Aces High Bulletin Board
General Forums => The O' Club => Topic started by: Thrawn on November 29, 2005, 10:30:10 AM
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I aim here is post what I hope is my definifitive arguement about the dangers of massive currency expansion. I find myself posting the same thing over and over here, and usually the same rebuttals come up. So I figured might as well have it out in one place. This way I can also just referrer to this thread if they come up again. Besides, I'm doing laundry and have some time to kill.
Currency makes devision of labour more efficient. Instead of everyone having a warehouse full of stuff to trade, they use a representation of wealth. Say you are a rancher and have some cows, you want to buy (or barter for) some eggs. How many eggs is a cow worth? One metric crapload would be my guess. Where are you going to put them all? What if you only want to buyone a dozen? How do you get change for the cow?
I suppose if you wanted change, the chicken farmer could give you an IOU for the eggs owed....Ha Ha, but now you've got money happening. That IOU is a piece of paper that has value. You can trade it for other stuff. This promotes division of labour. Which is good, because people can specialise on producing one thing. Your village smith doesn't have to break up his time making cows or wheat etc. He can concentrate on making metal stuff, which he is good at. So currency is pretty damn useful.
But does currency have inherant value? It depends. Typically currency has been backed by or made of a commodity that had inherant value. If we look at our bartering rancher, his cows have inherent value, you can eat them. What about the IOU he got from his chicken farmer friend? It doesn't have much inherent value, it's only a piece of paper. The IOU is only as good as the chicken farmer's word. Of course if the chicken farmer renegs on the IOU, he won't find many people willing to accept his IOUs anymore.
What of these commodities that back currencies and that currencies are made of? Well in feudal Japan it used to be rice. Their base unit of currency (correct me if I'm wrong) was the equivalant to the amount of rice a family of four needs to survive for a year. Precious metals are used to back currencies and for a long time, currencies were made of precious metals like gold and silver.
Gold and silver have inherent value, you can make stuff out of them. But what has more inherent value, one of our rancher's cows or it's equivant in gold? I'm going to with the cow. I can eat the cow, there's not to many I can do with gold. During the colonial period, the British imported commodities and resources. The Spanish imported gold. The actual resources and commodities where. Which do you think was better the better import? You can build ships out of wood, you can't build them out of gold.
So not a whole hell of alot of inherent value there. Why is it worth so much then? It's worth alot because it's so damn useful for exchange and it doesn't rely on chicken farmer keeping his word.
Okay, let's say our rancher, chicken farmer, smith and few score other people live in a closed community. There is about 500 ounces of gold distributed about the community that they use as currency. Our rancher is walking about the back forty when he finds a chest filled with an additional 500 ounces of gold. "Ho ho," he says, "I'm rich!".
The actual amount of cows, eggs, horseshoes and all resources haven't increased in the community. Only the amount of currency. The amount of currency goes up, value of it goes down. Although our rancher's purchasing power has gone up, everyone else's has proportionally gone down. The rancher is richer, everone else is poorer. There are no more resources in the community than there were before, but the rancher can buy more of them and everyone else can buy less. I think we can see that the creation of currency (or expansion) is and of itself not helpful to this communities overall economics but infact skews it.
In the next post, I'll talk about examples of real world currency expansion and thier historical effects.
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So where did paper money come from and what good is it? Paper money is typically just a form of IOU (or promisary note). Gold and silver was more convienent to carry carry around than a cow, a few chickens and some nails for change. Paper was even more convienent.
Banknotes emerged, which where paper contracts that banks gave out that represented gold and/or silver. They said that if you brought this note to the bank that issued it, they would give you gold or silver in exchange. Great stuff eh? You could deposite your gold in a branch on the east coast and get a banknote. Travel out west, and pick up gold in branch out there. And you only had to carry a piece of paper if you so chose. But some banks were simply shells and people were defrauded. So gold was still gold, and important as currency.
During the late 1700s you started to see the US state and federal governments start to get into the currency business. This involvement increased and 1913 the Federal Reserve Act was legislated. The US government would lend money to the banks at an arbitrary rate, then the banks would could lend that money at a higher rate and make a profit. The net effect was the creation of alot alot of money. And although the US economy was becoming more productive. The increase in production didn't match the increase of currency. Alot of that extra cash was being lent to people so they could make speculative investments. But, as their was no actual increase in resource to match the extra cash, you had a misallocation of what resources thier was on iffy investments. Due diligence isn't as important if money is less scarce. That goes for individuals and banks. The banks were flush with money, why not loan it at a higher risk? They could always borrow more from the Fed.
But factories, mines, and products are built with actual resources, not gold or paper money. By issuing more paper money to banks, the Fed was decreasing the value of paper money for everyone else. People who were smart, and saved got screwed because their saved money was worth less. Thank goodness people still had gold....then government stole their gold. Legislation was passed that people had to hand it over in exchange for paper money. This was done in repsonse to the effects of trying to counter the previous money expansion. Wonderful, so people have less value for thier saved money because of expansion, then the government steals thier hedge against expansion. Well...damn.
The market correction for the expansion caused by the Federal Reserve we call the Great Depression.
Next, gold standard to fiat currency.
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Let me give a quick breakdown on where I think Thrawn is going woth this:
1. The US prints too much money
2. China owns the US
3. The US is living an unfair, higher lifestyle then we deserve
4. the US economy will collapse.
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For all intents and purposes the US dollar became a fiat currency within the United States when the government stole people gold in exchange for paper dollars. It didn't matter if gold backed the dollar, people used dollar for exchanging wealth. And that worked because people accepted it and didn't have much choice in the matter. But what about international trade?
Each country (more or less) had their own currency. They didn't use US dollars. So in order to exchange US dollars for foriegn goods, there had better be something tangible backing it, like gold. Now the Federal Reserve had tons of the stuff, after all it did steal a bunch of it from the citizens. So great. People can trade stuff to US in exchange for dollars. Because those dollars where representations of gold. They knew that if there was a trade inbalance the US would ship gold to balance it. Say one year france exports $100 dollars in wine to the US and the US exports $100 US dollars in exhange for it. France (if push came to shove) could ask for those $100 US dollars be redeemed for gold in the US treasury, and all was good.....for awhile.
In the early 1970's other countries started noticing that the US was printing off whole of of US dollars and had some trade inbalances. A group of them led by France under DeGaul said, "We we have a bunch of US dollars from your trade inbalances with us. We want to exchange them for gold.". Nixon decided that the US didn't really need gold to back the dollar and by executive order, switch the US dollar to a fiat currency system. US imports where increasing compared to exports, the costs for Vietnam were huge, and LBJ's socialist programs as well. Most of the world followed suit and started using the US dollar to back thier currency. And why not? If you weren't going to use gold, the US economy seemed like a good bet. Massive economy and production, pretty damn stable decomocracy. The the US government and econimists lobbying for it helps with the decission as well. So most of the world sans commies, switch over the the US dollar as the backing for their currencies. This idea becomes so pervasive that the US dollar starts being called "Hard Currency". How crazy is that?! You and I know that hard currency is gold.
Next, the effects of the US dollar being accepted as the world's reserve (or backing) currency.
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Thrawn,
I assume you are taking a basic economics course at this time. If not, then you really do need to take one as this concept you are posting about is explained in a class of that type.
There are a couple things here.
ALL applications of value are subjective. It doesn't matter a whit if the value is assigned to a cow, a chicken, a lump of gold, platinum, silver or manure. It all depends on what you are willing to exchange for that item. Barter is a basic means of exchange of items considered "wealth" or things of "worth". It is still barter if you exchange a cow for a lawn mower or $100.00 for the mower. The use of any kind of fiat (gold is fiat as well) for a piece of goods simply makes the system easier to use, stable and consistent. Rather than the inventory of cows as in your example.
Now you can continue to worry about it and lose sleep or you can simply accept that almost the entire world has accepted the concept of fiat (of any type) and deal with it. As I said before, value is subjetive and or situational. To a man dying of thirst a gallon of water has incredible value. To a man with a viable well it has virtually none.
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Let's go back to our rancher. Say instead of finding just a chest of gold, he finds a magical endless chest of gold. I get the feeling that he isn't going to be ranching for much longer. Ranching takes time, work and investment. He can buy want he wants with his gold. Now, the community still wants cows as the supply of cows goes down it becomes a good investment for someone else to start producing them. As the years go by and the rancher is buying stuff with gold, people are probably going to get tired of it. They are all sitting on heaps of gold, and that gold isn't doing them much good. The gold is decreasing in value. They might decide to say, "Screw the gold, let's start using something else.".
In which case the rancher has a problem. Someone else is already producing cows, he's out of practice, his ranching infrastructure is going as well. The rancher has some hard times ahead.
The US got it's "endless chest of gold" in 1971. Look, at the trade balance from then on.
http://www.census.gov/foreign-trade/statistics/historical/gands.txt
It's been printing US dollars in massive amounts and it's only increasing. The US government, due to massive spending. Pays interest on the dollars it's that are printed, to China and Japan. For this they need to print more dollars. The US government also sells debt to the Federal Reserve, which in turn prints off even more money. So we have an absolutely increadible amount of currency expansion.
Some people have said that the US defaulting on it's obligations can't happen. But it already has, in the 1930's and again in 1971.
Other's say that, for example, it's bad for China if the US doesn't buy thier stuff. I'll use an anaolgy to explain why I think it's wrong.
You have a tech support company called...Chinatech. They have several clients, one of thier major clients is named Uncle Sam. They allocate a techmonkey to handle Sam's calls. Now Sam has been paying for the service in IOUs. Chinatech pays it's employees in cash, not in IOUs. If Chinatech tells the employees to take the day off and not service Sam's calls, yet still pays the employees. How does that hurt Chinatech or the employees? It doesn't. But Sam is out those services.
What if Chinatech tried to buy something off Sam with the IOUs and Sam told China to piss off? Would Chinatech be will more or less will to accept IOUs from Sam?
What if other companies started accepting less and less of Sam's IOUs, would thier value go up or down?
What if Sam kept giving out ever increasing amounts of IOUs?
These things are happening. China couldn't buy Unical, serveral countries are diversifying their reserve currencies. The US trade deficit, and government deficit spiral upwards. US dollars are printed with abandon. Personal debt increases as people invest what is in effect money from currency expansion into the housing boom. All this is reminicent of the the precursors to the Great Depression. But in my opinion many times worse.
Gold has increased in value by 60% in the past three years, the US dollar has fallen by 30% in the last 6. Central Banks of various nations are diversifying from the US dollar. I don't think that other citizens of the rancher's community are going to using "gold" for much longer.
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Originally posted by Maverick
ALL applications of value are subjective. It doesn't matter a whit if the value is assigned to a cow, a chicken, a lump of gold, platinum, silver or manure. It all depends on what you are willing to exchange for that item.
I know, did I say differently?
Barter is a basic means of exchange of items considered "wealth" or things of "worth". It is still barter if you exchange a cow for a lawn mower or $100.00 for the mower. The use of any kind of fiat (gold is fiat as well) for a piece of goods simply makes the system easier to use, stable and consistent. Rather than the inventory of cows as in your example.
You are using the terms, "barter" and "fiat" with a completely different meaning than I understand them.
Here are some definitions.
Barter
"Definition: A barter economy is an economy that lacks a commonly accepted currency, so all exchanges must be made with goods and services because money does not exist in these economies."
Fiat
"Definition: Fiat money is money that is intrinsically useless; is used only as a medium of exchange."
Although, gold has little inherent value you can still use it to make stuff. At least more stuff than a small piece of paper with a picture of dead person on it. What's more because of gold's relative scarcity it's alot more difficult to expand it, especially compared to paper money (or electronic money). And history has shown this. For example....
(http://www.gold-eagle.com/editorials_04/images/greene032104.gif)
Now you can continue to worry about it and lose sleep or you can simply accept that almost the entire world has accepted the concept of fiat (of any type) and deal with it.
Well sure, I hope to protect myself and my family from it's inevitable inflationary effects as well.
As I said before, value is subjetive and or situational. To a man dying of thirst a gallon of water has incredible value. To a man with a viable well it has virtually none.
Again, I'm not sure where I said differently. But if I have implied that I believe differently I apologise.
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When a guy writes "in next post" it's usually a sign that he's going to continue his post and I find it hilarious some have to drop their opinions between the posts.
Anyways would be nice to hear Miko's view; IIRC he was working as analyst or something ?
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miko posts over at agw.bombs-away.net
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Frankly from what I saw of miko's posts before he left, Thrawn is providing a reasonable immitation. It's much ado about nothing given that the entire worlds economy is based on fiat.
As to the value of a piece of paper vs gold, it's a wash. If you bring in a lump of gold you exchange it. It gets exchanged for paper money or even for less, a representation of paper money ie. a check. Try to buy a weeks groceries with a gold nugget and see what happens.
Like I said before, if you want to fuss about whether the economy has too much cash or not is up to you. There is no viable alternative in the economy at this time. I suppose you could join some of the other folks living "off of the grid" and live in a cabin in the woods without contact with the economy. I wouldn't recomend it but you'd be free of any effects of dependance on paper money.
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You have a tech support company called...Chinatech. They have several clients, one of thier major clients is named Uncle Sam. They allocate a techmonkey to handle Sam's calls. Now Sam has been paying for the service in IOUs. Chinatech pays it's employees in cash, not in IOUs. If Chinatech tells the employees to take the day off and not service Sam's calls, yet still pays the employees. How does that hurt Chinatech or the employees? It doesn't. But Sam is out those services.
The only thing I have to add is that in this scenerio you are referring to a "service" and not a "good". IIRC from basic economics goods and services are completly different. The argument that China needs us as consumers holds just as much water as the fact that we need them (among other countrys) as manufacturers.
WIthout sale of good to the US the chinese (and probably asian markets) could collapse as much as the Americans.
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Originally posted by Thrawn
miko posts over at agw.bombs-away.net
yup, I recognized mikos cut and paste when I saw you sticking it here.
Miko was banned from this board, lets leave his nonsense off the board.
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Originally posted by Maverick
Try to buy a weeks groceries with a gold nugget and see what happens.
What do you think people use during periods of hyperinflation?
There is no viable alternative in the economy at this time. I suppose you could join some of the other folks living "off of the grid" and live in a cabin in the woods without contact with the economy. I wouldn't recomend it but you'd be free of any effects of dependance on paper money.
I think that there is viable alternatives. But I don't think that's an issue as I don't think things will change until after a massive market correction. But I hope I can either be refutted or if not refutted people might take notice and do what they can to protect themselves and thier families from the effects of the correction.
Originally posted by Gunslinger
goods and services are completly different.
But both have value. Both require investment to produce. They are effect by supply and demand. Goods are tangible but that doesn't really effect the analogy. Chinatech is still producing something that same has a demand for, and getting paid in IOUS for it.
WIthout sale of good to the US the chinese (and probably asian markets) could collapse as much as the Americans.
Why?
PS: Dago,
"Miko was banned from this board, lets leave his nonsense off the board."
How about I'll post what I want as long as HTC doesn't object, and you feel free to ignore it. If what I posted here is such nonsense, it should be a simple matter for you to refute it, and I gladly welcome you to do so.
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Originally posted by Thrawn
What do you think people use during periods of hyperinflation?
I think that there is viable alternatives. But I don't think that's an issue as I don't think things will change until after a massive market correction. But I hope I can either be refutted or if not refutted people might take notice and do what they can to protect themselves and thier families from the effects of the correction.
But both have value. Both require investment to produce. They are effect by supply and demand. Goods are tangible but that doesn't really effect the analogy. Chinatech is still producing something that same has a demand for, and getting paid in IOUS for it.
Why?
PS: Dago,
"Miko was banned from this board, lets leave his nonsense off the board."
How about I'll post what I want as long as HTC doesn't object, and you feel free to ignore it. If what I posted here is such nonsense, it should be a simple matter for you to refute it, and I gladly welcome you to do so.
well just to answer your question directy do me......If china all of a sudden found they had no way of selling their goods to the US they would develop supply of said goods with very few customers. Anyone know's that a business that has too much product on hand that they can't sell is a liability. Their stock loses value, investors lose money, markets reflect.
Here's an examply, for a very short time I worked in the silicon business as an R&D Tech. The company I worked for was having problems because of the asian market crisis, in fact most business in this sector were having major problems. Asian companys ordered all sorts of fab equipment right before their market went bust. When that happened they found they had to cancel the orders and now my company was stuck with all this equipment that they spent all this money on developing and manufacture and now had no way to sell them, and no profit/income to show for their effort. In a matter of weeks the stock lost 30% of it's value and I lost my job. Supply and demand, it works both ways.
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Most of what Thrawn has been saying is pretty much right.
The two points he is missing majorly on are Supply and Demand, and Power.
Everything is driven by supply and demand, even your Fiat currency system. Hence we have inflation and hence an egg isn't literally worth the exact amount of change as it was 40 years ago.
However, this is nothing to freak out about. The only way you really lose money is by either keeping it in a stationary (no interest) savings account, or hiding it under your mattress in your house. Pretty much any standard Savings / Bank Account will accrue you more interest then you lose VIA inflation.
I.E. If Inflation is 5%, you should have your money in a 7% savings account.
The next point is Power.
Almost every single large country out there does not have a commodity as the backing of their money. It's almost impossible to do. There doesn't exist 100's of trillions of dollars worth of gold in the world, or silver, or platinum.
The real power of the money comes from the power of the country. I.E. Military and World power.
As of right now, the countries with the most power are China, Canada, US and Possibly Britain, though that is debatable.
The real problem are countries that do not have any military backing to their Power. I.E. Most of Europe. Right now, most of europe is weak. The moment they are challenged militarily, they will be beaten. And as such the worth of their money will drop like a rock.
So they try to form the EU. This seems like a good idea, but the problem is that it is filled with European Countries. The banding together of all those countries still does not overcome their power deficiencies. And yet again, the moment the EU is challenged, the EURO will drop like a rock.
Case and Point is USSR / Russia. The moment the USSR collapsed, the Rubel(might be off) collapsed with it.
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Originally posted by Gunslinger
well just to answer your question directy do me......If china all of a sudden found they had no way of selling their goods to the US they would develop supply of said goods with very few customers. Anyone know's that a business that has too much product on hand that they can't sell is a liability. Their stock loses value, investors lose money, markets reflect.
I believe I understand what you are saying and appreciate your example. If China found that it no longer had a US market almost all of the problems you site could be remedied by the Chinese government buying all the stock that was or is being created for the US market and then throwing it into an incinerator, and this would have have little effect on thier economy. I know, pretty whacky idea.
Chinatech now produces microchips, and one of thier biggest clients is UScorp. When UScorp buys microchips from Chinatech it sends them US dollars in exchange. Now Chinatech can't really use those US dollars. It's employees and other creditors live in China. They demand Chinese yuan in exchange so they can buy food, pay rent etc.
So Chinatech goes to the bank and exchanges those US dollars for yuan. Now the bank has the US dollars. The bank can't use them, when people borrow money from them they want yuan as well, they live in China and buy houses, cars, pay for building restaurants and stuff with yuan. So the bank kicks the US dollars upstairs and sells them to China's central reserve bank in exchange for yuan.
Now where is China's central reserve bank getting it's money? Same place the US Federal Reserve Bank is. It literally makes it, prints it off. Now we know that by expanding currency, it loses value. But those people with the extra money become richer. It's net effect is like a tax on everyone else.
China could simply cut out the middle-man. Tax everyone directly, buy the surplus microchip, and then incinerate the microchips. Chinatech gets it's yuan, employees and creditors get thier yuan. The Chinese central reserve bank doesn't have to expand it's currency so it's value doesn't drop and standard of living in China stays the same.
Another solution is let the business that serve mostly US demand fold. But what of the workers? They are misallocated anyways. China as a whole isn't benefiting from their trade with the US because they are getting those US dollars in exchange. They already have hundreds of billions of them, they can't seem to be able to buy what they want with them. So let the market correct for their loss of jobs. Tax the people directly, give those people that lost their jobs wealfare until they find jobs that will benefit the standard of living for the Chinese. Besides, more people in the labour market. Price of labour goes down, more jobs open up.
Our ex-rancher gives gold to the community. In exchange they give him chickens, eggs food, tools, wood etc. The community has tons of gold now, more then they could ever need. If the community stops taking his gold in exchange for those things. Who is it going to hurt? They don't have to produce enough stuff to meet his demand. They could spend those resources making thier lives better...
...of course, the ex-ranch has guns, lots of guns and he has shown he's willing to use them. That makes at least one lumberjack neighbour to the north nervous. ;)
Edit: I just saw your post lazer, funny we both thinking about military at the same time. I should be able to reply tonight.
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you still havn't explained what chinese company's would do with all that surplus inventory and no one to sell it to. They can only buy it from themselves for so long and we are talking ALOT of goods here.
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Originally posted by lasersailor184
Everything is driven by supply and demand, even your Fiat currency system. Hence we have inflation and hence an egg isn't literally worth the exact amount of change as it was 40 years ago.
Well, this is precisely my point. Currency certainly is subject to supply and demand.
However, this is nothing to freak out about. The only way you really lose money is by either keeping it in a stationary (no interest) savings account, or hiding it under your mattress in your house. Pretty much any standard Savings / Bank Account will accrue you more interest then you lose VIA inflation.
The total US national debt is over $34 trillion dollars. The US government until now has convinced counties and banks not to call it in. If any country with a significant amount of US promisary notes (if they be dollars, T-bills what have you) desides to call them in. It won't matter where you have your money stored. Think 1920's Germany, or 1980's Argentina.
One of Greenspan's last acts as Chairman of the Fed was to increase US dollar issue to $50 billion a week. Massive, massive supply of US dollars, and demand is falling.
The real power of the money comes from the power of the country. I.E. Military and World power.
Interesting notion and I agree with it, with some qualifications.
As of right now, the countries with the most power are China, Canada, US and Possibly Britain, though that is debatable.
I was surprised to see Canada up there. But in hindsight, I would agree once again, with qualifications. ;)
I'll go over a few quick concepts just so we will hopefully be on the same page.
There are four ways that generally one actor can influence another.
1. Rational discourse. Convince someone that an action is in their best interest using rational, honest arugements. Say a doctor explaining to someone why the should quit smoking.
2. Manipulative discourse. Lie to them, use rhetoric and bull****. Say a sales man telling a potential customer a product has certain features it doesn't.
3. Sanction (or "Power"). Threaten to or deprive an actor of something they want until they complie with you demands. A boss telling an employee to do their work or they will be fired. A pimp telling a potato to get out on the street or she won't get her crack.
4. Coersion. Literally forcing someone to comply with your demands. Rape, mugging, but also stopping someone that is attacking someone else.
Canada is powerful in some senses. We are economically power, compared to most of the world. Militarily we are not. But we can threaten sanction, against countries that are economically weaker than us. We rarely do so though, because we tend to like the rational discourse way of setting differences, heck we have a pretty good history of it at least from the 1950's on.
But when one threatens sanction, they better have a really good idea about who can sustain the lack of trade better. Even then it doesn't always work, look at Cuba.
Now what if a country tries to use it's military to coerce another country to do something? Well, they better be able to follow through and successfully invade that country, and even then it doesn't always work. But it seems to me that history as shown that sometimes countries that enter into harsh economic crises do indeed end up at war.
Argentina and the Falklands is an example, Japan and WW2. If an economy is collapsing, the last thing a government lets do without is typically it's military. You need it to keep civil unrest to a minimum and keep the politians in power. What's more it might be your last card at possibly avert total economic meltdown. Can't buy the resources your country needs? Invade someone and take them.
But if you look at the strategic objectives, the country with economic crises must take and hold the invaded country to get the resources out. The invaded army merely has to repulse the invader, or make sure the occupation doesn't pay off.
The real problem are countries that do not have any military backing to their Power. I.E. Most of Europe. Right now, most of europe is weak. The moment they are challenged militarily, they will be beaten. And as such the worth of their money will drop like a rock.
Europe can be weak as it wants, who is going to invade them? Britain and France have the nuclear trump card. So far at least, history has shown that nuclear powers do not fight wars with each other. They fight proxy wars.
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Everyone says that Nukes are a trump card. They are not, nor have they ever been.
Nukes have always been a deterant against whack jobs. Nothing more than that. Other then retaliation, no one would have ever used a nuke. And following that logic, no one would ever use them to start off with.
Next, what happened in 1920's germany will never happen. EVER. First, germany did it more of a "**** Off" move then an actual economic move. They practically shot themselves in the foot to dick the other countries.
The only type of country that would do that would be one that had just lost a huge war.
Next, the demand for actual dollars is always falling. This is nothing amazing. Neither is the increasing supply.
Though Greenspan has always been a whackjob himself. Especially when it came to politics. He would often do things to benefit one party over another.
I.E. The current economic recession. As it was coming back, Greenspan would often do things that directly would limit the growth even though the reason for doing it was totally false. So we could possibly (key word) be about 10% higher after the growth.
The key here is that 95% of all the people don't quite know how and why the Federal Reserve works, including politicians. So when they pull some BS move, there are very few people to call them on it.
I believe that canada is more powerful militarily then they let on. Should they want to roll any european country, they could do it without too much trouble. Canada might be able to become a super power if they work at it.
However, I do believe that Canada purposefully does not exercise her might Economically and Militarily. I could point straight out why, but I don't think 50% of this board would agree with me.
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Originally posted by Gunslinger
you still havn't explained what chinese company's would do with all that surplus inventory and no one to sell it to.
Sell them to the Chinese government. The chinese taxpayers are already paying for them. What difference does it make to the companies or taxpayers if they end up going to the US or a landfill in Shanhai.
The US hasn't paid for them. The US has given US dollars saying that at sometime in the future China can get buy some actual US goods with those dollars. Problem is that the US doesn't produce much that the Chinese want. And when they want to buy some like Unical they are told they can't. So the dollars accumlate and accumulate. US demand for Chinese goods increase and increase, more and more US dollars flood in. The products are being paid for by the Chinese taxpayers already through the Chinese central reserve bank.
Heck, if they send them to a landfill they will save shipping costs.
They can only buy it from themselves for so long and we are talking ALOT of goods here.
Well, they wouldn't have to do it forever. My point was they could and it would have negilible effect on their economy, because the Chinese are the ones paying for those goods, not the US.
They could just let the market take care of it. Heck, what do those in power care? They aren't a democracy, it's not like they have to pander to the voters. Or they could do something inbetween. Buy the stuff for awhile, and ween the companies off.
Balanced trade means, A gives B stuff that B demands and A produces effciently, in exchange for stuff A demand that B produce efficiently. Both profit and prosper, great thing trade.
Unbalanced trade means, A gives B stuff that B demand and A produces efficiently in exchange for an IOU from B. But no one worth thier salt is going to keep giving A stuff if A just keeps giving more and more IOUs and pleading with B not to call them in.
Eventually it won't even matter if A is going to effect his economy negatively in the short term by not taking any more IOUs. Because it will be good in the long term. But it won't necessarily be bad in the short term because B actually hasn't paid for the products. A has.
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Originally posted by Thrawn
The total US national debt is over $34 trillion dollars.
Your nomenclature is imprecise. As of 30 Nov 2005 at 06:12:59 AM GMT out National Debt is (http://www.brillig.com/debt_clock/debtiv.gif)
Add my Visa bill and my mortgage and you get Total Debt.
The US government until now has convinced counties and banks not to call it in. If any country with a significant amount of US promisary notes (if they be dollars, T-bills what have you) desides to call them in. It won't matter where you have your money stored.
The US Government has not negotiated on my behalf with my credit card or mortgage company. They negotiate for their (our) 8.1 trillion part of it.
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Originally posted by lasersailor184
Everyone says that Nukes are a trump card. They are not, nor have they ever been.
Nukes have always been a deterant against whack jobs. Nothing more than that. Other then retaliation, no one would have ever used a nuke. And following that logic, no one would ever use them to start off with.
Well, it was NATO policy under the "trip wire" paradigm to totally use nukes if the Commies invaded western Europe. But I doubt it's worth anyones time to test their resolve. That's what's so great about having nukes. Plus who is going to invade them...heck not just them come to think of it. How many ex-colonial and other nations would have thier back?
Next, what happened in 1920's germany will never happen. EVER. First, germany did it more of a "**** Off" move then an actual economic move. They practically shot themselves in the foot to dick the other countries.
The only type of country that would do that would be one that had just lost a huge war.
Or Argentina, or any other country that has massively expanded thier currency.
Next, the demand for actual dollars is always falling. This is nothing amazing. Neither is the increasing supply.
Well, I would like to know of any other periods of history where a country has increased it's currency supply by the equivalent of $50 billion a week. I would also be interest to know what happened to them.
Though Greenspan has always been a whackjob himself. Especially when it came to politics. He would often do things to benefit one party over another.
He used to be pretty good. He once wrote an essat decrying the hazards of a fiat money system. ;)
...ah here is part of it.
http://www.lewrockwell.com/englund/englund12.html
Boy did he change his tune.
I believe that canada is more powerful militarily then they let on. Should they want to roll any european country, they could do it without too much trouble.
Oh, I doubt it. We have three standing infantry regiments, two or three armour. About three squadrons of aging CF-18s. And although we have the largest coastline in the world, our Navy is about the size of Holland's, which has one of the smallest coastlines.
Canada might be able to become a super power if they work at it.
We had our chance post WW2 during the fifties and blew it. No biggie, there's something to be said for flying under radar. We have a degree of peace and prosparity that seems to suit us.
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Thrawn, you really don't know half of what you think you know.
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Originally posted by Holden McGroin
Your nomenclature is imprecise. As of 30 Nov 2005 at 06:12:59 AM GMT out National Debt is (http://www.brillig.com/debt_clock/debtiv.gif)
Add my Visa bill and my mortgage and you get Total Debt.
I stand corrected.
US Government has not negotiated on my behalf with my credit card or mortgage company. They negotiate for their (our) 8.1 trillion part of it.
Not just the 8.1 trillion, but also for the current account (or trade) debt. Bush has been pushing for the G7 and other nations to maintain the value of the US dollar.
Originally posted by Nuke
Thrawn, you really don't know half of what you think you know.
You are probably right NUKE, but it should be a simple matter for you to enlighten me. After all your IQ is in the 98th percentile. :o
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Your advantage, Thrawn, is that Nuke does not know which half you do know.
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:D
Here are some numbers and graphs for those that are interested.
http://www.gold-eagle.com/editorials_05/conrad060105.html
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Originally posted by lasersailor184
And yet again, the moment the EU is challenged, the EURO will drop like a rock.
Like $ ?
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Originally posted by Thrawn
The US has given US dollars saying that at sometime in the future China can get buy some actual US goods with those dollars. Problem is that the US doesn't produce much that the Chinese want. And when they want to buy some like Unical they are told they can't. So the dollars accumlate and accumulate. US demand for Chinese goods increase and increase, more and more US dollars flood in. The products are being paid for by the Chinese taxpayers already through the Chinese central reserve bank.
You're talking like China's only trading partner is USA and all the $$ can't be spent otherwise but buying good from us.
As long as most of the world trade is in $$, China won't accumulate much of it. China growing economy has enormous appetite (and needs) for all kind of goods. Just think of oil.
Dollar is in danger only when goods will be exchanged for another currency. OPEC has threatened in the past to switch to Euro. Didn't happen. Fortunately... But that would be all it takes.
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Originally posted by 2bighorn
You're talking like China's only trading partner is USA and all the $$ can't be spent otherwise but buying good from us.
As long as most of the world trade is in $$, China won't accumulate much of it. China growing economy has enormous appetite (and needs) for all kind of goods. Just think of oil.
Dollar is in danger only when goods will be exchanged for another currency. OPEC has threatened in the past to switch to Euro. Didn't happen. Fortunately... But that would be all it takes.
your talking to a guy who thinks that China can just all of a sudden replace every single US consumer and not have an effect on it's own economy.
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50% of chinas exports go to the USA,
if all the countrys holding "worthless" US dollers dumped them on the market and the dollar became worthless they would lose all their money.
if you owe the bank $500,000, the bank owns you.
if you owe the bank $500,000,000 you own the bank. they can't let you fail.
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Yup, John hit a good point there. That's how Donald Trump is so successful.
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China can just call it in???? How so?
The one that issues the Note, US Treasury, can call the note in, not the one holding the note. China owns Treasuries for which the get paid interest. They can't just call & say hey, we want all the principal paid to us now. Just one of many problems with lot of statements above, wish had the time to go into. Definately over simplistic point of view.
How does investments play into your little scenario? What is need of foreigners to achieve returns on investments? How reliant is China on foriegn investment? For China to continue to grow its economy it needs huge amounts of foreign investments.
Also not sure what referring to when including them as powerful? Military basis, maybe so. Economic basis, hardly. China is a minor country economically. What is there GDP again?
Also to compare current economy to 1930s or other time periods is truely comparing apples to oranges. The way in which trade works is very very different than 70 years ago. Globalization is a major change which makes 1930s not comparable to now.
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Originally posted by BigGun
Economic basis, hardly. China is a minor country economically. What is there GDP again?
Measured by GDP, China is second largest economy in the world.
In economic terms, China is and will be the power to reckon with...
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Originally posted by 2bighorn
Measured by GDP, China is second largest economy in the world.
In economic terms, China is and will be the power to reckon with...
Wow, made me have to double check, I know there growth has been high, but not that high. From world bank data......top 15 countries... think China is 7...
Total GDP 2004
(millions of
Ranking Economy US dollars)
1 United States 11,667,515
2 Japan 4,623,398
3 Germany 2,714,418
4 United Kingdom 2,140,898
5 France 2,002,582 a
6 Italy 1,672,302
7 China 1,649,329
8 Spain 991,442
9 Canada 979,764
10 India 691,876
11 Korea, Rep. 679,674
12 Mexico 676,497
13 Australia 631,256
14 Brazil 604,855
15 Russian Federation 582,395
Source (http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf)
Now if I use those figures, it appears the US nominal GDP is over 600% larger than China nominal GDP.
Growing at less than 10% (which is doubtful can substain for long period of time) how long will it take for China to have GDP equal to US (assuming US grows 3%)??? Have to open spreadsheet to figure that one out, but it is a long time. And this is just GDP, do it on a per capita basis and China is a third world country on economic basis, hardly powerful.
Edit..
This link shows China as 7 per the IMF, also has World Bank data
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28nominal%29
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Originally posted by BigGun
China can just call it in???? How so?
The one that issues the Note, US Treasury, can call the note in, not the one holding the note. China owns Treasuries for which the get paid interest. They can't just call & say hey, we want all the principal paid to us now. Just one of many problems with lot of statements above, wish had the time to go into. Definately over simplistic point of view.
.
No but if China stops bidding at the auctions the , the value of the bond goes down and that will shoot the intrest rate up that we pay to finance our debt.
And yes they can "just call & say hey, we want all the pricipal paid to us now" its called selling the bond, same result as above.
shamus
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Selling the Bond is not the same as Calling in the Principal...please tell me u don't work for a bond shop, especially one managing over $1 bil in bonds for me...
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Originally posted by BigGun
Selling the Bond is not the same as Calling in the Principal...please tell me u don't work for a bond shop, especially one managing over $1 bil in bonds for me...
I'm sorry, you seemed to be having a hard time understanding how China could get its principal out of US bonds..should I use smaller words?
shamus
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"Measured by GDP, China is second largest economy in the world."
China is ranked 7th in GDP and comparable to Italy. The CIA Fact Book (my italics added for irony) typo has propogated throughout the internet and print media to reach legendary urban myth status.
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Calling in the Principal would be requiring the issuer to repay the principal. Selling the Bond would give them the Market Value of the Bond, not the principal. If bond is issued at PAR (100) and is currently priced at 99, they would only get 99. Selling the bond doesn't call the Principal, it just gives the Principal obligation to another bond holder. Dont need smaller words, just use correct terminology.
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Well there ya go, the holder cant call the bond can he? but he sure can get the principal by selling the bond right?...OH wait if he sells more than the market will bear the intrest rate goes up and the value of the bond goes down, the government pays more for new issues, anything wrong with that terminology?
shamus
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Originally posted by BigGun
Wow, made me have to double check, I know there growth has been high, but not that high. From world bank data......top 15 countries... think China is 7...
Total GDP 2004
(millions of
Ranking Economy US dollars)
1 United States 11,667,515
2 Japan 4,623,398
3 Germany 2,714,418
4 United Kingdom 2,140,898
5 France 2,002,582 a
6 Italy 1,672,302
7 China 1,649,329
8 Spain 991,442
9 Canada 979,764
10 India 691,876
11 Korea, Rep. 679,674
12 Mexico 676,497
13 Australia 631,256
14 Brazil 604,855
15 Russian Federation 582,395
China's GDP (Purchasing Power Parity) is
7,334,254 mil $ (7,123,712 by WB) 2nd Place
PPP gives more accurate figures than that of current market exchange rates, especially because China is keeping their currency artificially low.
List of countries by GDP (PPP) (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29)
CIA gives GDP as PPP as well http://www.cia.gov/cia/publications/factbook/geos/ch.html
http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf
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Originally posted by 2bighorn
Measured by GDP, China is second largest economy in the world.
In economic terms, China is and will be the power to reckon with...
The American public controls their economy. We stop buying, they drop. No?
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Originally posted by Ripsnort
The American public controls their economy. We stop buying, they drop. No?
Not quite. But it would hurt them same way it would hurt us. China makes for roughly 10% of our total trade and we make about 20% of China's total.
On the other side, they have some 80 billions trade surplus (total), while we have 150 billion deficit with China alone.
Our economies are very interdependant, so it kinda equals out.
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For you Thrawn:
(http://pic4.picturetrail.com/VOL767/2726312/8668097/120504222.jpg)
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Originally posted by 2bighorn
You're talking like China's only trading partner is USA and all the $$ can't be spent otherwise but buying good from us.
Nations use the US dollar as an exchange medium for oil, but it is not a necessity for international trade and oil isn't the only thing traded. Nations are free to use what every currency they fancy.
As long as most of the world trade is in $$, China won't accumulate much of it.
What do you consider "much"?
Dollar is in danger only when goods will be exchanged for another currency. OPEC has threatened in the past to switch to Euro. Didn't happen. Fortunately... But that would be all it takes.
Well, the Europeans are already pushing for the Euro to become the new reserve currency. Not sure about OPEC, but Iran is gonig to start using Euros for for oil trade.
Originally posted by Gunslinger
your talking to a guy who thinks that China can just all of a sudden replace every single US consumer and not have an effect on it's own economy.
I didn't say no effect, but a negligable effect. And in the longer term, a beneficial effect. If you believe differently, please explain why.
Originally posted by john9001
50% of chinas exports go to the USA,
if all the countrys holding "worthless" US dollers dumped them on the market and the dollar became worthless they would lose all their money.
No, they wouldn't lose thier money. They would write off the book value of the US dollar. The actual value of the US dollar is many times less than what is represented now because there is much of them in central reserve banks, and promisary notes but not in circulation.
if you owe the bank $500,000, the bank owns you.
if you owe the bank $500,000,000 you own the bank. they can't let you fail.
I explained at the begining why countries can let the US dollar fail. Countries that are sitting on tons of US dollars have already lost productivity because of it. Countries will just lose more if they continue having a trade surplus with the US, thier economies will improve if they stop.
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I explained at the begining why countries can let the US dollar fail. Countries that are sitting on tons of US dollars have already lost productivity because of it. Countries will just lose more if they continue having a trade surplus with the US, thier economies will improve if they stop.
No, that is absolutely wrong.
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Originally posted by BigGun
China can just call it in???? How so?
The one that issues the Note, US Treasury, can call the note in, not the one holding the note. China owns Treasuries for which the get paid interest. They can't just call & say hey, we want all the principal paid to us now. Just one of many problems with lot of statements above, wish had the time to go into. Definately over simplistic point of view.
Okay, they can sell off thier US dollars while they still have book value. Or wait for the T-Bills to mature then sell off the US dollars.
How does investments play into your little scenario? What is need of foreigners to achieve returns on investments? How reliant is China on foriegn investment? For China to continue to grow its economy it needs huge amounts of foreign investments.
Investment is taking some actual wealth and exchanging it for stuff to increase productivity. In order for China's economy to keep growing, it needs actual goods and resources, not piece of paper with dead Presidents on it.
Last year China imported about $34 billion dollars worth of stuff from the US. Compared to the $194 billion it sent. Now if the US dollar tanks, will China be able to $34 billion worth of stuff the following year? You bet, not only that but they will be able to buy it for much much cheaper.
Also not sure what referring to when including them as powerful? Military basis, maybe so. Economic basis, hardly. China is a minor country economically. What is there GDP again?
GDP is an erroneous way of measuring the economy of a country. If a countries government went $1 gazillion in debt one year and spent that money, it would show that the GDP of that nation increased by $1 gazillion.
Also to compare current economy to 1930s or other time periods is truely comparing apples to oranges. The way in which trade works is very very different than 70 years ago. Globalization is a major change which makes 1930s not comparable to now.
Sure it's comparable. The laws of supply and demand hasn't changed since then, globalization or not.
Originally posted by Ripsnort
The American public controls their economy. We stop buying, they drop. No?
Read what I posted at the top. I also state my "point" in the first paragraph of the first post up their.
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Originally posted by 2bighorn
On the other side, they have some 80 billions trade surplus (total), while we have 150 billion deficit with China alone.
Our economies are very interdependant, so it kinda equals out.
It would only equal out if China had a hope of being able to recieve equivalent value in trade at some point in the future. I don't see how that's possible.
But it would hurt them same way it would hurt us.
Why would it hurt them?
Originally posted by lasersailor184
No, that is absolutely wrong.
I merely restated my arguments of which you said...
"Most of what Thrawn has been saying is pretty much right."
...in a different way. What's changed to make them now wrong?
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Originally posted by Ripsnort
The American public controls their economy. We stop buying, they drop. No?
The American public does not have that kind of control on anything....especially itself.
The only way the American public will stop buying goods from China is if the American and European companies that build factories there or source their goods from there stop doing so because those companies have found a cheaper labor source elsewhere....like India or even smaller producers like Vietnam.
As a Global Supply Chain guy, I've seen first-hand the fear in other countries eyes when China was gaining entry to the WTO. The only thing at that time that made them able to compete with China was the duties we were imposing on Chinese goods. China's labor force was the meanest and cheapest around. Now, there are some producing countries that are cheaper, but they don't have the infastructure or population to handle the volume that we have placed on the Chinese.
It used to be that the race was on to get into China to source goods from there. Now the race is on to move into western China because the labor is cheaper there then near the northern (Shanghai) or southern (Shenzen) regions.
I don't remember the exact number that China is spending just on road building for 2005, but I believe it equals what we spent on our entire Interstate system over a period of many years. They are serious about maintaining their lead producer status.
The American public is the fuel to alot of the world's economic growth, no question. But we do it on borrowed money. And there's no disputing that as well.
As of now, China has a vested interest in keeping our currency afloat. But no situation lasts forever and this one will change as well. Maybe they find Europe a good consumer market, or maybe their own population becomes a great consumer market. Then our importance to them will diminish. We may hold alot of cards now, but nothing stays static, and we aren't a lock to keep those cards.
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Well said, Stringer. It's rare to see a reasonable person around here who actually knows something about a topic. Particularly this one.
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Originally posted by Thrawn
It would only equal out if China had a hope of being able to recieve equivalent value in trade at some point in the future. I don't see how that's possible.
Because they aren't limited to the USA market to buy goods. They can and they do spend $$ elsewhere.
Whilst their surplus with EU and USA is about 245 billion, their total trade surplus is only 80 billion. Somewhere they do indeed trade lots of money for the goods.
Originally posted by Thrawn
Why would it hurt them?
Because almost 20% of their export goes to US. You can't just lose 1/5 of your market without getting hurt. Besides they sit on billions and billions of dollars. They have lot more to lose with $ devaluation then just an export market.
Big surplus or deficit. None is sustainable over long period of time and over certain breaking point.
If dollar drops, whole world will suffer (especially Canada ;) ). It's in everyone's interest to keep it afloat, and in the future, gradually diversify into other currencies. The latest may push us into slight recession, but recession is the only thing that can cut our growing trade deficit and definately is much better than world wide depression.
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Originally posted by 2bighorn
China's GDP (Purchasing Power Parity) is
7,334,254 mil $ (7,123,712 by WB) 2nd Place
PPP gives more accurate figures than that of current market exchange rates, especially because China is keeping their currency artificially low.
List of countries by GDP (PPP) (http://en.wikipedia.org/wiki/List_of_countries_by_GDP_%28PPP%29)
CIA gives GDP as PPP as well http://www.cia.gov/cia/publications/factbook/geos/ch.html
http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf
Whether or not PPP is more accurate is not accepted gospel. Just a different way of calculating GDP, and it uses a lot of assumptions (guesses) in its calculation. Nominal is the actual GDP at the current Market exchange rates.
Was interesting if you look at per capita GDP.
Nominal China ranks 110 at 1,272 (below Angola but above Indonesia) ....US ranks 7th at 39,935
PPP China ranks 97th at 5,642 (barely above Venezula and Peru)....US ranks 3rd at 39,496
From this, China is a emerging/developing market economically and is in no way a superpower economically. For the most part of the country, China is very poor on an economic basis.
Using the much more generous PPP percapita GDP, Assuming growth for US is constant 3%, and China has longterm constant growth of 8% (which is ridiculously generous, no way economy can consistently grow at that rate) it will take over 40 years for China to approach US level of wealth.
Again, using the much more generous PPP per capita GDP, Assuming growth for US is constant 3%, and China has longterm constant growth of 5% (which is still ridiculously generous to assume China can consistently grow at that rate) it will take over 100 years for China to approach US level of wealth.
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Someone linked this at AGW. I imagine my reasons for posting it hear are self-evident, what with the recently noises about Iran and all.
"December 29, 2005
Doomsday for the Greenback
by Mike Whitney
http://www.opednews.com
A preemptive attack on Iran would “provoke other industrial nations to strategically abandon the dollar en masse”… “in an effort to thwart the neoconservatives from pursuing their desperate strategy of dominating the world’s hydrocarbon energy supply.” William R. Clark “Petrodollar Warfare; Dollars, Euros and the upcoming Iranian Oil Bourse”,
The Federal Reserve is the financial headquarters for the cartel of multinational banking establishments. The confederation of banks in the Fed underwrites the exploitative activities of the world’s main industries and sets rates in a manner that best serves their objectives. This is how the bankers perpetuate the system of economic hegemony and apply the shackle of debt and dependence to the planet’s most destitute countries. The Federal Reserve is every bit as critical to the maintenance of the empire as its political counterparts in Washington or its blood-brothers in the US Military. It is the largest of the empire’s three gears; economic, political and military, which mobilize the mighty wheel of state terror.
If we look carefully at the Iraq war, the main financial institutions stood squarely behind the hostilities and did their best to create a hospitable economic environment for aggression. The Federal Reserve dropped the prime rate to a paltry 1.5% just 6 months before the Iraq invasion to keep the American economy purring along while Bush dragged the nation to war. The bloody footprints for Iraq lead straight to the oak-panel doors of America’s primary lenders even before they trail off to the bastions of America’s energy giants.
There’s a reason for this. The main impetus for the war was not petroleum, but greenbacks and the future of a currency that is underwritten by $8 trillion of debt. The only way to safeguard its dominance is to back up the listing dollar with boatloads of oil. And, that is exactly the plan.
The Capital of Empire
America’s capital is not in Washington DC. In fact, it is not geographic location at all. It is the greenback, the epicenter of the global rule. The dollar is the cornerstone upon which the mighty pillars of empire rest.
At the same time, the greenback is the greatest swindle in human history; a worthless scrap of paper buried beneath a mountain of debt. It is only through the skillful mix of politics, diplomacy, and brute force that the grand deception is maintained. As America’s fortunes grow more tenuous, the probability of attacks on the dollar will increase exponentially. Even now, nations are conspiring to knock the dollar from its towering summit and introduce a more equitable system.
At present, the greenback serves as the world’s reserve currency, the main medium of exchange. This allows the US to pile up enormous debt while avoiding the pitfalls of skyrocketing interest rates or hyper-inflation. The $2 billion of borrowed wealth that props up the faltering empire every day comes primarily from the exporting powerhouses Japan and China. This means that America’s profligate spending is financed by the labor of some of the most poorly paid workers in the world.
Ironically, sweatshop workers in Kwantung Province are now bankrolling the criminal occupation of Iraq by facilitating America’s massive trade deficits.
Every greenback carries with it the accumulated weight of two centuries of war, slavery, and ethnic cleansing of Native Americans. It is the flaccid script that has fueled 50 years of covert activities, coup d’etats, and third-world death-squads. It churns through the arteries of the empire to the furthest most extremities where torture and abuse are carried out beneath the tri-colored standard. It is strewn across the empire like the myriad gulags that now speckle the planet. It is the heart of the beast; a venom-pumping organ with arteries strung across the globe like the concertina-wire that surrounds Falluja, Samarra and Tal Afar.
Eventually the stately images of Lincoln and Washington will be stripped from the currency; replaced with the looming specter of Guantanamo’s gun towers or the iconic figure of an Abu Ghraib prisoner, hooded in sackcloth, arms outstretched in Christ-like submission, wires draped from his hands and feet. These are the freshly minted symbols of the new realm, the republic of terror.
As the empire extends its withering grip to the world’s last resource-centers, the dollar is coming under increasing scrutiny. It is the dollar that facilitates the perennial war and the vast expansion of military force; just as it is the dollar that binds together the constellation of American colonies that function exclusively in the interests of their Washington overlords. The asymmetrical warfare that is approaching will put the greenback squarely in the crosshairs; the weal-link in America’s coat of mail.
Hugo Chavez knows this, as did Saddam; that’s why he switched to the euro 6 months before “Shock and Awe”. Now, Putin is trading oil in euros and Iran will open an oil bourse in petro-euros in March. For Iran, its actions are tantamount to a declaration of war. Already, America’s proxy Israel has threatened to attack in March. Is it merely coincidence that Iran’s oil bourse is scheduled to open at the same time?
No, it’s not.
The empire requires a steady diet of petrodollars to maintain its gluttonous appetite for debt. If the oil-producing nations switch to euros, the dollar would freefall like a wingless gull and America would be trapped in a bottomless vat of red ink.
America’s prodigious dept has made the war for the world’s remaining resources an existential struggle. A retreat from Iraq is no longer possible. If America’s debt is not propped up with oil reserves the anemic dollar will crumble with the economy following right behind.
In William R. Clark’s “Petrodollar Warfare; Dollars, Euros and the upcoming Iranian Oil Bourse”, Clark outlines the problems the dollar faces if Iran proceeds with its plan to use a euro-based oil trading exchange. The new Iranian bourse would compete head-on with the New York Mercantile Exchange (NYMEX) and London’s International Petroleum Exchange IPE) giving international buyers an option of “buying a barrel of oil $60 on the NYMEX or IPE or 45 to 50 euros via the Iranian bourse.” Clark calls this the Federal Reserves “biggest nightmare” as it would precipitate a face-off between the dollar and the euro and would fundamentally change the dynamics in the world’s largest market.
“In essence, the US will no longer be able to effortlessly expand credit via US Treasury Bills, and the dollars demand-liquidity will quickly fall.” This will “challenge the hegemony currently enjoyed by the financial centers in both London and New York.”
In other words; doomsday for the greenback.
Clark also notes that “both Russia and China significantly increased their central bank holdings of the euro, which appears to be a coordinated move to facilitate the anticipated ascendance of the euro as a second world reserve currency.” This would effectively end the petrodollars hegemony as the “monopoly oil currency”.
The world is preparing for a seismic shift in the global power-structure, but Washington believes it can forestall that change through military force.
The prospect of a competing Iranian oil-exchange greatly increases the likelihood of a unilateral attack by the US. Clark anticipates that this may “provoke other industrial nations to strategically abandon the dollar en masse”…”While central bankers throughout the world community would be extremely reluctant to ‘dump the dollar’”… “They would likely move in tandem on the currency exchange markets in an effort to thwart the neoconservatives from pursuing their desperate strategy of dominating the world’s hydrocarbon energy supply.”
A strategy to “dump the dollar”?
Some variant of Clark’s scenario will undoubtedly transpire pending an American attack on Iran. The world will not confront the empire militarily, but neither will they stand idly by while vital oil resources are put at risk. A coordinated assault on the dollar is an extreme, but probable consequence.
The vulnerability of the dollar, skittering atop an ocean of red ink, has become the Achilles heel of the empire. Washington may believe that its weakness is well-concealed behind a wall of high-tech weaponry and media propaganda, but potential adversaries will certainly know where to strike if they are forced to respond.
America’s future has grown increasingly uncertain due to the reckless militarism of its leaders. An attack on Iran is sure to incite an asymmetrical war that will target the greenback; dislodging it from its lofty perch.
When the dollar collapses, the baling-wire of economic coercion that keeps the empire sewn together will quickly unravel."
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when the dollar collapses chevy and ford will be selling $500 cars to the rest of the world and jobs will be outsourced to the "cheap" labor the the USA.
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I love conspiracy theory believers. They never give up.
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Originally posted by john9001
when the dollar collapses chevy and ford will be selling $500 cars to the rest of the world and jobs will be outsourced to the "cheap" labor the the USA.
No they will be 500 Euros or $500,000.00, but just think about it, all of us in the US will be multi-millonaires :)
shamus
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So... we are doomed? Our currency will be as worthless as canadian money?
lazs
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Yep Laz, you better stock up on chickens as they will be the next currency in the US due to their ability to be transported easily and the eggs they lay. The sky is falling the sky is falling....... run and hide.
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Originally posted by john9001
when the dollar collapses chevy and ford will be selling $500 cars to the rest of the world and jobs will be outsourced to the "cheap" labor the the USA.
Yep, in the long term the market will sort itself out, assuming the government doesn't try and "fix" it. It's getting through, or even finding the opportunities during the economic crisis that's the key. I wouldn't want to live in a city when it happens though.
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Well... It is hard for me to know what to be the most frieghtened of... The crashing of the greenback and turning into a canada like third world country or... the impending global warming or...
bird flu!
I don't know how anyone hopes to get through life alive!
lazs
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No one gets through life alive.
shamus
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It's not about getting through life alive, for me it's about positioning my family so it can survive or thrive through any of the possible crises mentioned.
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Well.... we all worry about things that are fairly unlikely to happen... like wearing seat belts... unless you are an asian driver you are unlikely to really need em.
Some own, for protection, firearms but... at least they get some other types of enjoyment out of em for the most part.
Some join eco movements because they feel the end is near and that man is destroying the planet. They think they might lay some hot hippie chick tho instead of their hand.
I guess.... if economics is fun for you then any doomsday thinking might also be fun to play with... just don't let it run your life. If you are slanting what you research in order to get an outcome you like (downfall of the U.S.) then you are just a sick, unhappy, pup.
lazs
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The US Federal Reserve Bank has decided to stop releasing the information contained in their most compete aggregate of US money supply (M3) on March 23. Three days after the Iranian oil bourse is supposed to open.
I certainly don't think this is a coincidence.
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If it makes you happy thrawn then more power to you... everyone needs a hobby or... a boogie man.
lazs
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Originally posted by lazs2
If it makes you happy thrawn then more power to you... everyone needs a hobby or... a boogie man.
lazs
Makes me as happy as trying to inform friends of coming tidal wave. As far as a boogie man is concerned I can only assume that I wasn't clear in my post.
Here's an analogy.
You are a stock holder in a company. This company has a monopoly on product "X". Even though this company has a monopoly, through short sighted management it runs at a loss. That loss has been increasing by about 15% a year for awhile. Now a competitor is openning up shop and the company has decided to stop issuing you financial statements.
Not sure about you but that would certainly raise my eyebrows to say the least. Taken in context of everything else I've argued in this thread, it certainly fits in the puzzle. But I would never of guessed that the Fed would just stop releasing money supply information. But then again, in the past few years there has been many changes in the upper echelons of Fed management.
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You will excuse me of course if I get a second opinion?
lazs
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Originally posted by lazs2
You will excuse me of course if I get a second opinion?
lazs
Only if you actually go get a second opinion. ;)
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you're probly right... I will probly skip the second opinion and go on to the 3rd fourth and fifth and then finally just figure that it is not an exact science and that there are far too many variables for even a student to be 100% correct.
lazs
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The Iranian oil bourse didn't open up as scheduled. The Iranian oil minister says they are going to open next week.
"Tehran, April 26 - Oil Minister Kazem Vaziri Hamaneh said on Wednesday that the establishment of Oil Stock Exchange is in its final stage and the bourse will be launched in Iran in the next week."
http://www.iribnews.ir/Full_en.asp?news_id=212013&n=32
The US dollar is trading at it's lowest value compared to the Canadian in 28 years.
"Loonie hits highest level since June 1978 against U.S. dollar
Last Updated Fri, 28 Apr 2006 17:47:21 EDT
CBC News
The surging Canadian dollar gained more ground on Friday as it rose to its highest level against the U.S. dollar since June 1978."
http://www.cbc.ca/story/news/national/2006/04/28/dollar-060428.html
The U.A.E. and more significantly Sweden has started actually selling off USD reserves.
"UAE turns back on dollar in foreign reserves shake-up
By Ambrose Evans-Pritchard (Filed: 14/03/2006)
The United Arab Emirates is planning to switch 10pc of its foreign reserves from dollars to euros in the first sign of fall-out from Washington's snub to Dubai Ports World last week."
"Dollar falls after Sweden echoes global switch to euros
By Ambrose Evans-Pritchard (Filed: 22/04/2006)
Sweden has slashed its holding of dollars in the latest sign that central banks across the world are starting to shun US paper."
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/03/14/cnuae14.xml&menuId=242&sSheet=/money/2006/03/14/ixcity.html
And gold was trading at over $660 today.
Is this it?
"Dollar starts the big slide against major currencies
THE dollar has embarked on a big decline that will see it fall against all leading currencies, according to analysts.
The plunge is being prompted by America’s $800 billion (£438 billion) current-account deficit, they say.
The dollar has been under pressure following last weekend’s meeting of G7 finance ministers and central bankers, which emphasised “global imbalances” and said currencies should reflect economic fundamentals. Then China raised its key interest rate to 5.85%, its first hike for months, and Ben Bernanke, the new Federal Reserve chairman, hinted that American rates would pause at 5% after a rise in May.
Analysts say that without interest-rate support, the dollar will be weighed down heavily by America’s imbalances.
“I think this is it,” said Tony Norfield, global head of currency strategy at ABN Amro. “The dollar has been supported by high yields but markets are saying that is no longer enough. The question for policymakers is going to be how to manage the dollar’s decline. It won’t be a one-way street but the fall is likely to be biggest against Asian currencies.”
The euro has already risen to an 11-month high of more than $1.26, while the dollar is at a three-month low of 113.70 against the yen. The Canadian dollar, known by traders as the “loonie”, rose to a 28-year high on Friday, boosted by a hike in Canadian interest rates.
Sterling climbed back above $1.80, closing above $1.82 in New York on Friday."
It seems to me that almost everything I see points in the same direction; The fall of the USD do to printing off to many of the things.
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Chinese exports to the US account for 21.4% of its total exports, which ranks the US as number 1 export market in dollar value, with the EU second with 19.6% and Hong Kong third with 15.1%.
Sooner or later we will all be assimilated.
The only thing I can see slowing China is the rising oil prices: and everyone's going to have to get used to the fact that oil will never be as cheap as it was, and will only get more and more expensive, as demand goes up and supply goes down.
Typical - just when I thought it might be handy to finally get a driving license, the waste matter hits the spinny spinny thing. Maybe I should get one anyway, if only for the "that was back when there were cars" anecdote to freak out the youngsters in my frail dotage.
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There will be many clinching thier eyes, hands over ears chanting lalalalala as loud as possible.
shamus
PS its about golds time:)
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Today, the Canadian dollar reached parity with the US dollar.
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Originally posted by Thrawn
Today, the Canadian dollar reached parity with the US dollar.
You are aware that 80% of Canada's export goes to US, right?
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I've never seen the US $ this low before, must be a record low. It's worth less than half a Pound Sterling and the Euro is now at more than US $1.40. The Aces High subscription now costs me about the same as three bottles of soda.
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Originally posted by Viking
I've never seen the US $ this low before, must be a record low. It's worth less than half a Pound Sterling and the Euro is now at more than US $1.40. The Aces High subscription now costs me about the same as three bottles of soda.
Not a record low, but a 15 year low.
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Originally posted by 2bighorn
You are aware that 80% of Canada's export goes to US, right?
Absolutely. You are aware that last year the US had an over $70 billion trade deficit with Canada?
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Originally posted by Thrawn
Absolutely. You are aware that last year the US had an over $70 billion trade deficit with Canada?
Yeah, that's less than 10% of our total.
Point is, majority of your trade and with that your economic well being depends on US.
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Oregon raised the minimum wage by 15 cents an hour this month. The guy they were interviewing on the radio was all " This means an increase of $25 a month for hardworking single mothers. She can buy her child a new pair of shoes or a warm winter coat.":cry I had to pull my truck over and weep openly that is so touching.
Then I remember my lunch and everything else will get a little more expensive to buy that little person of illegitimate birth's coat :mad: :mad: :mad: I hope hes happy.:mad:
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Originally posted by Thrawn
Today, the Canadian dollar reached parity with the US dollar.
I noticed today in news, but that's bad, for the canadian economy, the interest rate was raised twice in last 3 months, and are going to incresse it again soon,we'll pay mortgages with 10%+ next year,Anyway the cost of living here in Ontario is way higher than most of US, Look at same car in US and here, 15-20% more expensive in Canada,go on Bestbuy.ca and to BestBuy US compare the price for same TV or other electronic stuff,: i payed 99 cents/l today in Toronto for 1 litre of gas, that's 3.6UDS/gal, more expensive than most of US, The average sale price for a house in GTA is about 360 000 $, you can buy same house with 120-150k in Dallas, Detroit, Indi, most of Ohio,Mo,IL and other places, except CA,and part of East Coast :1 pack of cigarettes cost over 9-10$ here and 3-4$ in US, the fresh vegetables/fruits and lot of other stuff at grocery store comes from CA, AZ and we pay more also, +more taxes
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No doubt that the US currently provides "well-being" for other economies. But that comes at a cost and risk that is beyond this discussion. It would be a mistake to think that the Canadian or other economies are dependent on the US, though. In the case of Canada, it has never seriously attempted to market its oil, food and lumber globally. It turns away requests to buy products now.
There are plenty of growing economies that Canada could trade with tomorrow, if it chose to. If US demand dropped catastrophically by 30% tomorrow, Canada could replace that US demand in a matter of months.
Billions of people in other economies are going through their industrial revolution now. Those economies will continue to grow, even when the US economy goes sour next year. The US provides little of the capital equipment and machinery those economies will be buying to service their own growing consumer class.
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rolex is spot on.... the bse mad cow hysteria was a good example, the lumber industry is pretty much fed up with american socialism and looking elsewhere.
exports to the states are down to 76% from 85% percent in 2002.
exports are up 29% to the european union and 65% to china.
canada is an energy storehouse and enough so to offset the hit the manufacturing sector is taking with the parity. the flipside is canadian companies will be able to invest more in upgrading with the new buying power.
so... if america doesn't want reliable energy or cheaper homes plenty of other countries beating on the door.
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You guy's better watch it, we may find terrorists up there.
shamus
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"Loonie hits 47-year high above $1.05 US
Last Updated: Monday, October 29, 2007 | 4:34 PM ET
CBC News
The Canadian dollar's upward charge continued unabated Monday, as it topped $1.05 US to reach its highest level since March 1960.
The loonie was quoted at $1.0501 US in mid-afternoon trading, up more than a full cent from Friday's close.
It later slipped back to close at $1.0496, up 1.03 cents US.
That leaves the Canadian dollar a little more than one cent away from its postwar high of $1.0614 US, set in August 1957."
...
"The U.S. dollar fell to a record low against the euro on Monday."
...
"The speed of the loonie's recent rise has been astonishing — up about 10 cents US just since the start of September.
Since the start of the year, the Canadian dollar has appreciated by 22 per cent. Its rise since the 62-cent US depths of early 2002 has been almost 70 per cent."
http://www.cbc.ca/money/story/2007/10/29/loonie.html
I'm sitting here wondering if it's time to think hyper-inflation.
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http://news.bbc.co.uk/2/hi/business/7067111.stm
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Hey buddy...can ya spare a dime:)
shamus
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US economy sees surprise growth (http://news.bbc.co.uk/2/hi/business/7071181.stm)
There was also good news for exporters, with exports of goods
and services growing by 16.2%, the biggest year-on-year rise since the
final quarter of 2003.
I guess this doesn't hold well for the dems...
:lol
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And we are still riding a 2 year old thread?
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Just another "NAFTA" issue....
Not Asked For Thrawn Assessment.
:rofl
Mac
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Originally posted by Shamus
Hey buddy...can ya spare a dime:)
shamus
Sure bud ... anytime. :)
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Originally posted by Tiger
And we are still riding a 2 year old thread?
I like to keep the info on this subject together, in order to maintain context.
"Loonie hits modern-day high above $1.06 US
Last Updated: Wednesday, October 31, 2007 | 6:25 PM ET
CBC News
The Canadian dollar surged to a modern-day high against the U.S. dollar late Wednesday after the Federal Reserve cut interest rates again and oil prices surged to another all-time high.
In after-hours trading, the loonie went as high as $1.0617 US, eclipsing the previous 50-year high of $1.0614 US set on August 21, 1957.
That's the highest the Canadian dollar has climbed since it was allowed to float in 1950.
You have to go back more than a century to find a time when the Canadian dollar was worth more.
According to a history of the dollar posted on the Bank of Canada website, the U.S. dollar plunged in 1864 as the Confederate Army approached Washington during the U.S. Civil War and the Union government temporarily shut down gold trading.
On July 11, 1864, the Canadian dollar was worth $2.78 US.
Continue Article
"This represents the all-time peak for the Canadian dollar in terms of its American counterpart," author James Powell wrote.
But there is some question about whether the two currencies can be validly compared to each other at that time. The Bank of Canada web site only lists exchange data going back to 1950.
It was just six weeks ago that the loonie reached parity with the U.S. dollar for the first time in 30 years. It's just kept climbing since.
It's risen by 23 per cent against the U.S. dollar since the start of the year.
The loonie's rise Wednesday was again due, in part, to another drop in the worldwide value of the U.S. dollar.
Wednesday afternoon's Federal Reserve rate cut helped to drive down the greenback against most major currencies. It reached a record low against the euro."
http://www.cbc.ca/money/story/2007/10/31/dollarjump.html
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bush is good for the canadian economy... i'll grant him that.
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"Iran stops accepting U.S. dollars for oil
16:34 | 08/ 12/ 2007
TEHRAN, December 8 (RIA Novosti) - Iran has stopped selling its oil for U.S. dollars, the Iranian ISNA news agency said on Saturday, citing the country's oil minister.
"In line with a policy of selling crude oil in currencies other than the U.S. dollar, the sale of our country's oil in U.S. dollars has been completely eliminated," ISNA reported Oil Minister Gholamhossein Nozari as saying.
He also said "the dollar is no longer a reliable currency."
Iran is the world's fourth-largest crude oil producer."
http://en.rian.ru/world/20071208/91488137.html
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Oh shait ... here we go. :confused:
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well looks like iran better go with i ran. I wonder if our ordenance is still reliable enough for them.
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Just the tit for tat regarding economic sanctions.
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china has signed a oil deal with iran, will china pay iran with Yuan?
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Here I was all ready for some haggling regarding global economic theory and a bit of lively debate on Fed policy but now I'm lost.
But since I spent the time scanning this can of worms we call a thread I just want to pick out a few points.
We ain't buying eggs from the farmer down the lane. Using this kind of analogy anywhere in a discourse about modern domestic monetary policy is like starting a discussion about unified field theory with the story of Newton's apple.
The Fed is not a clearinghouse for private lenders' speculative lending operations. It's there to serve as a lender of last resort should certain conditions occur. To that end it also functions as this country's accountant.
Military might nor political influence do not necessarily go hand in hand with international acceptance of any denomination, it helps but not a rule. (see Japan) Monetary and domestic investment policy is much more a deciding factor.
Selling a Bond affects it's value by virtue of the % return it will bear. The best thing for the value of the U.S.D is diversified international holdings. Watch one nation dump U.S. debt. I bet a bunch of players will convert riskier instruments (national and corporate) if for no other reason than flight to value. Massive diversification of debt is an amazing tool. Just ask Donald Trump. What hurts the U.S.D hurts everybody.
One needs to understand World Bank reserve requirements as well as how currency pricing affects net exporters before assuming we have the most to lose regarding inflation. With globalization, the benefits of isolationist and protectionist policy become even more unfulfilled save for a very few nations at a specific point in their respective economic maturations.
I'm sure I forgot something but I don't think it really matters.
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Here's Ron Paul Youtube video. I'm not trying to hijack, this video is about the US dollar.
http://www.youtube.com/watch?v=XaxdUPNYj2s
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Since Nov 7, 2007, the Canadian Dollar has lost 9% of it's value as measured against the American Dollar.
Canada is doomed.
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What's with the music on that Ron Paul video?
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Is it too simplistic to say that the low interest rates in the US are behind the loss of the value of the dollar?
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If you are saying that low rates are the reason U.S.D. pricing declines then the answer is "partially"
Interest rates are generally the "price" of borrowed money. If there is little demand then of course there will be a lower cost to obtain it. If you are talking about exchange considerations, it gets fuzzy.
Player one may see lower rates and chose the Dollar over another denomination when looking to borrow, creating dollar demand.
Player two may see the reduced yield as a negative and move to a higher yielding denomination to place equity into interest bearing instruments, lowering demand.
Player three may require repatriation from dollar based assets to his native denomination for any number of reasons and to whom pricing and rates have little bearing. Dollars get sold the market accommodates.
Player four may want or need to get his capitol out of his native denomination (or any other for that matter) and for pragmatic purposes finds the U.S.D. to be the most attractive vehicle.
Of course you also have the guy who trades Rubles for Yen, then trades again for Dollars because there's a divergence he can capitalize on. (Ruble stronger against Yen than U.S.D, Yen stronger against Dollar than an alternative like AUD.)
There are a couple of different rates quoted on U.S.D. depending on where the transactions take place and who the counter parties are. Sometimes they move in step with each other, sometimes not.
It is possible for domestic demand to place a premium on a currency where there is diminished demand worldwide, creating a discount.