Travis

U.S. Dollar Paradigm Shift Underway

The Fed DOES back the dollar - by you and me. The American economy and government is strong enough to attract foreign investment even now when treasury yields are so damn low. If the dollar is so weak, why is China and Europe STILL buying treasuries in LARGE amounts?

The simple fact that these doomsayers here haven't moved out of the country is the same reason why foreign investors still buy our debt... if its so bad, and you are still here, it sure says a lot about the faith in the US's position in this global economy.

And for the people that want our currency backed by some sort of commodity... tell me what commodity and where it would be stored to back the trillions of dollars in the world.

I don't see how people can argue that changing to a fiat system hasn't helped global expansion, increase in wealth, standard of living, and prosperity tenfold.

johngonole says:
"The idea that we inflate our currency regardless of whether it is to fight off deflationary spirals or simply to avoid the next recession creates the opposite affect which I will term the moral decay spiral. These constant bail outs are providing incentive for irresponsible behaviors of every kind. More criminals, more irresponsbility, more debt, more of everything that caused the need for the printing of more money in the first place. This is the cancer that cachaca refers too."

You must realize that if the Fed did not come in and help restore confidence in our credit market and save our system from grinding to a halt - we would be in very dire straits right now. As much as bailouts shouldn't occur - free market economics is not perfect enough to protect society from greed. Greed is what caused all these rating companies to over-rate MBS, it is what caused the incredible leveraged investmet vehicles.

But its not like these "bail outs" have replaced all the dollars in these greedy bastards pockets. Do you think Bear Stearns feels bailed out when it goes from 50 billion in market share to 236 million in a week? These "bail outs" don't bring things back to what they were before, they only help ease the fall so it doesn't crush everyone from Wall St. to Main st.

U.S. Dollar Paradigm Shift Underway

It won't be the end of us... if anything foreign developed countries will just hold positions in euros, pounds, dollars, and juans. You have to realize that the power of the US is strong, both financially in terms of REAL WEALTH (our physical assets are worth a lot, including real estate, people want to immigrate here for our high quality of life this will always make our real estate valuable), our power as the world's consumer, and our military strength. The rest of the world is STILL buying our treasuries because they know more than ANY other country in the world, the US is good for it.

If our dollar loses more value, it obviously helps exports which spurs a segment of our economy that much needs it. Plus it hurts foreign exporting countries who aren't able to sell to us because we can't afford it. Eventually other central banks will want to increase their money supply to help ease the pain they are feeling from our devalued dollar. Think about the tourism in europe right now, even BMW is forced into layoffs because of hurting sales.

Plus, oil and gold are down... oil supplies are up, demand is down, simple economics will keep oil at a normal pace of price increase, not this rampant increase we have had in the past few months.

We live in a globalized economy more than EVER and we, nor the rest of the world, can afford to let any one country spiral out of control fiscally, financially, or economically.

We can survive this just fine, just like we have other cyclical and sudden (9/11) downturns.

U.S. Dollar Paradigm Shift Underway

There isn't enough gold and silver on the planet to support our global financial system. We need fiat money period. It greatly helps our financial system to be working in one currency (dollars for now), by letting the dollar eventually crumble, the whole world would be in a depression - no one wants this, so they will work together to keep the system working.

U.S. Dollar Paradigm Shift Underway

You cannot compare our global world and economy with the roman empire.... get real.

U.S. Dollar Paradigm Shift Underway

I dont think there were many people (besides the doomsayers who think the world will come to an end) that saw the credit markets unravelling as much as they did.

Just because someone is wrong once, doesnt mean they can't be "right" or make a good observation/prediction later.

U.S. Dollar Paradigm Shift Underway

This article is great. Finally we get an author that values a long term outlook with a logical and rational understanding of the TRUE VALUE OF THE AMERICAN DOLLAR AND ECONOMY! We are still the number one consumer in the world with the largest GDP... the world needs us to buy their exported goods just as much as we need them to fund our debt -if not more.

"So at risk of sounding Pollyannish, it is encouraging to note that big central banks in Asia and Europe are not bailing on the U.S. economy. According to a report released by the Department of the Treasury on Monday, foreign central banks bought a net $36.1 billion in Treasury bonds and notes in January. That was a record." from - money.cnn.com/2008/03/...

While foreign governments may be investing in euros and other currencies, they are still buying dollars, because they know they are backed by the U.S.

And the world should be (and will be) applauding Bernanke and the Fed for the innovative and aggressive ways they have employed to get our economy and credit markets working again.

Anything in the economy is cyclical, just like the dollar. Our current recessionary forces will start to bring price inflation back down. As with the "irrational exuberance" of a bubble market, we see the same doomsdayers come out during tough times.

cheapybob: What is the US dollar supposed to be worth? And are you seriously comparing a loaf of bread at 1 cent in 1900 to current prices? Of course we are going to have inflation, but we have also seen an explosion in GDP, productivity, and wealth (in real terms) since 1900. Come on now.