Monetary policy/U.S. Dollar

[SMEGMA STENCH]

Most people would have a hard time expanding wealth because it would be wiped out every decade by a banking crisis. That is in the history books too, not only for this country but for Europe as well.

So what happens when eventually, the dollar is so devalued and inflation is so high, that we have to come up with a new currency? Eventually even a trillion dollars would become pocket change. Do we just start making up new numbers, like a zillion dollars, or something?

[jayjohnson600]

Just like a frog in a pot.

The current economic system requires infinte growth, as it inflates infinitely.
You may get periods of deflation, but the Fed policy is to maintain a small amount of inflation.
Moderate inflation tends to keep the economic engine cycling. It keeps money chasing
returns in an effort to prevent loss of purchasing power.

We don't really notice inflation(and complain) if it's slow and steady. Like a frog in a pot
where the temperature is slowly brought up to boil.
So far, the Fed(or gov't) has not had to revalue the USD. Though, it has debased the
currency which puts the power of valuing it's currency in the hand of gov't and Fed, as opposed
to hands of the people who hold it.

A new car for the average commuter(Ford model T) in 1922 cost $300, a gallon of Gas
cost $0.21 .
Today, the average cost of a new commuter car is probably around $20,000 and a
gallon of gas is $3.50 .

As you can see, the dollar has inflated quite a bit under the reign of the Federal Reserve.
Expect inflation to continue, over the long term. There is another force that tends to reverse
some inflationary effects.
Technology is a force that is deflationary on prices, but it can also have its drawbacks in
economic terms. Plus, technology requires cheap energy in one way or another, while it lasts.

BTW: If a person kept their money in silver and gold from the time of Fed inception, they would
still retain nearly all of their purchasing power. Much more than simply holding paper dollars.
Precious metals are generally seen as the anti-inflationary currency. US coinage for general
circulation used to be minted in precious metals, before fully transitioning into fiat currency.
A pocket full of change would contain copper, silver, and gold coins before the US dropped
the gold standard then later dropped the silver standard.

And somewhat related to inflation, don't forget that the middle class status used to be achieved
by the many with 1 income. Now, it generally takes 2 incomes.
Is that because we are now biting off more than we can chew with quality of life demands,
or is it also due to inflation? Probably some of both.

So, to maintain the purchasing power of your money, it needs to grow at the rate of inflation,
and of course, the more the merrier.

Jay Johnson

[Broncojohnny]

You may be reading it the same but it's not. They have yet to literally de-value the dollar as FDR did. Does printing money de-value it, yes, but #5 is talking about when you deposit your money Fri. morning and Mon. they tell you that $1000 is no longer $1000, but $600.
And it's not me talking, as I stated.

Oh, I love this part...where the increase in the value of gold from the Reserve Act of 1934 meant that the dollar was devauled by 41%.

[SMEGMA STENCH]

I'm trying to learn all this stuff. So basically, Fiat currency sucks and the gold standard sucks. What about decentralizing the banks but still somehow maintaining fiat? Possible? Or no? Doesn't sound like it would be. So you have either corruption, or, corruption.

[jayjohnson600]

Well, if you don't know which way things are going to go(or which way you
want to go), then diversifying your holdings could be beneficial to you.

Hold some fiat, and some precious metals, and/or other widely appealing stores
of value. Watch the changing conditions for an opportunity to take a position.

Jay Johnson

[SMEGMA STENCH]

I was actually thinking the same thing. Hold some fiat and some precious metals. I guess that whole "diversify" thing is starting to sink into my brain.

[bcoop]

I was actually thinking the same thing. Hold some fiat and some precious metals. I guess that whole "diversify" thing is starting to sink into my brain.

A few of us are still waiting to be wowed by your IQ....

[Denny]

Well, if you don't know which way things are going to go(or which way you
want to go), then diversifying your holdings could be beneficial to you.

Hold some fiat, and some precious metals, and/or other widely appealing stores
of value. Watch the changing conditions for an opportunity to take a position.

Jay Johnson

That's about it, right there. As much as I can't stand the USD (or any of the other fiat crap), I do hold quite a bit since that is the current medium of exchange and the USD is still a place where dumbasses run in times of fear.

I think I have a few ounces of PMs as well. LOL

Another store of value I like is ag land.

[STANGGT40]

screw fiat currency...i think we should all start trading actual fiats!

[Zfan]

What ever you want to call it, it is going to hurt! There is no easy fix to our problems!

[Denny]

What ever you want to call it, it is going to hurt! There is no easy fix to our problems!

Resets are always easy!

[jayjohnson600]

Back before the gold and silver standards were dropped, solid backed currencies circulated, all at the same time.
A middle class person's wallet could contain several distinctly different paper
currencies, and the pocket could contain coins of nickel, copper, silver, and gold.

Starting from 1861 up to the drop of the gold/silver standards, the paper money in circulation once contained:
Demand notes
Legal tender
Compound interest treasury notes
Interest bearing notes
Refunding certificates
Treasury/coin notes
Gold certificates
Silver certificates,
National bank notes
National Gold bank notes
Federal reserve bank notes
Federal reserve notes
Fractional currency
Postal notes

All with different obligations/backing.

It's possible to re-introduce a currency with real backing, but then when people realize that
there's nothying backing the fiat, they will likely decide not to accept fiat and move to using
only the solid currency. Then the fiat currency will find it's true level of value. Good money
will drive out bad money.

The new currency would have to be a product laid out by the US govt, or it will be squashed.
Private currencies have been attempted and squashed.
The obligation is usually what puts it on the bad side of the gov't laws.

If the fiat USD collapses, we'll be back to PM's and barter, but the transition will be
catastrophic for anyone who doesn't hold PM's, hard assets, and widely accepted stores of value.

and of course, the transition(or even the fear of transition) will be just another condition
that will be taken advantage of, by those who are in power and those who hold hard assets.

When I started to diversify into PM's I had put only 10% of my cash-like holding in PM's.
But, that was when PM's had no one's attention. That 10% holding now comprises 50% of the
holdings, due only to the rise in PM's.
The diversification turned out ot be a huge gain, for a "safety" asset that I resigned to be a
non-performing one. I wouldn't make a move like going to 50% to PM's like that now, since
PM's have alot of attention(and cost). But I would not have an issue with starting a safety
allocation of 10% of cash-like holding, even at current PM valuations.

Jay Johnson

[SMEGMA STENCH]

What ever you want to call it, it is going to hurt! There is no easy fix to our problems!

Yeah but let it hurt the government, and the entitlement moochers. Not us. Cause it could just be that way. Not that it will.

[Denny]

Back before the gold and silver standards were dropped, solid backed currencies circulated, all at the same time.
A middle class person's wallet could contain several distinctly different paper
currencies, and the pocket could contain coins of nickel, copper, silver, and gold.

Starting from 1861 up to the drop of the gold/silver standards, the paper money in circulation once contained:
Demand notes
Legal tender
Compound interest treasury notes
Interest bearing notes
Refunding certificates
Treasury/coin notes
Gold certificates
Silver certificates,
National bank notes
National Gold bank notes
Federal reserve bank notes
Federal reserve notes
Fractional currency
Postal notes

All with different obligations/backing.

It's possible to re-introduce a currency with real backing, but then when people realize that
there's nothying backing the fiat, they will likely decide not to accept fiat and move to using
only the solid currency. Then the fiat currency will find it's true level of value. Good money
will drive out bad money.

The new currency would have to be a product laid out by the US govt, or it will be squashed.
Private currencies have been attempted and squashed.
The obligation is usually what puts it on the bad side of the gov't laws.

If the fiat USD collapses, we'll be back to PM's and barter, but the transition will be
catastrophic for anyone who doesn't hold PM's, hard assets, and widely accepted stores of value.

and of course, the transition(or even the fear of transition) will be just another condition
that will be taken advantage of, by those who are in power and those who hold hard assets.

When I started to diversify into PM's I had put only 10% of my cash-like holding in PM's.
But, that was when PM's had no one's attention. That 10% holding now comprises 50% of the
holdings, due only to the rise in PM's.
The diversification turned out ot be a huge gain, for a "safety" asset that I resigned to be a
non-performing one. I wouldn't make a move like going to 50% to PM's like that now, since
PM's have alot of attention(and cost). But I would not have an issue with starting a safety
allocation of 10% of cash-like holding, even at current PM valuations.

Jay Johnson

OK, so DFWM isn't totally full of dumbasses.