Wait! I have just a couple... Maverick74 so you are saying the fed is printing money....... but not really...... because the new money is being locked away in a vault somewhere. Fair enough but I would imagine this would still have some kind of immediate impact on the value of the dollar. Trying to work through the mechanics of how all this sleight of hand is accomplished - The treasury prints bonds and sells them to banks (or the fed??) for dollars.... The bonds yield ~ 3.5% and can be redeemed for currency that is worth 1/4 of the currency that was paid for them? Why would a bank do that? >>The data explains the current market environment to a T. >>Since the market is not being valued properly right now, LOL so we are in a bubble and we can prove it
Hi Wheaties, This video might interest you. It also explains why we have inflation in the first place. www.youtube.com/watch?v=iFDe5kUUyT0
VERY informative video xelite. Thanks very much! Verbatim from the video: "The more currency we have, the more prices rise. This is where inflation comes from." "The true definition of inflation is an expansion of the currency supply... Rising prices are merely the symptom." This is really the source of my original question. We should be swimming in worthless dollar bills by now, save for that they are held in reserve as Maverick pointed out. So I guess there is a built in bias by the fed now for the economy to NOT grow else the banks will lend out the money at a higher rate than the government can pay. I'm still not clear on how that works.
Wheaties, a few things here. A currency's value is derived from what it can purchase. There is a formula you can google called ppp (purchasing power parity) that helps derive this value. When the currency is sitting in reserves and not in the market, it's not driving down it's value. I don't know where or how you are getting at the dollar is only worth 1/4th of what it should be. I think there is a lot of things you are missing here. Let me try to help. When one buys a treasury for 3.5% they can borrow against that treasury to buy shares of AAPL, a house on the pacific ocean, or a priceless work of art. The Treasury's value comes from it's liquidity. Which is why one can borrow so easily against it and convert it into an asset that generates huge returns. Part of the demand for the dollar comes from the demand for our stocks, our real estate and our resources.
There are probably a few different factors. The aging of the global population, with the exception of Africa, but Africans. Then the entry of India and China and former Soviet Union to global labor market. Plus the deflationary aspects of technology, and the internet. Also the shift of consumption towards services and away from goods (only need one toaster). The actual weight of GDP is actually declining, for instance flat screen tv costs more but weighs less. So add all of these factors up, and fewer households chasing more services and cheaper labor and technology and you plenty of deflationary factors that have nothing at all to do with the Fed and the endless internet bores who never stop droning on about the Fed and the money supply and when will they ever shut up already?
You are welcome. Actually we are swimming in worthless dollars (and Euros, British Pounds, etc...), even though less than 3% of that money exists in physical form (banknotes and coins), the rest (bullshit money) is in virtual form in computers. Because, again, the banksters create money out of thin air. Prevent them from doing so and you will virtually eliminate inflation overnight.
The job of guys like Maverick and Martinghoul and others like that is to toe the party line and always offer alternatives so that ideas never gain momentum. There must never be consensus. Even when US debt goes to 40 TRILLION, when inflation goes from 11-12% to 20% a year. Even then these guys will show up to say how all of this is OK and normal, and nothing to see here. The fact that in the future every single family will have 4-5 jobs just to keep up, all of that will be explained by these guys as the normal way to live.
I think deflation would be best for me but governments, for their self-serving reasons, never want deflation.