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Gold is probably warehoused and price controlled just like diamonds, you doomers just don't know it yet. Listen up Doomers, here's the scheme perpetrated by the man. They cause the price of gold and silver to artificially go up in value, a LOT if you hadn't noticed in the last few years. Then they make the stock market go way down, so that the regular guy sells off and buy precious metals. Once they are satisfied and the rich people have bought up all your cheap stock, the market will go back up, and the price of gold and silver will drop as some company "discovers" some magical new mine. Be afraid... be very afraid...*ghost sounds in background*
Well, if you guys haven't heard yet... the world central banks have pledged to back/pump trillions into the world markets. Just like the "hypothetical" situation I outlined last week.
The debtor nations are going to reduce the buying power of their currency to prop up the global economy. Most likely they should be able to stave off a depression... BUT, at the cost of reducing the debtor (developed) nations and increasing the wealth of the creditor nations.
This isn't the hypothetical situation you described. This sort of thing was being discussed months ago, its similar to what was done during other financial crisis.
The point is to get institutions lending again, how exactly is getting institutions lending as they once were going to debase the currency more than it already is? Lending is never going to return to the levels seen during the bubble so even with pumping money into the system the net effect is still negative. They are just trying to avoid a total collapse of the financial system.
What would happen if ALL the central banks of debtor nations, pretty much all of the developed nations, printed/injected trillions of dollars into their respective economies? This can be in the form of direct cash infusions to every citizen, etc. to eliminate their debt or increase their savings.
Of course this would devalue their currencies and it'll also devalue the creditor nations holdings... but, it'll reduce/eliminate the citizen's debt load as well as the value of the nation's debt holdings.
This action would also pretty much instantaneously leap frog the value of the currencies of the creditor nations... causing the Yuan to rise, Saudi Riyal to rise, and pretty much increase the purchasing power of those in these nations bringing them instantaneously into the first world.
Would this work? Or would something like this cause WWIII with the Developed nations vs. the developing nations? Creditors vs. Debtors?
If we did this, there wouldn't be a "cheap" labor argument anymore for the developing nations.
-chuck22b
What exactly do you think we are doing right now minus helping the average citizen?
What would happen if ALL the central banks of debtor nations, pretty much all of the developed nations, printed/injected trillions of dollars into their respective economies? This can be in the form of direct cash infusions to every citizen, etc. to eliminate their debt or increase their savings.
Of course this would devalue their currencies and it'll also devalue the creditor nations holdings... but, it'll reduce/eliminate the citizen's debt load as well as the value of the nation's debt holdings.
This action would also pretty much instantaneously leap frog the value of the currencies of the creditor nations... causing the Yuan to rise, Saudi Riyal to rise, and pretty much increase the purchasing power of those in these nations bringing them instantaneously into the first world.
Would this work? Or would something like this cause WWIII with the Developed nations vs. the developing nations? Creditors vs. Debtors?
If we did this, there wouldn't be a "cheap" labor argument anymore for the developing nations.
This isn't the hypothetical situation you described. This sort of thing was being discussed months ago, its similar to what was done during other financial crisis.
The point is to get institutions lending again, how exactly is getting institutions lending as they once were going to debase the currency more than it already is? Lending is never going to return to the levels seen during the bubble so even with pumping money into the system the net effect is still negative. They are just trying to avoid a total collapse of the financial system.
Your right... for now... but as long as the governments and central banks fund banks ("inject" liquidity) and not address the defaults and debt loads of households... they will continue to pump money into banks in the boat load.
Basically they are trying to pump money just as fast as the speed that credit is disappearing (because of defaults). So, in that regards in the short/mid term the injections would have a "neutral" effect.
The thing is though, if we still have a trade deficit in a couple years (which is very likely since transferring into a production economy takes time) ... eventually, that "surplus" in American dollars will trickle back into the US (currently I think a lot of foreigners are just holding them - since we still have a trade imbalance or buying treasuries) and...
Just as fast as the credit markets are deflating... they can just as easily inflate (the fun thing about the fractional reserve system). In 3-5 years... default rates should drop dramatically... and then what would happen?
There would be excess cash... deposits... and a rapid expansion of credit (money multiplier). Each dollar injected now... can "potentially" multiply 10X (10% reserve fund - of course they may raise this requirement to stave off too much money on the market)... causing the nations that injected capital to have heavy inflation. Of course... that's when interest rates will have to rise to try to real in the money supply. But by that time... our dollars would have dropped considerably more... while the Yuan, and other Creditor nations would have increased.
Printing out money and giving it out is going to be easier than reeling them back in... the central banks prints money or lowers interest rates to increase the money supply. The banks can only basically increase interest rates to reduce the money supply.
What would happen if ALL the central banks of debtor nations, pretty much all of the developed nations, printed/injected trillions of dollars into their respective economies? This can be in the form of direct cash infusions to every citizen, etc. to eliminate their debt or increase their savings.
No, chuck. The only way to get rid of debt is to write it off the books or bring it down to the debtors ability to pay.
When you print lots and lots of currency, it's like diluting soup. The currency drops in value.
We have a debt problem in this country, not a liquidity problem.
No, chuck. The only way to get rid of debt is to write it off the books or bring it down to the debtors ability to pay.
When you print lots and lots of currency, it's like diluting soup. The currency drops in value.
We have a debt problem in this country, not a liquidity problem.
Yea I know... we're heavily in debt... The right way is like you said... to get the banks to write it down/off or somehow arrange for the households/debtors to pay. As a result there may be more defaults, unemployment, bankruptcies, etc. etc.
The easy way, is to print money and to increase the money supply. Dilute the dollars... and make the debt become easily payable by diluting the value of the currency.
Of course, what this would do will increasingly make America on sale for creditor nations... AND hurt savers and those who are responsible.
Anyhow... that's what the central banks and governments are doing. I don't think Americans today could take the pain of a deep recession/depression. I think in the most part we prefer a long dragged out limited/diminishing prosperity.
Yea I know... we're heavily in debt... The right way is like you said... to get the banks to write it down/off or somehow arrange for the households/debtors to pay. As a result there may be more defaults, unemployment, bankruptcies, etc. etc.
The easy way, is to print money and to increase the money supply. Dilute the dollars... and make the debt become easily payable by diluting the value of the currency.
No, printing more money does nothing to pay off the debt. None of that money is going toward making life easier for struggling homeowners.
That's why the bailout won't work.
About a million more homes will default next year and our economy will continue to slow down because people are simply too over leveraged. All of their income is going towards paying off the interest that continues to accumulate on their debt.
Worse, as food prices rice and my wages decrease, I have even less money than before to go out and buy clothes and toys with. So inflation causes the system to slow down even more.
And what happens when you dilute the currency with more money?
There would be excess cash... deposits... and a rapid expansion of credit (money multiplier). Each dollar injected now... can "potentially" multiply 10X (10% reserve fund - of course they may raise this requirement to stave off too much money on the market)... causing the nations that injected capital to have heavy inflation. Of course... that's when interest rates will have to rise to try to real in the money supply. But by that time... our dollars would have dropped considerably more... while the Yuan, and other Creditor nations would have increased.
The fed is not injecting deposits into banks, its buying preferred shares. This doesn't change their reserves. Rather it makes the banks solvent again. It should increase the amount banks are willing to lend though as they will have more free capital. Its not going to return to what we were seeing a few years ago tough.
Quote:
Originally Posted by chuck22b
Printing out money and giving it out is going to be easier than reeling them back in... the central banks prints money or lowers interest rates to increase the money supply. The banks can only basically increase interest rates to reduce the money supply.
Stopping inflation is just as easy as starting it. You simply reduce credit and/or the money supply. There is also the issue of the velocity of the money supply, right now...its seems to be declining. But its not easy to measure or control.
Anyhow, the only way the FED would be able to inflate is by totally annihilating the dollar. Nothing being purposed would do this though. The FED is not going to be able to inflate after one largest global expansion of credit in history. Only after everything unwinds would inflation be able to show its head in a major way.
Quote:
Originally Posted by chuck22b
I don't think Americans today could take the pain of a deep recession/depression. I think in the most part we prefer a long dragged out limited/diminishing prosperity.
The rest of the world does not care about what Americans prefer. Americans are going to have to learn the hard way that they aren't the center of the universe.
The FED nor the government will be able to stop the unwinding, at best they can keep the system from a complete collapse.
Anyhow, once the intellectuals start to leave the country it will slowly collapse.
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Listen up Doomers, here's the scheme perpetrated by the man. They cause the price of gold and silver to artificially go up in value, a LOT if you hadn't noticed in the last few years. Then they make the stock market go way down, so that the regular guy sells off and buy precious metals. Once they are satisfied and the rich people have bought up all your cheap stock, the market will go back up, and the price of gold and silver will drop as some company "discovers" some magical new mine. Be afraid... be very afraid...*ghost sounds in background*
It has begun
