June 14, 2007

The Death of the US Dollar, the Fall of Rome, and the Confusion and Ignorance of the Masses

Dow sets "record". Boss gives you a raise. Home price soars.

Sheeple think: "We're rich! We're rich! We're rich!"

Reality says: "No, you aren't."

I know the trolls won't bother reading this, since they obviously don't read, but for those interested in inflation, and the head-fake that a depreciating currency gives to its unsuspecting and ignorant holders, this is required reading.

And if anyone can argue why unjustified and unsustainable asset prices are good for society, make your case. And by the way, how's that M3 doing? Oops, you mean it's not reported by the government anymore? Gee, imagine that.

Enjoy HP'ers.

An important concept to understand as it relates to money unlike other commodities is that an artificial increase in its supply confers no social benefit.

The price of money—like any other commodity—is by eternal laws of supply and demand. Like any other commodity an increase in its supply lowers it price. Conversely an increase in demand raises its price. As Rothbard reminds us, ”What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor, and capital.

Multiplying coin will not whisk these resources into being. We may feel rich for the moment, but clearly all we are doing is diluting the money supply… Thus we see that while an increase in the money supply, like an increase in the supply of any good, lowers its price, the change does not—unlike other goods—confer a social benefit.

Whereas new consumer or capital goods add to standards of living, new money only raises prices—i.e. dilutes its own purchasing power. The reason for this puzzle is that money is only useful for its exchange value…its utility lies in its exchange value, or “purchasing power.”
What is even more important is that when money is depreciated, it leads to the moral and economic decay of a country.

In the final days of the Roman Empire, its currency was depreciated repeatedly by successive emperors.

25 comments:

tim73 said...

Please stop comparing USA to Roman Republic/Empire. They lasted about 1000 years, most of it as the ruler of known world.

Compare THAT to 60 years of USA as "superpower" plus that you are not the ruler of the world. You guys have been existing only about 300 years, most of it as colonial backwaters. That is nothing compared to glorious Roman history.

Anonymous said...

Rome took longer to build...hence longer to fall.

things are proably gonna be different this time.

the proud gringo said...

the usa may be flawed, but they are still superior to europe. europe is literally dying. the euro is currency for such economic power houses as greece, belgium and portugal. the choice between the $ and the euro is the choice between lindsay lohan or britney spears.

Anonymous said...

The Rome comparison is right on target. Clearly, the United States became the undisputed dominant world power following the collapse of the Soviet Union. That being said, I believe the domination will be short lived. The United States as we knew it is rapidly descending into oblivion and eventually will become a 2nd world country.

America is now run by millions of bureaucrats at the federal, state and local levels. These parasites continue to implement socialist policies, confiscatory tax codes and nanny state regulations. Big brother is here and getting bigger every day. They have their job security, full medical coverage and pension plans. Joe sixpack and his wife work two or more jobs, cannot afford medical coverage and will never be able to retire.

The United States has unfunded liabilities of 52 trillion dollars, a worthless do nothing Congress and Senate, an insane President, hordes of baby producing aliens invading the country, a failed war in the Middle East, collapse of the manufacturing base, a failed energy self sufficiency policy, a failed war on drugs and so on and so on.

America the new Rome? You bet it is and Nero is tuning up the fiddle.

tim73 said...

"the usa may be flawed, but they are still superior to europe. europe is literally dying"

Hmmmm...you have 300 million, EU has 500 million people. You called that "dying"? FYI, Europe is not one big country or just UK and France. There are problems with 5-8 countries OUT OF 25 but compared to FUBAR shit on your side of the pond, those are nothing.

USofA is the one dying. Mammoth trade deficit with China, decimated manufacturing base, total of 40 percent of tax money going to the military and debt levels skyhigh everywhere. "Made is USA" usually means crappy, unfinished products.

Europeans could easily do the same (spend most of tax money to military) but they have chosen another route. Better to have decent education, infrastructure and health system than trying to be the world police in far away sandlands...

For more, average Joe Sixpack is undereducated yahoo when compared to even ex-soviet Polish worker. Now this talk about "new Rome". THAT is an insult to ancient Romans.

Anonymous said...

Yeah, but we got a sh*tload of weapons we can extort the rest of the world with. At least I think that's w's foreign policy...

Anonymous said...

the usa may be flawed, but they are still superior to europe. europe is literally dying. the euro is currency for such economic power houses as greece, belgium and portugal. the choice between the $ and the euro is the choice between lindsay lohan or britney spears.

Ill bet $10000 ... never been to europe...or read up... in depth on europe....

james dean said...

I agree 100%; we are just like Rome. Consider the breakdown of the American family as part of the symptoms.

We are falling from grace quicker because everything happens more quickly in the modern world. Add to the equation: sheeple + TV + politics dominated by money and you have one of the chief reasons for the quickening.

Sad, and re-enforcing just like our long term economic policy. I have decided to not have children; the average in my office is 1.5 with most of the folks in our 20s/30s currently at 0 or 1.

Conservatives look at history and say "Stop!" With the direction we are headed, why would you want to move forward (except in social/ civil rights). Good luck to all.

Anonymous said...

fyi: Mortgage rates: biggest spike in 4 years-- Home Buyers Scared Straight by Rates

Mortgage rates: biggest spike in 4 years
http://money.cnn.com/2007/06/14/real_estate/mortgage_rates/index.htm?source=yahoo_quote

Rate on 30-year fixed mortgage gained 21 basis points in past week, to 6.74%, highest level since July 2006.
By Rob Kelley, CNNMoney.com staff writer
June 14 2007: 11:01 AM EDT
==========

Home Buyers Scared Straight by Rates
Thursday June 14, 10:36 am ET
By Jeremy Herron, AP Business Writer

http://biz.yahoo.com/ap/070614/pmi_increase.html?.v=1

shtove said...

Nah - collapse of the Spanish Empire is a better comparison. Military overstretch across the world; domestic market flooded with silver from the Potosi mines, leading to a collapse of domestic manufacturing and a surge in inflation; emerging powers from northern Europe keeping their gains and increasing the challenge to empire monopolies. The empire even had its own bloggers - the Arbitristas, people who kept writing with proposals to solve the empire's problems. Empire at its height c.1610 - thirty years later defeated on land and at sea, and left to a slow decline. It's always been a big bad world.

DaveO said...

Speaking of inflation - From Lawrence Yun (sorry I already posted this piece in a different topic):

"We did anticipate the rates would rise. What's surprising is this quick of a movement this early," he said. "In terms of the overall housing market, generally it takes about three months for home sales to be affected by rising rates. I'm not sure if rising rates are sustainable. They sometimes overshoot one way, and then they swing back the other way."

Rising rates not sustainable? As if the super low rates we've had for the last 4 years are the norm, and the rates from the 80s and 90s were just an anomaly? IMO, I see the trendline in rates only going up in the next few years, not down or level, especially with inflation as bad as it is getting.

Also, someone really needs to create a LawrenceYunWatch site similar to DavidLereahWatch.

Anonymous said...

The U.S. has a ton of uranium in the form of nuclear weapons. Uranium as a commodity has skyrocketed in value. So the U.S. can always hoc some uranium at the pawn shop for quick cash. Though there's no guarantee Al Qaeda might not go shopping at the pawn shop...

RJ said...

It's good to see that people realize we are an empire.

Both the real economy of tangible goods and the financial economy of equities, bonds, derivatives are debt driven. Debt is serviced through economic expansion. Economic expansion requires ever increasing energy inputs. Once natural limits to energy production are reached (energy supply and production are not infinite) economic expansion will decelerate, debt will become unservicable and the economic implosion will begin.

Current global energy production:
84 mbd
Current global consumption: 84 mbd

Global Natural Gas consumption
2004
103.4 Quadrillion Btu
Projected consumption to 2030
170.4 Quadrillion Btu

Supply will depend largely on stability in producing regions and investment by energy producers.

See the IEA World Energy Outlook 2006
http://tinyurl.com/2lwkqd

Today oil is at $67.61/barrell. The higher oil goes, the higher the production costs for everything else grows, including alternative energy or non-conventional oil. The ramification is less energy production.

"Receding Horizons" Energy and Capital
http://tinyurl.com/2edcav

"The Cavalry Stays Home" Energy and Capital
http://tinyurl.com/ywah6g

We are hitting energy supply limits and no amount of delusional fantasizing will change that. Our government is reacting to this like any good empire should. Militarize energy supplies.

We're running out of time to make the necessary changes to our transportaion infrastructure, localize food production and redevelop domestic production of goods. I'm worried.

RJ said...

Oil demand ‘rising faster than expected’
By Ed Crooks

Published: June 12 2007 13:27 | Last updated: June 12 2007 13:27

World oil demand is rising faster than previously expected while non-Opec supply is growing more slowly, the International Energy Agency has said in its latest monthly assessment of the market...

The IEA now expects demand for oil to rise by 1.7m barrels a day this year compared to last year – an increase of about 2 per cent – and non-Opec oil supply to rise by just 900,000 b/d. That rise in demand is 167,000 b/d more than the IEA had previously estimated, while the rise in non-Opec supply is 97,000 b/d less...

http://tinyurl.com/2odeaj

Oil fields are in decline in Kuwait and Saudi Arabia. Oil workers are on strike in Iraq. Production isn't going up any time soon, if ever.

hermogeno said...

Real estate only goes up. What's why I can afford the $700,000 house on my lettuce picker's wages. I'll just sell for $1.4 million before the 1% teaser rate adjusts.

Anonymous said...

Hmmmm...you have 300 million, EU has 500 million people. You called that "dying"? FYI, Europe is not one big country or just UK and France. There are problems with 5-8 countries OUT OF 25 but compared to FUBAR shit on your side of the pond, those are nothing.

-------------------------------------
Europe has 500 million. Of which 250 million will be Muslim in not so long. Let's celebrate the strength of Europe.

Moron.

Anonymous said...

Nice comment rj, it's nice to know someone can see housing is the least of our worries.

armed said...

Ok you caught me not reading. All this time I thought the site was about Hispanic. Oops.

Anonymous said...

All great societies collapse from within. Corruption and greed are the culprits. The world needs a wake up call. As a society we need to smartin up especially in investing in real estate and not be the greater fool financing some greeding bastard.

Budvar said...

Moron said (Well thats how you signed it)

"Europe has 500 million. Of which 250 million will be Muslim in not so long. Let's celebrate the strength of Europe".

Do tell us how many muslims and Mexicans the US will have by that time?

shakishia said...

I am invested in miners. As the USA sinks into oblivion, other countries will rise. Those countries are in Asia. The #1 supplier of natural resources to Asia is BHP, an Australian company.

Anonymous said...

Europe is dying off. The native white population in Europe is much older than the majority white population of the USA. Both are dying off, but Europe will die off faster. The second most popular name for babies in the UK is Mohammed. The most popular name for babies in Belgium is Mohammed. The USA is nowhere close to that. Asia will be the new power center of the world.

Anonymous said...

"America is now run by millions of bureaucrats at the federal, state and local levels. These parasites continue to implement socialist policies, confiscatory tax codes and nanny state regulations. Big brother is here and getting bigger every day."
=================================
Youre cracked. This country is under the thumb of private financier interest. There are hundreds and hundreds of private hedge funds (most incorporated outside the country in the carribean islands), who are running rough shot over US economic policy. They are looting every last asset this country has.
Anyone who thinks that too much "government" is the problem is way off their rocker.
Our Government is nothing but a rubber stamp for these financial hoodlums.

The sole and proper role of Government is to defend and foster the "general welfare" and it's posterity. That is still the law of this country and it is time the government [and this degenerate population] reclaimed that role.

But our problems stem from a lack of effective Government. That and a degenerate culture dominated by baby boomers.

Anonymous said...

U.S. as an empire? you may want to check out Sorrows of Empire, by Chalmers Johnson. it's not a comparison of the US and Rome, mostly covers the extent of US bases overseas. it will be interesting to see where the US pulls back (South Korea perhaps?) when the domestic economy tanks.

Macaca

armed said...

You lost me. "Ignorance of the masses", is that dark matter(Ha,ha,I slay me).Comparing Rome to the Good Ole USofA.They didn't have Catie Couric,or gangsta rap(they did have a Rosie though,Mt Pinheadtuba,better check my atlas) and they still look like a booger compare to the USofA( I think they wore dresses too!).Those countries(all of them)have'nt the resources,the infastructure,manufacturing capabilities,the brains or the brawn(go ahead nueter yer self some mo).If the commie assed libs left the Good ole USofA alone it would last forever.They would have to change the saying "As good as gold" to "As good as the USA".Get rid of the ACLU and this country would steamroll over everybody(I don't mean conquer,you fool).Those cheese sniffers across the pond(man I am glad the wind does not blow this way!!!!)are being over come by 13'th century mobs.We pay for their protection and they are still going bankrupt. Africa?(lets get serious). South America?(stop it you clowns,no more).The ME?The oil was a curse.They get all these petro dollars and they still eat goats and ride camels.Asia and Russia (or what ever they call them selves today)would be running around in the 11'th century if it were not for slick(sick,you be the judge,hey Monica watcha do'n tonight)willie selling military secrets for campain cash(aw crap that don't look right,somebody look up campain in your fucknwagnals)don't forget them stealing the secrets too. We still come to the aid of everyone,rebuild and replace and they still can't become self reliant. HEY KOOOOOOL-AID!!!! Gotta git fer now. Europe, bwahahahah. You guys tear me up.