Economy - me confused :)

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stmadeveloper

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O.K. I'm a little confused - my edubecation taught me that if you inject (print) money into the system with things like a bail out, lowered interest rates, etc.. you end up with inflation.

That SHOULD cause the value of the dollar to drop.... (the main reason we've been paying 100+ dollars a barrel for gas for the last several quarters.)

However, we've injected like a trillion into the economy, billions in Iraq, national debt is higher than ever --- and our dollar value is rising.

Doesn't make sense to me - even factoring in the same economic issues other countries are having. Our national debt is so high it's worth more than america is worth - we're "bankrupt" to the point where if we were filling for it we couldn't even get chapter 13. How the heck is our dollar value rising?


Spread some light?
 


the deflation from the collapse of the real estate market is to an extent overriding the inflation caused by the fed printing more money... plus, the full impact from the bail outs probably won't hit for at least a few more months...

imho, once our recession/depression hits bottom and prices stabilize, inflation will come roaring back with a vengeance...
 
Remember that other currencies are debasing directly and more quickly to ease pressure. The dollar isn't getting stronger, it's getting stronger relative to other weakening.
 
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xentech said:
As far as I know they haven't printed money to inject into banks...
Click to expand...

They don't have to, all those virtual numbers are money too. They are as good as the real thing.

It sounds funny and it's tough to explain.
 
Well, the world is de-leveraging. All of these bad mortgages, many of them are held by foreigners. The Chinese have a massive portion of the US debt. Foreigners have been financing the speculative boom, and they are the ones taking the write downs now.

The real crisis for Americans, is going to be when they have no one to lend them money for consumption from overseas and they have no capital (currently running a negative savings rate). With the coming price controls and ballooning debt, which requires servicing (interest payments) coupled by rising taxes and more demand on entitlements...

The answer is to slash the size of government, and to cut taxes. Raise interest rates too. That's the only shot in hell of not going bankrupt.

Peter Schiff explains it best.

YouTube - Peter Schiff BLOOMBERG 28 Oct 2008 Part 1

YouTube - Peter Schiff BLOOMBERG 28 Oct 2008 Part 2
 
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