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  1. #191
    Senior Member reason's Avatar
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    Apr 2007


    Quote Originally Posted by meanlittlechimp View Post
    Inflation is inevitable. Not just because of rising fuel costs, or Wall Street's collapse, but because of our enormous debt (from the right's ridiculous war) and the trade deficits caused by our increasingly LESS competitive companies in industries that we used to dominate.
    So ... how do each of these things contribute toward inflation?
    A criticism that can be brought against everything ought not to be brought against anything.

  2. #192
    Order Now! pure_mercury's Avatar
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    Feb 2008


    Quote Originally Posted by reason View Post
    This is interesting (note the date).
    The Barney Frank quotation from 2003 about them was hilarious, too.

    "These two entities - Fannie Mae and Freddie Mac - are not facing any kind of financial crisis. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."

    New Agency Proposed to Oversee Freddie Mac and Fannie Mae - New York Times
    Who wants to try a bottle of merc's "Extroversion Olive Oil?"

  3. #193


    Quote Originally Posted by reason View Post
    So ... how do each of these things contribute toward inflation?
    Driving up massive debt to finance war causes inflation because when you're barely paying off the interest on said debt, they become less and less likely to purchase this debt via T-bills or treasury bonds. It is a problem when you keep borrowing ever more money driving up our debt to an insane 10 trillion dollars (people start to lose faith in your ability to pay). Even worse, we have crushing trade deficits which continually get worse which adds ever more debt, every single year.

    Printing money (or expanding money supply) causes inflation because it makes each dollar already in the system inherently less valuable. This isn't necessarily always problem when we are facing real economic growth or increased productivity (which we haven't).

    In the past when there was a gold standard, Governments had commodities with REAL VALUE to back up their paper money. Once the dollar replaced gold as the "commodity" that was pegged to world currencies (meaning they now had to hold US dollars in their treasuries instead of gold) keeps our currency artificially strong.

    Once central banks around the world lose faith in the intrinsic value of the US dollar and they start dumping their dollars and Treasury notes - the dollar will plummet even further (causing more inflation).

    The upside is that our products will be more attractive in int'l markets (from the weaker dollar) which should help our trade deficits. The downside is our standard of living will fall to more realistic levels. You can live nice for a while off your credit cards but once the credit gets turned off, we're gonna face a painful dose of reality.

  4. #194
    Join Date
    Mar 2008


    Stock market today, record lows, told you so. I'd advise everyone to be on alert this week, possibly for tomorrow. I've heard some credible sources say there may be another shoe to drop...

  5. #195


    The truly strange thing about dollars is how nebulous they really are. Ask someone what a dollar is, and they'll fish out one of those printed pieces of paper and show it to you... yet many more dollars are exchanged in the US economy on any given day than we actually have printed paper currency to represent. The Fed doesn't actually have 700 billion physical representations of dollars to make good on US mortgage trading debt.

    And of course, it wouldn't matter if it did. All a single dollar represents is an IOU, but this IOU is powerful precisely because it is universally recognized as a medium of exchange. If that consensus is broken, the power of the dollar is broken.

    Because the Fed backs the dollar, controls the supply of dollars, and manages the value of the dollar (the majority of said dollars being merely numbers in Federal Reserve Bank ledgers rather than printed notes), its willingness to soak up bad mortgage debt cannot help but weaken the currency. Our dollars will get smaller, because the entity that controls the value of the dollar has agreed to trade its IOUs for industry IOUs... to the tune of seven-tenths of a TRILLION dollars.

    That's 700 billion individual impacts on the consensus of the value of the dollar.


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