The Spring of Discontentment

Author,

You wrote:

"... and once again like every paper and/or political money ever circulated in known Human history the Dollar is fading."

What do you make of Bernanke's remark in the Senate Testimony on 28 Feb, and the related comment? (emphasis mine).

Bernanke also told the Senate panel that the dollar's depreciation is 'a positive factor' for reducing the U.S. trade deficit.

``This is the Bernanke shock, causing much faster dollar depreciation than expected,'' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest publicly traded lender by assets. ``We are entering into another world of dollar weakness. The Fed is not unhappy about that.'' (Bloomberg)

Re: # 10

And that my friend is the reason Islam opposes this INTERESTing terrorism!

For the guilty to delcare a war in return is true terrorism!

Sleep well.

Government is not the only guilty party. It doesn't simply print money from a mint. It borrows from the Fed which is comprised of private banks that create money out of thin air by the magic of fractional-reserve banking and then charge interest on it. These banks are also huge beneficiaries of this 'taxation'.

Dear Mr. Goldfinger, do invest in Gold, 20-30% I'd say. Countries do too! Reserves, you know!

The US governemt only mints cents, by the way!

Thank God, OUR women prefer 22K instead of the 14K trash that the liberated (?), rich, sexy(?) and fair-skinned (!) women abroad do.

We have something right at least!

Don't they have huge oil pools? Dunno if Gold can ever be considered as a measure, it is the advance in science and technology that still holds them in good stead.

We would have to go to the occidental nations for newer medicines and technologies and this would ensure their standing in the world.

I thought India is the largest consumer/buyer of gold in the world. Can't we assume that the citizens' wealth to be the nation's when the situation arises?

Re: # 6:

Loose monetary policy would likely increase inflation, resulting in reduced purchasing power.

Ejaz,

(but thanks to all the Fed rate cuts we will also have a reduction in purchasing power. )

Why wud rate cuts result in a reduction in purchasing power.

Regards

Re: # 3
Von Mises would have the last laugh...down with Keyenes...down with Freidman...

Ejaz you have presented a more technical and if I might say a microeconomical view of the things. What I ahev presented is the fundamental analysis and the underlying reasons for this economic meltdown.

Its so ironic that only people without formal training in Economics are able to comprehend the phenomenon lucidly because modern education, that has effaced the basis of sound money, has just rendered modern economists incompetent and impotent.

As far as energy prices and outbidding of third world countries is concerned, Pakistan just experienced its Winter of discontentment with no electricity, no gas and no water in many parts of Rawalpind, Karachi, Lahore and Peshawar.

Once the scramble for Energy resources begin...the third world countries would find themselves outbid...even at $150 per barrel Indian and Chinese industries would coming to a grinding halt...moreover the cheap bonanza of cheap goods manufactured in Bangladesh, Malaysia, Vietnam, china and exported half-way around the globe to Europe and U.S. would come to an end...

WTH? … trying again …

Here’s the web address ….

http://www.energybulletin.net/12125.html

Here’s another attempt to post the live link …

This theme has been coming up more and more recently. Here is a link to a bit dated article with similar ideas … one which also explains the subtle reasons for going to war against Iraq.

Good points. The most recent spate of commodity price increases (everything from wheat to oil to gold) occured starting August 2007. This is when the Federal Reserve decided that the balance of economic risks had shifted from being evenly balanced between growth and inflation, to being more weighted towards the risk of an economic downturn. The hope was that cutting short term rates would prevent transmission of a financial crisis into the broader US economy, while inflation would be contained as aggregate demand cooled. Unfortunately the reality has been an upsurge in inflation and no contraction of credit spreads, so longer term interest rates haven't dropped like they should have, which means most interest rates in the economy have not gone down as much as Fed Funds have. Since credit is hard to get and the cost of credit overall hasn't come down much, we may be headed for a recession after all, but thanks to all the Fed rate cuts we will also have a reduction in purchasing power. In other words, stagflation.