Re: Global financial crisis

On Wed, 29 Oct 2008 07:41:10 -0700, "a425couple"
<a425couple@xxxxxxxxxxx> wrote:

"Renia" <renia@xxxxxxxxxxxxxxx> wrote in ..
OK, it's off-topic, but everyone else does it!
If most major countries are in financial trouble,
who has all the money?

I think it's a very valid question.
It has been on my mind lately.
But, at least so far, still confusion, and no
actionable conclusions.

And I tend to think, not terribly far "off-topic".
In medieval times (& before, & after) the people
had some faith in their currency because it was
what it was. (Semi-uniform) coins, put out by
their king (/queen/government) containing precious
metal and stamped equally so everyone knew
it's metal and size. Not just faith, but a tangible item.

Correct. Fractional reserve banking is medieval. Most people don't
withdraw all or even most of their money most of the time. That is
they leave it idle. The trouble is that servicing the account is
expensive relative to most people's savings, so the bank covers the
cost by lending.

That works reasonably well as long as the bank maintains enough
reserves to cover expected withdrawals. It should be obvious that a
profit-oriented bank has incentives to keep the lowest reserves
possible and even perhaps, cheat by keeping less than the likely
withdrawals on hand. That leads to regulated reserve requirements
(modern).

Now it's faith. Faith in what?
A government, , , and it's underlaying economy
and productivity.
So the various markets move, and to a fair extent
in inverse proportions to each other.

(So, like in prior times, if the "faith" in USA dollar
((hence faith in USA future value/productivity))
was shaken by bad news, then it's value in
the marketplace would decline, hence the value
of other countries currencies would increase
((British Pound, EEC Euro, Mexican peso,
Japanese yen, Australia, Canada, India Rupee,
Russia Ruble, etc.)). )

And the inverse movements would apply to
various sectors. If faith in currency declined,
then increase in desire for tangible goods
(gold, silver, lumber, wheat, oil).

Now, I've had concerns for some time about
the goofy mortgage business - but no concept
that it had gotten so wrapped up in so many
other things/ways.

So the simpleton's view is that this is all the
fault of USA overvaluing it's housing stock,
and "all fall down". Economies go in cycles,
and invariably after a number of years of
"good years", must come some "less good years"
(or speaking frankly = relatively bad years).
People who bought a house too expensive and
betted that interest rates would stay down and
their salaries would increase - lose for themselves
and for all the rest of us some also.

Reasonably good job so far...

But the WTF is things like:
1. How can I now go in with my US dollar,
and with it buy about 50% MORE Australian
dollars than last year?
2. ----- about 30% more Canadian $ than last year?
3. ----- about 30% more British pounds than last year?
4. ----- about 40% more wheat than last year?
5. ----- about 11% more gold than last year?
6. And if the yen has gained, then why have my
stocks in the Japanese market taken a beating?
7. What is with the "faith" in Hong Kong currency??

Yeah, I clearly admit, , I'm confused.
Have at it/me, prove my brain is still on vacation.
I'm not likely to try to deny it right now!


Ah. Many problems. Fiat money with unregulated flexible exchange rates
is subject to what I think are undesirable distortions caused by
relative interest rates. Underneath that, the prices of commodities
and financial assets are also changing as the market shifts
expectations. The system adjusts to eliminate arbitrage, i.e.,
mispriced assets. It does that very quickly, though efficiency is
another matter.

Wheat production was down in the 2007-2008 growing year. In the US
production was sluggish due to cold. Australia was in drought. Europe
was too wet. A record harvest is forecast for this year. That's the
good news. The bad news is that the drought in the Middle East is
spreading, so the harvest in Iraq and Iran is expected to be poor and
weaker than usual. That's a big part of why the ME has been so
troubled recently. Anyway, record harvests mean lower prices, at least
in the short run, though prices are usually lower at harvest time
anyway.

Gold is used both in manufacturing and as a hedge against inflation.
It's a bit lower because of the manufacturing recession and its
associated lower inflation risk. The currency changes suggest that the
markets are forecast either higher interest rates or economic growth
in the US than in Canada/UK, or both.
.

Relevant Pages

  • Re: What does it mean?
    ... The ensuing article says the latest round of government bailout money ... In context what does the word "faith" mean in the headline? ... There is not enough money in the world to meet the demand. ... Therefore currency was invented: currency is pieces of paper that ...
    (talk.origins)
  • Re: economics
    ... > What is the relationship between inflation and the exchange ... should not the currency loose value ... > demand because of high prices) ... What is money? ...
    (sci.econ)
  • Re: Russian tradition of assassinating journalists and human rights activists is alive
    ... Sure - colonial contracts and money made on robbery of the nation ... Sure - canceling colonial contracts and money flowing in the country to ... As to the single country currency as an anchor of the world economy - ... countries feel great unity due Cold War - and it fails. ...
    (soc.culture.baltics)
  • Re: The U.S. Trade Deficit
    ... >>You have just said that there may be no limit to how much debt the US may ... >>> The government's intrinsically worthless fiat money is valuable to the ... However if U.S. taxes were no ... > foreign currency as its de facto money. ...
    (sci.econ)
  • Re: Another stab at my $500 Bill, and other issues?
    ... government money, on cutting the minting of quarters about in half. ... printing a pre-1990 $5 note or higher, on the genuine currency paper, ... with vending machine dollar bill readers, such as how, the inks in ... redesign of the $2 note, should also feature a huge numeral 2, ...
    (rec.collecting.coins)
Loading