The dollar is at least imposed by force indirectly, in the form of the requirement that taxes be paid in dollars.
If you follow bitcoin you’ll have noticed that its valued plummeted recently because of FinCEN. They sent “industry outreach” letters yesterday to around a dozen firms, discussing potential compliance measures related to Bitcoin businesses.
In other words… if you’re a business accepting Bitcoins… the government wants you to know it’s watching you. :ph34r:
Which assets? Data?
Crow I’m not sure what you mean by which asset. If you just google asset price inflation there’s plenty of info. The S&P’s up 25% this year, home prices are up 17%, household wealth hit record highs (since 1945) last monday…all thanks to QE4ever.
[Probably way way off topic to get into a biz discussion here so I’ll let that aspect of the thread die].
In other words… if you’re a business accepting Bitcoins… the government wants you to know it’s watching you. :ph34r:
As opposed to a business accepting US dollars?
Who’s afraid (or even concern about) US dollar inflation?
People who invest in loans are afraid of US dollar inflation.
The dollar is at least imposed by force indirectly, in the form of the requirement that taxes be paid in dollars.
There is also a very direct, explicit ban on financial institutions operating on a national level unless they are a part of the Fed. That puts a damper on any currency not issued by the Fed.
People who invest in loans are afraid of US dollar inflation.
Yep. In other words, informed investors who explicitly decide that the US dollar is a good investment and place their bet accordingly are afraid of their business decision being the wrong one. Good answer. I stand corrected.
If your point is that a perfect investor will always make perfect trades, then fine. I’ve got no argument, but I don’t see any broader implications in your posts than that. The point I was approaching is this:
“Informed investors” making good decisions by fleeing the dollar is exactly the danger. This will cause an economy-wide retraction of liquidity for businesses. If you can’t see how this will affect you, then good. It means, on some level, you understand why central planning doesn’t work. But you must realize that it’s not just the “uninformed investors” who suffer. When people are forced to use a particular currency, the inflation of that currency is fundamentally different than the inflation of a real commodity. When gold devalues it’s because we have more gold or a suitable alternative. In other words, the devaluation indicates a relative increase of value in the economy. All monetary distortion does is cloud signals, which will result in less value over time.
Ron Paul understands that bitcoins aren’t inflatable, but he’s found a poor way to make that point. One of the reasons I don’t believe that bitcoins will rival the dollar any time soon is that they aren’t forced on us. I’ll start believing in them when people start trading them for real estate.
If your point is that a perfect investor will always make perfect trades, then fine.
I don’t know what that means, so that wasn’t my point, no. I don’t think “a perfect investor” is a valid concept. Maybe an illustration?
[…]
When people are forced to use a particular currency, the inflation of that currency is fundamentally different than the inflation of a real commodity. When gold devalues it’s because we have more gold or a suitable alternative. In other words, the devaluation indicates a relative increase of value in the economy. All monetary distortion does is cloud signals, which will result in less value over time.
Ron Paul understands that bitcoins aren’t inflatable, but he’s found a poor way to make that point. One of the reasons I don’t believe that bitcoins will rival the dollar any time soon is that they aren’t forced on us. I’ll start believing in them when people start trading them for real estate.
To buy a house, I’d sell a couple thousand shares of AAPL, transfer the US dollars I’ve converted to the selling party, and then pick up my keys. I have, in effect, bought a house with AAPL shares. I would have held US dollar for about 3 hours perhaps. I could do the same with gold or whatever.
There are absolutely, positively, NO laws in the USA forcing citizens to use US dollars for trading. Billions of transactions a day occur without US dollars, millions of them involving US citizens.
So no, the US dollar is no different than any other commodity or investment instrument in which one might place a bet. If your portfolio has US dollars in it, that’s your fault, not the fault of any government. There is no law that says you must place your savings in US dollars. None. The only thing the law says is that you must pay Federal and State taxes in US dollars. Even that law does not force you to hold US dollars for more than a few milliseconds.
What I mean is an investor that correctly interprets all data and is good enough at obtaining data that he always makes profitable decisions. It’s as valid a concept as is a Unicorn. That neither can exist is a separate matter.
Regarding the rest of your post, do you mean to imply that dollar inflation won’t cause a retraction in business loans?
Edit: I already said that I have no argument with you regarding how investors treat the dollar when trading commodities. But the fact is that when an AAPL stock split occurs, your shares aren’t diluted. You can’t say the same of the dollar. The point I’d like you to stop dodging pertains to how this difference effects businesses. Because there is no requirement that monetary inflation be paired with a distribution scheme that maintains each individual’s asset value, and because _it’s the law _that people trade in dollars (not AAPL shares), monetary inflation signals something fundamentally different and causes different things to happen. One of those things is a retraction in loans. Can you name another investment instrument that could have this effect? I can’t. I briefly considered oil because energy is one of the few things that could effect a whole economy. But if oil prices took a nosedive, again, that would indicate an abundance of value. It certainly wouldn’t cause a fog that prevents businesses from obtaining loans.
What I mean is an investor that correctly interprets all data and is good enough at obtaining data that he always makes profitable decisions. It’s as valid a concept as is a Unicorn. That neither can exist is a separate matter.
Yep, humans are non-omniscient. Even the richest hedge fund managers on Wall Street hedge their investments because they deal in educated guesses, not certainty.
Regarding the rest of your post, do you mean to imply that dollar inflation won’t cause a retraction in business loans?
A retraction? Sure. Lots of relatively small factors can cause a retraction, however. A war, for instance. A major terrorist attack. A major financial failure of a large private institution. A prolonged period of leveraging causing a bubble (to then burst). And yes, the US government suddenly reversing its 30 year old anti-inflation stance and suddenly, willfully trying to mess up our economy. That too would cause a shock and a resultant contraction of activity.
All of these things are temporary. 9/11 didn’t cause us to devolve into the stone ages, nor did the 2008 blow-up. The Fed going psycho wouldn’t either.
Edit: I already said that I have no argument with you regarding how investors treat the dollar when trading commodities. But the fact is that when an AAPL stock split occurs, your shares aren’t diluted. You can’t say the same of the dollar. The point I’d like you to stop dodging pertains to how this difference effects businesses. Because there is no requirement that monetary inflation be paired with a distribution scheme that maintains each individual’s asset value, and because _it’s the law _that people trade in dollars (not AAPL shares), monetary inflation signals something fundamentally different and causes different things to happen. One of those things is a retraction in loans. Can you name another investment instrument that could have this effect? I can’t. I briefly considered oil because energy is one of the few things that could effect a whole economy. But if oil prices took a nosedive, again, that would indicate an abundance of value. It certainly wouldn’t cause a fog that prevents businesses from obtaining loans.
AAPL stock could crash leaving me with nothing. I’m not sure what splits have to do with it.
Also, for the Nth time here, there is no law that people trade in dollars in the USA. None. Zip. Zero. Nada. There is no law, and people trade in non-dollars millions of times a day. 80% of the world economy trades in non-dollars. Every US citizen, by law, has access to virtually every investment on Earth, including the 80% not transacted in dollars. You can trade your neighbor his Honda for your dog. Corporate share swapping happens in every single day in the USA in acquisitions. Dollars are convenient most of the time, but not legally required.
If oil spiked (again because of a war etc.) then surely that would cause temporary uncertainty and probably a contraction of business activity… US dollars (and the Fed in general) is different in degree, but not in form…
Government printing money is analogous to a stock split without the rule that an individual’s stake must be maintained. Therefore, though AAPL stock can fail for many reasons, it can’t fail because of a stock split. The Dollar can.
We’ve gone round after round over the monetary monopoly, and you’re wrong that it isn’t enforced by law. It is the mechanism by which wealth is taxed, business subsidies are granted or denied, FDIC participants are insured, vast sectors of the home loan industry are guaranteed, etc. You are correct in that you are free to barter or contract without it under limited circumstances. But your property and capital gains will be converted into dollars and taken from you for the express purpose of propping up the “good faith and credit” of the US. If you want to make the argument that “there’s no law” requiring that each and every transaction involve dollars, then you won’t have an arguing partner. But I won’t let you use that argument as a semantic life raft to escape the sinking ship Innocent Dollar. She happens to be as seaworthy as her name is candid. Before this analogy runs away on me I want to make it clear that I am making no predictions about fed policy or the value of the dollar. In other words, though I remain open to the idea, I don’t share Schiff’s and Paul’s convictions that the demise of the dollar is imminent. But _if _the value of the dollar were to sink like the Spanish armada, the State’s monetary monopoly will make this a very messy affair for anyone with any wealth to lose. And, yes, that too will be temporary.
The dollar is destroying it’s self, doesn’t need any help from Bitcoin. Be fascinating to see if Gold or Bitcoin will win out in the future.
But your property and capital gains will be converted into dollars and taken from you for the express purpose of propping up the “good faith and credit” of the US.
So you must pay your taxes in US dollars. So what. I convert some of my (non-dollar) holdings into USD and pay my taxes a few nanoseconds later. If the dollar tanks, it’s the US government that gets screwed, not me. This is a very real effect, which underscores how our government does not have a vested interest in tanking the Dollar–quite the opposite: the US government would see the biggest downside to USD inflation.
But I won’t let you use that argument as a semantic life raft to escape the sinking ship Innocent Dollar. She happens to be as seaworthy as her name is candid. Before this analogy runs away on me I want to make it clear that I am making no predictions about fed policy or the value of the dollar. In other words, though I remain open to the idea, I don’t share Schiff’s and Paul’s convictions that the demise of the dollar is imminent. But _if _the value of the dollar were to sink like the Spanish armada, the State’s monetary monopoly will make this a very messy affair for anyone with any wealth to lose. And, yes, that too will be temporary.
So say I have lots of wealth to lose. While I personally, currently see the USD as a decent store of value, I could move the fraction of my holdings in USD out of it on a moment’s noticed should I see any evidence I should. The dollar can tank all it wants. It won’t effect me, directly at least.
Don’t get me wrong, massive and sudden USD inflation would mess things up because it would make things hard to compute, taxes would be a mess, and so forth. I think the technical solutions I’ve talked about in other threads would mitigate things a lot, but clearly our economy would be forced to spend an undue amount of resources on accounting and finance until the problem is fixed (which as I said would involve complete disintermediation of the USD from widely perceived value). The technology is there and its a solution in search of a problem. The minute the ship sinks, we’ll all climb aboard our airplanes…
So in summary:
- I don’t worry about US dollar inflation, run-away inflation, the Fed printing money, bla bla bla. It’s no more on my radar than dying of smallpox. There’s absolutely no evidence that it’s going to happen anytime soon, and lots of evidence that it won’t happen ever.
- Even if such a thing did occur, I personally would be fine, financially, as would anybody with any sort of modern financial approach (i.e. any more modern than stuffing Benji’s into their mattress).
- If such a thing did occur, it would be akin to suddenly running out of oil: we’d have an alternative available by wile entrepreneurs in a matter of months or even days, and then life would go on, business as usual, except that the fluctuation of USD value would have no impact on our lives rather than the some minimal impact as before. We’d get a cold and then build up the antibodies for next time, impervious to its effects.
Do you understand that the way you argue this point screams out the implication that the monetary monopoly is ok because you (one guy) have the skills and means to minimize its impact on your life?
Do you understand that the way you argue this point screams out the implication that the monetary monopoly is ok because you (one guy) have the skills and means to minimize its impact on your life?
The government has a monopoly on lots of things that they shouldn’t have. It’s a matter of prioritizing. The US monetary policy is “okay” right now, yes. Not ideal, but making it “perfect” would have no discernible impact on my life. Compare that to fixing things like drug laws, abortion laws, industry graft, immoral taxation, etc. etc.
The number of customers of mutual funds and various investment instruments in the USA numbers in the tens of millions, and virtually every citizen makes use of a bank, which could easily move funds on behalf of customers.
So it’s a little broader than, “one guy” who has the “skills” to not store their wealth in their mattress.
Do you understand that the way you argue this point screams out the implication that the monetary monopoly is ok because you (one guy) have the skills and means to minimize its impact on your life?
Furthermore, one function of money is to act as a standard: as a basis for interaction and as a mental standard. It is very convenient when people who trade a lot (e.g. an employer and an employee, or a store and its customer) use the same mental standard.
It’s a bit like using English to get around in the U.S. In theory, one could train oneself to think in Esperanto, and then translate whenever one spoke to someone else: French to your manager, Spanish to your customer, and English to your supplier. Money evolved for this very reason: to have something that you know will be readily acceptable to everyone from whom you might want to get some other value in exchange.
While the government allows people to use other media, they would always have to convert to dollars – either in reality, or at least for the purposes of accounts and taxes. Court judgement too will be in terms of dollars.
In addition, once a money gets started and becomes widely accepted, it takes on a life of its own – with its acceptability giving it value over and above any intrinsic value it might have had. You can start with gold, then reduce the basis, and then make it purely fiat, and it retains its social-acceptance value.
Still, if one gratuitously expands the money enough, people will weigh the conveniences against that expansion. Typically, at some point, the government steps in and restricts the convertibility of the currency. Not just governments like Argentina; even Western European governments had exchange-controls in the 1970’s.
I think that you are mistaken. First of all, the ‘conspiracy theory’ is not rooted in the '50’s but in 1910, 3 yrs before the Federal Reserve came into being.
As long as our currency is controlled by the feds, the feds can control inflation (theft), by being the first in line to trade their money-out-of-thin-air at the current value, pre-circulation. The rest of us get that money after the circulation has devalued it (hence theft).
If we all accepted shoes as currency, they would have no power over us via inflation. But we do not.
In comes BitCoin. By widely accepting this medium of exchange, we now have the power to overthrow the hijack. After a while we will see stability. The rise and fall of the bitcoin value is only due to its youth and governments’ attempts to dethrone it.
Information and communication will always be our ally, thanks to the web - hence the reason ALL governments now see it as a threat, including ours. It has dethroned monopolies on the music industry, all forms of publications, hotels (airbandb.com), taxis (uber). No reason why it would stop at currency. Philosophically, it stands to absolute reason that a virtual form of mining would replace its physical counterpart - gold. Is it BitCoin? I don’t know - but it would need to stand the test of what makes for a good currency. Rarity, endurance, work needed to attain it, easily divided, easily exchanged etc. Paper replaced gold ONLY because of weight and volume and therefore exchangeability. Bitcoin surpasses this requirement being weightless, volumeless with no limit to the distance of exchange. To me, the only ‘if’ area is in the mining. It needs to be rare with a substantial effort needed to acquire. But I do not know much about the mining of this technology.
I think that you are mistaken. First of all, the ‘conspiracy theory’ is not rooted in the '50’s but in 1910, 3 yrs before the Federal Reserve came into being.
As I understand it, the Illuminati was founded in 1776, not 1910.
As long as our currency is controlled by the feds, the feds can control inflation (theft), by being the first in line to trade their money-out-of-thin-air at the current value, pre-circulation. The rest of us get that money after the circulation has devalued it (hence theft).
Can you explain, then, why they haven’t used their magic powers in any significance since the 80s? We have a Kenyan Socialist Dedicated to Evil in the White House. Why hasn’t he used this power?
(Awaiting the inevitable conspiracy theory answer, as all good CT’s have an answer to absolutely everything).
As I understand it, the Illuminati was founded in 1776, not 1910.
Can you explain, then, why they haven’t used their magic powers in any significance since the 80s? We have a Kenyan Socialist Dedicated to Evil in the White House. Why hasn’t he used this power?
(Awaiting the inevitable conspiracy theory answer, as all good CT’s have an answer to absolutely everything).
When he said “conspiracy theory”, he didn’t really mean it. It’s called sarcasm.
The notion that the government controls the value of the dollar isn’t a conspiracy theory, it’s a basic fact that really shouldn’t escape anyone with a pulse.
When he said “conspiracy theory”, he didn’t really mean it.
I think he was talking about the role of the “Jekyll Island” in the founding of the Fed. (Not that I consider it a “conspiracy”; but, I think that is what he meant.)