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

To: TimbaBear who wrote (45032)	11/8/2005 10:51:05 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

What about the unsaved dollar? presumably it was spent or invested. the only dollars that could be of relevance to Ron Paul are the ones gathering mold under mattresses for 18 years. i believe those dollars are in the minority, but it must be said that implicit in the fiat currency "social contract" is the requirement that the dollar holder should do something with the dollar besides stick it in a mattress for decades on in. that reality probably raises the hackles of libertarian gold hypesters, but i consider it one of our government's lesser evils. if you spent the dollar you earned in 1987 on goods and services in 1987, then you got your money's worth. to buy the same goods and services today would cost more, but you'd be buying them with a dollar you earned in 2005, and it'd likely take you less time to earn the money thanks to real income growth. i say "likely" in the sense of "on average", but critics have pointed out that lower income earners have had flat or negative real income growth the last 20 years or so. this is mainly due to the collapse of organized labor in the US since the 1970s, and the rise of slave labor in Chindia as a substitute for labor here. i think these issues are important, but separate from the question of US interest-rate policy. Your argument implies that more dollars in circulation is not a dilutive factor. i really wouldn't say that at all. but think it's very complex, like the weather or something. i would say it's not as straightforward as gold hypesters have implied. if they were right, the US dollar would have collapsed when we had a 3% current acct deficit. but we have been able to sustain 5% plus "twin peaks" for years now, thanks to the Asian mercantilists. these helpful fellows buy our debt and then monetize and/or sterilize it. to the extent that they monetize it, they are increasing circulation back home, which should be inflationary. when this will all come around to slap the US in the face is anybody's guess--as mentioned, i have some Brazilian debt because their monetary policy seems less insane than our own. it seems there are a lot of moving parts that are not very predictable, mainly because it's no longer just us and the French we have to worry about -g-. we could have a big inflation blowup, who knows. but my point is, to the extent fiat currencies will be continued (and i think they will), at some point, you have to rein in the growth, and CBs will do this. just look at Brazil and their 14.5% real rates.