The Time Table for the Dollar

Fear mongering...

Not the first time people have claimed the country was going to collapse. As bad as our dollar looks right now, the Euro is worse and their economic situation is much worse because the countries refuse to cooperate.

The speculation that the dollar may no longer be the world's reserve currency is a valid concern, and would cause the dollar to depreciate, but wouldn't cause our money to be worthless.

Hopefully Barry will keep these things in mind before he spends us into trouble.

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Is this thought process fear mongering

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Yes.

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or true

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While they use completely true underpinnings, they completely ignore relativism. Sure, we're pretty f'd, but who's better? The Euro Zone is 10x as much of a shitshow, the Japanese are on our same path, but 20 years ahead. Everyone likes to point to China as a big scary point, but really: who in the hell would make a country like China the head of the global currency? We're talking about the country who's most common business technique is blatantly ignoring intellectual property laws.

Also, the guys who pimp these books are using only econ 101 type relationships, and choosing and picking them. I find a lot of parallels between the anti fed lunatics and the global warming lunatics.

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Well i am anti-fed

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You are most likely not in the group of "lunatics" I was speaking about. I'm willing to bet that you have very litle idea of what the fed actually does. The lunatics are the ones who get it and still think that shutting the fed down wouldn't be the end of this country.

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i dont know if im doing any good by placing all my savings in foreign resources

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I'm a big advocate of holding foreign assets. 25% of my 401k is invested in foreign assets.

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Also i never said this would collapse our country

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I don't think I inferred that you did.

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The government would take care of themselves no matter if its getting bigger or not.

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This sentence made no sense in the context of everything else you said.

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Well i am anti-fed

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Why? I'm assuming you think they are just printing money everywhere, right? You know the dollar is actually worth more now than it was before the start of the QE programs?

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but i dont know if im doing any good by placing all my savings in foreign resources.

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Depends on the foreign resources. The strongest real returns the next couple decades are going to come from emerging markets. Foreign isn't bad it just depends on what "foreign" you're speaking of and what type of resources.

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Also i never said this would collapse our country. The government would take care of themselves no matter if its getting bigger or not.

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People really need to understand what the pre-existing conditions must be for a country to collapse. These are unsustainable debt, very weak worldwide political influence (defense included here), widespread corruption, fiscal and monetary transmission mechanisms being completely broken, and revolution from the working class.

The only condition met is unsustainable debt. Some radicals will try to say some of the other criteria are met, but they aren't even close. Do we have corruption? Of course, everywhere does. But it's nowhere near actual widespread corruption. The closest country to collapsing right now is Greece because they meet all these criteria.

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Why do you call them lunatics?

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I know this is for THF, but anybody that thinks it would be a "good" thing to shut down the Fed truly has no idea what the Federal Reserve does, especially in the past several years.

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Do you think central banking is a good thing?

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I don't believe there is such thing as good or bad. You can make an arguement for or against any possible scenario.

Now the question becomes what I think you're trying to ask: Would an economy be stronger and less volatile with or without central banks? The answer to this is without a doubt, with. Monetary authorities are the only people that have made actual proactive decisions since 2006, and saved us from going completely down the tube. If you actually care enough to see my full take its the 13th post on this page. That's specific to the recent occurences, but on a higher level the central bank is the biggest reason the US has been able to grow and raise our standards of living in such a rapid manner since 1950. The problem was that standards were raised higher than the "intrinsic" value of the average American. This was partly to blame on central banks but also partly to blame on fiscal regulation and the majority of blame is saved for society.

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Is it possible to dislike central banking and not be an anti-fed lunatic?

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It is possible, but in practice it doesn't happen that often.

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Because they are.

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What makes them a lunatic? What if they just prefer to allows markets to operate freely? Is that lunacy?

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I think that it is (nearly) a necessary thing in a developed economy.

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Why?

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What if they just prefer to allows markets to operate freely?

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If markets operate freely they will mean revert but the volatility would be much higher. For example, if you didn't have inflationary controls price levels would rise uninhibited and banks would be laggards in raising interest rates. Eventually your exports would plummet and labor would be laid off in mass. Price levels would plummet and exports would eventually rise, the problem is capacity would be shaved too highly because of the dramatic swing. These dramatic swings damage confidence which damages the economy and the entrepreneurial spirit.

The only difference between a free market economy and a free market economy with a central bank is the latter smooths out the swings both ways, which in turn actually allows the economy to grow more by mathematical compounding (an asset that goes up 6% then down 4% is worth more than an asset that goes up 60% and down 40%).

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Why?

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See the above. A developed economy has a massive amount of resources and labor involved, and volatility in these situations leaves a lot of uncertainty for the livelihoods of a lot of people. The market will correct itself but a smoothing mechanism can be very valuable if used correctly.

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What do they do that is so good?

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See the above post. In normal circumstances they smooth out economic cycles. In unusual circumstances (the past 4 years) they can save the system from disaster.

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Why not accept the reality that both are related and that thinking in some theoretical central banking model is not realistic, and perhaps a bit utopian?

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The fiscal side still holds onto the old academic models. Trust me when I say this, the Fed has many, many models that they use. None of them are "ivory tower" models that are created in academia without real world testing.

In terms of you blaming central banks, I'm not exactly sure why you feel the need to point a finger at the only institution that actually saved us when things really went bad. What you can blame on the Fed is keeping rates way too low during the 90's and early 2000's. You can blame fiscal authorities by allowing banks to make loans to, in essence, anybody. You can blame banks for taking on too much risk. But the end blame has to be placed on society, because in essence if you refuse to do that you're not blaming the biggest underlying cause.

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Wouldn't some sort of equilibrium eventually be reached?

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Re-read the post. The question isn't reaching equilibrium, its how many standard deviation moves happen between reaching the equilibrium. Those large movements hurt, read the mathematical example and then think from a business owner's perspective. If you can count on a single digit, constant growth rate every year they will have confidence in hiring and be able to sleep better. If you have no idea if your business will quintuple sales or lose half of your customer base from quarter to quarter you will be more uncertain with deploying capital.

Confidence and fear are both self-fulfilling prophecies in the market, the central bank is used as a tool to smooth animal spirits to get to your less volatile environment.

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Their complete and total disregard for economic good in the pursuit of robbing the federal government of power.

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I understand where you are coming from, but the difference between us is that I don't like taking perceived shortcuts because more often than not they have long term negative effects. Your definition of "economic good" may be good for the here and now, but maybe not so much for the there and then.

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Someone has to control the currency

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I disagree. But then that gets into my view on things like Bitcoin and what not, and I don't think this thread needs to devolve into a discussion on that.

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Please explain a system that is more free than the one we have.

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Well shite. I may not have a choice to avoid it. Umm...well....Bitcoin is a perfect example of this. If it, or something like it takes off in the future, then it will be the example you seek. A currency and economy completely free of meddling, and only impacted by supply and demand.

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random shiny metal

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FWIW, I don't care for gold at all. I don't understand why any one would ever consider it valuable, to be honest. However, I understand it's use in the past, although I do think it's something we should get away from in the future.

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If you were setting up a government and someone were to tell you that you could control 2 of the 3 following options, which one would you choose?

1) Fixed Exchange Rate
2) Sovereign Monetary Policy
3) Free Capital Flow

Which ones would you choose?

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If those are my only choices, then I'd pick #2 and #3, but I don't understand why I would have to choose any of those anyway.