US dollar

Interesting to see the US dollar value history going back to 1988. Here is chart.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3449922&cmd=show[s176747883]&disp=P

The chart speaks for itself. Look at the path and distance it took from 2002 to 2005, and the low in early 2008.

Please translate for those of us who don't speak High Finance - what is the rigid benchmark used to pin the value of the dollar? Gold? Silver? Plutonium?

I don't consider petroleum useful for this - it's a finite and dwindling supply (maybe not as fast as people would have us believe, but it's a commodity that gets used up. Metals get used, but the basic form and value doesn't change - a gramme of gold is still a gramme of gold, whether it's bulk metal or a ring - assuming the same alloy.)

Numbers are generally meaningless without a unit attached.

First off that is not the chart I was trying to post. I will try again. Still not working right, but to answer your question it is a fixed basket of foreign currencies that they use.

EDIT: Here is working link, finally! LINK



The U.S. Dollar Index® is computed using a trade-weighted geometric average of six currencies. The six currencies and their trade weights are: Euro Japan/yen UK/pound Canada/dollar Sweden/krona Switzerland/franc

So, nu, it's a comparison of a unit of fiat money with other units of fiat money - making the whole thing a mass hallucination (as I see it.)

I don't have a great deal of faith in fiat money, but it doesn't matter how crooked the game is if it's the only game in town.

I carry my fortunes about in my head - using the skills I've learned, I can present something a bit more tangible than special bookmarks for use in trade.

All the use of a fiat currency unit does is allow for extra stages in the barter system. That's really all it is - nothing more, nothing less. You can't really "redeem" them for a universally-accepted unit of value without having to deal with an awful lot and lose some worth in the transaction.

For those who don't know the term, "fiat currency" is a monetary unit that has a given value "because we say so" ('we' being the issuers of the unit.) I believe pretty much everyone on Earth is now using fiat currency - and the loss of the specie anchor is what is contributing mightily to the trend of inflation we've been seeing for the last 35 years or so. the use of fiat currency may simplify interpersonal trade, but that seems to be its major contribution to the system. Since it can be manipulated freely by the issuer, it really shouldn't be trusted...

I posted this for those who have complained about the value of the dollar dropping. That chart and that basket of currencies is the number the news media is always using to poke the masses with when certain politicians come out of the wood working trying to blame current in power politicians for a falling dollar. As you can see from the chart there is a whole lot more to the story than news media and pundits ever reveal in the news.

Arbitrarily printing more money, and digging the US even deeper into debt sure doesn't help our cause though....

The previous administration's explicitly stated strategy was to weaken the dollar to boost exports after the tech bubble burst. As you can see in your own damn chart the dollar had become very expensive during the tech bubble's rise, and as you can also see the dollar stabilized into a range that was consistent with previous spreads, right up until the financial sector started to implode, at which point the dollar got weak (big duh there).

It's interesting that it seems to be heading kamikaze path to the bottom now, don't you think.

You need to re-examine the chart. The dollar soared during the financial crisis, not the other way around. Also deficit spending for 2 wars weakend the dollar between 2002 and 2005. It went from 121 to 80 in those 3 years. Right now the dollar is still about8% higher that its 10 year low in early 2008. It is also close to its 1992 low.

ehall said:

The previous administration's strategy was to weaken the dollar to boost exports after the tech bubble burst. As you can see in your own damn chart the dollar had become very expensive during the tech bubble's rise, and as you can also see the dollar stabilized into a range that was consistent with previous spreads, right up until the financial sector started to implode, at which point the dollar got weak (big duh there).

It's interesting that it seems to be heading kamikaze path to the bottom now, don't you think. No, sorry, you don't think

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The previous administration stated flat-out that they were going to weaken the dollar for export purposes (that coupled with low interest and tax cuts led the general recovery). Feel free to review some of the damn historical material

OTOH I can't find anything from the current administration that says kamikazee dive is intentional. Did you really bring up the subject so as to apparently say that the previous administration is continuing to exercise policy? LOL Do you suppose the current administration is out of control on policy?

ehall said:

The previous administration's explicitly stated strategy was to weaken the dollar to boost exports after the tech bubble burst.

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That's what I was about to say. It may cost us more to import oil, but a weak dollar is usually a huge boost especially to the American heavy machinery industry, as a weak dollar makes American made goods look cheaper to foreign buyers.

Money that is not tied to anything of constant value is worth what you say it's worth.

Imagine you want to invest in something using dollars, and the return rate on that investment is close to zero. Each dollar you invest is not worth a whole lot in the long run.

On the other hand, if you invest using Euros, and the rate of return is more than using dollars, you make money.

That means that the Euro as a money is worth more than a Dollar, and the relative value of the Dollar remains low.

What kills us (example here), is that because the Euro is valued so high, it takes less Euros to by more Dollars. That is what is happening to Oil right now. Since Oil is traded in Dollars, Foreign investors are getting a bargan at our expense.

As long as the Fed keeps interest rates low ( devaluing the Dollar ), it will take less foriegn currency to trade Dollars. Keeping interest rates low, also causes inflation because money is not "worth" anything.

Sure, it makes our exports look cheap, but in the long run, this is a failing policy.

Ron

https://www.theice.com/productguide/ProductDetails.shtml?specId=194

US dollar rallied up strongly today, along with US stock markets reaching new 52 week highs. Dollar up a good 3% from recent lows.

http://quotes.ino.com/chart/?s=NYBOT_DX&v=s

S&P 500 (and others) index has made new 52 week highs three days in a row now:

http://quotes.ino.com/chart/?s=CME_INX&v=w


Official US Unemployment dropped from 10.2 to 10%. Christmas rally is under way.

Oil was down nearly 2% at one point today, gold dropped $75 last 2-3 days, oil is down about $7-$8 from recent highs.


http://quotes.ino.com/chart/?s=NYMEX_CL.F10.E&v=d1&w=1&t=l&a=50

What ever became of the value being backed by silver and gold reserves? I lost that from my memory but I do remember that being the way it was taught in school many, many years ago.

90Blue_XJ said:

What ever became of the value being backed by silver and gold reserves? I lost that from my memory but I do remember that being the way it was taught in school many, many years ago.

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Richard Nixon

90Blue_XJ said:

What ever became of the value being backed by silver and gold reserves? I lost that from my memory but I do remember that being the way it was taught in school many, many years ago.

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You are dating yourself sir (LOL), not that I am not by any means. :wow:

Islander is right, Nixon removed the last vestiges of the fractional gold reserve currency link during his reign. He also instituted prices controls to try and control inflation, but failed.

The FED tries to use money velocity and GDP as guides for controlling the amount of money in circualtion, or money velocity. Most money is now just a bunch of electrons stored in computers world wide now backed by GDPs and real assets like real estate.

IslanderOffRoad said:

Richard Nixon

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Ding Ding. We have a winner.

Lets go with Ron Paul's idea and audit (then abolish) the Fed....

JNickel101 said:

Lets go with Ron Paul's idea and audit (then abolish) the Fed....

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That is fastest way I know to crash the world economy and start the "Greatest Depression Ever Known" IMHO. IIRC he favors a return to the gold standard, right? If that were too happen, it stagnates the money supply which needs to grow with a growing GDP. Gold standard was part of the problem during the Great Depression.

If the money supply can not be allowed to grow due to a gold link and fixed gold supply, an increasing GDP gets crushed by the fixed money (gold backed) supply. The trick is to grow the money supply to reflect the growth in GDP, so that neither deflation nor inflation can not take off in either direction and ruin the economy.

The FED is about the only thing that saved the economy from total collapse.

Ecomike said:

IIRC he favors a return to the gold standard, right?

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His Audit the Fed bill and position on the gold standard are two separate things. I actually donated money to Ron Paul to get Audit the Fed pushed through. It already has over 200 bipartisan co-sponsors in the House. The American public deserves to know where the Fed is funneling money.

Besides, the Fed helped to CAUSE the crash by manipulating interest rates.

ryguy32789 said:

His Audit the Fed bill and position on the gold standard are two separate things. I actually donated money to Ron Paul to get Audit the Fed pushed through. It already has over 200 bipartisan co-sponsors in the House. The American public deserves to know where the Fed is funneling money.

Besides, the Fed helped to CAUSE the crash by manipulating interest rates.

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The FED sets FED funds interest rates, by law, not sure "manipulation" is the appropriate word. BofA, Citibank and Wallstreet manipulate! Go audit them first! See who they are lending you deposits to? The ones they .05% interest on while charging you 50 times the interest paid in fees to hold and use your money! They are the crooks!