Even if the blunder is profitable to some entity, it is bad social policy to promote the blunder.

3. You are probably right about most people working night jobs. Some people well fit them because they do not get along well with people. Some people work at night in 24-7 businesses and would hate their jobs if those jobs if they were 9-to-5. But I see no reason to believe that people working night shifts work more hours. They do watch some television. If they are in low-end jobs and have a good reason to be in those low-end jobs (like a lack of skill and limited learning), then I can't imagine them watching recorded concerts of the Berlin Philharmonic Orchestra.

4. Television viewing and social-economic-status (SES) have a strong negative correlation. Well-educated people generally have other things to do than watch television, generally a very passive entertainment.

Snob? I can see through what Jerry Springer does. Bring a dysfunctional family to Chicago, let them stay a night in a nice hotel room, let them have some 'gourmet' meals, and bring the family onto the stage to implode.

5. Vocational schools with modest but attainable objectives (as in "become a pastry chef") and modest cost can do their students some good. It's the ones that make big and unsupportable promises that hurt their students and rip off the public.

6. Yes, the United States is the only advanced industrial society that treats formal education as a luxury. Maybe that reflects the heritage of the plantation order that is much of the American political heritage. Nobody needs to do much thinking to do farm labor; indeed, the more that one thinks the more likely he is to seek alternatives to being abused and exploited.

Just to deal with the reality of the disappearance of scarcity as a necessary constraint upon working people Americans are going to need more formal education just to make use of free time. Leisure meant nothing when people worked seventy-hour weeks just to make farm implements.  One measure of progress is that people have gone from the 70-hour workweek to the 60-hour workweek, and on down to the 40-hour workweek of the 1930s. For political reasons we are stuck at the 40-hour workweek.

We do not need to make more schlock objects. We need to learn how to make life meaningful. Karl Marx' dream in which productivity makes material fetishes irrelevant is nigh -- even, and maybe especially in, capitalist societies.

[Kinser79]

(05-20-2016, 10:08 AM)pbrower2a Wrote: A few comments:

1. Working people are better off with one union card than with one credit card.  People with adequate incomes can pay cash for significant purchases. Credit cards were originally designed for people who spend money on legitimate business activities -- like travel on behalf of an employer. That is where American Express, Carte Blanche, and Diner's Club operated in the old days. A traveling salesman from Chicago checking into a motel in Louisville so that he can make a sales call in Louisville isn't going to be hurt with his credit card.

Banks used credit cards to meet the competition of finance companies. Taking an overpriced vacation on a credit card is unwise.

I agree. Of course this presupposes that said union card is worth the paper it is printed on.

As for the purpose of credit cards the original intent was for business purchases first and foremost and secondly purchases by people with the means to immediately pay off the unsecured loan. Which is what a credit card is, a purchase of a good or service via the means of an unsecured loan.

Quote:2. Education is worth borrowing for if it makes one a better or more skilled worker. Borrowing a huge amount of money to matriculate through med school makes sense because physicians earn huge incomes. Med school is difficult enough that one does not want a promising physician to waste time on paying work. Borrowing a small amount to become a hairdresser makes sense because one likely gets a job.  Getting a bachelor's degree that allows one to be a schoolteacher isn't a bad idea (the sorts of schools that have 'education' as a major are usually inexpensive. One attends the mediocre Western Michigan University, and not the great University of Chicago, to get a teaching degree. But if you attend the University of Chicago, you probably have a very good life awaiting you.

Borrowing money to get a degree is only worthwhile if with that degree you can actually do something with it. Largely this means that liberal arts degrees are worthless as are degrees in Feminist Dance Thearapy and Gender studies (the latter I think should be completely abolished). Getting a certification in education (the degree required to teach--and remember my BF is a real teacher not the fake ass substitute kind like you are) is not as expensive as some degrees but going into debt for it is generally unwise (but going into debt for anything that isn't a durable consumer good is unwise). Most school teachers are not highly paid, my bf has been teaching for over 7 years and he only makes about 5K more than myself and remember he's both union and tenured. His benefits are pretty great though and in three more years he'll have a state pension.

All of that said, having an education is not a guarantee of success. In my years on the planet I've met many people who blew a load of money on good schools and pretty much ended up just as broke as if they hadn't gone to school at all--in some cases they are worse off because they have a low paying job and also a mountain of student debt they can't evade through bankruptcy.

Quote:Attending a bad technical school and going into debt as if one were attending a great university but without financial aid is a huge blunder. Even if the blunder is profitable to some entity, it is bad social policy to promote the blunder.

Again, agreed. If the point of a technical school is to get a certification for a specific job then that should be offered through a community college which can perform the same task much more cheaply.

Quote:3. You are probably right about most people working night jobs.

No probably to it. I walked in those shoes for years. People who work overnight sleep during the day.

Quote: Some people well fit them because they do not get along well with people. Some people work at night in 24-7 businesses and would hate their jobs if those jobs if they were 9-to-5. But I see no reason to believe that people working night shifts work more hours. They do watch some television. If they are in low-end jobs and have a good reason to be in those low-end jobs (like a lack of skill and limited learning), then I can't imagine them watching recorded concerts of the Berlin Philharmonic Orchestra.

This is only partially true. There are 24 hour businesses that require people to work overnight. There are other functions that can only be conducted efficiently when the business is closed. A prime example is my own donut shop. While there is some donut making and finishing done during the day, the primary base of the baking especially is conducted on an 8pm to 5am shift. The reason for this should be self-evident.

Those who work on stock crews and such (I've worked that too--right after I got out of the Navy) typically either don't like dealing with very many people or take the job for other reasons.

As for myself, I rather dislike working 9-5. The vast majority of people on this planet are, to put it charitably, fucking idiots.

I would say that the jobs people take is not a good indicator of their entertainment tastes. Neither is their educational attainment. Rather it is a matter of taste, and trust me the BF and I do not really share the same tastes. I have less education than him and I watch Masterpiece Theater, he does and yes he DVRs Survior and crap like that. He comes home from dealing with trying to make imbeciles less imbecilic and wants nothing more than some light entertainment whereas I get easily bored with it.

Quote:4. Television viewing and social-economic-status (SES) have a strong negative correlation. Well-educated people generally have other things to do than watch television, generally a very passive entertainment.

I'd only partially agree. Given the choice between watching television and doing anything else...it depends on what is on the television. Generally speaking there isn't anything good on anyway but I have been known to watch television. And I'm merely in the upper strata of the proletariat. That being said if there is a reasonably complex drama on I probably want to see it, I'm also quite fond of certain shows (Walking Dead, Vikings for example) as well as documentaries.

Quote:Snob? I can see through what Jerry Springer does. Bring a dysfunctional family to Chicago, let them stay a night in a nice hotel room, let them have some 'gourmet' meals, and bring the family onto the stage to implode.

That statement isn't just about your television viewing habits or tastes. You are a snob because of all the other bullshit you've posted over the years. I believe I directly called you a "pathetic self-hating proletarian" at least once before. The old forum is gone but most of us here still remember the gem posts. Perhaps you'll care to enlighten us with your fine pallet for wines, I hear Manishewitz has a fine vintage this year or do you only drink wine from a box?

Quote:5. Vocational schools with modest but attainable objectives (as in "become a pastry chef") and modest cost can do their students some good. It's the ones that make big and unsupportable promises that hurt their students and rip off the public.

Such entities usually work through community colleges which is more efficient than trying to be stand alone enterprises, generally.

Quote:6. Yes, the United States is the only advanced industrial society that treats formal education as a luxury. Maybe that reflects the heritage of the plantation order that is much of the American political heritage. Nobody needs to do much thinking to do farm labor; indeed, the more that one thinks the more likely he is to seek alternatives to being abused and exploited.

As odd as it might seem this is untrue. A great many of the State Universities used to offer very affordable educations. They also were primarily financed through taxation, donations, and of course expansive land grants. A great deal of that has been dismantled relatively recently--the 1980s to be precise. I like to think that a lot of it was Boomers with their "I got mine screw you" mentality.

Quote:Just to deal with the reality of the disappearance of scarcity as a necessary constraint upon working people Americans are going to need more formal education just to make use of free time. Leisure meant nothing when people worked seventy-hour weeks just to make farm implements.  One measure of progress is that people have gone from the 70-hour workweek to the 60-hour workweek, and on down to the 40-hour workweek of the 1930s. For political reasons we are stuck at the 40-hour workweek.

I'm not sure I agree with that. One doesn't need a degree in English to watch and understand Shakespeare. Also we are always promised more and more leisure time...I'm not seeing it. I don't think there has been a week lately I've not worked a minimum of 60 hours.

Quote:We do not need to make more schlock objects. We need to learn how to make life meaningful. Karl Marx' dream in which productivity makes material fetishes irrelevant is nigh -- even, and maybe especially in, capitalist societies.

Schlock objects will always be made, that being said, it appears that generations younger than Boomers are less interested in such which is not surprising as it was largely the Silents and GIs who demanded said objects. And this is coming from someone who has a collection of glass knicknacks. I think over all the phenomenon had a great deal to do with the Depression and the over all general scarcity of items in totality. Now that scarcity is quite rare in developed countries--not so much in underdeveloped countries.

[Galen]

(05-20-2016, 07:08 AM)Odin Wrote: This is the same kind of rationalization Fundamentalists use when their latest prediction of Jesus coming back fails, or orthodox Marxists who think the revolution is right around the corner, for that matter.

There is a limit to everything.  I you would bother looking at the economic data you would realize that GDP growth last quarter was abysmal, labor participation rate is down and unemployment applications are up.  Then there is the small matter of retail sales increased by %0.5 unadjusted by inflation.  These are all things that happen in a recession and its happening in a close to zero percent interest rate out of the Fed.

All of these things tell me that we are simply running out of room to kick the can.

[TnT]

So my fellow Economic Wizards ... what is it? Catastrophic inflation or catastrophic deflation?

[Galen]

(05-20-2016, 06:54 PM)TnT Wrote: So my fellow Economic Wizards ... what is it?  Catastrophic inflation or catastrophic deflation?

It really does depend on what the Fed chooses to do.  If they decide to inflate at all costs which is historically what bankrupt governments do.  This is why the inflation scenario is more likely.  Some central banks are considering the possibility of Helicopter Money because they can't even conceive of the possibility that Keynesian economics is wrong.

So far negative interest rates seem to have a deflationary effect.  At this point there is little data to work with so the long term implications for this policy are not known.  This makes a certain kind of sense since you would effectively be paying the bank to hold your money and so people would tend to withdraw it as a consequence.  This would cause the multiplier effect of fractional reserve banking to go in reverse.

Prior to government guaranteed deposit insurance, lowering interest rates was like pushing on a string as was the case at the beginning of the Great Depression because the monetary multiplier was running in reverse as demand deposits were withdrawn.  This caused banks to hold more reserves which meant that fewer loans were made which is the channel that printed money usually enter the economy.. .I suspect this is the reason for governments and central banks pushing for a cashless society to forestall such a  possibility.  There is also a secondary effect of of enabling Big Brother which all governments like to do.

Unfortunately people tend to discount the benefits of economic freedom because they never give such issues the amount of thought that they deserve.

[Kinser79]

(05-20-2016, 06:54 PM)TnT Wrote: So my fellow Economic Wizards ... what is it? Catastrophic inflation or catastrophic deflation?

A little of both. Currently there is a deflationary trend, but all the imaginary cash created through QEinfinity will eventually have to wash through the economy causing a rise in prices and a devaluation of the dollar. This will probably result in further down grades to US Bond status, once it reaches the general economy. Rising prices of course would largely be the result of inflation as I don't foresee a major shut down of normal production and distribution just yet.

Once US Federal debt has been down graded to BBB status it would effectively be junk bonds, since that is only two steps below the current rating all one has to do is substantially increase the federal debt. Then perhaps the OPEC countries might decide that any other currency is desirable for trading oil and the era of the petrodollar will have effectively ended meaning that the US can no longer export inflation to other countries.

Of course there is nothing stopping them from doing so now. Indeed it is my view that the War in Iraq was primarily caused by Saddam trying to convert some of his oil accounts over to Euro. Granted a silly move given today's news--but we have to remember this was before 2003.

[Galen]

(05-20-2016, 09:50 PM)Kinser79 Wrote:

(05-20-2016, 06:54 PM)TnT Wrote: So my fellow Economic Wizards ... what is it?  Catastrophic inflation or catastrophic deflation?

A little of both.  Currently there is a deflationary trend, but all the imaginary cash created through QEinfinity will eventually have to wash through the economy causing a rise in prices and a devaluation of the dollar.  This will probably result in further down grades to US Bond status, once it reaches the general economy.  Rising prices of course would largely be the result of inflation as I don't foresee a major shut down of normal production and distribution just yet.

There is one simple question:  Will the Fed governors ever accept that Keynesian economics does not work?  If they accept this possibility then a deflationary period is likely followed by a long period of growth.  If not then the US gets to look like Venezuela or Zimbabwe.  So far the Fed has shown a pronounced tendency to print at every crisis but I have hedged against both possibilities in case they decide to behave in a sane manner for once.

One thing that you can count on is the economic predictions made by the Fed are the exact opposite of what will happen.  They have a lousy prediction record.  Even worse than Eric the Obtuse, which is quite a feat given how clueless he is.

[Kinser79]

(05-20-2016, 10:49 PM)Galen Wrote: There is one simple question:  Will the Fed governors ever accept that Keynesian economics does not work? 

I'm willing to bet the answer is no. The Fed only has two leavers it can work economically, the interest rates and money printing. The interest rate is already at its minimum. That leaves money printing.

Quote: If they accept this possibility then a deflationary period is likely followed by a long period of growth.  If not then the US gets to look like Venezuela or Zimbabwe.

I'd definitely agree should the Dollar lose reserve status. The question is then what conditions have to be met for the Dollar to lose that status. With the USD holding reserve status inflation can be exported. That is one of major reasons why Argentina, Venezuela, Zimbabwe and other less developed countries have recurring bouts of chronic inflation and hyperinflation.

 

Quote:One thing that you can count on is the economic predictions made by the Fed are the exact opposite of what will happen.  They have a lousy prediction record.  Even worse than Eric the Obtuse, which is quite a feat given how clueless he is.

It isn't just the Fed. Typically I listen to the talking heads on CNBC and other such news outlets in regard to my investments (as small as they are) and typically do the exact opposite of what they say to do. I've not gone broke by counting on the so-called experts to be wrong.

I especially pull out when people start talking about "X" can only go up in value, because that indicates a bubble mentality has set in and it is a good idea to get out before prices crash.

[Galen]

(05-21-2016, 12:19 AM)Kinser79 Wrote:

(05-20-2016, 10:49 PM)Galen Wrote: There is one simple question:  Will the Fed governors ever accept that Keynesian economics does not work? 

(05-21-2016, 12:19 AM)Kinser79 Wrote: I'm willing to bet the answer is no.  The Fed only has two leavers it can work economically, the interest rates and money printing.  The interest rate is already at its minimum.  That leaves money printing.

(05-20-2016, 10:49 PM)Galen Wrote: If they accept this possibility then a deflationary period is likely followed by a long period of growth.  If not then the US gets to look like Venezuela or Zimbabwe.

I set up my investments with this in mind.  In the reality asserts itself, even against those who think that their wishes mold the universe.  It is only a matter of time.

(05-21-2016, 12:19 AM)Kinser79 Wrote: I'd definitely agree should the Dollar lose reserve status.  The question is then what conditions have to be met for the Dollar to lose that status.  With the USD holding reserve status inflation can be exported.  That is one of major reasons why Argentina, Venezuela, Zimbabwe and other less developed countries have recurring bouts of chronic inflation and hyperinflation.

The world reserve status of the dollar depends on oil being sold only in dollars.  This is the main reason for the hostility towards Iran.  For those of you who doubt this take a look at the reasons for invading Libya even though Ghaddifi ended his nuclear weapons program.  This is been a one of the main reasons for the recent wars in the Middle East.  Consider for a moment that the Food for Oil program sold oil for Euros.

Like it or not, all of the recent wars in the Middle East with the possible exception of Afghanistan have been fought to maintain the petrodollar system.

(05-21-2016, 12:19 AM)Kinser79 Wrote:  

(05-20-2016, 10:49 PM)Galen Wrote: One thing that you can count on is the economic predictions made by the Fed are the exact opposite of what will happen.  They have a lousy prediction record.  Even worse than Eric the Obtuse, which is quite a feat given how clueless he is.

It isn't just the Fed.  Typically I listen to the talking heads on CNBC and other such news outlets in regard to my investments (as small as they are) and typically do the exact opposite of what they say to do.  I've not gone broke by counting on the so-called experts to be wrong.

I especially pull out when people start talking about "X" can only go up in value, because that indicates a bubble mentality has set in and it is a good idea to get out before prices crash.

[/quote]
Clearly, you are a right smart vertebrate which I can't say about many of the people here.

Russian and China are buying as much gold as they can.  Putin may be an authoritarian but by the usual Russian standards he is positively benign.  Please keep in mind that Russia is now pricing oil in Rubles which will help to end the petrodollar system.  It is not if but rather a matter of when the petrodollar system will end.  While Trumps foreign policy is uncertain in many respect the fact that the neocons support Hillary suggest that if she is elected then the wars will continue.

Truth is that people like Eric the Obtuse and Odin couldn't care less as long as the current welfare state is maintained which in the face of a collapse of the petrodollar system is unlikely.  The GIs and Lost that I knew were grateful that they wouldn't live to see this day.  They knew it would happen and spoke of it from time to time and I paid attention to what they said.  It has served me well through the years.  Perhaps there are some here who will benefit from their wisdom as well.

[Kinser79]

(05-21-2016, 05:14 AM)Galen Wrote: The world reserve status of the dollar depends on oil being sold only in dollars.  This is the main reason for the hostility towards Iran.  For those of you who doubt this take a look at the reasons for invading Libya even though Ghaddifi ended his nuclear weapons program.  This is been a one of the main reasons for the recent wars in the Middle East.  Consider for a moment that the Food for Oil program sold oil for Euros.

I'd definitely agree on both Iraq and Libya. It was a major controversy in my circles when I bluntly said that the whole point of messing around with Libya was not Ghaddifi (if they really wanted to just take him out they could do so at any time), rather it had to do with Libyan oil accounts. Wanting to substitute Euro with Gold Dinars as the backing for the CFA franc though would definitely hurt the Euro that is for sure, it would also probably eat into the need for dollar reserves as well.

That being said I don't look for the Euro to take international reserve status, the Germans don't want that, and Germany is the linchpin of the EU.

Quote:Like it or not, all of the recent wars in the Middle East with the possible exception of Afghanistan have been fought to maintain the petrodollar system.

Not surprising.

Quote:Clearly, you are a right smart vertebrate which I can't say about many of the people here.

I view the business media as propagandists just like all other media. In their particular case their job is to get the suckers to buy in before a crash--so it is a good time to sell when they say buy. Occasionally they happen to be wrong but as long as one profits selling short is no big deal.

Quote:Russian and China are buying as much gold as they can.  Putin may be an authoritarian but by the usual Russian standards he is positively benign.  Please keep in mind that Russia is now pricing oil in Rubles which will help to end the petrodollar system.

Certainly explains why the Neo-cons are wanting the US to involve itself in the internal affairs of Ukraine on the side of some right nasty figures.

Quote:  It is not if but rather a matter of when the petrodollar system will end.  While Trumps foreign policy is uncertain in many respect the fact that the neocons support Hillary suggest that if she is elected then the wars will continue.

I believe I said on the old forum at least once that HRC's policy is supported by those same people and as such anyone else would be a better choice.

Quote:Truth is that people like Eric the Obtuse and Odin couldn't care less as long as the current welfare state is maintained which in the face of a collapse of the petrodollar system is unlikely.  The GIs and Lost that I knew were grateful that they wouldn't live to see this day.  They knew it would happen and spoke of it from time to time and I paid attention to what they said.  It has served me well through the years.  Perhaps there are some here who will benefit from their wisdom as well.

The problem is the welfare state is dependent on reserve currency status. Other countries that have welfare states can afford to have them because they import raw materials and export finished goods. Trying to import finished goods and export raw materials and have a welfare state as the same time results in Zimbabwe if you don't have a reserve currency, or Greece if you have a currency that isn't under the direct control of the national government.

Given the current balance of imports to exports any attempt to maintain the welfare state as it currently exists without the petrodollar in place results in hyperinflation. Once the US loses reserve status all those checks suddenly come due all at once.

As for which currency will likely replace the Dollar I expect it will be the RMB, China is already the largest trading country and the second largest economy, though the Rupee is looking pretty good because China's held it's One Child Policy a bit too long. The Chinese seem likely to grow old before they grow rich.