That would be the case were it not for the Fed's infinite power of money creation. They are playing chicken with precedent, so the market will eventually serve it up in the form of a correction to zero on the dollar. I would agree with you on natural mkt forces, but as you know 2/3rds of all US dollars reside outside the country and in essence the rest of the world is trapped under our increasingly worthless paper. Who benefits from a permanently indebted populus and massive wealth stratification? imo the american people don't deserve this. We may have liquidity and flexibility as traders, but most of the country is trapped by it without even realizing why
The old saying is that a country gets the government that they deserve. More specifically, the lower class with no assets (outside of primary residence) couldn't care less where this goes, as long at they get the stupid gov programs. The upper class (Warren Buffet and down) are fully hedged. In the middle, the posters here (including myself) are not hedged. BTW, any opinions on buying CDs denominated in foreign currencies in U.S. chartered banks?
It's even harder to track now that M3 is hidden. No doubt a move to gain leverage on our foreign trading partners by hiding the increasing worthlessness of the dollar as we continue to print out billions and billions backed by nothing of value. The Fed is printing more money not keeping pace with GDP or any type of value-creation.
Would it not be "smart" to just keep printing "worthless paper" if other countries are happy to exchange boatloads of goods and services for them? Now, if those countries (our trading partners) suddenly realize that, "hey all this crap is just paper not worth the paper its printed on" and decide to stop manipulating their currencies and protecting their markets, then the dollar drops. Trade deficits start to diminish and all of a sudden you got Chinese driving Hummers, listening to Ipods, smoking Marlboros and popping Viagra. Not very bad is it? Of course Americans would have to pull in their spending habits, skip a vacation abroad or two, but eventually our trade deficits would be in sharp decline and our currency would start to strengthen. You see many people throughout the world would rather hold dollars than any other currency regardless of their rates of return due to one fact, they believe that the U.S. will still be here! You think that if the Chinese let their currency float and markets decide its value rather than manipulating it, the populous wouldn't revolt? The Chinese have to make sure their currency stays cheap so Americans will keep shipping dollars over to them for their goods so their population will accumulate wealth and the economy will keep growing in order to avert rebellion. You think France and Germany together would be able to consume enough to help China raise its population out of poverty and send them enough Euros? HELL NO! It's hard enough to just find a Frenchman with a job, much less one that will spend his money on Chinese goods. Tiananmen Square ring a bell. Placate the populous by giving them huge rates of economic growth while elevating them out of poverty and guess what? They stop aiming their sites at governmental overthrow. It works for a while, but not forever. You see much of this has little to do with the Fed. Like others have stated, Americans will consume as long as others are willing to keep feeding us and accepting our "worthless currency".
The Fed, or more exactly, the member banks, create money out of nothing but get to charge interest on it. I would like to do that too, I would be mega rich in no time. But if I tried, I would be jailed. Funny how that works. If a government can issue bonds, it should be able to issue its currency. You can't escape taxes, so a government has a guaranteed source of revenue, which is taxes. So it can issue notes as money, because they are secured by the very essense of its tax base. WTF does it need the Fed for anyway? So that it can pay interest on its own money? No really, what logical sense is there to have a private entity create your money, then charge you interest on it?
Oh really? How many U.S. bond issuance's of the last 10 years had a hard time being digested? Hydro, do I also need to put you in the stagflation camp in regards to the latest economic conditions?
Yeah you're right, every nation in the world, particularly Russia, China and the OPEC nations only want dollars and no other currency. Like I said, you don't really have an idea of what's going on. Let me give you a clue. The US bonds dont go on market without full knowledge that the buyer is ready to suck it all in. There is not going to be a clue of US bonds having even a slight problem of being digested, it will follow the process of a quick avalanche.