Glenn Beck: How stable is the Dollar?

[EmptyTimCup]

Tilted: Opnion Please ....

Glenn Beck: How stable is the Dollar?

GLENN: 50th. Banking stability, number 36. Our currency is the fifth ‑‑ we are the global currency, the global world standard and we are now ranked at number 50, five‑zero. And you expect that to last? Who are you kidding? Now, when the movers and shakers see the world economic forum come out with a report that says our currency is number five‑zero in the world, 50th in the world, if you hold a lot of dollars, what do you think you're going to do with them? If you see that our overall financial stability is 38, what are you going to do? If you think our banking stability is now, you see that the world economic forum places it at 36th, what do you think you're going to do? Don't you see what's happening? And at the same time all of these cases from these global organizations are moving in the opposite direction and saying bad America, bad America. What is our Nobel Prize winner doing? Our Nobel Prize winner is learning to spend even more money. They are now looking at a second stimulus package... for what? Well, one of the things they would like to look at is they would like to look at, you know, being able, being able to go back and look at the last five years or maybe seven years for companies that have been struggling and been losing money, give them a tax break for those companies that have been losing money. Let them say, "Well, I've got to claim, you know, the losses that I had six years ago." Here's an idea. What do you say that we start giving tax breaks to producers? What do you say we start giving tax breaks to people who are actually making a difference and hiring people? What do you say we give a tax break to, oh, I don't know, everybody, and stop spending money? Stop printing money. Stop spending money. Yes, I know what that means. There are people right now in their car who are financial quote/unquote geniuses who are still telling everybody to stay in the market when it was at 13,000, stay in the market when it was at 12,000, stay in the market when it was 10,000, all the way down to 7500: Stay in the market, stay in the market, stay in the market. Yeah, well, thank you for your help, genius.

Now, these same geniuses are telling you don't worry about the economic stability of the United States of America; it will turn around, don't worry about the stability of the dollar; it will turn around. It will not turn around. You know why it won't turn around? Because the people in Washington and the people in the globe don't want it to turn around. So what do you do?

[Tilted]

I don't know what the world economic forum report looks at, or what, specifically, they are saying. But, I have to agree with the general sentiment that the U.S. dollar is in a precarious condition, and there are significant risks for its value and stability going forward.

It's been getting beat up against most major world currencies since March. Our 30 year bond, though it is still trading at very low yields, is trading .19% higher than the British 30 year bond and .27% higher than the German 30 year bond.

If one looks at what happened to the Federal Reserve balance sheet during September and October of last year, they can't help but go . We've basically doubled our monetary base. When economic activity picks up in earnest, it's hard to imagine how that reality doesn't lead to serious inflation. There is so much more money in the system now that there is no way there will be enough increased economic activity to absorb it. That means price inflation for goods and services.

The government always says that they'll pull the extra liquidity out of the system when the time is right - but do we really trust them to get the timing right? Decreasing the monetary base is problematic in itself, and thinking you can do it in a way that both prevents high inflation, and doesn't stifle economic recovery, is a bit optimistic. It's just a messy business and needing to do it is a risky position to put yourself in. I'd say it's kinda like having sex without pregnancy protection and saying, 'I'll pull out at just the right moment.' Yeah, okay, no possible problems with that plan.

And, even if that isn't a problem, the enormous scale on which we are financing government activity through debt remains problematic. At some point, the promise of future productivity increase gets overwhelmed by the realization of how much legacy cost we are saddling that future productivity with. For the benefit of the global economy, the world can agree to play stupid for a while. But eventually, individual people decide that they don't want to be the last one who stops playing stupid, and they start to face reality.

[EmptyTimCup]

Originally Posted by Tilted

I'd say it's kinda like having sex without pregnancy protection and saying, 'I'll pull out at just the right moment.' Yeah, okay, no possible problems with that plan.

I have a 4 yr old that proves that doesn't always work .....

[ImnoMensa]

Originally Posted by Tilted

I don't know what the world economic forum report looks at, or what, specifically, they are saying. But, I have to agree with the general sentiment that the U.S. dollar is in a precarious condition, and there are significant risks for its value and stability going forward.

It's been getting beat up against most major world currencies since March. Our 30 year bond, though it is still trading at very low yields, is trading .19% higher than the British 30 year bond and .27% higher than the German 30 year bond.

If one looks at what happened to the Federal Reserve balance sheet during September and October of last year, they can't help but go . We've basically doubled our monetary base. When economic activity picks up in earnest, it's hard to imagine how that reality doesn't lead to serious inflation. There is so much more money in the system now that there is no way there will be enough increased economic activity to absorb it. That means price inflation for goods and services.

The government always says that they'll pull the extra liquidity out of the system when the time is right - but do we really trust them to get the timing right? Decreasing the monetary base is problematic in itself, and thinking you can do it in a way that both prevents high inflation, and doesn't stifle economic recovery, is a bit optimistic. It's just a messy business and needing to do it is a risky position to put yourself in. I'd say it's kinda like having sex without pregnancy protection and saying, 'I'll pull out at just the right moment.' Yeah, okay, no possible problems with that plan.

And, even if that isn't a problem, the enormous scale on which we are financing government activity through debt remains problematic. At some point, the promise of future productivity increase gets overwhelmed by the realization of how much legacy cost we are saddling that future productivity with. For the benefit of the global economy, the world can agree to play stupid for a while. But eventually, individual people decide that they don't want to be the last one who stops playing stupid, and they start to face reality.

What will they us to pull out the extra liquidity??? Taxes??
Who will that get pulled out of? Middle income?

We are screwed.

[Tilted]

Originally Posted by ImnoMensa

What will they us to pull out the extra liquidity??? Taxes??
Who will that get pulled out of? Middle income?

We are screwed.

Raising taxes would be fiscal policy (as opposed to monetary policy) that would serve to reduce money supply (M1, M2 or M3) - which are important metrics.

However, what I was mostly referring to was the monetary base (MB). That is really only affected by monetary policy (exercised by the Federal Reserve). In order to contract the monetary base, they would just sell off some of the assets that are currently on their balance sheets (e.g. U.S. Treasury securities, mortgage-back securities) and then 'destroy' the money they get for them. This is the reverse of the process whereby they 'created' the money with which they bought them to begin with. So, they printed the money (though that's mostly done electronically) and bought stuff with it, thereby expanding the monetary base. In order to contract the monetary base, they'd sell the stuff and burn the money (electronically).

[EmptyTimCup]

Originally Posted by Tilted

So, they printed the money (though that's mostly done electronically) and bought stuff with it, thereby expanding the monetary base. In order to contract the monetary base, they'd sell the stuff and burn the money (electronically).

I'd love to make me some free money electronically ..........



so do you think we are headed the way of Zimbabwe

[ImnoMensa]

Originally Posted by EmptyTimCup

I'd love to make me some free money electronically ..........



so do you think we are headed the way of Zimbabwe

I dont know what anyone else thinks, but I think inflation is just around the corner. Yous just cannot make up a trillion dollars out of thin air without halfing the money in existence.

[exnodak]

Originally Posted by ImnoMensa

I dont know what anyone else thinks, but I think inflation is just around the corner. Yous just cannot make up a trillion dollars out of thin air without halfing the money in existence.

The problem will not be inflation. It will be spiraling deflation straight into what the economists call the "liquidity trap". That's a situation where monetary policy cannot stabilize anything no matter what is done.

Its here and now. I cite one leading economic indicator: the CPI which was nearly zero for the last 12 month period and which is looking like it may go negative for the foreseeable future.

A shift towards lower salaries and wages will prevail because of the glut of unemployed. Everything will become less expensive, but the dollars will be more difficult to earn.

Those at the bottom of the income scales will become increasingly destitute and more proactively political in demanding government help and redistribution of wealth.

Dumping the treasury at the beginning of such a cycle cannot work. The more money printed, the worse the problem becomes. The Fed cannot go into negative interest rates to provide stabilization for banking. We've already had one warning from FDIC that they don't have enough in reserve to cover the exposed deposits. There probably won't be a second warning.

The government will have spent all of its ammo too early and will have nothing to work with at the end of the cycle when it would do the most good (i.g. infrastructure investment).

That is probably why most of the recovery act money is being held back until just before the 2010 elections. It will give the economy a good but temporary boost just before the Dems have to face the music. Then all hell will break loose.

[Tilted]

No end in sight for the decline of the U.S. dollar. It continues to lose value against almost everything - it even gave up a little ground the the British pound today.

Originally Posted by EmptyTimCup

I'd love to make me some free money electronically ..........



so do you think we are headed the way of Zimbabwe

No, it isn't that bad. For various reasons, the dollar is a little stabler than that, and the world can't let what happened there happen to the dollar anyway. The global economic structure would have pretty much collapsed before the U.S. dollar went the way of the Zimbabwean dollar. Though, I suppose that is possible.

[Vince]

Bush must have caused all this. Couldn't have been Oblamy and his stupid ideas.