I understand, but even if public opinion is favorable, economic theory shows that increasing money supply isn't that good for the economy unless it is in a recession, so I am assuming that the fed wants what is best for the economy. If we assume they do, and since we know they are good economists (which excludes ignorance), why are they doing it?
Especially true in developing countries, If you go in there; and tell them the USD didn't worth the paper it is printed on, and no one will believe you. Very sad; but what can you do? Let's exploit their ignorance; and suck their natural resource dry; left them with our paper money and our outdated army surplus. Add your evil smile here.
Saving what, though? Saving dollars is a self defeating exercise. They print more faster than interest gets paid, so your "savings" disappear over time. And when the other CB's decide they absolutely won't take any more dollars, then you'll wish you hadn't saved them. The big inflation will begin when the other countries buying US govt debt try to SPEND it instead of LENDING it back to us. Then, the only way to contain inflation would be for the Fed to raise rates like they did in1980 and kill the economy. of course THIS time there is $9 billion of debt the Government would have to pay interest on, meaning the deficit would go thru the roof from interest expense and welfare costs increasing at the same time. If interest rates went to 10% WHO would lend our government an extra TRILLION per year to fund a doubled deficit? IMO, Gold already smells it coming... "Not worth a Continental". There WAS a REASON the Constitution did not provide for any paper money to be printed.
Imagine a day where the U.S. Government can not pay back lenders and defaults on its debt. It is not outside the realm of possibilities given demographic trends in the U.S., whereby one worker will be paying taxes to support 3 retirees, and the entitlement program spending grows exponentially.
History never repeats...not. Remember what happened to the Roman Empire and the British Empire - both collapsed financially. US Empire is no different today.
China just set up a new minister to manage its foreign exchange reserve of over one trillion U.S. dollars. They are looking for a better return.
Hey guys, nice thread. Since I know next to nothing when it comes to economics, I'd like to ask you some good books or articles for Econ 101. Thanks!
Its not known as the "dismal science" for nothing. You have some experts saying growth, some saying slowdown, and some saying recession. Who do you believe? Two will be wrong, one will be right. How can all of them be experts? You can pick your books depending on which outcome you want to hear. I think the Fed is just trying to keep the economy alive and at the same time keep the level of inflation low enough by increasing productivity and lowering living standards gradually that people don't lose faith in the dollar. I really like Bernanke because I think he's doing his best to move things slowly towards being on an even keel at the same time as not doing anything rash that might cause a crisis. As I see it, Greenspan brought up the same problems before congress, and just as with Greenspan, they listen, but do absolutely nothing Bernanke reccomends that need to be done, and one day its going to erupt into a big problem due to their inaction. One thing that does bother me is the number of FRB members retiring lately, and the seeming lack of qualification of the one new guy proposed by the Bush administration. It will be interesting when we see these FRB members on TV doing play by play a year from now like the other former FRB members do. I really like having the check/balance of their intelligence, experience and opinions. It occurs to me that we are borrowing another 6% each year from the rest of the world on top of what we already owe in terms of dollars out there in the world plus debts owed, plus interest on all of it. Honestly, I think the rest of the world has just about had it lending us money, because as the number gets larger they have less chance of ever getting it back in real world spending power, and I think that's a lot of what's behind Asia and the Middle East setting up their own regional currencies. As long as they are pegged to the dollar, and doing all their business in dollars, our fate becomes theirs, and they know it. The way I see it, its just a matter of time before a storm big enough to swamp the decks randomly occurs. I think that was what former Fed Chairman Paul Volker was trying to say last April. Its not that he'd want that to occur, but if someone doesn't do something to reduce the deficits, eventually something will snap. PS: I've heard Bernanke's favorite book is "A Monetary History of the United States, 1867-1960" by Milton Friedman and Anna Jacobson Schwartz. I have it, but haven't made it through it. I really like Milton Friedman's attitude towards things, though from the interviews I've seen.