Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Amark$p who wrote (100610)	8/10/2009 3:27:40 PM
From: maxncompany	2 Recommendations Respond to of 116555

I sure don't know. I'd like to hear Mish speak on that.

To: Amark$p who wrote (100610)	8/10/2009 5:07:27 PM
From: Elroy Jetson	1 Recommendation Respond to of 116555

The U.S. Dollar currently floats freely against other currencies. Let's say George W. Bush and the military seize the government -- and declare the U.S. Dollar to now be worth half of what it was one minute ago. How successful would he be? Immediately a black market for U.S. Dollars would appear, trading the U.S. Dollar for roughly double the price declared by George W. Bush. I guess George could then threaten to invade an evil doer nations which exchanged the U.S. Dollar for more than the official price. This doesn't seem to be going so well . . . Why was it so easy for FDR to devalue the Dollar? Because every nation was on the gold standard. FDR merely signed a proclamation which stated the U.S. government would pay more significantly more U.S. Dollars for gold. This effectively lowered the value of the Dollar. What would happen if George W. Bush offered to pay $2,000 an ounce for gold? Would this devalue the Dollar? Not very well. As you might expect, George W. could buy huge amounts of gold for double the market price, but the amount of gold in the world is not that large and wouldn't take too many Dollars. As for "devaluation, the U.S. Dollar would still be able to purchase the normal amounts of other commodities. So perhaps George W. could try to corner these markets, offering double the market price to purchase all items available for sale. Where would he store all these items? Perhaps the military could commandeer half of all homes to use as storage, and move the displaced families in to share the adjacent home of their neighbor? You see, one of the "problems" with taking nations off the gold standard was to remove the ability for a nation's leader to devalue their currency by fiat. George W. could declare the U.S. Dollar to be non-exchangeable except for the official price through the central bank, as many have tried in the past. People like George Soros have made billions of dollars in profit by betting against governments who do this. Because the truth is, there's still a real market out there with a real market price for the currency, which is different from the "official price". People the world around would be lining up at the Fed to buy U.S. Dollars at half price in order to buy U.S. assets. George W. could try to sell out the country to foreigners in record time. Except that the price of everything would double within seconds or days at the most. I went to Mexico for three weeks, immediately after they devalued their currency greatly in 1982. The Mexican government was only able to do this because the price of the Peso was artificially too high. The Mexican devaluation merely acknowledged the market price of the Peso. The price of things with only a local market, like air flights and hotels, remained low for a few weeks until tourist traffic increased, but the price of nearly everything else immediately adjusted upward. It's easy to over-value your currency if you have enough foreign exchange. It's tough to undervalue your currency. China, as an example, has tried to keep the value of their currency too low by making it illegal for their citizens to buy foreign currency. China effectively has two currencies, a domestic currency and an international currency. A lot of people make a lot of money arbitraging these two through various types of deals. China tries to minimize this by imposing the death penalty for black market currency exchange, but the lure of money being what it is . . What about a bank holiday. Could George W. do that if he seized the government? Sure! Why not. He could immediately bring to U.S. economy to a screeching halt. Would this benefit him in some way? What if thousands of banks failed this weekend? What about that! Huh? The FDIC would open them as usual. Congress would certainly immediately authorize a blank check for the FDIC to do so. Would this devalue the Dollar? No, afraid not. Debt destruction is by it's very nature deflationary. .

To: Amark$p who wrote (100610)	8/10/2009 6:05:55 PM
From: benwood	3 Recommendations Read Replies (1) \| Respond to of 116555

They have been devaluing the dollar by design for years now. A holiday is the LAST thing they'd want to do (not to mention virtually impossible w/o a basis for devaluation which they control). That is, they want to keep sneaking trillions to their friends WITHOUT devaluation, so that eventually when the game is UP, they will have transferred the entire middle class to the elite without anybody noticing; and then the elite will be worth the more in real terms than before, because they will have everything, and the middle class will simply be crushed overnight. At least, that's how they do it in Argentina.