[RdSnt]

They have promised this money, but they have not gone to the market yet for any of it. 7+ trillion dollars, and counting, and there has been no effort to generate the funds, either through bonds or treasuries.

$this->bbcode_second_pass_quote('patience', 'T')rying to understand this. Where did the Fed get $2.1 T they gave out so far? I don't think it was just lying around in a boxcar someplace up until they needed it recently. So, is this just fantasy money they got from their imagination? Or did it really exist somewhere? I suppose it was "lent into existence" like the money that banks loan that they don't have, against some other borrower's loan payments they hope to get someday (haven't yet-maybe never will get) which is called an "asset" on their books, huh? If this is true, then it is ALL just promises-to-pay, that in today's world aren't worth a heckuva lot, right?

So, then the dollar (and all other fiat currencies) are just worth something because somebody said so, and others believed him. The first one to blink loses everything then, right? As in Iceland.

[RdSnt]

How are you measuring the size of the US economy? If it is the current fantasy economy then you are over-estimating the actual size of the economy. Keep in mind most of what you see is based on 30 years of borrowed money, both governmental, corporate and personal. The real US economy is likely a third of the current size.

$this->bbcode_second_pass_quote('dissident', 'T')he current stimulus amounts are small compared to the size of the US economy and Paulson et al. are hoping that the world continues to sterilize the inflationary impact of these injections.

They are trying to take inflation into account, otherwise there would have been an $8 TRILLION buyout. But to me it looks like they are overestimating the desire of the world to absorb these pieces of paper.

[Homesteader]

Any thoughts on the recent strengthening of the yen vs. USD in the past week?

[shortonoil]

Failed Fiat Monetary System Heading for Rampant Inflation

The FED can create an infinite amount of money, but that does not mean that they can get that money into the general market with the present crippled credit market. If asset values continue to decline at their present rate, we will see deflation (asset values back the debt that allow for the creation of the currency and make the credit market possible). If asset prices decline slower than the injection of currency we will get inflation.

As asset prices approach zero the chances of inflation increase. Whether or not the monetary system can hold together long enough for this to happen is, however, questionable.

[Revi]

We're still in deflation mode. The value of an ounce of silver has dropped a buck today. I think we are in some kind of a deflationary depression already. The world is having a big yard sale. That means everything is worth far less than it was a year ago.

Silver is below $10, and it was at $20

Real Estate is half of what it was worth a year or two ago.

Oil is less than half of what it was worth a few months ago.

Cars are being deeply discounted. They only want around 12 grand for a pickup nowadays.

Everyone lost half or more of their retirement.

How long will it last? Who knows?

[ReverseEngineer]

$this->bbcode_second_pass_quote('Revi', 'W')e're still in deflation mode. The value of an ounce of silver has dropped a buck today. I think we are in some kind of a deflationary depression already. The world is having a big yard sale. That means everything is worth far less than it was a year ago.
Silver is below $10, and it was at $20. Real Estate is half of what it was worth a year or two ago. Oil is less than half of what it was worth a few months ago. Cars are being deeply discounted. They only want around 12 grand for a pickup nowadays. Everyone lost half or more of their retirement. How long will it last? Who knows?

[Novus]

I don't see rampant inflation happening in this market. A lot of money has supposedly been created but it is never entering the system in terms of new loans and spending. The money just ends up in a black hole. The black hole of debt is not just sucking up the imaginary bailout rescue money it is sucking real money as well. Every time someone pays a debt that money is Gone from the economy because the banks don't lend it back out. It is just gone.

Also the US dollar will not collapse in a vacuum because every other currency in the world is being sucked into the same black hole. This is basically the Tainter scenario that is playing out. If a single economy collapses wealth and power is transfered to other powers and the overall system reballances and continues on. In the Tainter scenario where all the economies are collapsing there is no continuing on, there is no tomorrow. It just all comes to an end in an apocalyptic meltdown.

[Zardoz]

$this->bbcode_second_pass_quote('Novus', '.')..In the Tainter scenario where all the economies are collapsing there is no continuing on, there is no tomorrow. It just all comes to an end in an apocalyptic meltdown.

[billg]

Wouldn't inflation start to kick in once we actually see physical shortages in basic commodities (things that are no longer being produced because of lack of easy credit)?

[shortonoil]

billg said:

$this->bbcode_second_pass_quote('', 'W')ouldn't inflation start to kick in once we actually see physical shortages in basic commodities (things that are no longer being produced because of lack of easy credit)?

[billg]

$this->bbcode_second_pass_quote('shortonoil', '[')b]billg said:$this->bbcode_second_pass_quote('', 'W')ouldn't inflation start to kick in once we actually see physical shortages in basic commodities (things that are no longer being produced because of lack of easy credit)?

[dissident]

Micki, I think Paulson et al. overestimate the demand for US dollars and treasury bills. So there is the potential for the current rate of stimulus to be too big for the US economy to handle. Watch for prices increases for basics that are out of whack with the official CPI.

RdSnt, I am taking the $13 trillion US GDP at face value. I agree that this figure is detached from the physical US economy. But the GDP is based on territorial and extra-territorial economic activity unlike the GNP. Globalization has been good for the US in the last 20 years.

Regarding the point about fractional reserve banking, as has been pointed out by Novus, the cash injection is not going to scale up by a factor of 10 but is probably not enough to fill the growing holes.

[ReverseEngineer]

$this->bbcode_second_pass_quote('dissident', ' ') But the GDP is based on [s]territorial[/s]virtual and [s]extra-territorial[/s]extra-terrestrial economic activity

[PenultimateManStanding]

The money now isn't backed by gold. That's supposed by some to mean that it is bogus money. So then, what makes gold "real money?" Its a shiny metal with some useful attributes: it is malleable and doesn't corrode. Plus it is attractive to the eye. So are seashells which have also been used as currency. And glass beads. I read somewhere that Roman soldiers were paid with salt which could then be used to buy a jug of wine or the services of sex trade workers. Fiat currency is elaborately crafted paper notes. It works fine if it is backed by confidence and state power. Take away either or both and nothing will work as money. Maybe salt will be the currency of the future. One pound of salt gets 10 pounds of beef or 50 pounds of wheat. It would be interesting to speculate what the exchange rate might be for salt and gold.

[3aidlillahi]

Salt does have a lot of uses such as flavoring as well as to keep meats fresh longer. I wouldn't base my economy on it but I can see that from a practical standpoint.

[mattduke]

The question you are really asking is, "what is money?" Read "What Has Government Done To Our Money" by Rothbard. It is available free online in PDF format.

[bodigami]

Chocolate and Coffee seeds?

[Revi]

The Mayans used cocoa beans, Quetzal feathers and jade.

I think they used salt as well.

Fiat currency has some value now, for some odd reason.

So many people have trusted gold for so long, that it has value.

I don't like how it's gotten, so I won't own any.

[PenultimateManStanding]

$this->bbcode_second_pass_quote('3aidlillahi', 'S')alt does have a lot of uses such as flavoring as well as to keep meats fresh longer. I wouldn't base my economy on it but I can see that from a practical standpoint.

[dinopello]

I could dump a buck of water and your salt and it dissolves away. On the other hand you could sweat money. Water is going to be pretty valuable.