What Makes a Nation's Money Gain or Hold VALUE???

Discussion in 'Economy' started by Neubarth, Jan 5, 2012.

  1. Neubarth
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    Neubarth At the Ballpark July 30th

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    If it were backed by Gold, it would hold value as long as the gold held out. Once you run out of Gold, all hell could break loose.

    I see a lot of people on this forum who say that as long as a nation has a balanced budget, its money will hold value.

    Those same people (well meaning, even if oblivious to the reality in the world standing right before them) tell you that if a country runs deficits that the money of the country will decrease in value. Some (foolish though they may be) will tell you that their money will decrease in value in proportion to their deficit spending over time.

    I am here to tell you that THAT THEORY is total Bolshoi under modern circumstances.

    The reality is that deficits do not matter for the producing countries of the world. Both Japan and the United States have run up tremendous deficits in Federal Government Spending. The Japanese individual is more in debt than the American, but both are technically over their heads in debt because of their government's liberal spending.

    Most of you will agree to that reality.

    Now, agree to this. The value of the Yen has been going up along with the Japanese deficit spending for the past third of a century as opposed to the currencies of the less productive nations. Ditto the Dollar for the past century.

    Our currencies go up in value against the Mexican Peso or the Venezuelan or Argentinian or whatever currencies as long as we are a more productive nation per capita.

    The reality is that it is the productivity of a nation that makes its money have value. The United States is the leading manufacturing country in the world. The value of our products for export help hold the dollar up. That also includes natural resources. The United States exports oil, coal, nuclear fuel, trees, minerals, agricultural produce and so on. We have a balance of trade deficit but our money still holds value against the nations of the world.

    We are not backed by Gold, but we are backed by CORN. (Corn and Wheat and Oats and Wood and 737's and weapons of war and so on....) As long as we keep on exporting CORN we are on the CORN standard. The hell with gold, as it is just another commodity like wheat and oats and pork bellies (We export a lot of them, too.)

    The CORN standard works fine and a dollar bill can be exchanged for CORN at most any store. You do not even have to go to a Federal Bank like you used to have to do before the Great Depression. The Hell with gold. Some people horde it, but you can not eat it, and with the world's overpopulation problem getting totally out of control, I strongly recommend stockpiling corn on your shelves for your family. Let the idiots try to eat their gold.

    The United States in producing all of this product is in competition with the other industrialized nations of the world. It is to their advantage to keep the value of their currencies low, to their products (their CORN) sells for a lower price than our products. Communist China has artificially pegged their YUAN to a very low value against the Dollar so the Chinese products can sell for less in the world's market place. The limit to lowering their Yuan is determined by their bottom line. They want to make money and lately the Chinese have been raising their profit margin from two percent to three percent to five percent and higher. If they go any higher, their prices will be up there with ours.

    Since the other industrialized nations are keeping their currencies low as opposed to the Dollar, they are effectively determining the value of the Dollar (Our deficit spending has no effect.) The same holds true for Japan.

    Quick, somebody go out and tell that ignorant buffoon Ron Paul how the system really works.

    Deficits? They do not matter! The Deficit can be totally make believe. Consider this reality. When the Fed buys our Treasury Bonds (effectively financing our deficit spending) the Fed is a bond holder just like the Bank of Japan or the Communist Government of China. There is one difference and that is that the Fed takes our interest payments and deposits it in the US Treasury. (That is right, From the US Treasury to the Fed and then right back to the US Treasury.) When the Fed holds our bonds and notes it is as if we do not have to pay interest on it. (Tell this to that buffoon Ron Paul who keeps on talking about the massive interest payments will have to pay on the debt.)

    If the Fed purchases all of our bonds and notes outstanding, the US government would have no real interest payments to make. WOW! That is Right! (Ron Paul is too stupid to understand that.)

    If you are not paying interest on a debt, what is that debt? That is right, it is just a ledger entry. All of our national debt can be converted to a ledger entry that we can carry forward for eternity and never have to repay. Just carry it forward from year to year as a ledger entry. Either that or simply forget about it because it does not matter, as it is just ink on paper in the ledger that you can throw away of you want to.

    No interest payments means effectively no debt. Exporting CORN means the other countries of the world force the value of the dollar up.

    Hell, we are in fine shape.
     
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  2. Sundial
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    Sundial Class Warrior

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    It sounds like you're reading MMT. But it you read carefully, you'll see they say deficits DO matter. It's just that they matter because of inflation, not solvency; and that deficits may be too small, as well as too big.
     
  3. Neubarth
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    Neubarth At the Ballpark July 30th

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    Actually, it is my political theory. Who is MMT?

    I see no direct correlation between deficit spending and inflation.

    We have inflation because we desire to have it because it seems to make the economy run better. Actually "seems" is not the right word.

    "Because it is an established fact it makes the economy run better." is a better phrase.
     
  4. samjones
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    samjones Member

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    I read about 2/3rds of it. Something do with CORN.....I believe it was in support of fiat money.
     
  5. Jos
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    Jos BANNED

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    A Nations money, these days is based on confidence, confidence that others will accept it as payment for goods
     
  6. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    I've actually taken Econ 101 so can set you straight on that one. Suggest you wait till college before you comment on economic matters.

    When the Fed buys bonds with fiat money( printed, not taxed money)
    it adds to the money supply and thus inflates prices. So, the American people pay with higher prices when they don't pay with higher taxes. In theory, the American people are neutral about whether their taxes go up or the Fed inflates the currency by buying the deficit. As always there are no free lunches.

    welcome to Econ 101.
     
    Last edited: Jan 16, 2012
  7. Toddsterpatriot
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    Toddsterpatriot Gold Member

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    Still haven't seen any Palestinian money. Why's that?
     
  8. Jos
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    Jos BANNED

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    You look but don\t want to see
    [​IMG]
     
  9. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    of course that is utter and pure liberal nonsense. Inflation creates bubbles or mal-investments that in turn cause recessions and depressions.

    A recession is the time period during which the Republican free markets puts people and resources back in their proper places. For example, a carpenter has to sell his tools and retrain for a free market job after the housing market was artificially inflated and burst due to liberal policies. Got it now?
     
  10. Toddsterpatriot
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    Toddsterpatriot Gold Member

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    Coins minted by the British?
    That's not Palestinian money.
    Try again?
     

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