reply to post by TheHistorian
I was more talking about all the facts this guy lays out before he gets to his pitch. The part of the inpending financial doom the U.S. is
facing. The devaluing of our currency, the possibility of U.S. dollar loosing its status as the reserve currency of the world. Thats what I wanted to
discuss.
It's simple math, really.
There are three basic numbers we need to pay close attention to:
GDP - an estimate of the overall amount of goods/services produced by a nation.
Bank Reserve/Liability ratio: Essentially - how much money a bank has in its vaults by comparison to its total credits (accounts of its members).
Federal Deficit Spending: - How much money the government prints versus how much money is taken out of circulation via taxation (the best way to think
about it when said tier of government has the authority to print money).
Basically, the more liabilities a bank has to pay compared to its held assets, the more money is in circulation than product exists to back it. For
example - Federal Reserve policy allows down to a 10% reserve. This means the money on the books is only backed to 10%. The rest exists as loans to
be repaid over the course of years - often levied against the value of a physical object (such as a home or car). The lower this figure, the more
indicative it is of a 'market bubble' - or series of 'bubbles.' High rates of loaning are often accompanied by rapid inflation elsewhere in the
market (often in housing). It's something of a vicious cycle.
lewrockwell.com...
mises.org...
- Fractional Reserve Banking
Federal Deficit Spending is another value to watch. The larger it is, and the more it contributes to the overall debt, the more dollars there are in
circulation by comparison to the total value of goods and services produced that year. Annual inflation and deficit spending rates are directly
proportional throughout history.
Compound this with Fractional Reserve Banking, driven to the extremes in our society, and there are a number of situations where the value of the
dollar can suddenly 'drop' by as much as 900% (this is a very, very extreme case). This is only exacerbated when government spending targets market
bubbles - such as housing, and only further inflates them. Other problems, such as 'stimulus packages' that often go straight into debt payments,
serve to make the economy even more unstable.
So - yes, the policies in place today are a huge factor to destabilizing the value of our currency. As to how much it could devalue.... that is,
really, anyone's guess. It is, however, not good for things to continue the way they are. Efforts to reign in the Federal Reserve and to seriously
tackle deficit spending will be crucial to stabilizing the value of the dollar.
If such action is not taken, then, yes, our currency will become defunct and the government will collapse as States take action to protect their
citizens and interests, switching to other economic standards. Businesses, perhaps, will be the first to switch. It wouldn't surprise me to see
people getting paid in facebook credits before too much longer (I know it sounds silly... but...)
