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Two out of three Americans do not have sufficient emergency savings


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2015 Jun 23, 11:13am   21,257 views  48 comments

by tvgnus   ➕follow (0)   💰tip   ignore  

http://www.centralvalleybusinesstimes.com/stories/001/?ID=28553

Those with no savings period at a five-year high •  Americans remain woefully under-saved Just 22 percent of Americans have an adequate emergency savings cushion enough to cover at least six months' of expenses, according to a new survey paid for by Bankrate.com (NYSE: RATE).

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1   Dan8267   2015 Jun 23, 12:04pm  

tvgnus says

Two out of three Americans do not have sufficient emergency savings

No shit. Currency debasement severely punishes having emergency savings or buying without accruing debt.

2   tatupu70   2015 Jun 23, 12:30pm  

Dan8267 says

No shit. Currency debasement severely punishes having emergency savings or buying without accruing debt

Not sure I agree with that. Assuming one puts their savings in the bank (or CDs), is there any evidence that the spread between inflation and interest on savings is lower under low or zero inflation than under high inflation?

Banks are going to make their money regardless of the inflation rate.

I guess with zero inflation, you could try to literally put your money under your mattress, but that's a bit risky and becomes impractical as your savings grows.

3   anonymous   2015 Jun 23, 12:38pm  

Yous are really putting the cart before the horse

Most Americans don't have enough income to afford them the luxury of headaching over wether or not their ROI is worthwhile, when accounting for phony baloney inflation "data"

4   turtledove   2015 Jun 23, 12:44pm  

tatupu70 says

Dan8267 says

No shit. Currency debasement severely punishes having emergency savings or buying without accruing debt

Not sure I agree with that. Assuming one puts their savings in the bank (or CDs), is there any evidence that the spread between inflation and interest on savings is lower under low or zero inflation than under high inflation?

When I read it, I didn't think he was referring to interest rates, as much as the costs of goods and services. As they go up and consume a greater percentage of a person's disposable income, a lesser percentage is then available for saving. But, I don't mean to speak for Dan. Perhaps he means it how you understood it.

5   tatupu70   2015 Jun 23, 12:52pm  

turtledove says

When I read it, I didn't think he was referring to interest rates, as much as the costs of goods and services. As they go up and consume a greater percentage of a person's disposable income, a lesser percentage is then available for saving. But, I don't mean to speak for Dan. Perhaps he means it how you understood it.

I think we read it the same. My point was that your money is growing the same as the costs of goods and services in the bank except for the spread (difference between savings rate and inflation rate). I'm not sure that spread is different during high inflation versus low inflation.

6   Bellingham Bill   2015 Jun 23, 12:54pm  

Dan8267 says

Currency debasement severely punishes

A strong dollar doesn't help people here though, just helps the globalists offshore more jobs to $2/hr Asia and Mexico.

is a brutal chart and the Fed dumping trillions into the economy since 2008 has nothing to do with rents outpacing wages like that.

Something else is going on, a housing squeeze. The mother of all housing squeezes as Gen Y starts hitting their mid-20s -- they're age 15-33 right now and they're bigger than the Boomers, who are age 51-69 now and are thus still also largely occupying the standard housing stock.

7   Ceffer   2015 Jun 23, 1:28pm  

Such an irrelevant observation. The real scandal would be if two out of three Americans didn't have a monster truck or monster SUV in the driveway.

9   Reality   2015 Jun 23, 4:57pm  

If I gather all of you around a game table, collect 22% of all the chips from everyone, then counterfeits half again as many chips as collected, then give the total now 33% of the original chip count on the table to myself and my friends around the table (which now has 111% of the original chip count) . . . what do you think will happen to the players who are not my friends at the table after a few rounds of this?? Of course they are going to be impoverished in the game

10   Tenpoundbass   2015 Jun 23, 5:04pm  

One out of three Americans believe that their 401k is a tax free contribution.

11   Entitlemented   2015 Jun 23, 5:05pm  

Ceffer says

Such an irrelevant observation. The real scandal would be if two out of three Americans didn't have a monster truck or monster SUV in the driveway.

Introducing the Car Reinvestment Act (CRA part deux):

http://tfctitleloans.com/locations/

12   Heraclitusstudent   2015 Jun 23, 5:07pm  

Maybe credit whores are the smart ones...

Study for a decade on student loans.
Buy a nice house with a huge mortgage, FHA loan 3.5% down, preferably adjustable rates.
Show up at emergencies with nothing to lose.
Die deep in debt.

Remember: you won't take it with you.

13   RWSGFY   2015 Jun 23, 6:12pm  

Heraclitusstudent says

Maybe credit whores are the smart ones...

Study for a decade on student loans.

Buy a nice house with a huge mortgage, FHA loan 3.5% down, preferably adjustable rates.

Show up at emergencies with nothing to lose.

Die deep in debt.

Remember: you won't take it with you.

Absolutely! The one who dies with the most debt - wins.

14   Strategist   2015 Jun 23, 6:48pm  

Dan8267 says

tvgnus says

Two out of three Americans do not have sufficient emergency savings

No shit. Currency debasement severely punishes having emergency savings or buying without accruing debt.

What is is considered as an emergency? An article here a couple of weeks ago showed a woman having to get an emergency loan to pay the cable bill. That is not an emergency, it's stupidity. A real emergency is a major car accident, unexpected death, fire burning your house down, accidents. There is insurance for that. Losing your job is the only real emergency that could really hurt your finances.
In an emergency you can always use your credit cards. Charge them up and go BK.

15   Blurtman   2015 Jun 23, 7:16pm  

"Two out of three Americans do not have sufficient emergency savings."

But they do have a gun (or two).

16   Strategist   2015 Jun 23, 7:20pm  

Call it Crazy says

Strategist says

In an emergency you can always use your credit cards.

that article a few weeks ago said cash or cash equal (credit card). That article claimed these people couldn't cover the emergency expense either with cash or credit card.

Shit.......Not being able to charge up your credit card and going BK would be a real emergency.

17   HEY YOU   2015 Jun 23, 7:38pm  

No jobs, short hours with low pay jobs are a problem for the whole economy. These people can't buy products or services from the company where you work.

"Thank you for you service but we won't need you tomorrow or ever."
And you thought unemployment & Republican & Democratic economic theology wasn't your problem.
I forgot you are in possession of the latest technology. One click and you have a 6 figure income.

18   Dan8267   2015 Jun 23, 8:55pm  

tatupu70 says

Not sure I agree with that. Assuming one puts their savings in the bank (or CDs), is there any evidence that the spread between inflation and interest on savings is lower under low or zero inflation than under high inflation?

Currency debasement of M3 is about 5% according to Shadow Statistics. Unfortunately, they are the only ones publishing M3 stats, so I cannot confirm the accuracy of their data, but it does sound reasonable and well within historic norms.

M2 debasement is still reported by the Federal Reserve. According to the Federal Reserve, M2 is being debased at an average rate of 6% per year over the past few years. So to merely break even, you'd need a CD or savings account that offered 6% interest.

Actual interest rates are around 0.5% to 1.0% for CDs, saving accounts, and money market accounts. The highest CD rate floating on bankaholic.com right now for a one year term or less is 1.25% for a jumbo CD of $25,000. If you have money in a checking account, a CD, a savings account, a money market account, or even a U.S. treasury, then you are losing purchasing power (the real definition of money). To avoid losing money, you must be storing your money in a risky investment like a high-yield corporate bound, stocks, commodity trading, or currency trading.

My point is that the American people should not have to gamble in order to save. Of course, it's discouraging to savers.

tatupu70 says

Banks are going to make their money regardless of the inflation rate.

The Federal Reserve creates money at the cost of nothing. Banks get to borrow this money for close to zero percent interest. Banks then lend this money to the federal government, local governments, corporations, and the public at one to five percent interest. Of course they are making money. The system of currency debasement is designed to help banks by letting them siphon wealth from the middle class, who pay the bulk of taxes including interest on the national debt. It is always profitable to borrow money at zero percent and lend it out for actual interest, regardless of the rate of currency debasement.

tatupu70 says

I guess with zero inflation, you could try to literally put your money under your mattress, but that's a bit risky and becomes impractical as your savings grows.

At zero percent currency debasement you could place your money in a zero percent checking account and it would be safe and available to society for the purpose of making loans to businesses, students, the government, etc. There is absolutely no reason why letting the public citizen save up for large purchases in any way harms society or causes the Saver's Dilemma. Money not being spent on consumer purchases can and does finance infrastructure, education, and businesses. Any banking system worth keeping is able to channel the liquidity from pizzas to robots and back as needed.

errc says

Most Americans don't have enough income to afford them the luxury of headaching over wether or not their ROI is worthwhile, when accounting for phony baloney inflation "data"

Currency debasement also decreases real wages over time as the typical productive worker must play the Red Queen's race just to keep his real wages. As such, currency debasement is a large cause of what yo describe.

Nonetheless, even lower-class families could save a little and escape poverty much more easily if currency debasement does not exist. Currency debasement does help debtors, but the system is still rigged so that the interest on the debt of private citizens is always greater than the currency debasement, so the poor in debt are not even helped by currency debasement, only the banks are.

Bellingham Bill says

Dan8267 says

Currency debasement severely punishes

A strong dollar doesn't help people here though

It is a very common misconception that currency debasement causes a weak dollar and reducing the currency supply causes a strong dollar. Whether or not the dollar is strong or weak only refers to its exchange rate, which is irrelevant to all economic activity. Yes, everything you heard is wrong. It does not matter if the exchange rate between dollars and Euros is 1:1, 1:10, or 1:1,000,000. You could literally increase the money supply by a factor of a hundred trillion and do it in a way that does not affect ANYTHING. Simply multiply everybody's digital and analog money by 100,000,000,000,000. If you had a five dollar bill in your pocket, you now have a five trillion dollar bill in your pocket. Provided you did this without changing the relative amounts of money in everyone's pocket, and by pocket I mean all their money storage devices, then nothing important would happen. The only affect would be that the price of everything, including your wages, would be multiplied by a hundred trillion. It would not in any way affect our trade balance or increase our exports.

To put it in mathematical terms, the currency exchange rate over time is a function. The value of that function is arbitrary and unimportant. What matters is the change of that function's value over time, i.e. the derivative of that function. A weak dollar does not increase exports! A WEAKENING dollar increases exports. That's the truth that no one will tell you. How strong or weak the dollar is does not matter to exports. What matters is how quickly the dollar is weakening.

A weakening dollar is simply the process of taking wealth from everybody who has dollars or is paid in dollars and using that wealth to subsidized the foreign purchasers of our products. It helps foreigners and exporters at the expense of everyone else in our society. It is a zero-sum game. It does not help the overall economy. Hell, it would be better if we just subsidized our exports and lower their prices honesty by taxing people and using that revenue to pay a certain percentage of the cost of the goods, if we wanted to increase exports. At least then we could do honest accounting.

Again, currency debasement does not improve the economy. Ultimately it severely hurts the economy because it hurts the middle class most of all. The middle class can buy less because of currency debasement and a strong middle class is the backbone of an economy. The purchasing power of the middle class is the greatest factor in promoting the Virtuous Cycle of spending and production. Our GDP could easily be several times its current value if the middle class wasn't squeezed so much. All the unemployed and underemployed people are lost economic opportunities that can never be recovered. You wouldn't want a factory you own to be idle, but that's essentially what currency debasement does to the factory of human capital.

19   Reality   2015 Jun 24, 4:22am  

Heraclitusstudent says

Maybe credit whores are the smart ones...

Study for a decade on student loans.

Buy a nice house with a huge mortgage, FHA loan 3.5% down, preferably adjustable rates.

Show up at emergencies with nothing to lose.

Die deep in debt.

Remember: you won't take it with you.

Depends on what percentage of income is going into debt service while the person is alive. Spending the same percentage of one's income on renting an apartment vs. renting the money makes zero difference unless one is on the right side of appreciation vs. depreciation. Likewise for student loans and loans on cars and boats.

Being a debt whore when one can generate substantially higher rate of income than interest rate on the debt is indeed profitable.

20   tatupu70   2015 Jun 24, 5:44am  

Dan8267 says

Currency debasement of M3 is about 5% according to Shadow Statistics. Unfortunately, they are the only ones publishing M3 stats, so I cannot confirm the accuracy of their data, but it does sound reasonable and well within historic norms.

M2 debasement is still reported by the Federal Reserve. According to the Federal Reserve, M2 is being debased at an average rate of 6% per year over the past few years. So to merely break even, you'd need a CD or savings account that offered 6% interest.

I don't regard shadowstats as a reliable source as their inflation data can be easily disproved, but regardless, if you are going to use money supply as a measure, you should account for population growth, money lost overseas, and velocity. US population growth is roughly 1%/year--not a huge adjustment. But the amount of currency that goes abroad, while difficult to measure, is not insignificant. Finally, using money supply to determine "break even" is not ideal because it assumes all money is in circulation. Looking at velocity statistics, this is clearly not the case (below chart is money velocity)

Dan8267 says

My point is that the American people should not have to gamble in order to save. Of course, it's discouraging to savers

Dan8267 says

At zero percent currency debasement you could place your money in a zero percent checking account and it would be safe and available to society for the purpose of making loans to businesses, students, the government, etc

Banks will get their money, one way or the other. At zero inflation, they will charge money for savings and (more) money for checking.

Dan8267 says

The Federal Reserve creates money at the cost of nothing. Banks get to borrow this money for close to zero percent interest

Banks almost NEVER borrow from the Federal Reserve. Even during the last crisis, it was only foreign banks that used the Federal Reserve window.

Dan8267 says

The system of currency debasement is designed to help banks by letting them siphon wealth from the middle class, who pay the bulk of taxes including interest on the national debt. It is always profitable to borrow money at zero percent and lend it out for actual interest, regardless of the rate of currency debasement.

I'm no fan of the banks, but they don't borrow from the Federal Reserve to make money.

21   tatupu70   2015 Jun 24, 5:47am  

Dan8267 says

Currency debasement also decreases real wages over time as the typical productive worker must play the Red Queen's race just to keep his real wages. As such, currency debasement is a large cause of what yo describe.

There is no evidence that real wages perform better under low (or zero) inflation environments than they do under higher inflation environments. In fact, from what I can tell, real wages do better under moderate inflation.

22   tatupu70   2015 Jun 24, 5:52am  

Dan8267 says

Again, currency debasement does not improve the economy. Ultimately it severely hurts the economy because it hurts the middle class most of all. The middle class can buy less because of currency debasement and a strong middle class is the backbone of an economy. The purchasing power of the middle class is the greatest factor in promoting the Virtuous Cycle of spending and production. Our GDP could easily be several times its current value if the middle class wasn't squeezed so much. All the unemployed and underemployed people are lost economic opportunities that can never be recovered. You wouldn't want a factory you own to be idle, but that's essentially what currency debasement does to the factory of human capital.

It's amazing to me that you can write the paragraphs preceding this one, yet still follow by writing the above quoted. It's a strikingly similar process. Currency debasement has zero effect as long as the new money is distributed equally. The problem isn't that new money is created, the problem is that it isn't distributed equally. Or, more realistically, it isn't redistributed well enough.

23   Dan8267   2015 Jun 24, 8:31am  

tatupu70 says

I don't regard shadowstats as a reliable source as their inflation data can be easily disproved, but regardless, if you are going to use money supply as a measure, you should account for population growth, money lost overseas, and velocity.

Nor do I, but the M2 stats are even higher and come from the Fed directly. And M2 growth is higher than population growth. The bottom line is that the purchasing power of savings and wages are harmed by currency debasement. That fact is inescapable as siphoning purchasing power from the middle class and directing it to the big banks is the sole purpose of currency debasement.

tatupu70 says

Dan8267 says

At zero percent currency debasement you could place your money in a zero percent checking account and it would be safe and available to society for the purpose of making loans to businesses, students, the government, etc

Banks will get their money, one way or the other. At zero inflation, they will charge money for savings and (more) money for checking.

No one stated that banks should not be profitable. It would be impossible to have a banking system without it. However, the profits banks get should be from doing good for society, not by stealing from everyone.

tatupu70 says

Dan8267 says

The Federal Reserve creates money at the cost of nothing. Banks get to borrow this money for close to zero percent interest

Banks almost NEVER borrow from the Federal Reserve. Even during the last crisis, it was only foreign banks that used the Federal Reserve window.

Banks hold $1.99 trillion in treasury debt. At a 2% discount window, they are making $40 billion/year off of it. That's hardly chump change.

Banks are also being paid with taxpayers money at the tune of $4 billion/yr to not lend money!

tatupu70 says

Dan8267 says

Currency debasement also decreases real wages over time as the typical productive worker must play the Red Queen's race just to keep his real wages. As such, currency debasement is a large cause of what yo describe.

There is no evidence that real wages perform better under low (or zero) inflation environments than they do under higher inflation environments.

I don't know if you mean cost of living rises, CPI rises, or currency debasement when you say "higher inflation". What I do know is that currency debasement, by mathematical necessity, lowers the purchasing powers of wages, which is the definition of lowering real wages. It's psychologically and politically easier to lower employee wages by simply not giving raises to compensate for the declining value of money than it is to lower the nominal wages of employees. That's a fact.

It is also a fact that currency debasement punishes savers, which is exactly why two out of three Americans do not have sufficient emergency savings as the original post points out. Americans also do save enough for retirement. Almost 20 percent of people near retirement age have not saved for it. America has many problems, but saving too much isn't one of them.

Our banking system, in collusion with the government, has a war on savers.
The New Yorker: Shut Up, Savers!
The Economist: The war on "the war on savers"
Time Magazine: Government policies that discourage saving are one of the chief reasons that so many Americans fail to put money away regularly.

The first step to solving a problem is acknowledging it's existence.

tatupu70 says

Currency debasement has zero effect as long as the new money is distributed equally.

A point I made clearly here

You could literally increase the money supply by a factor of a hundred trillion and do it in a way that does not affect ANYTHING. Simply multiply everybody's digital and analog money by 100,000,000,000,000. If you had a five dollar bill in your pocket, you now have a five trillion dollar bill in your pocket. Provided you did this without changing the relative amounts of money in everyone's pocket, and by pocket I mean all their money storage devices, then nothing important would happen. The only affect would be that the price of everything, including your wages, would be multiplied by a hundred trillion. It would not in any way affect our trade balance or increase our exports.

However, the ENTIRE point of the currency debasement in our banking system is to unevenly distribute the new currency effectively transferring money from middle class savers and workers to big banks. You are not getting the interest payments from the national debt. You are making the interest payments. Even if you buy U.S. Treasuries, you are losing money because the debasement rate is greater than the interest rate. Only banks make money on Treasuries because they borrow at 0% to buy treasuries that pay 2.5%. You mathematically can't lose money under that rigged system if your the one rigging it.

That's why Elizabeth Warren has proposed that Student Loans Should Have Same Rate Big Banks Get.

Currency debasement is just one of many zero-sum fraud games that our banks play in order to make money at our expense. Banks and other businesses should make profits by benefiting society, not harming it. We should not reward destructive and undesirable behavior. Is it really a problem that America's rich-poor gap isn't big enough? Currency debasement increases the rich-poor gap.

24   zzyzzx   2015 Jun 24, 8:47am  

Two out of three Americans do not have sufficient emergency savings

It's all Obama's fault!!!

I'm also curious as to the breakdown by race.

25   tatupu70   2015 Jun 24, 11:23am  

Dan8267 says

Banks hold $1.99 trillion in treasury debt. At a 2% discount window, they are making $40 billion/year off of it. That's hardly chump change.

That's not Federal Reserve borrowing at discount window rates. That's US Debt at market rates.

26   tatupu70   2015 Jun 24, 11:25am  

Dan8267 says

What I do know is that currency debasement, by mathematical necessity, lowers the purchasing powers of wages, which is the definition of lowering real wages. It's psychologically and politically easier to lower employee wages by simply not giving raises to compensate for the declining value of money than it is to lower the nominal wages of employees. That's a fact.

That's actually not a fact. If the treasury prints $1 gazillion dollars, gives them all to me, and I bury them in my backyard, that increased money supply does exactly nothing to real wages.

Now, very few people are burying money in their backyard, but the velocity has decreased substantially as inequality has gone up. So, it's more complicated than just using money supply increases.

27   tatupu70   2015 Jun 24, 11:29am  

Dan8267 says

Our banking system, in collusion with the government, has a war on savers.

The New Yorker: Shut Up, Savers!

The Economist: The war on "the war on savers"

Time Magazine: Government policies that discourage saving are one of the chief reasons that so many Americans fail to put money away regularly.

The first step to solving a problem is acknowledging it's existence.

I agree we have a problem--I just disagree on the root cause. Currency debasement is way down the list, IMO.

28   tatupu70   2015 Jun 24, 11:39am  

Dan8267 says

However, the ENTIRE point of the currency debasement in our banking system is to unevenly distribute the new currency effectively transferring money from middle class savers and workers to big banks. You are not getting the interest payments from the national debt. You are making the interest payments. Even if you buy U.S. Treasuries, you are losing money because the debasement rate is greater than the interest rate. Only banks make money on Treasuries because they borrow at 0% to buy treasuries that pay 2.5%. You mathematically can't lose money under that rigged system if your the one rigging it.

Interest payments from the national debt are not really relevant to currency debasement. The transferring of money from the middle class to the 1% has very little to do with currency debasement--it has everything to do with the loss of bargaining power of workers vs. owners. You have written very well on this topic so I don't think we disagree that it is a good part of the problem, at least. I think you can see this phenomena very clearly in corporate profits, and that obviously drives the stock market, as well. So, investments are growing fast while wages are stagnant. People who have money see their wealth grow quickly while people who have to work barely struggle to get by. Which is what we see now.

I agree that the financial sector in general--Banks, Wall St., etc.--are a blood sucking parasite on the economy. They add nothing, and cost immeasurable amounts. Hell, I'd be for nationalizing all banks and severely regulating Wall St.

But I don't subscribe to the Fed cult or think that currency debasement is a major problem. I just don't see any evidence of it.

29   Heraclitusstudent   2015 Jun 24, 11:58am  

Reality says

Being a debt whore when one can generate substantially higher rate of income than interest rate on the debt is indeed profitable.

You don't understand. Revenues are for workers/savers/losers.
The idea is to work just enough to be able to make the absolute minimum payments.
Have your house work for you and borrow more equity.
Who needs revenues when you can borrow more?

30   Bellingham Bill   2015 Jun 24, 11:59am  

tatupu70 says

I don't subscribe to the Fed cult or think that currency debasement is a major problem

what we've got is the boomer echo also flooding in the job market, which depresses wages due to increased labor supply.

The boomers had the advantage of arriving in the pre-globalized 1970s economy, and it took 20 years to get everyone fully employed:

https://research.stlouisfed.org/fred2/graph/?g=1koc

What's worse now is we've got millions of boomers in their late 60s still working, keeping those jobs out of the hands of Gen X & Y.

Complicating matters is mfg, construction, and info jobs have been zero-growth at best:

(green line)

Health and social media, that's about it for our economy these days.

31   Heraclitusstudent   2015 Jun 24, 12:11pm  

Dan8267 says

You could literally increase the money supply by a factor of a hundred trillion and do it in a way that does not affect ANYTHING. Simply multiply everybody's digital and analog money by 100,000,000,000,000. If you had a five dollar bill in your pocket, you now have a five trillion dollar bill in your pocket. Provided you did this without changing the relative amounts of money in everyone's pocket, and by pocket I mean all their money storage devices, then nothing important would happen. The only affect would be that the price of everything, including your wages, would be multiplied by a hundred trillion. It would not in any way affect our trade balance or increase our exports.

Well... if you keep debts labeled at the same nominal value (as they normally are), that amounts to complete debt jubilee. This means current gov bonds would become worthless. Many people would lose huge sums. Retirees would see their bonds portfolio become worthless. They may lose most of their savings.

32   Heraclitusstudent   2015 Jun 24, 12:18pm  

Dan8267 says

And M2 growth is higher than population growth.

M2 growth of 5% = 2.5% real growth + 2.5% inflation.
Real growth includes population growth + productivity growth. Money needs to grow by at least that much just to prevent prices from going down.
Inflation was in fact lower than M2 growth implies because of changes in the velocity of money.

5-6% growth in M2 is totally normal to get the target inflation for the fed.

33   anonymous   2015 Jun 24, 12:29pm  

So, it's more complicated than just using money supply increases.

-----------

It's actually bery simple and any simple simon can see it plain as day without access to any FRED charts

Wages- flat
Housing - tripled
Gas - tripled
"Health""care"- quintupled
Food - doubled

People just continue to ask the wrong questions. Costs of living are derived from wages, not the other way around. How is that possible?

34   Heraclitusstudent   2015 Jun 24, 12:31pm  

errc says

People just continue to ask the wrong questions. Costs of living are derived from wages, not the other way around. How is that possible?

Strategist will now explain why you are wrong and free trade with poor countries makes a lot of sense.

35   Dan8267   2015 Jun 24, 12:47pm  

tatupu70 says

That's actually not a fact. If the treasury prints $1 gazillion dollars, gives them all to me, and I bury them in my backyard, that increased money supply does exactly nothing to real wages.

If you bury the money in your backyard, you have removed it from circulation and have, by definition, stopped the currency debasement from happening.

tatupu70 says

So, it's more complicated than just using money supply increases.

Any discussion about any subject matter physically cannot include ever minute detail. It is a cop-out to say, "it's more complicated than that" as that cop-out would apply to every statement every made about anything. If you actually accepted that cop-out, no book could ever be written on a subject matter.

Furthermore, none of the complications you allude to in any way negate the premise I've made: currency debasement the way it's designed and done in our banking system harms savers and wage earners.

Nor have you said anything to demonstrate that currency debasement as implemented in our banking system helps anyone but the banks.

tatupu70 says

Currency debasement is way down the list, IMO.

You're entitled to your opinion, but it does not contradict the facts I've stated. Nor does fixing the problem of currency debasement in any way interfere with anything else on your agenda. The fix is simple. The government creates money and lends it to itself at 0% interest. The government must pay back the money to deflate the currency back to its original level. Long term currency level is a constant. If more monetary units are needed, multiply everyone's currency reserves by a constant. Better yet, use a unit value of currency and just subdivided it by another two decimal places. You can increase the number of currency units without even changing the nominal prices and wages. Just start trading in nano-credits instead of micro-credits.

tatupu70 says

But I don't subscribe to the Fed cult or think that currency debasement is a major problem. I just don't see any evidence of it.

Have you saved up hundreds of thousands of dollars over the past 20 years just to see your money not able to buy the house it could have in 1999? Long-term saving is harmed by currency debasement. It may not be your problem, but it affects all savers and it encourages unnecessary debt.

As for how much of a problem it is, it's big enough to be worth solving especially since solving it does not interfere with any other reform.

Having money whose value is a constant also offers many other benefits including the ability to make meaningful and accurate long-term comparison of the prices of goods and services. Adjusting for CPI introduces a huge error in measurements taken over long periods of time. No scientist of engineer would use a metric that constantly and unpredictably changes. It's just plain stupid. Currency is not only a mechanism for the exchange of goods and services. It is also your fundamental accounting unit. What would be so bad about having honest, transparent, and accurate accounting? This is needed for any wise policy making regardless of your politics.

Heraclitusstudent says

Well... if you keep debts labeled at the same nominal value (as they normally are), that amounts to complete debt jubilee. This means current gov bonds would become worthless. Many people would lose huge sums. Retirees would see their bonds portfolio become worthless. They may lose most of their savings.

In this scenario, you wouldn't keep nominal values the same. You would multiply all credits and debts by the same constant.

36   tatupu70   2015 Jun 24, 1:55pm  

Dan8267 says

If you bury the money in your backyard, you have removed it from circulation and have, by definition, stopped the currency debasement from happening.

I agree, but that makes the money supply calculations unreliable without taking money velocity into account, which you appear unwilling to do. Money supply doesn't tell enough of the story.

Dan8267 says

Any discussion about any subject matter physically cannot include ever minute detail. It is a cop-out to say, "it's more complicated than that" as that cop-out would apply to every statement every made about anything. If you actually accepted that cop-out, no book could ever be written on a subject matter.

Furthermore, none of the complications you allude to in any way negate the premise I've made: currency debasement the way it's designed and done in our banking system harms savers and wage earners.

Nor have you said anything to demonstrate that currency debasement as implemented in our banking system helps anyone but the banks.

Let's back up a second then. What exactly is your premise. How does currency debasement harm wage earners? You made a point that the extra money isn't distributed evenly causing some winners and some losers. The losers don't get a proportional increase in money so their purchasing power is decreased. I think we can all agree with that as a general theory. My contention is--it's not the debasement that is the problem, it's the distribution. And you seem to agree (if I understand you correctly).

Then you make some statements about banking and how debasement is purposely designed to enrich the bankers with a few shots at the Federal Reserve sprinkled in. That's where you lose me. Can you explain, in detail, exactly what the mechanism is that you think purposely hurts the middle class? How the new money is being distributed to bankers?

Currency debasement, as it is practiced today, is meant as a way to keep the economy from collapsing under the current inequality. It's good in that manner as an injection of liquidity as velocity is falling.

Dan8267 says

You're entitled to your opinion, but it does not contradict the facts I've stated

I don't think you've stated any relevant "facts". Or at least not any that exist in the real world.

Dan8267 says

The government creates money and lends it to itself at 0% interest. The government must pay back the money to deflate the currency back to its original level. Long term currency level is a constant. If more monetary units are needed, multiply everyone's currency reserves by a constant. Better yet, use a unit value of currency and just subdivided it by another two decimal places. You can increase the number of currency units without even changing the nominal prices and wages. Just start trading in nano-credits instead of micro-credits.

As stated previously--it's not that simple. You have to adjust currency for population, productivity, amount lost overseas, velocity, etc.

Dan8267 says

Have you saved up hundreds of thousands of dollars over the past 20 years just to see your money not able to buy the house it could have in 1999? Long-term saving is harmed by currency debasement. It may not be your problem, but it affects all savers and it encourages unnecessary debt.

All debt is someone's savings. There is no shortage of savings right now--just look at interest rates.

37   Strategist   2015 Jun 24, 3:18pm  

Heraclitusstudent says

errc says

People just continue to ask the wrong questions. Costs of living are derived from wages, not the other way around. How is that possible?

Strategist will now explain why you are wrong and free trade with poor countries makes a lot of sense.

I have hired a staff of 100, and a President to do the explaining for me. Let me know if I should fire anyone.

http://www.cnbc.com/id/102785680
The Senate voted Wednesday to give President Barack Obama "fast track" authority to negotiate trade deals—one of the final steps in a long political battle that pitted the White House against House Democrats.

The bill—which passed 60-38 in the Senate—will be sent to the president's desk later this afternoon, but it was not immediately clear when he would sign it.

Unions and most congressional Democrats say free-trade deals cost U.S. jobs and reward countries that pollute and mistreat workers. Obama and most Republican leaders say U.S. products must reach broader markets.

38   Heraclitusstudent   2015 Jun 24, 3:49pm  

Strategist says

Unions and most congressional Democrats say free-trade deals cost U.S. jobs and reward countries that pollute and mistreat workers. Obama and most Republican leaders say U.S. products must reach broader markets.

They said this, they said that. No explanation.
Fire them all.

39   Dan8267   2015 Jun 24, 5:05pm  

tatupu70 says

What exactly is your premise. How does currency debasement harm wage earners?

The Red Queen Race. Every year you don't get a 5% raise is a year your wages go down. Purchasing power declines 3 to 4% each year. Add to that the marginal tax rate and you need a 5% raise to make the same after-tax dollars with 4% currency debasement. Do you get a 5% raise every single year?

40   Dan8267   2015 Jun 24, 5:06pm  

tatupu70 says

As stated previously--it's not that simple. You have to adjust currency for population, productivity, amount lost overseas, velocity, etc.

The current system does not do that. If it did, milk would cost the same as it did in 1913 or even less given technological advancements.

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