I believe 1’s and 0’s money will decouple from true green dollars or whatever other colored currencies there are. People will realize the 1’s and 0’s have less value than the toilet paper in their wallet.
$this->bbcode_second_pass_quote('firestarter', '
')How is the dollar strengthening wishful thinking? It appears that even with the ECB and BOE holds today the FX traders especially prefer $$ over euros and yen . Apparently virtual dollar destruction vis a vis debt defaults/deleveraging is creating a mini run for dollars. The $4 trillion forex market and its traders are telling us in part, since the BSC fiasco in March, that it's time for the other of the world's currencies to bleed a little, especially the euro. BTW, more evidence of deflation.
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Byte Dollars Decouple from Real Dollars?
Re: Inflation in Wall Street. Deflation on The Streets?
by ColossalContrarian » Thu 07 Aug 2008, 23:06:18
I wanted to post this here because I think what firestarter said in the Housing Collapse Thread states my trouble grasping the inflation/deflation debate.
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Re: Inflation in Wall Street. Deflation on The Streets?
by Iaato » Fri 08 Aug 2008, 03:12:12
$this->bbcode_second_pass_quote('ColossalContrarian', 'T')he Fed can keep pumping the markets with more and more 1's and 0's, but those aren't real dollars like the ones we have in our wallets right?
Which begs the question, what is the ratio between “byte dollars” and real dollars?
Could this be deflationary for real dollars? Could there be a scenario where real dollars decouple from “byte dollars”?
Which begs the question, what is the ratio between “byte dollars” and real dollars?
Could this be deflationary for real dollars? Could there be a scenario where real dollars decouple from “byte dollars”?
These are great questions. The ratio is a bit lop-sided, Contrarian. As I understand it, less than 1% of world money is real money, and the rest is bits and bytes.
So then could we have a squeeze on real dollars? Probably so. Just to confuse the issue even more. Will the real and fake decouple? I think so. What I see now is the real economy decoupling from the fake FIRE (financial, insurance, RE) economy, due to peak oil and contraction. The same thing could happen with money. I believe it will, given that the final economic system will probably be a contraction back to barter. The first step in that devolution would be to get rid of those bits and bytes that go along with the FIRE economy and the wall street craps table.
I won't comment on Firestarter's good question about the dollar strengthening. Currency interactions are something my little pea-brain does not understand. I do think that the USD bounce is just a temporary rise, given the long term outlook for the dollar. Something like coming up for air for the second time from a drowning man.
“Paper money eventually returns to its intrinsic value ---- zero.” --Voltaire
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Re: Inflation in Wall Street. Deflation on The Streets?
by Iaato » Fri 08 Aug 2008, 11:27:33
$this->bbcode_second_pass_quote('', '"')So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here's the proof. When central banks intervene in the currency markets, they exchange their currency for dollars. Central banks then use the dollars they acquire to [s]buy US government debt instruments[/s] sop up and neutralize American garbage paper so that they can earn interest on their money. The debt instruments central banks acquire are held in custody for them at the Federal Reserve, which reports this amount weekly.
On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.
So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally."
On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth. To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, assets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.
So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit. The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally."
http://goldmoney.com/en/commentary.php
“Paper money eventually returns to its intrinsic value ---- zero.” --Voltaire
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Re: Inflation in Wall Street. Deflation on The Streets?
by ColossalContrarian » Sun 26 Oct 2008, 22:39:54
Who would have predicted:
~$65 Oil
~$730 Gold
~8400 pt DOW
A strengthening Dollar
All in the midst of a Presdential election?
I’m still seeing paper dollars being worth more than toilet paper over the next 3 years at least for J6P people like me.
~$65 Oil
~$730 Gold
~8400 pt DOW
A strengthening Dollar
All in the midst of a Presdential election?
I’m still seeing paper dollars being worth more than toilet paper over the next 3 years at least for J6P people like me.
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Re: Byte Dollars Decouple from Real Dollars?
by ColossalContrarian » Fri 12 Dec 2008, 01:01:20
I asked this question eight months ago:
$this->bbcode_second_pass_quote('ColossalContrarian', 'T')he Fed can keep pumping the markets with more and more 1's and 0's, but those aren't real dollars like the ones we have in our wallets right?
Which begs the question, what is the ratio between “byte dollars” and real dollars?
Could this be deflationary for real dollars? Could there be a scenario where real dollars decouple from “byte dollars”?
$this->bbcode_second_pass_quote('ColossalContrarian', 'T')he Fed can keep pumping the markets with more and more 1's and 0's, but those aren't real dollars like the ones we have in our wallets right?
Which begs the question, what is the ratio between “byte dollars” and real dollars?
Could this be deflationary for real dollars? Could there be a scenario where real dollars decouple from “byte dollars”?
The posts that followed represent some of the most respected posters on PeakOil.com.
$this->bbcode_second_pass_quote('DantesPeak', 'T')he US Treasury was given the power to issue money, which had to be backed by gold and/or silver. The US Treasury can not issue fiat money. However the Fed was later given the power (100 years ago) to issue Federal Reserve Notes, a kind of fiat money, which was at first backed by gold, later by US government debt, and now by "mortgage related instruments" of dubious and uncertain value. There is about $800 billion or so of paper money issued by the Fed, and the Treasury has basically withdrawn all of its paper money from circulation.
How far we have come.
Anyway, all other trllions of 'dollars' that exist in book entry or electronic form are based upon the 'value' of the paper money issued by the Fed.
The early 1930s deflation was based upon the Treasury/Fed dollars being withdrawn from banks due to poor economic conditions - and therefore book entry dollars had to be converted to paper money, and paper money to gold/silver. This caused quite a misfunction, and the US afterward stopped issuing Treasury money and further delinked gold from all dollars.
I suppose that deflation is possible if money could be converted into something else like gold/silver. But since it can't, I think monetary deflation is not only almost impossible, but the US dollar will eventually be destroyed in value by hyperinflation, or a long period of inflation.
AND…
$this->bbcode_second_pass_quote('DantesPeak', '')$this->bbcode_second_pass_quote('pstarr', 'I')sn't that what we can expect in the future for the entire world? The worst of all possible worlds--depreciation of income and savings, and a reduction in production and employment?
Well yes, we may never see a worldwide sustained economic recovery again without increasing the total supply of energy, or using available energy more efficiently. Periods of economic recovery from here out may be just due to increased use of available energy stocks, or possibly some new device/process efficiency.
However as far as monetary deflation goes it doesn't seem likely. My view is that even if money is destroyed by withdrawing it from the financial system, it is still losing it's intrinsic value at the same time - being the underlying paper money value of the Fed dollar is dropping.
Understanding what‘s coming six months down the road is next to impossible, everyone has opinion, a year from now is next to impossible. All that can be accurately predicted is that things will be “worse”.
This is good stuff but you can’t print $64 trillion. You just can’t.
Try to fathom 1 trillion:
wiki trillion
(1 000 000 000 000; 10004; short scale: one trillion; long scale: one billion)
It just is not possible. Sure, you can upload a trillion dollars into someones bank account. They can login to their online banking and see 1 Trillion, but you can’t print it.
I foresee 1’s and 0’s (byte) dollars decoupling from real “green-back” dollars.
