US Dollar has sunk to record lows against Euro

http://news.scotsman.com/latest.cfm?id=3759014 ^ | me

[Southack]

"I disagree. Someone is buying those 5,000 dollar big screen HDTV's. There is as market for new products before they get to a level of affordability. Why do they even market them? I was in a store today and every tv in there was tagged at several thousand dollars. This store has been in business for at least twenty years. Are you telling me that they are going out of businees? I think not."

Apples and oranges. You are trying to disagree with my *example*, not my point.

My point was that it is more difficult to speed up the velocity of money when money maintains or increases its purchasing power. I gave you a PC example to help illustrate that concept. Arguing with the illustrating example, however, takes you far away from the point itself.

Then I made another point for you: noting that the faster money loses value, the easier it becomes to convince people to speed up their personal velocity of money.

[jpsb]

Well I am in over my head on this thread as some of you seem to be educated economists. So you are in a much better position then I to spot a Bull Sh*ter. And I have no problem with calling a BSer a BSer.

That said, Southack, does play fast a loose with his arguments but he can be nailed down. I know this because I have nailed him once or twice myself on this very thread. So I while disagree with his world view I find him consistent in presenting it and reasonable in his arguments. But like I said, I might be easily fooled on this topic, and have to google to fact check.

[jpsb]

You know thinking about it I did call him a troll early on. Hmmmm,

[Baraonda]

"Anyone else have a better explanation?"

I was thinking the speed at which money multiplies.

As a crude example. If you borrow a million dollars from a bank, you won't take that money out immediately. You usually have an account at the bank with a credit of the million dollars you just deposited. Since the money is not withdrawn at once, the bank can reloan a percentage of the balance, say it lends, 500,000 of it. The 500,000 just lent is either redeposited at the same branch or another branch, etc. A percenatge of this latter 1/2 million dollar is eventually loaned again. And the process continues.

The velocity of money has to do with the speed at which the original million dollars is relent over and over, or, IOW, the time it takes for the money to multiply at its maximum.
There is a maximun to which an original dollar will multiply to, if I'm not mistaken, due to reserve requirements and other factors.

Please correct me on this because I'm not sure I know what I'm talking about. Only trying to recallect what I learned ages ago. :)

[OwenKellogg]

>>> Then I made another point for you: noting that the faster money loses value, the easier it becomes to convince people to speed up their personal velocity of money <<<

Southack, in this statement, you make the case that is appropriate for the government to manipulate the currency in order to increase the velocity. Is that what you intended? Is that a conservative stance?

It also implies that Americans are too stupid to make their own economic decisions and must have the government herd them in the right direction? Is that a conservative policy?

This is as close to a Keynesian policy as you can get.

[jpsb]

4. What is the velocity of money? What is its formula?

* The velocity of money is the speed at which money circulates: the average number of times each dollar is spent on final goods and services in a year. If MV=PQ, then V = PQ/M Example:

* If M = $1.6 trillion, Q = $6,4 trillion, and P = 2, then V = 8, so that a dollar must be spent an average of 8 times per year if a $1.6 tr. money supply is to support an output of $6.4 tr.

[Baraonda]

What is P? Is it a constant?

Thanks for the formula. I had it all wrong.

[Southack]

"Southack, in this statement, you make the case that is appropriate for the government to manipulate the currency in order to increase the velocity. Is that what you intended? Is that a conservative stance?"

That wasn't my intention so much as to simply state the ground rules. You can have a currency that makes it easier or harder for your economy to speed up the velocity of money. That's a ground rule. It's not a direct call to manipulate an economy...but, in general it is a good thing for money to move faster rather than be hoarded so tightly that no financial transactions happen at all.

So in that sense, yes, the government should make it easier for an economy to speed up the velocity of money, even if direct currency intervention is required.

[Southack]

"It also implies that Americans are too stupid to make their own economic decisions and must have the government herd them in the right direction?"

No, it implies the opposite, that Americans are smart enough to hoard money if the Dollar always appreciates in value...and likewise smart enough to move their money more rapidly into areas that store or invest wealth if their Dollar is always losing value.

[jpsb]

This is interesting

$5.02 in the year 2003 has the same "purchase power" as $1 in the year 1969.

Dow in 1969 was 876.72; 876.72 X 5 = 4380. Dow today call it 10,000 so investors (on average) did a little better then doubling their money in the marget since 1969.

Gold in 1969 $35 Gold in 2004 is $400 now 35 X 5 = 175 almost exactly the same growth as the market!!!! Hmmmmm, something is fishy here.

[Baraonda]

"What is P? Is it a constant?"

Got it! P= price.

[OwenKellogg]

As long as you have the goverment manipulating the medium of exchange, you don't have a free market, you don't have free enterprise.

What you have is a manipulated economy.

You still haven't addressed my question concerning these policies. Are they conservative policies?

[Southack]

In a global economy, your competitor nations are going to manipulate your currency if your own government leaves it alone. There is no conservative option; only the option to attack.

[jpsb]

beats me, I just googled on velocity of money, I am the thread fact checker, I ain't no stinkin economist!

[OwenKellogg]

>>> In a global economy, your competitor nations are going to manipulate your currency if your own government leaves it alone. There is no conservative option; only the option to attack. <<<

You avoided answering a direct question again.

If you call devaluing the savings of all Americans and raising prices on all goods an attack on competitor nations, I'd like to see what a retreat would look like.

If you are advocating a continuous round of competitive currency devaluations, then I ask again...Is this a conservative policy? How do you know when one nation wins? Where is a historical example of a competitive currency devaluation bringing prosperity?

[Southack]

"If you are advocating a continuous round of competitive currency devaluations, then I ask again...Is this a conservative policy? How do you know when one nation wins? Where is a historical example of a competitive currency devaluation bringing prosperity?"

Japan, circa 1946 until today (compared to pre-ww2 values). China, circa 1990 until today.

Is it "conservative?"

Yes, in the sense that it is Nationalistic to subsidize your exports and penalize the imports of comeptitor nations.

[investigateworld]

"...Subsidize your exports..." Gee you mean there are governments that work to under mind the American worker (Second correct thing you've said tonight)

[OwenKellogg]

>>> Japan, circa 1946 until today (compared to pre-ww2 values). <<<

Are you saying that Japan found prosperity by devaluing their currency?


>>> Is it "conservative?"

Yes, in the sense that it is Nationalistic to subsidize your exports and penalize the imports of comeptitor nations. <<<

Southack, subsidies and tariffs to manage trade are not conservative values. You are espousing liberal policies!

[Southack]

"Southack, subsidies and tariffs to manage trade are not conservative values. You are espousing liberal policies!"

No, no, and no.

Devaluing your currency is a *stealth* subsidy. It makes your exports cheaper even though there are no direct payment subsidies. This is nationalistic, not liberal.

Likewise, devaluing your currency makes your imports from competitor nations more expensive, yet there is no actual, direct tariff involved. Again, this is Nationalistic.

Nor do you have much of a choice in a global economy. You can play the ostrich and pretend that because there are no overt, direct subsidies or tariffs that you are somehow espousing free market Capitalism, but the hard, cold, cruel reality is that your global competitors are going to seize upon such naivity by using their own resources and tricks to manipulate *your* currency to your entire nation's detriment. This is precisely what China is doing by hoarding $500 Billion in U.S. Dollars. It props the Dollar up higher than its natural free market value would ordinarily reside.

The other choice is to play the same game by attacking competitors' currencies via devaluing your own.

[OwenKellogg]

Recap:

You have dropped the fundamental purpose of a currency -- to be a store of value, so that government may manipulate the economy.

You have acknowledged that it is good for the government to be able to manipulate spending and savings habits of its citizens through currency manipulation.

You have endorsed the use of currency manipulation in order to manage trade.

It doesn't get any more "non-conservative" than that.

If I recall, you were slapping people pretty hard earlier in the thread. I just don't see that as proper.