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The More Fed Chairmen Change, The More They Want To (Unsuccesfully) Kill The US Dollar
What dollar speculation was in 1979, so HFT is today (Tobin tax seems to be the universal antidote). Yet, even 30 years ago, cooler heads prevailed and despite contrary desires to the opposite, no doubt spearheaded by the Federal Reserve, the dollar did recover after it got once again dangerously close to the precipice.
The money (no pun intended) line from a 1979 NYT article :
The United States does not want to surrender the power of covering its big deficits with dollars that it can print or give up its role as world monetary leader. Other countries, such as West Germany and Japan, are unwilling to take on new responsibilities or a monetary role that might cause their huge trade surpluses to decline.
And now, like back then, unless countries believe they are exclusively self-sustaining and have no need for global trade ever again (don't even think this within thoughtshot of Tom Friedman or the man will suffer a quadruple heart attack coupled with a few strokes), any and all discussion about the imminent death of the dollar is quite exaggerated (despite the Chairman's unquestionable desire to roundhouse the living daylights out of every portrait with Ben Franklin on it).
ht/ Geoffrey Batt
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I don't think the Fed is that stupid to kill the dollar.
I think they might be smart enough to pull it off.
If the stock market went into a free fall, they might test the limits of the dollar to around $72. If the Fed lose control the situation and they will, one of two things will happen.
1. Dollar is killed, Stock Market temporary saved.
2. Dollar is killed, Stock Market crashed.
I think #2 is more likely to happen then #1.
Repost from an earlier thread:
Check out this post by Chris Martenson over on his site http://www.chrismartenson.com/blog/insatiable-demand-us-debt-or-somethin...
Truly unbelievable. It seems every government in the world is printing money and buying each others debt and getting away with it. Defying the laws of economics that have governed our planet for thousands of years. If this was truly possible why turn off the presses? Why not put everyone in a McMansion with a Maserati in the driveway?
There aren't really "laws" of economics. It never has been a bona fide science. Categories here are vital to possibly getting a fix on what will and won't work.
Traditions, habits, rules, guidelines maybe but there are no laws.
Aside from nature, and what passes for the "Rule of Law" here in the United States---go ahead and try and make that one stick given the more egregious and frequent rapacious violations of buxom, begowned Lady Justice by the very legislators that concocted them for the proletariat and the 'reasonable doubt' scenarios presented to 12 gullible people chosen for their willingness to entertain scenarios of "if the glove don't fit, you must acquit" mentality---there are no laws.
Once that notion is dispensed with, we are left with economics likely being a craft or an art. It is our muse
then which is the determinant.
And we know where that can lead us.
It is our so-far practical obsession with trying to morph economics from art into a Newtonian, Einsteinian science with fixed man-made laws that gets us into a box that smothers even one possible original thought.
Examining the entrails of failed Zimbabwean, German or USA 70s-80s era rampant QE that might give us the clues that will stand Keynes, Adams, Ricardo and Chicago School economic history on its head. Maybe they were just artists with an ephemeral hold on our imagination, simply because there were no better artists at their respective times.
Perhaps what we have here and there is really a failure of our individual and the collective imagination.
"Reality" is always just that.
"There aren't really "laws" of economics. It never has been a bona fide science."
Its not "science" in the sense it isn't predicated on the scientific method, but I struggle to with the idea there aren't "laws" of economics. Perhaps its semantics. Either way, approaching economcis as if it were a hard science is a big part of the problem.
Economic theory, from its very beginnings, has endeavored to discover and formulate the laws governing economic behavior. In the early period, which was under the influence of Rousseau and his doctrines of the laws of nature, it was customary to apply to these economic laws the name and character of physical laws. In a literal sense, this characterization was, of course, open to objection, but possibly the term "physical" or "natural" laws was intended merely to give expression to the fact that, just as natural phenomena are governed by immutable eternal laws, quite independent of human will and human laws, so in the sphere of economics there exist certain laws against which the will of man, and even the powerful will of the state, remain impotent; and that the flow of economic forces cannot, by artificial interference of societal control, be driven out of certain channels into which it is inevitably pressed by the force of economic laws.
It's funny (or not), I just kind of assumed this was what was going on. Just like I assume the Fed is a festering rotten vault of corruption. Just like I assume there is not enough gold in existence to cover all the paper gold. While I am pissed at them, there starts to be too many "thems" involved in all of this. It is us. We have to stop. The thing I keep coming back to is how do we shut the system down to fix it when we are dependent on it for our survival? It needs to be shut down to be fixed. But the fixers will be corrupt too. Don't programmers always leave themselves a back door?
People need to swing, for sure, but it is our culture of entitlement that is corrupt.
Thanks for the post. Validating.
it is our culture of entitlement that is corrupt.
I have an idea, that I might write up someday in some detail, that we were corrupted on purpose, and that the easy credit / easy money environment was the vehicle. The short version is this: Humans will only engage in long term strategic thinking when they feel threatened. Human behaviour and social norms become more "conservative" during lean times. Fat years are "party time", and party time means not worrying about what's going on around you. It's my observation that humans can be placed in "party mode" in just a few fat years, maybe 2-3 years. Imagine if there was a way to make party time last for 25 years?
I give you: Alan Greenspan. People became shockingly short-sighted and materialistic during his reign, and the hand-off to Bernanke changed nothing. We've been living in a credit bubble for the past 25 years; money has been too easy, which means life itself has been too easy for that period. There's an entire demographic in the U.S. that has lived their entire adult lives in this environment. This long period of fat years helped us learn to eschew politics, to our current dismay.
Try to imagine a cultural environment that could possibly give birth to something like "Real Housewives." How is it even possible for people to believe they should be able to live that way, then shamelessly allow themselves to be recorded for a television program?
SWRichmond,
Regarding this, "Humans will only engage in long term strategic thinking when they feel threatened."
At first blush, this has a ring of truth to it and I wonder what my keyword would be for a psych. abstract lit research.
Then I think about the Chinese. They have a culture built around long term planning, or so the PR would have me believe. Could be, though, they live in a greater state of threat than us plump Americans do.
I know I did not dig myself out of debt until I became aware of peak oil. Then I got scared. Then I got a plan and carried it out.
Maybe a thread will come up sometime where energy talk would be appropriate.
Later on!
Fed and treasury are more and more diametrically opposed. The Fed can "mend" the dollar at the expense of any hope on exports - not that a weak dollar is all that productive anyway - while choking the federal government and suffocating them under their smoldering pile of Treasuries - all $9T worth in due course. Regardless dollar is in secular decline so any short term move on rates would likely be shadowed around the world all the while as China moves to grow its government debt market. What is Japan commiting harikari with the stronger yen or are they sayng somehting more profound about the changing paradigm/trade focus. No matter how hard they try the world isn't looking to regress. As McCain said, and he shuld know, the dollar (US) is acting a bit like the 40 year old actress still trying to get by on its looks.
It's not that the dollar will die, necessarily. Remember, ultimate monetary death occurrs when no one will hold the dollar, ie panic. There's a lot of inter-connectedness, so such a sudden collapse is less likely. Within current conditions, I wouldn't bet on that scenerio, though if it was ever to happen, I wouldn't be surprised. What I think is a more likely outcome is that people who rely on the dollar will be progressively poorer. Look at the Pound for some foreshadowing.
You must have physical gold. That is the only way not to be surprised.
And what are you going to do when "they" make ow-ning physical gold illegal?
anon
"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." - President F.D. Roosevelt, 1933
Thank you for your Tom Friedman dis. At best he's an undercover CIA agent practicing the evil art of disinformation. At worst he's as dumb as he appears. I don't know which is which but my money is on the CIA.
Logic dictates that the powers-that-be not destroy a good thing. That alone bodes well for the dollar. But greed and fear always trump logic and as I always say, desperate men will do desperate things.
I have saved every WSJ printed over the past 2 years for my own little slice of history. Each copy is in pristine condition and never been opened. Last weekend I took them out of storage and scanned the front page of the past 2 years of the Journal.
When insanity has been around for awhile, it begins to look pretty reasonable. What was once ridiculous slowly becomes acceptable and then down right respectable. One can only recognize this when one looks at the progression of ideas from the wild side to the accepted side to the proposed policy and finally to implementation. We're talking retrospective big picture viewing rather than naval gazing.
We're all familiar with the phrase "It sounded good at the time" right? The slippery slope of madness is easily mistaken for prudent policy during stressful times. Please don't make the mistake of assuming that the players have good intentions. Doing so is usually fatal to those making the assumption.
The errant Columbus disproved the flat-earth theorists (more likely, threw it in the face of the Catholic Church)
a few months under 517 years ago.
OPERATION:Duck and Cover:o0o0o mark 93 testing.09.11.01 10.11.09
World Order phase 3 security contingency action.
RFID set in place.
H1N1 set in motion.
Middle East Security/invasion Force set in place.
Dollar and Zero Interest exposure set.
Militarized global police forces set.
Mahdi seated as head of U.N. Security Council set.
...action ready... minus two... countdown 9 days 14 hours 50 minutes 3 seconds mark....
Geithner quote from yesterday from Reuters....emphasis mine.
"WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner said on Thursday that a strong dollar was very important to the United States and the rest of the world needs to be convinced Americans will be more thrifty in future.
"A strong dollar is very important to this country, I mean that, and it's very important that people recognize it," he told a news forum at the Newseum in downtown Washington."
Gee, would a person think he placed that emphasis on there because he is thinking that maybe, just maybe, no one quite believes him?
Another quote in regards to the Fed used the phrase "...our independent Fed".....thanks for reminding us tax cheat.
increased debt into an unproductive economy only adds more strain to an already stressed economy. the lack of willing credit only increases the relative value of the domestic currency. deflation and depression are integrated. the fed has only made things worse, and we are at point of no return. USD is going up and asset prices across the board will decline. until enough relative collateral supports credit levels, this trend would most likely continue. either credit gets reduced or collateral increases.
I've been reading Jim Sinclair since 2003, and he has an interesting take on this theme. He's been calling for the US Dollar to crash, and in order to restore faith back into the currency, the US will re-introduce a Federal Reserve Gold Certificate-Ratio.
http://jsmineset.com/2009/01/08/rentenmarc-to-the-rentendollar/