The Dollar and world economy crash

[chaz wyman]

Is Khalid right in calling it a Ponzi scheme?

All value and investment in that sense is a ponzi scheme - if you can't sell X for more than you bought it then you lose.

A ponzi scheme is paying off current investors with future investors investments.

The promise is that when you sell a share it ought to be backed up with a business with actual personnel with expertise, a selling point, or at least an idea for one, maybe some property or premises.

What the whizz kids of the derivative market managed to do was to sell products that looked like they were based on a business idea, which was IN FACT nothing more than the idea of selling the financial product!!

The collapse of the sub-prime market was the result of the trading of these so-called Derivatives.
The current financial bubble was burst when the bluff on these products was called.
People, in the know, realised that this bubble-burst would happen and are all filthy rich, whilst the economy that provided for them is destroyed.

If I buy a share in a shop, I get a share of that shop's profits or losses. A Ponzi scheme is nothing more than buying a shop that does not exist, except on paper.
A derivative is a paper shop.
There is a difference here.
A derivative is a legally accepted fraud; a paper shop, secured on your house.

[chaz wyman]

Is Khalid right in calling it a Ponzi scheme?

All value and investment in that sense is a ponzi scheme - if you can't sell X for more than you bought it then you lose.

A ponzi scheme is paying off current investors with future investors investments.

Just try to find an answer , how could a government ever pay back a national debt worth over 16 trillions or reduce it while it's in permanent need to borrow another bigger loan every time due to the interests ?

That's easy. Either you start a war and plunder $16 trillion+ the cost of the war, Or you could print $16 trillion dollars.
The gov only has to pay interest on money it does not print.
Obviously in printing you risk inflation and the reduction of the spending power of the dollar overseas.
This is no problem at all if you are NOT dependant on imports.

If I borrowed a dollar which is the only dollar exists on earth and promised to pay it back with an interest that's another dollar , how can I pay back the second dollar ? The answer is that I have to borrow it and here we are in the ponzi scheme .

No you get the gov to print another one.

[bobevenson]

No - printing money is not the sole cause of inflation, and does not always result by prinitng. The Gov is responsible for the money supply. The power to choose the amount is paramount. It is necessary for the gov to ensure there is enough to go around. think about it. It is also a tool to avoid DEFLATION. You sound like some twisted commie that is jealous of people having things. Let's say I have a TV - do I have to continue to pay tax on it every month whilst it still has a market value? I think I said before that such an idea is ridiculous. how would you make out your tax return? DO I have to itemise everything in the house?

Look, I don't mind if I have have to talk myself blue in the face, I will keep repeating what I know to be the absolute truth, and as far as inflation goes, the late, great economist Milton Friedman would be the first to agree with me. There is only a single cause of inflation, and that is a government that in one way or another lets the amount of money under its jurisdiction exceed the value of the property it represents, pure and simple, and absolutely unchallengeable. Where Friedman and I differ is that he was in favor of a national sales tax instead of the myriad taxes that people face. The problem with his reasoning was that a sales tax is only a tax on the current production of property, but leaves out the past production of property that the government also has an obligation to protect. It doesn't matter when property was created, the cost of protecting that property is the responsibility of the owner of that property. So, yes, you should be paying for the protection of that TV set for as long as you own it. All property is audited by companies appointed by the government for this function. Normal household goods would only require a notarized statement of ownership, but substantial property like expensive items and real estate, would require third-party evaluation. All property would be valued at the wholesale price, the price you could immediately sell it to a third party. The beauty of this system is that it puts a limit on the amount of money the government can issue, and that the tax rate is extremely low since it is based on everything of monetary value. Finally, it is by definition the only proper basis of taxation.

[chaz wyman]

No - printing money is not the sole cause of inflation, and does not always result by prinitng. The Gov is responsible for the money supply. The power to choose the amount is paramount. It is necessary for the gov to ensure there is enough to go around. think about it. It is also a tool to avoid DEFLATION. You sound like some twisted commie that is jealous of people having things. Let's say I have a TV - do I have to continue to pay tax on it every month whilst it still has a market value? I think I said before that such an idea is ridiculous. how would you make out your tax return? DO I have to itemise everything in the house?

Look, I don't mind if I have have to talk myself blue in the face, I will keep repeating what I know to be the absolute truth, and as far as inflation goes, the late, great economist Milton Friedman would be the first to agree with me.

No one listens to Friedman these days. Monetarism was tried and failed.
Inflation is caused by ANY upwards pressure on prices; that can include scarcity of resources, higher priced imports; Demand pull / cost push. Increase in wage demands, house price increase etc....
Printing money does not always result in inflation so long as issuing authorities have sufficient assets to cover redemption.
Part of the reason that inflation has not shot through the roof in the last 4 year DESPITE printing money is that house prices are falling balancing this out. There are range of other theories, but your emphasis on printing money IS NOT M Freidman's view. The view you actually have is called the "Austrian View".
But no economist on earth chooses ONE cause and sticks with it. The various causes, all of which are relevant and important can get attached to certain models has systems designed to solve problems tend to rely on fixed solutions.



There is only a single cause of inflation, and that is a government that in one way or another lets the amount of money under its jurisdiction exceed the value of the property it represents, pure and simple, and absolutely unchallengeable.

You have already adapted your view.
.

[bobevenson]

No - printing money is not the sole cause of inflation, and does not always result by prinitng. The Gov is responsible for the money supply. The power to choose the amount is paramount. It is necessary for the gov to ensure there is enough to go around. think about it. It is also a tool to avoid DEFLATION. You sound like some twisted commie that is jealous of people having things. Let's say I have a TV - do I have to continue to pay tax on it every month whilst it still has a market value? I think I said before that such an idea is ridiculous. how would you make out your tax return? DO I have to itemise everything in the house?

Look, I don't mind if I have have to talk myself blue in the face, I will keep repeating what I know to be the absolute truth, and as far as inflation goes, the late, great economist Milton Friedman would be the first to agree with me.

No one listens to Friedman these days. Monetarism was tried and failed.
Inflation is caused by ANY upwards pressure on prices; that can include scarcity of resources, higher priced imports; Demand pull / cost push. Increase in wage demands, house price increase etc....
Printing money does not always result in inflation so long as issuing authorities have sufficient assets to cover redemption.
Part of the reason that inflation has not shot through the roof in the last 4 year DESPITE printing money is that house prices are falling balancing this out. There are range of other theories, but your emphasis on printing money IS NOT M Freidman's view. The view you actually have is called the "Austrian View".
But no economist on earth chooses ONE cause and sticks with it. The various causes, all of which are relevant and important can get attached to certain models has systems designed to solve problems tend to rely on fixed solutions.



There is only a single cause of inflation, and that is a government that in one way or another lets the amount of money under its jurisdiction exceed the value of the property it represents, pure and simple, and absolutely unchallengeable.

You have already adapted your view.
.

I'm sorry, but when it comes to economics, my friend, you don't know shit from Shinola!

My recent letter in the Memphis Commercial Appeal newspaper:
Your Nov. 17 Associated Press article "Medicare premiums to rise $5 a month" makes an egregious error. It said, "Health care inflation has remained modest." Unfortunately, The Associated Press, like much of the public, associates inflation with rising prices of one thing or another. Actually, inflation has nothing to do with individual prices, but represents the general dilution in the value of money, for which only the government can be held responsible. By definition, the price of various products or services cannot exclusively be subject to inflation, for inflation affects everything equally.

Date: Sunday, November 18, 2012, 6:37 PM
From: William T Smith II (wtsmith) <wtsmith@memphis.edu> (Chariman of the department of economics at the University of Memphis)
To: "bob evenson"
Subject: Re: Letter to the Editor
Mr. Evenson, I agree completely that the term "inflation" is much abused. It's macroeconomic meaning is, as you say, that the general price level is increasing. It should never be confused with an increase in the prices of individual goods. That said, "inflation" is also used in common parlance to refer to increases in the price of a subset of goods, as in "inflation" of health care costs, or real estate prices, or commodity prices, or whatever. That is just a shorthand for saying that the prices of those goods are increasing faster than the aggregate price level. I have no trouble with this usage as long as it is explicit which prices we are talking about, and it is not confounded with the macroeconomic meaning. As for your diagnosis of the cause of inflation, I would adhere for the most part with Milton Friedman's famous dictum that "inflation is always and everywhere a monetary phenomenon.
Bill S.

Date: Monday, November 19, 2012 6:43 AM
From: bob evenson
To: William T Smith II
Thanks for your incredibly fast response and reference to Milton Friedman.

Date: Monday, November 19, 2012 11:23 AM
From: "William T Smith II
To: "bob evenson"
Yes, I was a student of a student of the Master.

[chaz wyman]

No one listens to Friedman these days. Monetarism was tried and failed.
Inflation is caused by ANY upwards pressure on prices; that can include scarcity of resources, higher priced imports; Demand pull / cost push. Increase in wage demands, house price increase etc....
Printing money does not always result in inflation so long as issuing authorities have sufficient assets to cover redemption.
Part of the reason that inflation has not shot through the roof in the last 4 year DESPITE printing money is that house prices are falling balancing this out. There are range of other theories, but your emphasis on printing money IS NOT M Freidman's view. The view you actually have is called the "Austrian View".
But no economist on earth chooses ONE cause and sticks with it. The various causes, all of which are relevant and important can get attached to certain models has systems designed to solve problems tend to rely on fixed solutions.
[/color]

I'm sorry, but when it comes to economics, my friend, you don't know shit from Shinola!
]

I try with you Bob, but you are just a closed minded moron.
I'm not going to read your dumbass letter.

[bobevenson]

I try with you Bob, but you are just a closed minded moron.
I'm not going to read your dumbass letter.

Not only did you read my letter, you read the emails from the chairman of the economics department at the University of Memphis, and you can't stop pissing in your pants (and maybe that explains your spelling the British "dumbarse" as the American "dumbass," unless you now secretly want to be a dyed-in-the-wool American without putting on those British airs!

[reasonvemotion]

Bob, I am going to say "how incredibily articulate you can be, when diverted from the subject of Ouzo".

[bobevenson]

Bob, I am going to say "how incredibily articulate you can be, when diverted from the subject of Ouzo".

I can never be diverted from Ouzo for it infuses everything I say.

[chaz wyman]

the more money in print, the less it is worth...

why is gold valuable? you can't print gold...

why was the dollar valuable? it was backed with gold... nixon screwed that up

-Imp

Ignorance of basic economics is astounding.

Money is not wealth.
Neither is gold. The amount of Gold held by a country never adequately represented the wealth of nations - that's why it was abandoned by the world's economies.
If we were to have a gold standard South Africa would suddenly be the most powerful nation on earth, and able to increase its clout by digging up a bit more. Ridiculous!

Then it would have been it's lucky fate . If it had not been for oil , the majority of Arab countries would have been beggars today . Gold means something touchable that needs humanist effort to be made and it'd have been a protection to the world financial system , not just paper that can lose it's worth and peoples' trust .

Try to image a world where the money was based on gold.
One day South Africa opens up a massive mine, and within 6months they double the amount of gold in the economy.
This would be a disaster. Across the whole world the value of money would be cut in half.
At first the local economy would not be affected, but soon prices would have to double as demand would outstrip supply. South Africa would have unprecedented spending power and would drain other economies until they would be forced to double prices.
Result: Inflation 100%.

[bobevenson]

Try to image a world where the money was based on gold.
One day South Africa opens up a massive mine, and within 6months they double the amount of gold in the economy. This would be a disaster. Across the whole world the value of money would be cut in half. At first the local economy would not be affected, but soon prices would have to double as demand would outstrip supply. South Africa would have unprecedented spending power and would drain other economies until they would be forced to double prices.
Result: Inflation 100%.

First of all, no currency can be based entirely on a single commodity such as gold. By this, I mean that everybody couldn't take all of their money and exchange it for gold at the prevailing price of gold because there's not enough gold in the entire world to allow this to happen. Currency must be based on all available property, including gold, to prevent inflation. Under Evensonomics, inflation is defined as follows: It = M1/M2, where I = inflation, t = any time period, M1 = money exchanged for but not representing property, and M2 = all money exchanged for property. Inflation has nothing to do with high prices, increasing prices or prices at all. It can range between 0 to 100% for any time period.

[chaz wyman]

Try to image a world where the money was based on gold.
One day South Africa opens up a massive mine, and within 6months they double the amount of gold in the economy. This would be a disaster. Across the whole world the value of money would be cut in half. At first the local economy would not be affected, but soon prices would have to double as demand would outstrip supply. South Africa would have unprecedented spending power and would drain other economies until they would be forced to double prices.
Result: Inflation 100%.

First of all, no currency can be based entirely on a single commodity such as gold.

<delete>.

It was very convenient to use the Gold Standard when the British controlled all world trade, So it was possible.

Aside from that YAWN - my comments were not directed at you but Khaled who thinks we ought to return to a gold standard.

[bobevenson]

When a country says its currency is based on a gold standard, this only means that gold backs a small portion of its currency, since all the gold in the world couldn't equal the currency's total value. Again, the only proper currency is one that is backed 100% by the property it represents, and not one dollar more. In case you haven't already figured it out, my friend, I am a prophet of political economics.

[chaz wyman]

When a country says its currency is based on the gold standard, this only means that gold backs a certain small portion of its currency since it would be impossible for all the gold in the world to equal its currency. Again, the only proper currency is one that is based on the value of the total property it represents and not one dollar more. And in case you haven't already figured it out, my friend, I am a prophet of political economics.

In 1844 the Bank Charter Act established that Bank of England notes, fully backed by gold, became the legal standard. According to the strict interpretation of the gold standard, this 1844 act marks the establishment of a full gold standard for British money.

[bobevenson]

When a country says its currency is based on a gold standard, this only means that gold backs a small portion of its currency, since all the gold in the world couldn't equal the currency's total value. Again, the only proper currency is one that is backed 100% by the property it represents, and not one dollar more. In case you haven't already figured it out, my friend, I am a prophet of political economics.

In 1844 the Bank Charter Act established that Bank of England notes, fully backed by gold, became the legal standard. According to the strict interpretation of the gold standard, this 1844 act marks the establishment of a full gold standard for British money.

If you think the entire population of England at any time in its history could turn in 100% of its currency and get gold at its current market price, I have some swamp land in Florida to sell you.