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The Federal Reserve's Explicit Goal: Devalue The Dollar 33%


By Thedaytoday   Follow   Fri, 25 Jan 2013, 2:50am PST   26,635 views   532 comments   Watch (0)   Share   Quote   Permalink   Like (4)   Dislike (2)  

The Federal Reserve's Explicit Goal: Devalue The Dollar 33%

The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.

An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.

But, an increase of 2% a year over a period of 20 years will lead to a 50% increase in the price level. It will take 150 (2032) dollars to purchase the same basket of goods 100 (2012) dollars can buy today. What will be called the “dollar” in 2032 will be worth one-third less (100/150) than what we call a dollar today.

The Fed’s zero interest rate policy accentuates the negative consequences of this steady erosion in the dollar’s buying power by imposing a negative return on short-term bonds and bank deposits. In effect, the Fed has announced a course of action that will steal — there is no better word for it — nearly 10 percent of the value of American’s hard earned savings over the next 4 years.

Why target an annual 2 percent decline in the dollar’s value instead of price stability? Here is the Fed’s answer:

“The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve’s mandate for price stability and maximum employment. Over time, a higher inflation rate would reduce the public’s ability to make accurate longer-term economic and financial decisions. On the other hand, a lower inflation rate would be associated with an elevated probability of falling into deflation, which means prices and perhaps wages, on average, are falling–a phenomenon associated with very weak economic conditions. Having at least a small level of inflation makes it less likely that the economy will experience harmful deflation if economic conditions weaken. The FOMC implements monetary policy to help maintain an inflation rate of 2 percent over the medium term.”

In other words, a gradual destruction of the dollar’s value is the best the FOMC can do.

Here’s why:

First, the Fed believes that manipulation of interest rates and the value of the dollar can reduce unemployment rates.

http://www.forbes.com/sites/charleskadlec/2012/02/06/the-federal-reserves-explicit-goal-devalue-the-dollar-33/

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Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:16pm PST   Share   Quote   Like   Dislike (2)     Comment 93

Reality says

If you really have a mountain of savings, even at 0.25%, there has to be unearned income.

Yes, negative unearned income. If the saved money has erosion in purchasing power one should be able to claim a loss like the gamblers with stocks get to, not get taxed on interest as income.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:21pm PST   Share   Quote   Like   Dislike (1)     Comment 94

Reality says

The federal reserve notes are just chips at the casino

Nobody would play with and for chips is they didnt reliably indicate an index of wealth.

People who have to protect the future due to having families and responsibility are risk averse, and would like to save up to elimiate the pressures of rents, and to try and anticipate unforseen issues.

If you cant see how killing people's savings through inflation hurts the average Joe then I dont know what to tell you. The idea is to get people to play at the casino, and if they use need government assistance.

Who is promoting save up, be self reliant, get and stay out of debt and eliminate all debts before "investng." Why invest if you have a negative net worth? its like using a credit card at the casino to gamble. Its a joke.

Some of these neg--net-worth people lease BMWs to look rich, its really quite laughable.

And they are borrowing this existence beyond their means and they kick the can down the road, the next generation will pick up the tab.

Lol. Lets see.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:22pm PST   Share   Quote   Like   Dislike (1)     Comment 95

Reality says

The goods basket chosen for measuring price indices is far more subjective to the data collector's whim and far more complicated than money supply

Commodities price index. And they do things like re-base the currency year used. The government does things like change out steak for ground beef. Its usually a lot worse than indicated. Regular people with responsibility and budget know the cost of living is going up faster than pay.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:24pm PST   Share   Quote   Like   Dislike (1)     Comment 96

uomo_senza_nome says

Most gains go to the top 1%.

More like the 0.01%.

The upper middle class is trying to get into that club. Even the upper classes. Its quite exclusive though. They do however admit new members here and there to keep the dream of being an oligarch alive.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:24pm PST   Share   Quote   Like   Dislike (1)     Comment 97

iwog says

dismantled by the Republican horde.

Who dismantled glass-steagall?

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:25pm PST   Share   Quote   Like   Dislike (1)     Comment 98

iwog says

I want regulated capitalism

You wont regulate yourself. I doubt from how unpleasant you come off towards your political "enemies" here that you would ever be generous unless your state-god mandated it. And if you could, you would seek exemption because you see yourself as a societal architect and thus more equal than others.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:27pm PST   Share   Quote   Like   Dislike (1)     Comment 99

iwog says

I am an architect, a builder, and a worker. Literally.

I would never be subjected to you based on your insane ramblings. I know you see yoruself as a demi-god in the church of governmentology, but you are a profiteering landlord who uses cheapest possible chinese paint and toilet fixtures to shut up complaining tenants. You dont care. You are plugging a leak. If you could you would do it with a wet rag if you culd get away with it, 3 stooges style.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:29pm PST   Share   Quote   Like (1)   Dislike (1)     Comment 100

Reality says

Why aren't you aiming this type of diatribe at the local supermarket or grocer?

I belong to several food co-ops and buy through local markets. The prison-planet-government is doing everything in its Monsanto-power to make sure your ONLY get your food from the local supermarket.

You best be checking who you Monsanto-Elect, even in "lib" california, before you complan to me oof the damage you are doing to the food supply.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:32pm PST   Share   Quote   Like   Dislike (1)     Comment 101

tatupu70 says

Do you have the impression that liberals aren't into money or markets??

1960s version? More into freeedom, liberty, the open road, some free love and some drugs if need be. Throw in some SDS leftism. Never got the sense they like big government, monsanto, police state, rules and laws everywhere, etc.

The 2012 version? All they care about is money, but need to appear like they dont. They will vote for monsanto and a police state to protect their interests but try to appear as free wheelin.

I would say classical liberalism is dead, and the maoist version has taken over.

Mick Russom   befriend   ignore   Fri, 1 Feb 2013, 8:43pm PST   Share   Quote   Like (1)   Dislike (1)     Comment 102

mell says

You all worship Paul Krugman's penis and have erotic dreams about Turbo Timmy, Helicopter Ben and the rest of the banking cabal, left and right. I have no problem with that reality, just admit it and don't pretend to be fighting for the "small guy", alright? ;)

Yep. They cant admit that though. It forces them to be honest with themselves.

iwog   befriend   ignore   Fri, 1 Feb 2013, 10:34pm PST   Share   Quote   Like (1)   Dislike     Comment 103

Mick Russom says

I would never be subjected to you based on your insane ramblings. I know you see yoruself as a demi-god in the church of governmentology, but you are a profiteering landlord who uses cheapest possible chinese paint and toilet fixtures to shut up complaining tenants. You dont care. You are plugging a leak. If you could you would do it with a wet rag if you culd get away with it, 3 stooges style.

No insane ramblings here folks.

I understand why you think the way you do. Pretty much everything you trust and have faith in is a fiction. How much longer are you going to enrich your landlord?

iwog   befriend   ignore   Fri, 1 Feb 2013, 11:08pm PST   Share   Quote   Like (1)   Dislike     Comment 104

Mick Russom says

If you cant see how killing people's savings through inflation hurts the average Joe then I dont know what to tell you.

The average Joe doesn't have any savings. 50% of Americans couldn't put their hands on $2000 in an emergency.

http://money.cnn.com/2011/05/24/news/economy/americans_lack_emergency_funds/index.htm

You're an interesting case. You'd make an excellent paid shill for the Republican party if the people reading your posts were too lazy to look up simple facts.

lostand confused   befriend   ignore   Fri, 1 Feb 2013, 11:13pm PST   Share   Quote   Like   Dislike     Comment 105

Mick Russom says

1960s version? More into freeedom, liberty, the open road, some free love and
some drugs if need be. Throw in some SDS leftism. Never got the sense they like
big government, monsanto, police state, rules and laws everywhere, etc.


The 2012 version? All they care about is money, but need to appear like they
dont. They will vote for monsanto and a police state to protect their interests
but try to appear as free wheelin.


I would say classical liberalism is dead, and the maoist version has taken
over.

So are you saying having money and making smart investment decisions is maoist?

Bigsby   befriend   ignore   Fri, 1 Feb 2013, 11:19pm PST   Share   Quote   Like   Dislike     Comment 106

lostand confused says

So are you saying having money and making smart investment decisions is maoist?

He appears to think the 'Communist' Party of China is still considered Maoist.

iwog   befriend   ignore   Fri, 1 Feb 2013, 11:29pm PST   Share   Quote   Like (1)   Dislike     Comment 107

Mick Russom says

However, given that Truman did things to undo various policy

Not one single thing on your long list is an example of Truman undoing policy. Most are examples of programs ending while FDR is still president. Nothing you said speaks to reforms of the tax code and government regulation which were left essentially intact until 1981.

Reality   befriend   ignore   Fri, 1 Feb 2013, 11:52pm PST   Share   Quote   Like   Dislike     Comment 108

Mick Russom says

My experience is this: the landlords will let tenants stew in filth and only renovate on turnover to raise the rents and then let the new tenant rot.

Rents can both rise and fall. Over the past two decades, I have rented (as a tenant) anything from a $300/mo tiny room to $2500/mo 5BR single family house. I got into the single-family house that the landlord had just spent $100k on renovating and asked for $2700/mo; I got it at a negotiated price of $2100/mo. After I moved in, I learned from the previous tenant that they had been paying $2200/mo. So the landlord essentially wasted $100k expanding a 1400sqft house to 2200sqft and finishing the cathedral ceiling with recess lights. In the subsequent 6+ years, the rent gradually rose to $2500, at which point I decided to buy my own house, and the then the landlord finally got his $2700 target price from the next tenant. During the same span of 6.5years, gold price went from just over $400 to well over $1600. In other words, effective rent went from 5 ozt to 1.5 ozt.

p>This becomes far more of an issue when the landlord is a managment company.

Well, the management company employees don't work for free. If the management company had been government, like so many eastern bloc country had when they outlawed private "landlords," the management expense would be even higher. IMHO, private entreprenuerial housing service providers in competition with each other produce the most cost effective way of providing housing service to people who are not yet ready to take the plunge and own their own homes. There are numerous reasons why people prefer not to own their own homes, including cost expectations, job mobility and even lack of time to take care of house because focusing on the primary job might be more profitable than taking care of even one's own home.

I also think that handing out money capitalized by public means so that landlords can leverage that to provide "housing as a service" lol to make themselves rich and making housing further out of the reach of the middle class is counter productive.

I don't think they lend money to "landlords" any more than lend money to any other existing business (including builders that provide competition on the supply side). There are no special loans for "landlords." In fact, they hand out far more money to the "competition" on the demand side: helping people buying their first homes involves far more government subsidy, to a far greater extent than government subsidy to small businesses and family "first business" that provide comparable competition to existing employees.

Reality   befriend   ignore   Fri, 1 Feb 2013, 11:55pm PST   Share   Quote   Like   Dislike     Comment 109

Mick Russom says

Yes, negative unearned income. If the saved money has erosion in purchasing power one should be able to claim a loss like the gamblers with stocks get to, not get taxed on interest as income.

Stock owners can't claim loss due to currency depreciation either. Nobody can under existing law. In fact, if one were to trade the dollar to another currency that depreciates less over time then trade back, the nominal gain would still be taxed. That is IMHO, the real reason why they depreciate the currency: to collect more taxes.

Reality   befriend   ignore   Sat, 2 Feb 2013, 12:01am PST   Share   Quote   Like   Dislike     Comment 110

Mick Russom says

People who have to protect the future due to having families and responsibility are risk averse, and would like to save up to elimiate the pressures of rents, and to try and anticipate unforseen issues. If you cant see how killing people's savings through inflation hurts the average Joe then I dont know what to tell you.

Don't get me wrong: I'm not at all being unsympathetic. I used to be and still am a big time saver. For what it's worth, my cars are 10-15 years old, and I'm wearing a 10+years old leather jacket indoors as I type this post because I keep heat setting down. It's worth reminding that parking one's savings in the cash currency itself is essentially saying one has more faith in the government than in the private sector's productivity. There is a price to pay for keeping oneself 100% liquid: opportunity cost.

If fractional reserve banking were indeed outlawed, the full-reserve bank too would charge you a storage fee instead of paying you interest regardless what form of money you use.

Reality   befriend   ignore   Sat, 2 Feb 2013, 1:22am PST   Share   Quote   Like   Dislike     Comment 111

Mick Russom says

Reality says

Why aren't you aiming this type of diatribe at the local supermarket or grocer?

I belong to several food co-ops and buy through local markets. The prison-planet-government is doing everything in its Monsanto-power to make sure your ONLY get your food from the local supermarket.

You best be checking who you Monsanto-Elect, even in "lib" california, before you complan to me oof the damage you are doing to the food supply.

I grow some of my own food too. It's tons of work. LOL. It's not possible to grow all of one's own food, for most people. My point was that, any retailer would have mark-up. It is the convenience that you are paying for. It is the division of labor that makes their goods/service more affordable to you even after the mark-up than if you had to put say clothing together from threads (never mind from cotton seeds!).

There are more competitors providing housing service than the retailing of almost any other goods/service in almost any given town. If one is not happy with a particular service provider, one can easily find another in the same town.

Reality   befriend   ignore   Sat, 2 Feb 2013, 1:33am PST   Share   Quote   Like   Dislike     Comment 112

iwog says

othing you said speaks to reforms of the tax code and government regulation which were left essentially intact until 1981.

There were two economic-political cycles involved in that time span. FDR's partisan public works program, union support, high taxation, price cap, etc. were rolled back in the late 40's to 50's, culminating in JFK's tax cuts in the 60's. The economic prosperity resulting from all that enabled a new generation of social engineers to emerge in the late 60's to burn down the reserve in the 70's. Remember Nixon's "We are all Keynesians now" quip? Although Jimmy Carter started to put brakes on the out-of-control government growth and monetary growth by appointing Paul Volcker, somehow popular mythology gives the credit to Reagan.

mell   befriend   ignore   Sat, 2 Feb 2013, 7:44am PST   Share   Quote   Like   Dislike     Comment 113

iwog says

The average Joe doesn't have any savings. 50% of Americans couldn't put their hands on $2000 in an emergency.

Yeah, because they are addicted to cheap credit and buying crap and because interest rates are kept artificially close to zero, Time to stop the looting and start the prosecuting.

tatupu70   befriend   ignore   Sat, 2 Feb 2013, 8:12am PST   Share   Quote   Like   Dislike     Comment 114

mell says

Yeah, because they are addicted to cheap credit and buying crap and because interest rates are kept artificially close to zero, Time to stop the looting and start the prosecuting.

No, actually it's because all the money is going to the top 1% and the bottom 50% are living paycheck to paycheck out of necessity.

mell   befriend   ignore   Sat, 2 Feb 2013, 8:30am PST   Share   Quote   Like   Dislike     Comment 115

tatupu70 says

mell says

Yeah, because they are addicted to cheap credit and buying crap and because interest rates are kept artificially close to zero, Time to stop the looting and start the prosecuting.

No, actually it's because all the money is going to the top 1% and the bottom 50% are living paycheck to paycheck out of necessity.

Same thing, chicken and egg. Stop the printing, let prices fall so there is leftover and let interest rates rise to tse leftover will be put into savings.

Robert Sproul   befriend   ignore   Sat, 2 Feb 2013, 9:23am PST   Share   Quote   Like   Dislike     Comment 116

Mick Russom says

Who dismantled glass-steagall?

Nothing is more revealing than the answer to this question.
None of the egregeous frauds committed by the largest banks could have occurred if they had not bribed their way off the leash.
All of the damage since can be laid at the feet of Bill Clinton.

Mick Russom   befriend   ignore   Sat, 2 Feb 2013, 3:10pm PST   Share   Quote   Like   Dislike (1)     Comment 117

iwog says

Not one single thing on your long list is an example of Truman undoing policy.

Sorry, FDR is a total superhero who did no wrong. Thanks for correcting my flawed thinking.

Mick Russom   befriend   ignore   Sat, 2 Feb 2013, 3:10pm PST   Share   Quote   Like   Dislike (1)     Comment 118

lostand confused says

So are you saying having money and making smart investment decisions is maoist?

No, its simple self interest. Stop trying to masquerade it as anything more.

Mick Russom   befriend   ignore   Sat, 2 Feb 2013, 3:11pm PST   Share   Quote   Like   Dislike (1)     Comment 119

iwog says

How much longer are you going to enrich your landlord

No more than 2 years. Then Im out.

Mick Russom   befriend   ignore   Sat, 2 Feb 2013, 3:13pm PST   Share   Quote   Like   Dislike (1)     Comment 120

iwog says

You'd make an excellent paid shill for the Republican party

bbbb b b b b but im not gop. soorry to shatter the label.

Mick Russom   befriend   ignore   Sat, 2 Feb 2013, 3:14pm PST