The American Dollar

[hmkpoker]

Over the next ten years, what do you think will happen to the value (that is, the purchasing power) of the American Dollar?

[theweatherman]

Correct me if I am wrong, but wouldnt a steadily falling currency only make a real difference in international markets? I thought the US was purposely dumping the dollar in order to outcompete Europe. But I'll be the first to admit that my knowledge of the currency markets is limited.

[hmkpoker]

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Correct me if I am wrong, but wouldnt a steadily falling currency only make a real difference in international markets?

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No sir. The effects of an inflating currency are not only felt by international markets, they are felt very, very much so by domestic markets...ESPECIALLY by the poor and middle class, since the money doesn't "trickle down" to them until after the prices have already gone up.

Your dear ol' mum may have been scrimping and saving through her days to put aside enough money for retirement, only to find out that when she retires the increases in prices have rendered her efforts worthless. Because social security is unreliable as all hell, her best choice is to buy high-demand, low supply assets (like gold and real estate) with her money and survive off the rapidly increasing prices (because everyone else is doing this too). This just makes it harder for people to afford homes.

So yeah, the inflation of the dollar is felt hard at home. I'll bet you don't like seeing things cost more today than they did five years ago, and knowing that the trend is going to continue.

[The once and future king]

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her days to put aside enough money for retirement, only to find out that when she retires the increases in prices have rendered her efforts worthless.

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Intrest rates > Inflation.

[hmkpoker]

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*** You are ignoring this user ***

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Best decision I've made all month.

[lozen]

I remeber the days of bonus hunting and getting 1.58 on my US Checks. Aghh the good old days before Bush

[AvivaSimplex]

I don't know why you put him on ignore. He's right. Interest rates will almost always hover a few points above the real inflation rate. As long as granny doesn't put all her money in long-term bonds, her savings won't be inflated away.

[hmkpoker]

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I don't know why you put him on ignore. He's right. Interest rates will almost always hover a few points above the real inflation rate. As long as granny doesn't put all her money in long-term bonds, her savings won't be inflated away.

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When you make up definitions for what the "real" inflation rate is and suggest that it is something other than a simple expansion in the money supply, then yes.

Of course, it's completely meaningless and functionally irrelevant, but it's a convenient way of duping people into thinking that their currency isn't going to inflate into critical mass.

Seems to be working though.

[The once and future king]

The moment you know you have defeated someone intellectualy.

When they put you on ignore for a post that is no way a troll or a flame. They thus choose to take the easy way out.

PATHETIC.

It is stone cold FACT that as long as granny has saved her dollars her wealth will probably have increased in real terms over time regaedless of however a perverted way ACers choose to define inflation.

[Cyrus]

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The effects of an inflating currency are not only felt by international markets, they are felt very, very much so by domestic markets...ESPECIALLY by the poor and middle class, since the money doesn't "trickle down" to them until after the prices have already gone up.

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Follow the money. You think the richer parts of a society and the ruling elites are spending their nights sleeplessly worrying about the plight of the poor and middle class? If you do, I have a bridge to sell you.

Suppose we crudely divide people in two camps, those who have lotsa capital and those who don't. Then we can make several observations. For example, that most of the have-nots are working stiffs, i.e. getting salaries or other, more-or-less fixed income. With COLA (which is usually achieved through organised, unionised action), the have-nots are virtually nullifying the effects of inflation, as far as their income is concerned : The worker gets an increase that covers inflation and so he is able to buy again this year generally the same number of, for example, shirts and oreo cookies.

COLA doesn't cover the worker's savings, though. Inflation affects negatively the buying power of capital, unless real interest rates (=interest rates after deducting inflation) are positive. (They are not always.)

And who stands to lose more by the corrosive effect of inflation on capital, the worker who has $500 in his savings account, or the rich cat who has $5 million parked all over the place? That's right, the fat cat. Now you can understand the source of all the moaning (and meaowing [img]/images/graemlins/smirk.gif[/img]) by bankers, rich guys and government about inflation.