derryl

A Strong, Stable Dollar Is Best for America

"We have had a strong currency and massive capital inflows for years. Has this resulted in massive investment in plant and equipment in the US? No. The reason is because we have an uncompetitive economy based on an uncompetitive exchange rate. Until we fix that, no one will invest in US plant and equipment."

I second chap08's take on this situation. US companies have been hollowing out the American economy for years because the price structure of US labor and other costs is uncompetitive with emerging economies. American workers cannot afford to live in America on emerging economy incomes so wage decreases are not the solution. But American workers can afford to live in an America with a weak dollar because the major costs of living like housing and food and utilities are domestically produced and not subject to currency exchange rates. As imports become prohibitively expensive America will fill in the production that was hollowed out by cheap Asian imports. This will restore domestic production and employment which are the true foundation of the strength of any nation and its currency.

Mr. Delfeld is right about the oil imports problem. Unless the US can increase domestic production, start major consumption reductions and innovate into alternatives to oil, the trade deficits will remain structural. A weak dollar means very expensive oil, which will make alternatives more competitive and will be a start in getting the US prepared for a world of peak oil. Right now a weak dollar could be the road to salvation for the US while strong currency countries trod the road to cheap oil perdition.

The Intrinsic Value of Nothing, Part 1

John wrote,
"You have defined value in terms of exchange. I would argue that is too narrow a definition. There are things with intrinsic value independent of any medium of exchange. Exchange is merely one way, but not the only way, to define value.

I maintain that anything necessary for my existence has intrinsic value. Air to breathe, water to drink and food to eat have intrinsic value. The value has a binary measurement: either I have these things and exist or one is missing and I don't exist."

This is the point of the Austrian theory of value as "subjective". In values theory it is called the "conative theory of value". A thing only has value inasmuch as some conative being, a being with needs, wants and desires, values that thing. All value is thus "subjective", because value can only exist if some conative "subject" values something. Such as continuing his own existence.

That's where the dead universe counterexample comes in. If there never was and never would be any sentience in the universe, no life, no consciousness, just dead mass interacting, there could be no value because there is nobody in that universe to "care" what happens one way or another. So I personally find the conative theory to be self-evidently true.

That said, I have encountered smart philosophers who do not accept the conative theory of value. They believe in the "intrinsic value" idea. They think it is just "better", somehow, that there is something rather than nothing. I personally suspect this is due to their inability to truly imagine a truly dead universe with no God and no sentience of any kind, ever. How could it possibly "matter" whether such a universe existed or not? Or if it blew up or collapsed? Or if it was made of gold or lark's vomit? There is nobody there for it to matter to. So there can be no value one way or the other and thus no value, period.

Helping China Hasten the Dollar's Demise

Check out this link canadafreepress.com/in...
to an article titled, 'The Purpose of the Financial Crisis'. It has a link to Bruce Weisman's previous article, 'The Financial Crisis-A Look behind the Wizard's Curtain'.

The author makes a good case that the financial crisis was engineered to replace the US$ as the world's reserve currency with a new BIS (Bank for International Settlements) currency. The BIS is a stateless, autonomous bank for central bankers that exists outside the laws of any country. The goal is to control the world's currencies and governments. The strategy is to manipulate the world into a situation where a single globalist entity (the Financial Stability Forum) looks like the only solution to our currencies crisis, and ultimately to replace national currencies with a single world currency that is created and distributed by the good bankers from Basel.

If you don't like the Federal Reserve having exclusive license to print US$ and 'lending' them to the United States at interest, you're really not going to like what the BIS has in store for us.

Impending Inflation? The Global 'New Deal' All but Guarantees It

L-Bow:
There are only 3 ways money can be created in the first place.
1. A bank makes a new loan which creates a new deposit in the borrower's account, which the borrower spends into the economy.
2. A bank sells a security to the Fed in exchange for Federal Reserve notes ("cash") or a credit in the bank's Fed account. Banks hold the cash to satisfy their depositors' cash withdrawal demands.
3. The federal governments sells securities to the Fed and the Fed credits the government's account, and the government spends the money into the economy.

Each of these actions (except banks holding money in their Fed account) increases the M1 circulating money supply. The point is, this is all the "money" there is.

When a borrower repays a loan the deposit (which had circulated around the economy until the borrower collected it back to repay the loan) ceases to exist and the money supply is reduced by that amount. When the government redeems its security from the Fed with money it collected by taxing the money it spent into the economy back out of the economy, that money ceases to exist.

L-Bow asks, "Who will borrow all the money that is printed to reinflate the economy?" If the government borrows money from the Fed to pay for infrastructure projects or more rounds of "stimulus" checks, that's one way to do it. Then don't tax it out of the economy until after a general recovery has occurred. This will not be inflationary because a lot of people will use the new income to pay down their personal debts and that debt-money will cease to exist.

If the government borrows money to buy up mortgages and other distressed assets, the banks who made the mortgages will reabsorb the loan money and it will cease to exist, so this is not inflationary. Actually this is deflationary, because the money supply decreases by the amount of the repaid mortgages.

Banks are at or near technical insolvency not necessarily because their cash reserves are too low, but because their capital value has dropped so much when bank share prices fell along with the rest of the stock market. Banks have a legislated upper limit of assets (loans) to capital (common and preferred shares and long term debentures they hold). I think the ratio is 20 to 1 but that might be outdated. By selling assets like mortgages to gov't they can get their ratio back in line with their reduced capital value. The government owes money to the Fed, but this debt can be treated as an accounting nicety and ignored as long as it is expedient to do so.

Banks don't "have to" fail, even if they are in technical default. The decision is up to the Comptroller of the Currency. It is in nobody's interest to destroy the US banking system so banks are being helped out of this hole.

I think the private sector will be pretty shy of new borrowing for awhile so I don't think there will be any inflation happening unless the federal government decides to inflate away US foreign debt. Paulson's $700 billion will just restore bank's balance sheets by reducing their assets to a level in line with their reduced capital. That money will never circulate.

But the original borrowers of that $700 billion spent it into the economy. The people who sold things to the borrowers still have that money (if they lost it, someone else has it). So there's a lot of "owned" money in the economy: the people who now own the money are not the people who owe that money to the banks. That money is sitting it out waiting to see what happens. Eventually it will get invested and spent, and the gov't can start taxing to collect the money to repay the Fed. It would take some working out, but the thing could be fixed in this way.

More Fed Reserve Notes Intended for Wall Street

PainfullyAware:
Whether it is by design or just the natural course of things, I think you are right about a further concentration of monetary control as the institution of "banking" evolves.

First the US and Canada passed our Bank Acts in 1913 (UK 1914) formally authorizing private banks to create, issue and manage financial credit denominated in the national currency (US or Canadian dollars, pounds, francs, etc.). England has had a central bank since 1694 but the 20th century saw all major economies create their own central banks as "lender of last resort".

Of course the real worth of American dollars resides ultimately in the real economic value of the American economy, not in the bank notes issues by the Fed, so central banking tends to "abstract" money from its true source of value and kind of lets money take on a life of its own.

At first States and populists resisted centralization of banking, but the 1930s monetary troubles destroyed political resistance to expanded Fed powers. Since WWII the G 10 (11 if you include Switzerland) of central bankers arose and now they meet regularly in Basle to harmonize world monetary policies.

With the current financial troubles it looks like control of money is taking another step away from private banking enterprises and governments and into the hands of central bankers. Unlike political leaders who at least supposedly speak for their country's people, central bankers speak for their country's money. And the interests of money do not always agree with the interests of us people who just want to be able to use stable-value money to get on with our economic lives.

If energy is the "material" lifeblood of a modern economy, money is the "immaterial" lifeblood. Shut off the flows of energy or money and your economy is shut down.

Money is an abstract concept that is growing more abstract as it evolves. The more abstract, the more removed from physical reality, the harder a thing is to understand. Wall St was selling "financial instruments" that nobody understood. But "money" itself is such an abstract concept that nobody understands it.

We absolutely need money to make our economies work, and we absolutely need bankers to create and administer money. Otherwise we're back to barter. Goodbye computers, hello chiselling letters in rocks.

We understand energy. We have good scientific theories about how energy works. Because we understand energy we are able to control it. But we have no good theories about what money is and how it works. If we don't understand energy it can blow up in our face, just like money does with these periodic meltdowns or crashes. We're always getting surprised by the behavior of money, and that's because if anyone knows how money works they're keeping it to themselves.

If the central bankers who are moving us towards monetary globalization know enough about money that they can prevent it from blowing up in our faces, then I'd like to see them present a theory of money--not incomprehensible and incoherent bafflegab but a real theory that can answer real questions about money supply, interest, who "owns" money, etc.--to demonstrate that centralizing control will serve our economic interest and is not just a power grab.