BUMP
Maybe a sluggish money velocity is not bad considering the 250,000-mile-high pile of pixels out there. Isn't that what's holding back hyper-inflation?
Yellen was the plan all along. Obama brought up Summers as a diversion.
Yellen was the plan all along. Obama brought up Summers as a diversion.
While WWII destroyed most economies of the world, the United States prospered. The only way to restart international economic activity was for the U.S. to take the lead, which it did with the Bretton Woods Agreement. Every currency had a fixed value in relation to the dollar, and the U.S. kept everything functioning by buying and selling gold at $35 an ounce. Therefore, once again there was a U.S. (and worldwide) gold standard and the dollar became the world’s reserve currency.
The U.S. unilaterally abrogated the agreement in August 1971, allowed the dollar to float in relation to the trading whims involving all paper currencies. When the Treasury in 1964 began producing dimes through dollars without silver, silver coins disappeared from circulation. Until about 1968 people could still trade their Federal Reserve notes for Silver Certificates and trade those for packets of silver from a Federal Reserve Bank. At this time the working careers of a single generation comprise the totality of comprehension for how the international community was to function economically without major currencies emerging from things people can touch and see.
The problem at the present moment is that the dollar is backed by the full faith and credit of the government. When much of the world looses faith in the U.S. as a reliable engine driving the world economy because of its incredible behavior, then the dollar’s status as a reserve currency is jeopardized. The memory of the United States as “The Arsenal of Democracy” would then fade to be replaced by the realization of the United States as “A Gulag of Dependency”. If you buy into the argument that humans are inherently flawed and driven by their appetites, then something as trivial as Cyprus having Qatar hold its financial reserves could start a cascade of anxiety overcoming arrogance.
However typical of all central bankers, Ben Bernanke believes he can overcome these international fears by applying his intellect to macro-economic models providing dubious information to achieve precisely timed money supply changes, which allow timely adjustments for identification and reaction to increases in money velocity. Supposedly he would sell bonds and reduce the money supply with a precision that prevents inflation from taking hold or a recession from occurring. He would proceed in such a manner as to concurrently allay any fears of a Congress and an Administration in an election year. This result has probably not been achieved since the seven years of plenty and famine in Egypt when Joseph obeyed the word of God from his dreams.
I imagine something like the final scene in “The Good The Bad and The Ugly”. The members of the G-20 are standing in a circle with open graves behind them. They are all contemplating how they are going to successfully outdraw the other nineteen members and survive the resulting mayhem, which Lee Van Cleef’s character did not. The only thing needed now is an of human frailty as I mentioned above to commence the cascade to catastrophe.
Communist overthrow BUMP