Dear At The Ask. Thanks for the questions.
<Why does the buying power of the dollar continue to increase? Or bettter yet if you could name the phenomenon what would you call it? >
More demand, declining costs. To expand the point - there are more and more people alive in an increasingly globalized world where dollars have increasing use. I have a few in my draw and a stack in the bank, so I can buy stuff around the world. I suspect millions more people around the world have a stash of US cash compared with how many did 10 years and 20 years ago. China, Japan and Saudi Arabia and a lot of others, receive payment in dollars for the things they produce. They can use those dollars to buy stuff from others.
But you can add to that, the happy circumstance that more and more can be done with less and less. It used to take thousands of people to produce cars. Now, they roll down production lines with robots doing a lot of the work. Robots don't get tired, don't need payment per hour. Similarly, software used to take ages to develop and the cost of development was shared by few end users. Now, there are sophisticated software systems and the costs are shared by millions of users, making unit costs near zero. Similarly for silicon chips. It used to take a lot of cost to make chips which didn't achieve much and the costs of which were shared by few end users. Now, high-powered superfast chips are produced with low costs and the costs are shared by many millions of people, so the unit costs are dropping and functionality is increasing.
The gains are truly spectacular and increasing, so the process is accelerating, not slowing.
<How long has this trend been in place and when was it last not in place? > This process has been in place since chimpoids first swung and axe, lit a fire and rolled a wheel. The process has accelerated ever since [a few glitches like the Black Death, Dark Ages and the like notwithstanding]. The process is accelerating still. Doomsters think it'll end in tears. It never has in a million years [other than for the relatively few unlucky ones who were run over by a truck, poisoned by Thalidomide, died in a plane crash etc]. People like it when their lives get better, so there is strong impetus driving the process. Not many people like their lives to get worse. So they opt for better rather than worse computers, cars, calculators, sunglasses, medicines, tooth repair, houses and so on and on and on and on...
<Why do people keep going on about a bond bubble and if bonds aren't a bubble why not? >
Now that Telecosmictechdot.com irrational exuberance has been shown to be a bubble, people are thinking bubbles are everywhere. I don't know about bonds in particular. Maybe they are, maybe they aren't.
<Is the US really making vast profits or are we merely mortgaging the future? >
Yes, vast profits, and so am I [because I own the USA via my ownership of QUALCOMM]. The USA is raking in umpty billions thanks to Microsoft, Oracle, Mobil and untold other companies. Individuals have mortgaged their future and will have to keep working for all of their lives. In a competitive world, there'll be less for spendthrifts who wasted their way through their lives. If China does as I expect, and makes themselves a better place to invest capital, the USA will be in a spot of bother. The USA is a high-tax place. If China doesn't rob capitalists, then capitalists will invest with them.
<How can the US ease the burden of debt that we have incurred over years? >
Learn, Work, Save, Invest and spend carefully.
<What effect will the measures that the US takes to ease it's burden of debt have on the dollar?>
If people run their country well, the value of their country will go up. But that doesn't mean the currency would go up. As Uncle Al KBE is doing, he can keep the currency at a constant value while the value of the USA zooms, by the simple expedient of pixelating billions more dollars into existence. If they run their country badly, it's bad news all round, including for the currency. Debt is okay - it has useful functions. But it introduces volatility risk and therefore risk of loss of assets.
<How will gold and other commodities perform relative to the dollar after these measures are implemented? >
I suspect gold will stay in the $250 to $400 range. I guess it'll drop because people around the world have got a fair dose of Poverty Effect [replacing their earlier Wealth Effect] and gold is a luxury purchase. Therefore, demand for gold will drop. Not only that, the speculative mania for gold of the past year will evaporate as speculators realize that there really isn't going to be a financial implosion and that Uncle Al KBE, in concert with the other currency managers, will contrive to maintain currency relativities, while they print heaps of fresh money, thus avoiding deflation and inflation.
Meanwhile, petatrillions of beautiful cdma2000 phragmented photons will work their magic around the world, creating peace, light, harmony, happiness, wealth, health and longevity. Jiang Zemin is having a visit to King George II and Hu Jintao will soon be taking over to continue the remarkable renaissance of China. CDMA is working wonders for them.
That's my theory!
Mqurice |
