Flying in the US may become even less pleasant

[Millie]

Originally Posted by tad10

Yuan¿hits 60th new high against dollar

UPDATE 2-Fed rate cuts don't tie China PBOC's hands - Zhou | Banking & Financial | Reuters

There's only so much china can do to control the yuan. I was never suggesting that we go to a 1 dollar = 1 yuan rate -- they have spent trillions to keep the yuan artificially low in relation to the dollar. It isn't just about lowering our export costs, it is also about raising their prices.

* * *

As to the big Fuck You. China still has the world's largest reserves of $. So the declining dollar hits them in the wallet. Well I am aware they no longer peg the yuan to the dollar but to a 'basket of curriencies' (which is what the dollar, yen and euro?) they still have enormous reserves and the dollar is still part of the basket. This means that our heroes in wall street (if noone else) can continue to make a good deal of money betting that the yuan will inch up. With their gains coming straight out of the wallet of China's central bank.

In any event this is far afield from the original topic.

This is the first thing you've said with which I agree. But you have to realize that we're not going to a) fix our own economy, or b) resolve trade deficits with China by devaluating the dollar. China's currency needs to keep inching up, and we (among others) should keep pressuring them to stop artificially keeping the value of the RMB/yuan low. But lowering the value of own our currency isn't going to address that issue. Furthermore, as China dumps its dollar reserves onto the market, it's going to devaluate the dollar even more. So we're playing a very dangerous game by trying to lower the dollar -- to speak nothing of the fact that, unlike China, we're not a country that can tolerate internal poverty in exchange for a flourishing export/import balance. If the dollar tanks, more foreign investment comes to the States at the cost of US citizens getting poorer relative to their counterparts around the world (especially in Europe, but also in some parts of Asia and even the Middle East). China can tolerate a booming economy at the cost of low per capita earning power because that's the name of China's game, and its citizens have never been accustomed to the middle-class lifestyle and its attendant comforts that Americans have come to think is their right for almost a century now. Americans won't tolerate a dollar collapse, even if that dollar collapse brings in foreign investment. And ultimately, the foreign investment being brought in will not account for the problems brought on domestically by the dollar's devaluation.

Rampant inflation, as is Ben Bernanke's apparent strategy, is never the answer to economic troubles. Germany in the 1920s should have taught us that lesson. Japan in the 1990s should have taught us that lesson. Our own economy in the 1920s-30s and 1980s should have taught us that lesson. But Bernanke seems hell-bent on repeating the mistakes the world has made time and time again.

One of the great strengths of the American economy, and even of the modern American way of life, is America's unparalleled consumption. A sharp decrease in prosperity of American citizens will tank that consumption, and in turn, cobble our economy.

[Soriak]

Banks are very reluctant to give out loans, even domestic investment takes a nose dive with "high" (relative) interest rates. Dropping them makes borrowing easier and should help patch things up for the time being. The US is probably the biggest debt-economy out there, just look at the average debt American households have, or the number of personal bankruptcies. This is no doubt bad, but isn't something that can be fixed right now and not at all without more government regulations, which I know Americans just love to support - especially close to elections

As for inflation as a fuck-off to China... that's like cutting off your nose to spite your face.

If you're dead, you can't press the button.

You'd think terrorists would use a dead man's switch... kill him, the grip loosens and the bomb goes off.

[tad10]

Okay you guys are the econ gurus -- I'm just a bad amateur. So here's my question:

Milllie isn't inflation triggered by the combination of a weak dollar and large money supply? Absolutely agree that the cut in rates is designed to weaken the dollar further but can't the fed simulatenously limit the money supply? Wouldn't the effect of the lower rates then be primarily to prop up the housing market which is currently imploding (as Soriak seems to be suggesting)?

An improved housing market then leads to improved consumerism (bankrupt individuals generally have a tough time buying washers & etc.).

I agree rampant inflation isn't a strategy but perhaps there are other results with the rate cut then such inflation.

[Taranatar]

Originally Posted by Burkex

Why would you want to leave the country? The value of the US Dollar is declining every day and will continue to go down. Basically, the president has fucked up the economy so badly with his personal war that the US Dollar completely sucks now. Good job. The US dollar is now equal to the Canadien Dollar. When I was a kid the Canadien Dollar was less than .5 to 1. Now it is 1 to 1. And don't get me started on the Euro. I have relatives in Europe and when they came here to visit they went on a shopping spree because everything was so cheap thanks to the value of the Euro. On the other hand, my brother just went to Paris and he said the conversion rate is completely nuts because of the declining US dollar. So yea if you are going to travel outside the US be prepaired to break open the piggy bank. Forget ordering some extra piece of paper to travel, the money issue is way worse imo.

The economy, actually, couldn't be better. That is, if you aren't ignoring any and all news on it.

[Millie]

Originally Posted by Taranatar

The economy, actually, couldn't be better.

Wow.

And yes, that's all I really need to say.

Wow.

[Millie]

Originally Posted by tad10

Milllie isn't inflation triggered by the combination of a weak dollar and large money supply? Absolutely agree that the cut in rates is designed to weaken the dollar further but can't the fed simulatenously limit the money supply? Wouldn't the effect of the lower rates then be primarily to prop up the housing market which is currently imploding (as Soriak seems to be suggesting)?.

The problem is that Bernanke is weakening the dollar by printing new money left and right. He's using inflation to weaken the dollar. It's impossible to simulatenously weaken the dollar via inflation and curb inflation.

He needs to pull his head out of his ass, let the housing market correct on its own (it's a casualty, sure, but better one casualty than many), and stop running his printing presses. At the rate he's going, we'll be lucky if the dollar is up on the peso at the end of the decade. (Obviously tongue-in-cheek there, but maybe not really? Ugh.)

[tad10]

Originally Posted by Burkex

Basically, the president has fucked up the economy so badly with his personal war that the US Dollar completely sucks now.

The Iraq war doesn't have much to do with value of the dollar. The cost of the war as a percent of GDP and as a portion of the US budget isn't all that much. Note: I said doesn't have much. I didn't say has nothing. The housing crunch, trade gap and budget deficit (a deficit that has a lot more to do with entitlements such as social security and medicare then with the military budget -- but the military budget is 18% part of the whole thus it can't be entirely discounted).

http://content.answers.com/main/cont..._us_fy2007.png

I know it is fun to blame Bush for everything from the Fall of Rome to that nagging hangnail on your right foot but once in awhile you might try checking the facts.

[Soriak]

Fighting high inflation is generally a major part of a central bank's job description, so I'd agree that the current path from the fed is a little unorthodox. On the other hand, I don't want to see what happens if the real estate market were to collapse. It doesn't end with some irresponsible house-owners on the streets... they'd now seek places to live in, driving the cost of renting up. Could this lead to people migrating from suburbs back to the cities?

The mortgages are probably also used to secure some other debt somewhere, which would be defaulting as well. I don't think anyone knows just how much falls apart once you pull on the thread. At least we're all aware of the consequences of inflation and while unfortunate, they're not devastating. (at least not at this level - we're not talking about Zimbabwe's inflation)


edit: the blame doesn't lie with the Iraq war, or with social security... this is a product entirely of VERY bad and irresponsible lending practices. I saw a chart the other day (not sure if it's available online - I'll check later) about missed mortgage payments. They start at month 2 and go up very quickly from there. So you buy a house, make the first payment, then can't make the second one. (and way more can't make the third one) Somehow the buyer thought this was a good idea, surely he'd win the lottery between those payments? And evidently someone had no issues giving out that loan, having to be completely aware that the person would have no chance to pay for it.

How could this possibly have gone wrong?

[GrobbeeTrull2.0]

The effect has already been seen in Europe and other places - banks that have invested heavily in the mortgage and insurance debt trade have had to be bailed out by their respective national banks (Bank of England and Bank of France, respectively that I've seen in the news thusfar).

Were the housing market to crash completely, it'd ripple it's way through Europe, and in to Asia. No one would like the consequences, and no one country (except the third world ones, amazingly) is shielded from it.

When we crash, so does a lot of everything else.

[rinthea]

Inflation is when your money is worth less than previously. Obviously creating more money is going to do this. Now, if the value of your currency (USD) decreases, this also has a very nasty spiraling effect of increasing inflation, by simple mathematics.

Soriak is right on the money (bahahaha) here, its the lending thats fucked everything. Bernake was put in a tight spot. Do I throw some more money out there, to help these people with their bad debts? Or do I let some of them bite the dust and stick to TARGETING INFLATION?

He has the pressure of next years election, his job, plus the precedent Greenspan set a while back, when he took the risk of keeping interest rates lower for longer than prudent, so as to avoid the Japan problem, where they had zero interest rates and years of recession. It seemed to pay off the first time. Or at least, the FED believes it did. Many believe that by keeping interest rates lower than needed, they created this recent problem of 'easy credit' with all the bad debts. The FED believe that China industrialization and its cash it brought with it, are the culprits.

Regardless, the cost of this plan, is your going to get inflation. That has to be paid off later. The only way this can be done is, higher interest rates in the future.

The problem with the latest decesion Burnake has made, is the FED does not have the power to affect aggregate interest rates they used too. With the masses of lending and todays global economy, credit creation has been taken away from them. The big players in the market now are the hedge funds that the FED has almost no control over. Markets set the price for captial now, not the FED. So they have diminished firepower in their traditional ways of fighting this problem by throwing cash at it.

Central banks have 2 major roles. The first one, is to stick to a policy of inflation targeting. Because this is the one expectation they have been able to control.
This is their most important job. When people are making decisions about their future. If this is stable, it makes things a lot easier.

Their second role, is the 'lender of last resort'. They have to do what they CAN that can to help the banking sector out in times of crises. This is what they are trying to do. They are valuing trying to help out in crises, over inflation targeting. Fair enough. However, the big problem here, is it doesnt help. They simply dont have the power. The difference is that structurally, this liquidity crises is different from the previous. Previously a few big players fucked up, bit it and caused a little liquidity problem. Currently, NO ONE wants to touch it. Who would? We dont just have a couple of bad problems, we've got a culture of creating dodgy debt, then repacking and reselling that dodgy debt to people that dont understand it.

THE fed follows the market, it follows interest rates. The market is raising interest rates. They shouldnt be bailing out people who fucked up. Thats what they're trying to do, and paying for it with inflation. The way this problem should be solved, is letting those who fucked up die. Like a gangrenous leg, you cut it off, dont put a bandaid on it. Its just going to get worse done like this.

[realadxm]

So what is it that people are going to import from America ? Last i checked you guys manufacture fuck all these days.

[rinthea]

Originally Posted by realadxm

So what is it that people are going to import from America ? Last i checked you guys manufacture fuck all these days.

er microsoft, coke, cisco, pepsi, banks, Hollywood etc etc get a significant portion of their revenues from non US consumers...

[Grooverider]

This is going to sound massively harsh, but I think in interest of public safety - this idiot should have been shot.

You just can't take risks with shit like this. If someone is wearing that gear in an airport, you just have to fucking shoot them. Otherwise you are risking the lives of hundreds within the building.

Of course - I have to reserve judgement until I see a picture of this retard. But seriously, if it's as obvious as it sounds, they just have to be put down immediately.

[Vatoreus]

Originally Posted by Grooverider

This is going to sound massively harsh, but I think in interest of public safety - this idiot should have been shot.

You just can't take risks with shit like this. If someone is wearing that gear in an airport, you just have to fucking shoot them. Otherwise you are risking the lives of hundreds within the building.

Of course - I have to reserve judgement until I see a picture of this retard. But seriously, if it's as obvious as it sounds, they just have to be put down immediately.

uh...

[Grooverider]

I think you probably missunderstand. I'm not saying this person deserved to die. I'm saying that security measures should be more stringent in situations like this.

Then again, you replied with two letters. So..