The U.S. Economy: Stand by for more worse news
- Thread starter Brian Foley
- Start date
And what makes you think that is going to happen? For that to happen, the US economy would need to become insignificant. I don't that will happen any time soon. The US is still the largest single economy in the world. I expect what will eventually happen is that large trading block will become even more prominent. That's already evident. There could be some movement to replace the Mexican peso and Canadian and US dollars with a new currency. I think that's far more likely than the complete demise of the US economy or the demise of the dollar. As long as there is a demand for US goods and services. There is and will be a demand for the US dollar. The US dollar isn't going to suddenly fall out of favor. However, it may evolve over time as European currencies have done. But even that is a big stretch.
sculptor
Valued Senior Member
alternately:
President Obama’s appointment of career bureaucrat Janet Yellen as Chairman of the Federal Reserve Board is evidence that the US policy of continuing to cheapen the dollar via Quantitative Easing will continue. Her appointment increases the likelihood that demand for dollars will decline even further, raising the likelihood of much higher prices in America as demand by trading nations to hold other currencies as reserves for trade settlement increase. Perhaps only such non-coercive pressure from a sovereign country like China can wake up the Fed to the consequences of its actions and force it to end its Quantitative Easing policy.
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And it doesn’t help the U.S. dollar when the president of the Minneapolis Federal Reserve, Neel Kashkari, says “it’s possible” the U.S. dollar could lose its status as reserve currency during his lifetime. (Source: “Fed’s Kashkari says dollar could lose reserve currency status,” Reuters, July 15, 2016.)
President Obama’s appointment of career bureaucrat Janet Yellen as Chairman of the Federal Reserve Board is evidence that the US policy of continuing to cheapen the dollar via Quantitative Easing will continue. Her appointment increases the likelihood that demand for dollars will decline even further, raising the likelihood of much higher prices in America as demand by trading nations to hold other currencies as reserves for trade settlement increase. Perhaps only such non-coercive pressure from a sovereign country like China can wake up the Fed to the consequences of its actions and force it to end its Quantitative Easing policy.
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And it doesn’t help the U.S. dollar when the president of the Minneapolis Federal Reserve, Neel Kashkari, says “it’s possible” the U.S. dollar could lose its status as reserve currency during his lifetime. (Source: “Fed’s Kashkari says dollar could lose reserve currency status,” Reuters, July 15, 2016.)
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Well here is the problem with that, that bureaucrat along with her fellow bureaucrats ended quantitative easing in 2014. Two, Kashkari, is 42 years old. He could could live another 50 years. And there is a difference between possible and probable. It's possible the world will be destroyed by a meteor impact tomorrow. But it's not very probable. Too much would need to happen in order for the US to lose reserve currency status. And I just don't see that happening. But a Trump presidency would be good first step. I too could see the US dollar losing reserve currency status if Republicans succeeded in doing some of the stuff they have attempted to do in the past e.g. cause a debt default and say they want to do in the future. But my faith is with the American voter. I don't think American voters are that stupid.
If the US dollar did lose its status as a reserve currency, it would devalue US currency. That would make US produced goods and services cheaper and it would raise the price of imported goods. It would be a competitive advantage. But it would also make borrowing money much more difficult.
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An alliance between Iran, Iraq, Syria, and Russia, would provide them with market control (cheapest production costs of the highest quality, in adequate volume to drive the spot price) of the world's oil. The use of the dollar as the world's reserve currency depends on its use as the currency of oil trading, and its favored position in Japan, Germany, and China. The Chinese, who already own major Africa, might then be offered a deal: dump the dollar, and get cheap oil (and natural gas) of the highest quality, plus backing in Central Asia. The Germans might then be offered a deal: dump the dollar and your Islamic terrorist problems vanish. The Japanese might be offered a deal: Russia and China will keep each other off your neck, plus you will get some serious help with Korea, if you start cutting loose from the US. Maybe even a favorable settlement of some territorial matters currently at issue.
How long would that take? Say if the Palestinian situation blows up, and the US has to concede Syria and Iraq.
The biggest effect on Americans - outside of everything suddenly doubling in price at WalMart - might be a fire sale of certain American assets to the Chinese. The original Japanese plan, of Japanese lordship over the factory (China), the farm (America), and the boutique (Europe), was essentially sound - they just forgot to regulate their bankers. The Chinese might not make that mistake, at least not until too late.
LOL...true to form Iceaura you are bathing in bullshit again and writing about stuff of which you are totally ignorant. The reserve currency status of the US dollar isn't tied to the petrodollar. If that were true, the US currency wouldn't be a reserve currency today. The Euro and British pound and Japanese yen wouldn't be world reserve currencies either. You are regurgitating another popular extremist myth.
The reason the US currency is the most common and popular reserve currency is because of the US economy. The US economy is the largest in the world. Its military is the most powerful in the world. It's the most influential country and the most trusted country in the world. That's why the US currency is the common reserve currency. It has nothing to do with oil.
Two, if Iran, Iraq, Syria, and Russia could control the oil markets they would. But they can't. Russia is suffering greatly because of lower oil prices. Russia has on several occasions attempted to coordinate production decreases in order to increase the price of oil. None of it has worked. Syria and Iran are responsible for about 2% of world oil exports. Iran, Iraq, Syria, and Russia account for about 20% of total world oil exports. That's not enough to control the market as you have asserted. And that doesn't even begin to account for US oil production capacity. US oil production is below capacity owing to a global oil glut and lower oil prices.
This really isn't that difficult once you get your head out of the muck. The reason US currency is the most common reserve currency is because the US is the largest economy and its the most trusted nation. It's debt is considered nearly risk free and is used as such in financial modeling.
Now if the US economy significantly declines and I mean significantly and irrevocably i.e. loses 80% or more of its GDP and the trust of other nations, then it very well could lose its reserve currency status. Baring Republican control of congress and the presidency, I just don't see that happening.
sculptor
Valued Senior Member
Meanwhile the fed continues to print money to satisfy demand.
If that demand falters, then the supply will be in excess of what's needed.
It seems that there is a balancing act between supply meeting demand, and overshooting demand.
Ergo, any threat to international demand via other reserve currencies could tilt the balance.
If/when that happens how fast will the fed react?
If that demand falters, then the supply will be in excess of what's needed.
It seems that there is a balancing act between supply meeting demand, and overshooting demand.
Ergo, any threat to international demand via other reserve currencies could tilt the balance.
If/when that happens how fast will the fed react?
The Fed rigorously monitors the money supply. Just as the Fed can increase the money supply, it can decrease the money supply. It's called tightening.
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It has to sell bonds to do that. If the market-setting oil producers sequester their trade to some other currency, selling T-bonds is going to get less effective and more complicated in a hurry.
No. It doesn't. The Federal Reserve has a number of tools it can use to tighten i.e. reduce the money supply. It can sell assets on its balance sheet which could included bonds. But it also has other tools. It can raise reserve requirements or it can raise interest rates. Raising interest rates doesn't reduce the money supply directly, but it slows demand which is the effect a reduction in the money supply would produce. So it produces the same effect.
That's nonsense. So now, instead of Syria, Iran, Iraq, and Russia, it's "market-setting oil producers"? Well, that doesn't help you out either. There are only two oil producing countries interested in using an alternate currency i.e. Iran and Venezuela and they are insignificant oil exporters. Two, there simply isn't enough money involved to cause much distress to the US Dollar. For some perspective, Apple Computer is worth more than the annual oil exports of the top 10 oil exporting nations. Think about that for a while. The top 10 oil exporting nations export a little over 500 billion dollars worth of oil a year. Compared to the 18 trillion dollar US economy, that isn't much. Apple, one American company, is worth more than that. And then there is the problem of getting all those nations to go along with your dump the dollar scheme, and that's going to be a very difficult sell to make given the the very recent deprecation demonstrated in other major currencies and instability inherent in those currencies.
The bottom line is it's not going to happen, at least for the foreseeable future. There won't be a dump the dollar cabal by oil producers which will have much of an affect. If Trump should win the presidency, that's a whole new banana as I previously wrote.
Our Central Planners have determined another 4 TRILLION of their magical fiat currency units could be needed to offset any potential 'Economic Shocks' - you know, because we're in the midst of "The" Great Recovery from "The" Great Recession (see: Greenshoots). You remember, the one where our Central Planners bailed out the richest 0.1% of America with generational debts and now is all well with the world - their world.
From PDF:
Finance and Economics Discussion Series
Divisions of Research & Statistics and Monetary Affairs
Federal Reserve Board.
From ZeroHedge:
Now you tax them in return.
You may, for instance, tax their pensions, their homes, their boats, their savings - all of it. If they garnish income above a certain minimum amount, you may want to take... err tax, all or most of it. Say, a 90 - 100% tax. You may now begin to use the "Political Process" to redistribute their wealth for the "Good of Society". If they try to escape, without paying their fair share - as determined by you, then you may use the State to legally kill them (well, only should they resist doing their part for the "Greater Good"). Passport restrictions - for example. And, once the magic voting has taken place, who would resist "The" Will of "The" People?! Surely all patriotic Muricans will want to 'do their part' as best they can?? Plus, think of all the Jerbs to be created building State-run Welfare "Retirement" Villages.
FREE to live in too!
LOL
Just something to bare in mind as we march Forward .....Guidance ahead!
Yay, democracy!!!
Progressive Central Banker style.
From PDF:
Finance and Economics Discussion Series
Divisions of Research & Statistics and Monetary Affairs
Federal Reserve Board.
QE and Forward Guidance.... LOL
From ZeroHedge:
Hey Millennials, you do know your demographic has now eclipsed the Baby Generation? You may now begin redistributing their wealth, to you, in the form of taxation. Like they did to you, via the T-Bonds and Municipal Bonds they used paying for the 'Public Services' they enjoyed - like building a football stadium or their sweet-arse Government pensions, with benefits and healthcare you could only dream of ever having. See how it works? They sold bonds on you, knowing you'd go without paying it all back - making them the richest generation to grace the Earth.
Now you tax them in return.
You may, for instance, tax their pensions, their homes, their boats, their savings - all of it. If they garnish income above a certain minimum amount, you may want to take... err tax, all or most of it. Say, a 90 - 100% tax. You may now begin to use the "Political Process" to redistribute their wealth for the "Good of Society". If they try to escape, without paying their fair share - as determined by you, then you may use the State to legally kill them (well, only should they resist doing their part for the "Greater Good"). Passport restrictions - for example. And, once the magic voting has taken place, who would resist "The" Will of "The" People?! Surely all patriotic Muricans will want to 'do their part' as best they can?? Plus, think of all the Jerbs to be created building State-run Welfare "Retirement" Villages.
FREE to live in too!
LOL
Just something to bare in mind as we march Forward .....Guidance ahead!
Yay, democracy!!!
Progressive Central Banker style.
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Raising interest rates does not reduce the money supply - "directly", as you put it. Raising reserve requirements would, but not by much and in the face of united and very strong resistance from their fellow bankers (can you think of the last time they did that?) - also, that tactic creates and is vulnerable to changes in the velocity of circulation.joe said:
If they can't sell T-Bills easily and in very large quantities, they are going to have a hard time reducing the money supply in a crisis - amirite?
Two names for the same people. Iran and Iraq have the lowest cost and sweetest crude available in large quantities, and Russia of course produces and can handle the production, military protection, etc. An alliance there, untroubled by war, would have near-dominant influence over the world market price - or why did you think W&Co were so keen on invading Iraq? (And that was when Iraq alone was threatening alliance with Russia alone)joe said:
On paper.joe said:
For perspective: Apple made record profits of about 11 billion in 2015, its best year ever. Exxon suffered a huge slump, a 50% decline over the already poor year of 2014, and only made about 16 billion.
Also, China is looking as if it will soon be Apple's largest market. Do you think Apple will need to deal in dollars at all, in China?
Cross your fingers. Iran, Iraq, Russia, probably something with Syria, in alliance, have to persuade at most one or two of Germany, Japan, and China - and they would have something of value to offer all three, as well as realistic threats at hand.joe said:
Unless you think Saudi Arabia is a reliable friend and cooperative ally, France and Turkey will go to the mat for US hegemony, etc? There's Israel, of course.
That's not the most important attribute of our Progressive Central Bank. What gives our Progressive Central Bank it's power, is the State's ability to issue debt (T-Bonds) on the paper they print up / fiat currency and then use State force to coerce "free" American Citizens of the US, to repay those T-Bonds via a Progressive Income Tax (in most cases, taxing labor - thus, it's a labor tax, also known as human Slavery).
Another shitty attribute of our Progressive Central Bank is it has a near-monopoly on currency, which it uses the State to enforce.
Another shitty attribute of our Progressive Central Bank is it's ability to manipulate interest rates / the price we pay for money - thus distorting the price mechanism. And because all use the same money, eventually distorting society itself.
Another shitty attribute of our Progressive Central Bank is it's ability to "monetize" Government 'Services' - themselves monopolies.
Another shitty attribute is 'tax breaks' the Government can use to manipulate behavior. Further distorting society.
Oh, and lets' be clear, "Profit" is a virtue. To act virtuously requires voluntarism. The Central Bank does NOT make Profit, it 'makes' Spoils.
LOL
Progressive State Authoritarianism - yeah, that's going to fix everything.
What a joke.
The Progressives GAVE us our Central Bank and accompanying Progressive Income Tax. Thank them for it.
Thank you!
Via: VisualCapitalist
Starting With Context
The median U.S. household income of $54,000 is a number that most people can relate to. It’s enough money to save up to buy a car, or maybe even a house depending on where you live. Multiply that income by eight, and that number is now big enough to count as being in the top 1% of earners. People in the “one percent” make at least $430,000 per year. Famous celebrities and businesspeople have fortunes that dwarf those of many “one percenters”. Actor George Clooney, for example, has a net worth of $180 million. Meanwhile, author J.K. Rowling is estimated to have a net worth of roughly $1 billion according to Forbes. Zuckerberg takes things to a whole new level. His net worth worth is $53 billion, thanks to the value of Facebook stock. Lastly, Bill Gates regularly tops the “richest people” lists with a wealth of $75 billion – though lately that number has been a little higher based on stock fluctuations. However, even the wealth of the richest human on Earth is not enough to get up to our unit of measurement that we use in the video: each square is equal to $100 billion.
The World’s Money
Some of the world’s biggest companies take up just a few squares with our unit of measurement. ExxonMobil for example has a market capitalization of about $350 billion, and the world’s largest public company by market capitalization, Apple, is at about $600 billion. The total of the world’s physical currency – all coins and bills denominated in dollars, euros, yen, and other currencies – is about $5 trillion. Meanwhile, if we add checking accounts to the equation, the number for the amount of money in the world goes up to $28.6 trillion according to the CIA World Factbook. This is called “narrow money”. Add all money market, savings, and time deposits, and the number jumps up to $80.9 trillion – or “broad money”. But that’s nothing compared to the world of Wall Street. All stock markets added together are worth $70 trillion, and global debt is $199 trillion.
That’s all impressive, but the derivatives market takes the cake. Derivatives are contracts between parties that derive value from the performance of underlying assets, indices, or entities. On the low end, the notional value of the derivatives market is estimated to be a whopping $630 trillion according to the Bank of International Settlements. However, that only accounts for OTC (over-the-counter) derivatives, and the truth is that no one actually knows the size of the derivatives market. It’s been estimated by some that it could be as high as $1.2 quadrillion, and others estimate it could be even higher.
There are many financial critics who worry about the risk that these contracts pile onto the global financial system. With the sheer size of the derivative market dwarfing all others, it’s understandable why business mogul Warren Buffett has called derivatives “financial weapons of mass destruction”.
--o--
All made possible through the one moral loophole we allowed Government: the legal ability to initiate violence against morally innocent humans within a geopolitical area. Thus, fiat/by decree paper money.
Starting With Context
The median U.S. household income of $54,000 is a number that most people can relate to. It’s enough money to save up to buy a car, or maybe even a house depending on where you live. Multiply that income by eight, and that number is now big enough to count as being in the top 1% of earners. People in the “one percent” make at least $430,000 per year. Famous celebrities and businesspeople have fortunes that dwarf those of many “one percenters”. Actor George Clooney, for example, has a net worth of $180 million. Meanwhile, author J.K. Rowling is estimated to have a net worth of roughly $1 billion according to Forbes. Zuckerberg takes things to a whole new level. His net worth worth is $53 billion, thanks to the value of Facebook stock. Lastly, Bill Gates regularly tops the “richest people” lists with a wealth of $75 billion – though lately that number has been a little higher based on stock fluctuations. However, even the wealth of the richest human on Earth is not enough to get up to our unit of measurement that we use in the video: each square is equal to $100 billion.
The World’s Money
Some of the world’s biggest companies take up just a few squares with our unit of measurement. ExxonMobil for example has a market capitalization of about $350 billion, and the world’s largest public company by market capitalization, Apple, is at about $600 billion. The total of the world’s physical currency – all coins and bills denominated in dollars, euros, yen, and other currencies – is about $5 trillion. Meanwhile, if we add checking accounts to the equation, the number for the amount of money in the world goes up to $28.6 trillion according to the CIA World Factbook. This is called “narrow money”. Add all money market, savings, and time deposits, and the number jumps up to $80.9 trillion – or “broad money”. But that’s nothing compared to the world of Wall Street. All stock markets added together are worth $70 trillion, and global debt is $199 trillion.
That’s all impressive, but the derivatives market takes the cake. Derivatives are contracts between parties that derive value from the performance of underlying assets, indices, or entities. On the low end, the notional value of the derivatives market is estimated to be a whopping $630 trillion according to the Bank of International Settlements. However, that only accounts for OTC (over-the-counter) derivatives, and the truth is that no one actually knows the size of the derivatives market. It’s been estimated by some that it could be as high as $1.2 quadrillion, and others estimate it could be even higher.
There are many financial critics who worry about the risk that these contracts pile onto the global financial system. With the sheer size of the derivative market dwarfing all others, it’s understandable why business mogul Warren Buffett has called derivatives “financial weapons of mass destruction”.
--o--
All made possible through the one moral loophole we allowed Government: the legal ability to initiate violence against morally innocent humans within a geopolitical area. Thus, fiat/by decree paper money.
You don't think I haven't noticed your attempt to go unnoticed by quoting me and then modifying my member name so I'm not notified? Don't you think that's a little dishonest?
As I said before, and contrary to your assertions, the US central bank isn't limited to just selling US debt. The US central bank has a number of previously noted ways of contracting the money supply. Where is your evidence increasing reserve requirements would "not much" reduce the money supply? The current reserve rate is set at 10% and there is no limit to the Federal Reserve's ability to set reserve levels.
It doesn't matter what members banks want or don't want. The decision to set reserve requirements isn't theirs. The Fed has made numerous decisions member banks don't like and you don't have to look far to see examples. Two weeks ago the Fed decided not to increase interest rates despite resistance from member banks. Member banks don't run the show.
Further taking money out of circulation slows the velocity of money. That's kind of the whole point. You are taking money out of the economy in order to slow the economy.
As previously pointed out to you Treasury Bills aren't the only debt sitting on the Federal Reserve's balance sheet. It isn't limited to just Treasury Bills in order to reduce the money supply. Additionally, I don't think you get it. Apparently you don't know how the Fed sells debt. It auctions the the debt. As long as the full faith and credit of the US government remains intact, meaning Republicans haven't refused to pay the nation's bills, there will be buyers for US debt. It's just a matter of price.
The only reason the Fed would be selling Treasuries is because the economy is growing too fast and the Fed wants to slow down the economy by reducing the money supply, i.e. there's too much money in the system, so there will always be buyers assuming Republicans don't cause the nation to stop paying its bills.
And you think that makes any kind of sense? Two names for the same people? The fact remains, there are only two countries who want to use a currency other than the US dollar for their oil sales, Iran and Venezuela and both are relatively small producers of oil. Further it doesn't matter if they are low cost producers of oil or not. It's totally irrelevant.
As previously pointed out to you, there just isn't enough oil or dollars there. The countries you named, with the exception of Russia, aren't big oil producers or exporters.
I don't see how you think any of that makes the least bit of sense in relation to the issue under discussion. Additionally, you have your numbers wrong. Apple's profits last year amounted to 54 billion dollars...oops. http://www.telegraph.co.uk/technolo...reports-biggest-annual-profit-in-history.html
Actually, Apple is now looking to India for its future, not China. And yeah, Apple will need to deal in dollars. It's an American company. Everything it owns overseas must be translated into US dollars just as every other US multinational does. Your imagined alliance poses no threat to the US or to the US currency.
The unfortunate fact for you is the US money supply is just fine. It can be increased as necessary and it can be decreased as necessary. That's one big reason the Federal Reserve exists. Your imagined alliance isn't a threat to the US or its currency.
As previously pointed out to you, it really doesn't matter. It just doesn't amount to much even if all of your silly machinations were to occur.
ForrestDean
Registered Senior Member
Hmmm ok? So is this a problem?
Not if you're a banker.