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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (44988)	11/7/2005 9:04:31 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 110194

Darffot believes that the interest rate, which banks offer on savings in a Monetarist economy, makes up for the losses resulting from chronic currency devaluation. I would prefer a Capitalist economy where the value of the currency is stable and lower nominal interest rates. .

To: NOW who wrote (44988)	11/8/2005 3:55:34 AM
From: Wyätt Gwyön	Read Replies (3) \| Respond to of 110194

Ron Paul asks Greenspan why a 1987 dollar is only worth 55 cents. but he is imagining a dollar that has been stuck in a mattress for 18 years. in the real world, people spend their dollars to buy goods and services, invest them, or save them. so somebody who was saving a 1987 dollar would have earned a cash rate on that 55 cents (in 2005 dollars), causing the 55 cents to compound to the point where it is in excess of $1 today. somebody who anticipated Ron Paul's asinine question and bought an 18-year US Treasury bond would have had a huge multibagger return. so Ron Paul is either being disingenuous or does not understand the most basic fact about money when he asks Greenspan this question. more broadly, one often hears claims of how money is debased because last century a dollar lost 95% of its value or whatever. this is a common "talking point" of gold hypesters. but similarly, the US cash rate over the 20th century caused $1 nominal to become worth 57 dollars thanks to a compound cash rate of over 4% nominal for the century. the real return was compound 0.5% for the century. so the saved dollar did not lose 95% of its value but actually gained in real value. btw, these facts and many others can be referenced in the excellent book, Triumph of the Optimists. i am always amazed at the abovementioned kind of goldbug claims about the dollar's "disappearance" without any consideration for interest on said dollar.