Fiat Money and its Social Significance

[Rshermr]

Economy run with Fiat currency is what I called a Fiat Society.

Our fiat currency losing it's status as the world's reserve currency will absolutely have an effect. In their time Rome and Great Britain lost theirs and none of it was good for the hometeam.

Do you always simply post conservative dogma?
Were you of the opinion that your opinion has some value???
Do you have an impartial source for your dogma???

Of course not. Thanks for your opinion. And you know how much I respect your opinion.

Those who have statements to make have authoritative and non partial sources. You, me boy, have none.

You are, in technical terms, of NO importance of any kind. Just another worthless con tool. Incapable of rational discussion.

Conservative dogma?

How can we talk about the collapse of the Roman empire when all you know about it is "I'll have a pepperoni slice"

Toward the end the Romans issued Obama coins, that is, coins that were made of some other metal but coated in gold. It was the like ObamaCare website and ended just as badly

Well, again proving you are stupid, you suggest the obamacare web site ended badly. You did not notice, apparently, that it did not end. It is, in fact, still in existence and doing quite well.

Funny how I knew you would make such an ignorant statement, criticizing the problems with the web site as if it was the law itself. Always right there, perfectly aligned with those bat shit crazy con web sites. (What a surprise)

Now, if you get together with step, and helena, and pool your iq's, you may get close to 100. Ah, probably not that high.

Remember. It is not your fault. Just plain bad luck.

 

[Rshermr]

China and OPEC nations dumping hundreds of billions (trillions?) of FRNs wouldn't affect our lives?

OK, now I'm certain that you can't be taken seriously. Ever.

So, it must have hurt last time they dumped dollars, right???
Oh, yeah, it NEVER happened before.

But they are going to dump now, because they like to kill their own economy, right???


So, since no reputable economist would buy your argument, perhaps you have some source that has status and agrees with you.
Oh, there are none. Just bat shit crazy con web sites. No impartial source???
What a surprise.

So, does your head hurt being this stupid??

We were talking about what would most likely occur, were the USD no longer the world's reserve currency.

Context, Spanky, context.

Speaking of stopit.

No, me poor ignorant con. You are talking about what YOU SAY would happen. Just your opinion. Or should I say, the opinion given to you by those great bat shit crazy con web sites you frequent. Pure fantasy, of course.
Funny how your opinions never come with a link for support.

 

[Rshermr]

How can we talk about the collapse of the Roman empire when all you know about it is "I'll have a pepperoni slice"

Perhaps you missed it, me boy. We are not in a history forum. If you would like to discuss rome, you should change forums. This is an economics forum. Perhaps you are in the wrong place. Because you have shown NO knowledge of economics. Just agenda without back up.

 

[Rshermr]

Speaking on behalf of others. The hallmarks of someone with severe mental insability.

Rshermr is indeed the king of battling strawmen, he never met an opinion he was able to manufacture that he couldn't defeat.

I assume he's not comfortable with dynamic thinking on his feet, he has a narrow band of standard arguments he's used to having (as evidenced by his ability to regurgitate the same wall of links over and over) and if someone strays outside of that comfort zone he has no choice but to attack what they haven't even said. It is pure comedy.

Of course it is, to you, me boy. But then, you do not read the links I provide you. Nor do you provide links yourself. Because, of course, you have no back up for your drivel that is impartial. I suspect even you would be ashamed to show where you get your drivel. Which I why I expect on links.

Thing is, when all you have is agenda, that is all you have. And it tends to make you stupid. Which you have proven.

By the way, watch the senseless laughter. It is a sure sign of congenital idiocy.

 

[HelenaHandbag]

First of all I'm not a con.

Secondly, you don't need to Kreskin to recognize the very high degree of probability that the value of the USD would take a drubbing, as trillions upon trillions of them would go chasing after the new reserve currency.

Last of all, go pound sand you condescending know-nothing twirp.

 

[Rshermr]

First of all I'm not a con.

Secondly, you don't need to Kreskin to recognize the very high degree of probability that the value of the USD would take a drubbing, as trillions upon trillions of them would go chasing after the new reserve currency.

Last of all, go pound sand you condescending know-nothing twirp.

Yes, you are. The only place you can find sources pushing your concept is right there among the bat shit crazy con sites.

So you believe. But then, you are stupid. Do you have a smarter source??? Or is it just your opinion?? {The Opinion of a Stupid Person)?

By the way, I don't think I want to pound sand, thanks. And I am not condescending. More knowledgeable than you, yes. But then, you set a really, really low target.

 

[Kimura]

China and OPEC nations dumping hundreds of billions (trillions?) of FRNs wouldn't affect our lives?

OK, now I'm certain that you can't be taken seriously. Ever.

So, it must have hurt last time they dumped dollars, right???
Oh, yeah, it NEVER happened before.

But they are going to dump now, because they like to kill their own economy, right???


So, since no reputable economist would buy your argument, perhaps you have some source that has status and agrees with you.
Oh, there are none. Just bat shit crazy con web sites. No impartial source???
What a surprise.

So, does your head hurt being this stupid??

We were talking about what would most likely occur, were the USD no longer the world's reserve currency.

Context, Spanky, context.

Speaking of stopit.

Again, for a second time, in order for the Chinese, Japanese, or Saudis to shed their dollar holdings they would have to exchange them for goods and services produced by Americans. This means that any foreigners holding dollars would to take those dollars and give them back to Americans who worked to produce the real goods and services they will have to purchase. This is the ONLY way for the foreign sector to get down to zero dollar holdings. If an Englishman exchanged his dollars with a Russian or Korean, this simply wouldn't suffice, since the foreign sector would still have those dollars. The roughly 3 trillion held by foreigners would be be used for a shopping spree. The 500 billion dollar trade deficit we had would be gone and we'd end up with a 3 trillion dollar surplus.

On the other side of the ledger, since trade is a zero sum game, countries like China, Japan, the OPEC countries, the countries that historically run surpluses with the United States would suddenly have deficits of a similar size. The very thing the scares morons like Peter Schiff, Ron Paul, Kyle Bass, their legions of ignorant cheerleaders, and the very reason for their incorrect dollar views, would vanish in an instant.

By the way, if this was to occur, all these historically strong saver nations would have deficits. We, as Americans, would receive back dollars, the foreign sector would get the real goods and services in return, such as software, automobiles, cloths, medicine, medical technology, pretty much a large chunk of what we produce. Please explain to me how this would make the dollar weak if we lost "reserve status"? The Japanese, for example, don't have the world's reserve currency yet they can freely issue Yen.

 

[TakeAStepBack]

Right. In no way could treasury holders not renew and look for payout.

 

[Kimura]

Right. In no way could treasury holders not renew and look for payout.

US Treasuries are nothing more than dollar deposits at Federal Reserve. In other words, they function like a savings account. Shifting funds between reserve accounts (checking) and Treasuries (savings) cannot impose a financial constraint or stress on the federal government.

 

[Rshermr]

Right. In no way could treasury holders not renew and look for payout.

US Treasuries are nothing more than dollar deposits at Federal Reserve. In other words, they function like a savings account. Shifting funds between reserve accounts (checking) and Treasuries (savings) cannot impose a financial constraint or stress on the federal government.

But....But......But....but that is NOT what step wants to believe.

 

[oldfart]

Right. In no way could treasury holders not renew and look for payout.

US Treasuries are nothing more than dollar deposits at Federal Reserve. In other words, they function like a savings account. Shifting funds between reserve accounts (checking) and Treasuries (savings) cannot impose a financial constraint or stress on the federal government.

I explain it this way. Crazy Harry decides to sell all of his Treasury holdings. He logs on to TreasuryDirect - Home, accesses his account and sells everything. The next day the money is in his bank account. Suddenly Harry panics. He runs down to the bank and withdraws that money as currency. What has he accomplished? He has converted interest bearing Treasury securities to non-interest bearing Federal Reserve notes. Whooppee.

Take it a step further, Harry decides to take the "worthless" paper currency and buy gold. He now ha a brick of gold he can sleep with. What's the effect on the government? NADA. Suppose the price of gold soars because a lot of people do the same thing. We have a gold bubble and gold speculators who were in at the start make lots of money. When the bubble bursts and the price of gold falls, the suckers who are holding gold are the losers. Again, the effect on the government is NADA as the government neither buys nor sells gold.

Now I call Harry Crazy, because if he were smart, after getting the currency he could have gone to Nevada and spent it on $1,000 a bottle bubbly and $2,000 an hour professional erotic acrobats. Which in my book beats sleeping with a bar of gold. And it will stimulate the economy (pun intended).

 

[Toro]

Right. In no way could treasury holders not renew and look for payout.

US Treasuries are nothing more than dollar deposits at Federal Reserve. In other words, they function like a savings account. Shifting funds between reserve accounts (checking) and Treasuries (savings) cannot impose a financial constraint or stress on the federal government.

If China suddenly sold all its Treasury bonds, why would that not cause a spike in interest rates causing a decline in consumption? Has Chinese buying of Treasuries not caused a decline in rates? How is China selling any different than the Fed selling its bonds?

Why would we assume that if dollars are swapped they'd be spent? Why couldn't they just sit as reserves on banks' balance sheets?

 

[Toro]

Right. In no way could treasury holders not renew and look for payout.

US Treasuries are nothing more than dollar deposits at Federal Reserve. In other words, they function like a savings account. Shifting funds between reserve accounts (checking) and Treasuries (savings) cannot impose a financial constraint or stress on the federal government.

I explain it this way. Crazy Harry decides to sell all of his Treasury holdings. He logs on to TreasuryDirect - Home, accesses his account and sells everything. The next day the money is in his bank account. Suddenly Harry panics. He runs down to the bank and withdraws that money as currency. What has he accomplished? He has converted interest bearing Treasury securities to non-interest bearing Federal Reserve notes. Whooppee.

Take it a step further, Harry decides to take the "worthless" paper currency and buy gold. He now ha a brick of gold he can sleep with. What's the effect on the government? NADA. Suppose the price of gold soars because a lot of people do the same thing. We have a gold bubble and gold speculators who were in at the start make lots of money. When the bubble bursts and the price of gold falls, the suckers who are holding gold are the losers. Again, the effect on the government is NADA as the government neither buys nor sells gold.

Now I call Harry Crazy, because if he were smart, after getting the currency he could have gone to Nevada and spent it on $1,000 a bottle bubbly and $2,000 an hour professional erotic acrobats. Which in my book beats sleeping with a bar of gold. And it will stimulate the economy (pun intended).

It's not a corollary that simply because a lot of people buying gold causes a bubble any more than a lot of people buying stocks or homes causes bubbles in those markets.

 

[Kimura]

If China suddenly sold all its Treasury bonds, why would that not cause a spike in interest rates causing a decline in consumption? Has Chinese buying of Treasuries not caused a decline in rates? How is China selling any different than the Fed selling its bonds?

Why would we assume that if dollars are swapped they'd be spent? Why couldn't they just sit as reserves on banks' balance sheets?

Well...those dollars could sit idle as reserves and accrue less interest. Every dollar the Chinese possess comes from the Unites States. This can happen two ways: lending and spending. The Chinese LOVE the latter because they work to produce stuff to sell the US so they can get dollars.

China ultimately obtains dollars from net exports which inevitably end up at the Bank of China. They prefer interest on dollars, so they purchase Treasuries. We're dealing with little more than a balance sheet operation on the books at the FED. The Bank of China has reserves at the FED which are debited and Bank Of China Treasuries are credited. We don't have a net flow of dollars to the US Treasury.

The USD could theoretically depreciate against some other currency. Would this increase interest rates? DOUBTFUL. The FED sets the interest rate all along the term structure - both short and long.

 

[Toro]

If China suddenly sold all its Treasury bonds, why would that not cause a spike in interest rates causing a decline in consumption? Has Chinese buying of Treasuries not caused a decline in rates? How is China selling any different than the Fed selling its bonds?

Why would we assume that if dollars are swapped they'd be spent? Why couldn't they just sit as reserves on banks' balance sheets?

Well...those dollars could sit idle as reserves and accrue less interest. Every dollar the Chinese possess comes from the Unites States. This can happen two ways: lending and spending. The Chinese LOVE the latter because they work to produce stuff to sell the US so they can get dollars.

China ultimately obtaina dollars from net exports which inevitably end up at the Bank of China. They prefer interest on dollars, so they purchase Treasuries. We're dealing little more than a balance sheet operation on the books at the FED. The Bank of China has reserves at the FED which are debited and Bank Of China Treasuries are credited. We don't have a net flow of dollars to the US Treasury.

The USD could theoretically depreciate against some other currency. Would this increase interest rates? DOUBTFUL. The FED sets the interest rate all along the term structure - both short and long.

Right. But if currency is merely debt, then selling debt, ie currency, doesn't mean it is going to be recirculated into the economy. It could just sit there as reserves. Or it can be used to jam up the price if other assets.

Also, what do you mean "theoretically?" The DXY is way lower than it was 15-20 years ago. Hasn't the currency already depreciated?

And if the Fed controls the long end if the curve, why are we steepening? Does the Fed want rates to go higher? That seems a contradiction if they're buying $85b a month.

 

[Kimura]

If China suddenly sold all its Treasury bonds, why would that not cause a spike in interest rates causing a decline in consumption? Has Chinese buying of Treasuries not caused a decline in rates? How is China selling any different than the Fed selling its bonds?

Why would we assume that if dollars are swapped they'd be spent? Why couldn't they just sit as reserves on banks' balance sheets?

Well...those dollars could sit idle as reserves and accrue less interest. Every dollar the Chinese possess comes from the Unites States. This can happen two ways: lending and spending. The Chinese LOVE the latter because they work to produce stuff to sell the US so they can get dollars.

China ultimately obtaina dollars from net exports which inevitably end up at the Bank of China. They prefer interest on dollars, so they purchase Treasuries. We're dealing little more than a balance sheet operation on the books at the FED. The Bank of China has reserves at the FED which are debited and Bank Of China Treasuries are credited. We don't have a net flow of dollars to the US Treasury.

The USD could theoretically depreciate against some other currency. Would this increase interest rates? DOUBTFUL. The FED sets the interest rate all along the term structure - both short and long.

Right. But if currency is merely debt, then selling debt, ie currency, doesn't mean it is going to be recirculated into the economy. It could just sit there as reserves. Or it can be used to jam up the price if other assets.

Also, what do you mean "theoretically?" The DXY is way lower than it was 15-20 years ago. Hasn't the currency already depreciated?

And if the Fed controls the long end if the curve, why are we steepening? Does the Fed want rates to go higher? That seems a contradiction if they're buying $85b a month.

The FED will only take action when they feel it’s necessary. Like I said, the FED sets the actual rates along the term structure, but they’ll allow for some variations between the IOR and discount rate. It all boils down to policy.

QE all boils down to sending signals. The FED realized that tapering was sending a message that they’re OK with increased rates, including the higher mortgage rates.
They don’t want to send the signal, so they’ve delayed any taper. Hence, the revised forecasts, which means that the economy hasn’t lived up to expectations, which was another blow against higher rates.

The FED is also concerned about fiscal drag. Again, this all boils down to signals, and how they telegraph their reaction to control the term structure of rates. For now, as it stands, the dollar is down somewhat, and the rates in question have come down.

Operationally, the FED can DIRECTLY control the term structure of risk free rates by creating a cemented market on any side of the curve.

The FED purchasing US Treasuries is the SAME as not having them issued. The results of quantitative easing/tapering would be the functional equivalent of not having issued Treasuries in the first place. Our policy toolbox, operationally, includes Treasuries being issued at pre-determined maturities/rates, along with maturity swaps, etc.

 

[Toro]

Well...those dollars could sit idle as reserves and accrue less interest. Every dollar the Chinese possess comes from the Unites States. This can happen two ways: lending and spending. The Chinese LOVE the latter because they work to produce stuff to sell the US so they can get dollars.

China ultimately obtaina dollars from net exports which inevitably end up at the Bank of China. They prefer interest on dollars, so they purchase Treasuries. We're dealing little more than a balance sheet operation on the books at the FED. The Bank of China has reserves at the FED which are debited and Bank Of China Treasuries are credited. We don't have a net flow of dollars to the US Treasury.

The USD could theoretically depreciate against some other currency. Would this increase interest rates? DOUBTFUL. The FED sets the interest rate all along the term structure - both short and long.

Right. But if currency is merely debt, then selling debt, ie currency, doesn't mean it is going to be recirculated into the economy. It could just sit there as reserves. Or it can be used to jam up the price if other assets.

Also, what do you mean "theoretically?" The DXY is way lower than it was 15-20 years ago. Hasn't the currency already depreciated?

And if the Fed controls the long end if the curve, why are we steepening? Does the Fed want rates to go higher? That seems a contradiction if they're buying $85b a month.

The FED will only take action when they feel it’s necessary. Like I said, the FED sets the actual rates along the term structure, but they’ll allow for some variations between the IOR and discount rate. It all boils down to policy.

QE all boils down to sending signals. The FED realized that tapering was sending a message that they’re OK with increased rates, including the higher mortgage rates.
They don’t want to send the signal, so they’ve delayed any taper. Hence, the revised forecasts, which means that the economy hasn’t lived up to expectations, which was another blow against higher rates.

The FED is also concerned about fiscal drag. Again, this all boils down to signals, and how they telegraph their reaction to control the term structure of rates. For now, as it stands, the dollar is down somewhat, and the rates in question have come down.

Operationally, the FED can DIRECTLY control the term structure of risk free rates by creating a cemented market on any side of the curve.

The FED purchasing US Treasuries is the SAME as not having them issued. The results of quantitative easing/tapering would be the functional equivalent of not having issued Treasuries in the first place. Our policy toolbox, operationally, includes Treasuries being issued at pre-determined maturities/rates, along with maturity swaps, etc.

The DXY is relatively flat since they announced QE3 in September 2012. The 10 Year has risen roughly 100 bps since then.

 

[HelenaHandbag]

Also, what do you mean "theoretically?"

From the posts of his that I've read through, "theoretically" means to him that if he were "theoretically" in charge of the entire world.

 

[Kimura]

Right. But if currency is merely debt, then selling debt, ie currency, doesn't mean it is going to be recirculated into the economy. It could just sit there as reserves. Or it can be used to jam up the price if other assets.

Also, what do you mean "theoretically?" The DXY is way lower than it was 15-20 years ago. Hasn't the currency already depreciated?

And if the Fed controls the long end if the curve, why are we steepening? Does the Fed want rates to go higher? That seems a contradiction if they're buying $85b a month.

The FED will only take action when they feel it’s necessary. Like I said, the FED sets the actual rates along the term structure, but they’ll allow for some variations between the IOR and discount rate. It all boils down to policy.

QE all boils down to sending signals. The FED realized that tapering was sending a message that they’re OK with increased rates, including the higher mortgage rates.
They don’t want to send the signal, so they’ve delayed any taper. Hence, the revised forecasts, which means that the economy hasn’t lived up to expectations, which was another blow against higher rates.

The FED is also concerned about fiscal drag. Again, this all boils down to signals, and how they telegraph their reaction to control the term structure of rates. For now, as it stands, the dollar is down somewhat, and the rates in question have come down.

Operationally, the FED can DIRECTLY control the term structure of risk free rates by creating a cemented market on any side of the curve.

The FED purchasing US Treasuries is the SAME as not having them issued. The results of quantitative easing/tapering would be the functional equivalent of not having issued Treasuries in the first place. Our policy toolbox, operationally, includes Treasuries being issued at pre-determined maturities/rates, along with maturity swaps, etc.

The DXY is relatively flat since they announced QE3 in September 2012. The 10 Year has risen roughly 100 bps since then.

The DXY is higher now than it was in 2008 and 2011, for example, yet the FED has increased its balance sheet. I think the DXY is like 80-ish for 2013 thus far. Basically, over the last five years, the dollar index has gained value as the Fed added reserves to the system.

I used the this dollar spot index here and compared reserve balances here.

Also, let's not forget that over this period of time (2008-2013), the FED has done well over 1$ TRILLION in dollar swaps, which got rid of a massive bid which would have been in the market for dollars. If this intervention had not occurred, the dollar would be way HIGHER, even with this massive increase in total reserve balances.