Hi mindmeld; Wow; we're actually agreeing about something. Regarding the concept of letting the market determine the medium of exchange...
Let's take a look at this logically.
The dollar has no intrinsic value.
This is a true fact whether the Federal Reserve does QE or not. It's been this way for decades.
On the other hand, what exactly would it take to really destroy the value of the dollar? That is, to destroy it so completely that we would have to come to the store with a bushel-basket full of bills?
My understanding is that you believe that the dollar's value is kept (relatively) high by its scarcity. This makes a certain amount of sense but you are not aware that the number of dollars has been increasing by leaps and bounds for 80 years? Since the inflation of the previous decades didn't destroy the value of the dollar (completely, LOL), why do you think the inflation of the coming decades is going to do the trick? The lack of scarcity created by QE is relatively small, compared to the hyperinflation of the Weimar Republic.
On the other hand, there are plenty of examples of things that dropped drastically in value even though they remained relatively scarce. Beanie babies, for example. I know a guy who must have taken it in the shorts when he put too much of his coin store's stock into the things. I kept telling him that they had no intrinsic value, but I guess he knew that very few things in his store had much intrinsic value, and the things that did were the ones that were the most difficult to make a profit on.
-- Carl
P.S. QE purchases are about 65 billion dollars per month (or 780 billion per year), according to wikipedia. The US GDP is about 16.6 trillion dollars per year. So QE is around 0.78/16.6 = 4.7% per year of our GDP.
Sorry, I just don't see money flows of around 4.7% as leading to hyperinflation. Hell, that's not enough to lead to even good old Carter years inflation.
Now eventually that 4.7% could build up to quite a lot of inflation. But when that time comes, you'll know it by the sharply rising incomes, paychecks, Social Security checks, etc. And when it comes, what do you think the Fed will do? My bet is that they will do the opposite of QE.
This is what the Federal Reserve is for. |
