US dollar

[JNickel101]

Gold standard was part of the problem during the Great Depression.

There were many causes of the Great Depression....devaluing gold is what got us out of the Great Depression - however, it was a short-term fix, IMO, and no standard is what has lead to inflation.

"Speculation" though, is the enemy of any economy....

 

[goodburbon]

Mike are you suggesting that we aren't experiencing inflation?

Cheapest new car I remeber advertised when I was in high school was a ford ranger base model for $5995

New model base prices are as follows from their respective sites.

2010 Ford ranger $17440
2010 Chevy Colorado $16985
2010 Nissan Frontier $17540
2010 Toyota Tacoma $15345

So that's greater than 100% cost increase aka inflation in 15 years for the same products. Even if you argue that these vehicles are better equipped, or meet stricter standards the government still had a big hand in causing those increases. You may notice similar trends in Fast food prices and other durable good prices. The idea of tying a floating value to a compilation of floating values and pointing out that they are even is total bullshit. Compare costs of durable goods over the past 30 years and note the trend. If you want to be super honest about it, compare something that doesn't change much and you're comparing apples to apples if you don't like my car example. Compare, for instance, the cost of a new rifle, or saddle. My point is that inflation is already outrageous, but you don't notice as much because they pay you more, which drives up the cost of goods, which makes them pay you more, which drives up the cost of goods.

Not having our currency anchored to anything tangible will lead to a dollar value spiraling downward in an exponential fashion. It's already happening. Compare cars in 1960 to 1990, then to 2010. The costs have increased exponentially and are continuing to do so. At some point it all crashes down and the currency must be "revalued" People are fussing about Healthcare costs increasing, but what if they are just a more honest expression of that inflation with a compound effect from people and insurance "just paying"?

 

[Ecomike]

Gold and oil have dropped substantially, gold down about $100/once in just 2 days.

http://quotes.ino.com/chart/?s=FOREX_XAUUSDO&t=f

 

[Ecomike]

There were many causes of the Great Depression....devaluing gold is what got us out of the Great Depression - however, it was a short-term fix, IMO, and no standard is what has lead to inflation.

"Speculation" though, is the enemy of any economy....

How do figure devaluing Gold got us out of the depression? That implies increasing the value of the dollar (fiat paper dollar) to devalue gold.


????

What I was saying is that restricting the money supply, by tying it to a static supply of gold restricted the FEDs policy options, and allowed deflation to run amuck.

 

[Ecomike]

Goodburbon, you are using the past compared to past to try show show inflation. Just look at oil and consumable commodities and you will see massive recent deflation. Oil down 50% from last year's high. N Gas down 75-80% since last years high. That is deflation. Housing and real estate prices collapsing. Look at dry bulk shipping rates for grain, coal, wheat worldwide, down 75%. Asset values of ships hauling coal, wheat oil, oil down >50%, and so on. India's Nano car is under $2,000 (LOL).

I bought my Thanksgiving 18 lb Turkey for just under $5! :greensmok

In summary, inflation was a problem in the past, deflation has been the recent problem and is potentially far worse than inflation from an economic psychology point of view. The FED can control inflation. Deflation, if it gets out of control, is dark ages great depression nightmare stuff.

Mike are you suggesting that we aren't experiencing inflation?

Cheapest new car I remeber advertised when I was in high school was a ford ranger base model for $5995

New model base prices are as follows from their respective sites.

2010 Ford ranger $17440
2010 Chevy Colorado $16985
2010 Nissan Frontier $17540
2010 Toyota Tacoma $15345

So that's greater than 100% cost increase aka inflation in 15 years for the same products. Even if you argue that these vehicles are better equipped, or meet stricter standards the government still had a big hand in causing those increases. You may notice similar trends in Fast food prices and other durable good prices. The idea of tying a floating value to a compilation of floating values and pointing out that they are even is total bullshit. Compare costs of durable goods over the past 30 years and note the trend. If you want to be super honest about it, compare something that doesn't change much and you're comparing apples to apples if you don't like my car example. Compare, for instance, the cost of a new rifle, or saddle. My point is that inflation is already outrageous, but you don't notice as much because they pay you more, which drives up the cost of goods, which makes them pay you more, which drives up the cost of goods.

Not having our currency anchored to anything tangible will lead to a dollar value spiraling downward in an exponential fashion. It's already happening. Compare cars in 1960 to 1990, then to 2010. The costs have increased exponentially and are continuing to do so. At some point it all crashes down and the currency must be "revalued" People are fussing about Healthcare costs increasing, but what if they are just a more honest expression of that inflation with a compound effect from people and insurance "just paying"?

 

[goodburbon]

Goodburbon, you are using the past compared to past to try show show inflation. Just look at oil and consumable commodities and you will see massive recent deflation. Oil down 50% from last year's high. N Gas down 75-80% since last years high. That is deflation. Housing and real estate prices collapsing. Look at dry bulk shipping rates for grain, coal, wheat worldwide, down 75%. Asset values of ships hauling coal, wheat oil, oil down >50%, and so on. India's Nano car is under $2,000 (LOL).

I bought my Thanksgiving 18 lb Turkey for just under $5! :greensmok

No, I'm looking at a trending past leading up to today.

Gasoline was a bubble, that led to a crash when the bubble was no longer sustainable. That bubble started in earnest around Hurricane Andrew. It ended when supply finally started catching up.

Real-estate was a longer term bubble, that led to a crash when the bubble was no longer sustainable.

Ammunition and assault rifles were in a bubble, but the bubble popped when no legislation came through and supply caught up.


You'll note, though, that the bubbles didn't drop back to their original prices when they popped, they normalized at a price much higher than they were before the bubble.

For all of your examples of deflation, I have experienced no associated increase in buying power. You can't pee on my head and tell me it's raining, I'm not stupid. You can say things are better all you like, I don't see it. All I see is numbers manipulated to tell me it's better. I still haven't been called for a job, my neighbor still hasn't worked in 3 months, my other neighbor is still being foreclosed on. My doctor tried to negotiate with the banks on his payments for their summer home, bank ignored him so he defaulted. I see no deflation of consumer goods, only inflation.

When Combo meals at burger king retreat back to $5.00 let me know. When Gasoline remains at $1.50 let me know. When Cragar soft 8's drop back down to $36 apiece let me know. When a Ruger 10/22 drops back down to $164 let me know. Until practical every day goods actually decrease in cost I don't care what statistic you quote, Inflation is real and we've experienced quite a bit in the last 30 years, and thinks to raising the min wage inflation won't ever go down.


BTW an indian car that is not even legal here is not an accurate comparison.

 

[JNickel101]

How do figure devaluing Gold got us out of the depression? That implies increasing the value of the dollar (fiat paper dollar) to devalue gold.


????

What I was saying is that restricting the money supply, by tying it to a static supply of gold restricted the FEDs policy options, and allowed deflation to run amuck.

Sorry, I mistyped - devaluing currency as it relates to gold was a step to get us out of the depression- but currency still needs to be related to some sort of "real" value (whether it is gold, silver, platinum, beads, moonrocks...), otherwise, you'll always have inflation/deflation in huge spikes.

You hear talk today about the "price of gold is at an all time high" - only because the gold is tied to the dollar, and not the other way around.

The gold standard was abandoned for the reason you said - it restricted the FED - so instead of fixing the REAL problem, the FED created rules/regulations to band aid the situation. The reason you have such a crazy oil/housing market with spikes and dips is because it is tied to something that is essentially worthless - a piece of paper. Speculation drives so much of "the market" today, and there are TOO MANY rules and regulations out there - which is why the FED needs audited and flushed down the comode.

The rest of the world is getting FED (haha...see what I did there?) up with everything being based on the dollar - because nothing is backing it - well, other than our immense amount of debt.

Economics is WAY more complicated than it needs to be. If the average person doesn't understand most of it (like me) then there are serious issues....

 

[RichP]

When I started driving in 68 gas was .11 cents a gallon for regular, a new mustang GT convertible was $2500 loaded with a 427. If you were supporting a family $10,000 was a good income, two bank presidents my dad knew made $50,000 a year and that was considered 'rich'. In 69 my base bay as an E3 in the Navy was take home $80 every two weeks.
In 73 I bought a new Chevy Vega GT, that cost me $2100. In 82 I bought a new S-10 sport, that cost me $6,000 off the lot.
To have maintained my dads standard of living I would need to be making about $120,00 a year now.

 

[goodburbon]

When I started driving in 68 gas was .11 cents a gallon for regular, a new mustang GT convertible was $2500 loaded with a 427. If you were supporting a family $10,000 was a good income, two bank presidents my dad knew made $50,000 a year and that was considered 'rich'. In 69 my base bay as an E3 in the Navy was take home $80 every two weeks.
In 73 I bought a new Chevy Vega GT, that cost me $2100. In 82 I bought a new S-10 sport, that cost me $6,000 off the lot.
To have maintained my dads standard of living I would need to be making about $120,00 a year now.

You're offering purely anecdotal evidence, there is clearly no inflation to worry about. Quit trying to use the past to describe the present. The value of the dollar is muey fuerte'.

 

[Ecomike]

I don't recall a currency devaluation in the US during the Great Depression. I am aware that in 1933 all gold coins were confiscated, outlawed, and forced to be exchanged for Federal Reserve or US Treasury gold certificates, green backs supposedly backed by real gold. I think it happened during or after the 1933 US banking system collapse and bank holiday week.

Gold backed currency did not stop the Depression.

Growing GDP, and a growing asset base, based on a growing GDP, requires a money supply that can grow with the increased GPD and increasing asset base. A static gold supply if used as the money, must be devalued to work with a growing GDP. Good luck doing that!

During the California gold rush inflation was rampant, even though the money was all gold. Also, during the California gold rush the economy grew by leaps and bounds, because the gold money supply grew by leaps and bounds (just dug it out of the ground). When the gold finds were exhausted, the economic expansion ended, then a recession started.

Is an interesting blog a friend of mine just wrote on gold fever and other bubbles.

http://www.iamgv.com/gv/2009/12/gold-bug.html

Sorry, I mistyped - devaluing currency as it relates to gold was a step to get us out of the depression- but currency still needs to be related to some sort of "real" value (whether it is gold, silver, platinum, beads, moonrocks...), otherwise, you'll always have inflation/deflation in huge spikes.

You hear talk today about the "price of gold is at an all time high" - only because the gold is tied to the dollar, and not the other way around.

The gold standard was abandoned for the reason you said - it restricted the FED - so instead of fixing the REAL problem, the FED created rules/regulations to band aid the situation. The reason you have such a crazy oil/housing market with spikes and dips is because it is tied to something that is essentially worthless - a piece of paper. Speculation drives so much of "the market" today, and there are TOO MANY rules and regulations out there - which is why the FED needs audited and flushed down the comode.

The rest of the world is getting FED (haha...see what I did there?) up with everything being based on the dollar - because nothing is backing it - well, other than our immense amount of debt.

Economics is WAY more complicated than it needs to be. If the average person doesn't understand most of it (like me) then there are serious issues....

 

[Ecomike]

A little more on gold, US dollar, Great depression, FED etc.

Oh, and looks like even gold certificates were outlawed in 1933, so you may be right about devalued currency, but not until 1933, at which point the damage was already done.

"
Monetarists, including Milton Friedman and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continued crisis in the banking system.[21][22] In this view, the Federal Reserve, by not acting, allowed the money supply as measured by the M2 to shrink by one-third from 1929 to 1933, thereby transforming a normal recession into the Great Depression. Friedman argued that the downward turn in the economy, starting with the stock market crash, would have been just another recession.[23] However, the Federal Reserve allowed some large public bank failures – particularly that of the New York Bank of the United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. He claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did.[24] With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch.[25]
One reason why the Federal Reserve did not act to limit the decline of the money supply was regulation. At that time the amount of credit the Federal Reserve could issue was limited by laws which required partial gold backing of that credit. By the late 1920s the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit was in the form of Federal Reserve demand notes. Since a "promise of gold" is not as good as "gold in the hand", during the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. On April 5, 1933 President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates, coins and bullion illegal, reducing the pressure on Federal Reserve gold"

From : http://en.wikipedia.org/wiki/Great_Depression

Sorry, I mistyped - devaluing currency as it relates to gold was a step to get us out of the depression- but currency still needs to be related to some sort of "real" value (whether it is gold, silver, platinum, beads, moonrocks...), otherwise, you'll always have inflation/deflation in huge spikes.

You hear talk today about the "price of gold is at an all time high" - only because the gold is tied to the dollar, and not the other way around.

The gold standard was abandoned for the reason you said - it restricted the FED - so instead of fixing the REAL problem, the FED created rules/regulations to band aid the situation. The reason you have such a crazy oil/housing market with spikes and dips is because it is tied to something that is essentially worthless - a piece of paper. Speculation drives so much of "the market" today, and there are TOO MANY rules and regulations out there - which is why the FED needs audited and flushed down the comode.

The rest of the world is getting FED (haha...see what I did there?) up with everything being based on the dollar - because nothing is backing it - well, other than our immense amount of debt.

Economics is WAY more complicated than it needs to be. If the average person doesn't understand most of it (like me) then there are serious issues....

 

[Ecomike]

http://en.wikipedia.org/wiki/Executive_Order_6102

This covers what you were talking about. Happened in 1934, dollar devalued in relation to gold, yes to get us out of the depression.

You said they did this instead of fixing the real problem. How would you suggest they fix the problem?

And here is a link to details on the 1934 act:

http://en.wikipedia.org/wiki/Gold_Reserve_Act

This is worth quoting from the first link:

Every major currency left the gold standard during the Great Depression. Great Britain was the first to do so. Facing speculative attacks on the pound and depleting gold reserves, in September 1931 the Bank of England ceased exchanging pound notes for gold and the pound was floated on foreign exchange markets.

The Depression in international perspective.[42]


Great Britain, Japan, and the Scandinavian countries left the gold standard in 1931. Other countries, such as Italy and the United States, remained on the gold standard into 1932 or 1933, while a few countries in the so-called "gold bloc", led by France and including Poland, Belgium and Switzerland, stayed on the standard until 1935–1936.
According to later analysis, the earliness with which a country left the gold standard reliably predicted its economic recovery. For example, Great Britain and Scandinavia, which left the gold standard in 1931, recovered much earlier than France and Belgium, which remained on gold much longer. Countries such as China, which had a silver standard, almost avoided the depression entirely. The connection between leaving the gold standard as a strong predictor of that country's severity of its depression and the length of time of its recovery has been shown to be consistent for dozens of countries, including developing countries. This partly explains why the experience and length of the depression differed between national economies.

 

[Ecomike]

You're offering purely anecdotal evidence, there is clearly no inflation to worry about. Quit trying to use the past to describe the present. The value of the dollar is muey fuerte'.

Cute, nice to see you still have your sense of humor, a major requirement when out of work for long periods (ask me how I know).

But I still stand by the statement that deflation is the current danger (although less now than 6-12 months ago, but still a danger), and use this example as proof.

Example: Gasoline and oil are currently selling for roughly 1/2 of their recent highs.

 

[Ecomike]

This was also in the first link, supporting my positions.

"By 1936, the main economic indicators had regained the levels of the late 1920s, except for unemployment, which remained high at 11%, although this was considerably lower than the 25% unemployment rate seen in 1933. In the spring of 1937, American industrial production exceeded that of 1929 and remained level until June 1937. In June 1937, the Roosevelt administration cut spending and increased taxation in an attempt to balance the federal budget.[74] The American economy then took a sharp downturn, lasting for 13 months through most of 1938. Industrial production fell almost 30 per cent within a few months and production of durable goods fell even faster. Unemployment jumped from 14.3% in 1937 to 19.0% in 1938, rising from 5 million to more than 12 million in early 1938.[75] Manufacturing output fell by 37% from the 1937 peak and was back to 1934 levels.[76] Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937. As unemployment rose, consumers' expenditures declined, leading to further cutbacks in production. By May 1938 retail sales began to increase, employment improved, and industrial production turned up after June 1938."

 

[Ecomike]

When I started driving in 68 gas was .11 cents a gallon for regular, a new mustang GT convertible was $2500 loaded with a 427. If you were supporting a family $10,000 was a good income, two bank presidents my dad knew made $50,000 a year and that was considered 'rich'. In 69 my base bay as an E3 in the Navy was take home $80 every two weeks.
In 73 I bought a new Chevy Vega GT, that cost me $2100. In 82 I bought a new S-10 sport, that cost me $6,000 off the lot.
To have maintained my dads standard of living I would need to be making about $120,00 a year now.

Intersting. When I started driving in 1973, jan, gasoline, regular was .29/gallon. So it tripled between 1968 and 1973. I paid $7,200 for new Dodge charger in 1976. And my mother LTD was about $7,800 in 1973. My 73 Ford Pinto was $2000.

The house I bought in 1981 and still live in, is now worth about what I paid for it in 1981.

 

[XJEEPER]

You said they did this instead of fixing the real problem. How would you suggest they fix the problem?

It's simple.....let unprofitable companies fail and go bankrupt. Require our government to stop meddling in the private sector.

It's not that complicated......it's called CAPITALISM. The government screwed with the economy in the 30's and caused the depression to be the Great Depression.

 

[Ecomike]

It's simple.....let unprofitable companies fail and go bankrupt. Require our government to stop meddling in the private sector.

It's not that complicated......it's called CAPITALISM. The government screwed with the economy in the 30's and caused the depression to be the Great Depression.

As you already I know I disagree. That works fine in a normal economy (letting unprofitable businesses fail), but is a disaster in a collapsing economy when everyone is losing money at an increasing exponential rate due to panic.

 

[JNickel101]

A little more on gold, US dollar, Great depression, FED etc.

Oh, and looks like even gold certificates were outlawed in 1933, so you may be right about devalued currency, but not until 1933, at which point the damage was already done.

"
Monetarists, including Milton Friedman and current Federal Reserve System chairman Ben Bernanke, argue that the Great Depression was mainly caused by monetary contraction, the consequence of poor policymaking by the American Federal Reserve System and continued crisis in the banking system.[21][22] In this view, the Federal Reserve, by not acting, allowed the money supply as measured by the M2 to shrink by one-third from 1929 to 1933, thereby transforming a normal recession into the Great Depression. Friedman argued that the downward turn in the economy, starting with the stock market crash, would have been just another recession.[23] However, the Federal Reserve allowed some large public bank failures – particularly that of the New York Bank of the United States – which produced panic and widespread runs on local banks, and the Federal Reserve sat idly by while banks collapsed. He claimed that, if the Fed had provided emergency lending to these key banks, or simply bought government bonds on the open market to provide liquidity and increase the quantity of money after the key banks fell, all the rest of the banks would not have fallen after the large ones did, and the money supply would not have fallen as far and as fast as it did.[24] With significantly less money to go around, businessmen could not get new loans and could not even get their old loans renewed, forcing many to stop investing. This interpretation blames the Federal Reserve for inaction, especially the New York branch.[25]
One reason why the Federal Reserve did not act to limit the decline of the money supply was regulation. At that time the amount of credit the Federal Reserve could issue was limited by laws which required partial gold backing of that credit. By the late 1920s the Federal Reserve had almost hit the limit of allowable credit that could be backed by the gold in its possession. This credit was in the form of Federal Reserve demand notes. Since a "promise of gold" is not as good as "gold in the hand", during the bank panics a portion of those demand notes were redeemed for Federal Reserve gold. Since the Federal Reserve had hit its limit on allowable credit, any reduction in gold in its vaults had to be accompanied by a greater reduction in credit. On April 5, 1933 President Roosevelt signed Executive Order 6102 making the private ownership of gold certificates, coins and bullion illegal, reducing the pressure on Federal Reserve gold"

From : http://en.wikipedia.org/wiki/Great_Depression

....that's why I stated that it was done to "get us out of the Great Depression" - implying that we were already in the middle of it, and, as you said, the damage was already done

Good info on gold though! I also read that pretty much the only economy not affected by the GD was China - they were on a silver backed economy....interesting....

 

[Ecomike]

....that's why I stated that it was done to "get us out of the Great Depression" - implying that we were already in the middle of it, and, as you said, the damage was already done

Good info on gold though! I also read that pretty much the only economy not affected by the GD was China - they were on a silver backed economy....interesting....

I found that interesting as well, the silver/china part. I wrote a term paper in college on Silver and Nevada politics in the late 1800s, based on several books I read. There was a real political battle around 1880s, IIRC over silver versus gold monetary policy back then.

 

[RichP]

We still had silver certificates up until a few years ago, I got a bunch of them put away somewhere.