Vent: The Value of the Dollar

Kazeko · Mar 2, 2008, 03:39 AM

This is a vent, feel free to reply as you see fit, though to be honest, I may not follow up and read replies.

I spoke with someone today, who was discussing the cost of living in the UK as it relates to buying a home - Property ownership. We're not talking a condo, or renting a flat somewhere in London, but physically purchasing a house, complete with a mortgage.

The statement made to me, was something akin to "A house that costs $250k in the US, would cost 250k pounds (don't know the ascii symbol, Sorry folks) in the UK."

The discussion continued on to how much more expensive it was due to the "strength" of the pound vs. the dollar.

Current Exchange rate as of 1:02am MST on 03/02/2008 is 1.986 GBP to 1 USD.

So the - With far more limited space, would it come as a shock to ANYONE that the price per square foot would be far higher in the UK than the US?

Perhaps there's something I'm missing, but it would seem to me that the value of any given currency rises or falls in direct proportion to the number of bills in circulation - the more dollars in circulation, the less they're worth.

What else would govern the value of a dollar?

Inflation from The Random House Dictionary

"Undue expansion or increase of the currency of a country, esp. by the issuing of paper money not redeemable in specie."

I'd make it a point of note, that the citizens of a country have no decision in the printing of dollar bills - the government controls when more bills are printed and not.

So, the more bills produced, the less each bill is worth.

We're about to send $300-$600 dollars to every Tom, Dick, and Sally in the US with this Economic Stimulus Bill.

Did you ask yet, who's paying for it?

Did you ask yet, where the money is coming from?

Do you still wonder why the value of the dollar is declining, when we're so quick to print more bills to throw into deficit spending, when we're so quick to print more bills to throw at the populace, in the jaded hopes that it will stimulate the economy?

So, in recirculating moneys through social welfare programs like Social Security, and paying out more than our incoming budget is capable of supporting (largely due to the Tax Gap, and the shoddy state of Social Security) is it a surprise to anyone that the mint is printing bills simply to fill the claims made and the gaps present, subsequently grenading the value of the dollar?

I realize, my statements here many be vague, and potentially blanketed, but it is just a vent post.

Zelig · Mar 2, 2008, 10:10 AM

The US government isn't paying for their deficit spending by simply printing more money, they're paying for it (for the most part) by borrowing money. This can cause a depreciation in currency, but won't necessarily cause inflation. See the current situation in Zimbabwe for a good example of what happens when you try to print more money to pay for everything.

FWIW, recessions tend to be pretty good (although obviously unpopular) at reducing inflation.

Judas · Mar 2, 2008, 11:02 AM

it's very difficult to built up any good of a value when for every dollar you spit out, your going to have to pay back nearly twice as much... and the only way they pay it off is to spit out more dollar to pay it back..

exponential interest sucks...

BTW

Over a year ago, a decent 1500 Square foot house would have cost someone in the city roughly $80k-120k CAD. However today, that same house is now over the $180k-300k CAD. And it's increaseing still (saskatchewan).

Some of the recent orginal heritage farm steads are selling for $4-12 Million a peice. Land value has gone through the roof.

What's extremely serpriseing is even with the "joined at the hip" with US+Canada.... while the US is experienceing some hefty nasty times atm, canada is surging in population (exudus from the states in bigger then anyone would care to admit), and economy is booming bigger every day. It's also nice to see new faces around here. It was expected that canada would follow suite with the US.... but not yet.... or anytime soon apparently.

Methious · Mar 2, 2008, 11:13 AM

While land and home prices have gone up, it's not actually bad in the US right now. Perception is bad. Hey wait a minute it's election year! Think maybe they'd like us to be believing their going to be saving us from some thing to get elected.

Naw they'd never do that.

On a side note. You mean you don't go to Canada to erect a log cabin and skin some beevers? (Just a joke chill!)

[hobo]eclipse · Mar 2, 2008, 01:36 PM

can anyone tell me what core inflation is and how it affects struggling families?

Neshi · Mar 2, 2008, 02:08 PM

well.. I don't know how it is all governed in the US of A, but as for what I've learned at school with economics, printing money is a very, very bad idea and can't imagine USA doing that. It would be just cutting yourself, badly.
Looking at Europe there is one country that tried it... Germany. After a while you had to stick like 5 million mark (german currency) on a letter to send it. no joke.. really that bad.

I think eventually the dollar will rise in worth again, or for my case, the euro will go down..
to make it very simple and black and white.. increasing the national interest rate (or I don't know what it is called in America) would make the dollar increase. Because higher interest -> more industry is going to invest money in america -> dollar is more wanted -> when alot of people want something the prices will go up, same for a currency...

or I'm mixing something up now very badly... ah, I don't know..

Zelig · Mar 2, 2008, 02:45 PM

Quote:

Originally Posted by [hobo]eclipse

can anyone tell me what core inflation is and how it affects struggling families?

Core inflation is just a measure of inflation that doesn't take into account food or energy prices.

High core inflation isn't going to affect struggling families much differently than low core inflation. High inflation generally punishes people who sit on their money without spending or investing it.

Kazeko · Apr 13, 2008, 12:48 AM

Edited.

Hugely out of Context.

cozumel · Apr 13, 2008, 04:57 AM

@Kazeko: Alt+156 produces the ASCII symbol '£'

Quote:

Originally Posted by [hobo]eclipse

can anyone tell me what core inflation is and how it affects struggling families?

Quote:

Originally Posted by Zelig

Core inflation is just a measure of inflation that doesn't take into account food or energy prices.

High core inflation isn't going to affect struggling families much differently than low core inflation. High inflation generally punishes people who sit on their money without spending or investing it.

I disagree. If inflation is rising much faster than income then it has the potential to have a severely profound effect on a struggling family that takes them below the poverty line.

***temeteus82*** · Apr 13, 2008, 05:04 AM

Quote:

Originally Posted by cozumel

I disagree. If inflation is rising much faster than income then it has the potential to have a severely profound effect on a struggling family that takes them below the poverty line.

Zimbabwe is a good example about that issue in mored world. And Germany was it after WWI.

[hobo]eclipse · Apr 13, 2008, 05:27 AM

Its alright Kazeko, emotions can get the better of us

(wishing for that post delete button again are you?) Bad mouthing the dollar (i.e. Greenspan

) and the devaluation of the dollar may be good for US Companies, but what about the people? Gasoline has tripled over the last decade, have our wages tripled?

***temeteus82*** · Apr 13, 2008, 05:34 AM

Since all the PC parts are made in dollars I'm having fun in here since € is stronger than the $ but the industry in here, forest and metal industry, are paying the prize of weak $ since their product is sold in $ but wages are in €. Ideal situation would be that the € and the $ would be 1:1 but that's just impossible :P

Kazeko · Apr 13, 2008, 10:20 AM

Quote:

Originally Posted by [hobo]eclipse

Its alright Kazeko, emotions can get the better of us

(wishing for that post delete button again are you?) Bad mouthing the dollar (i.e. Greenspan

) and the devaluation of the dollar may be good for US Companies, but what about the people? Gasoline has tripled over the last decade, have our wages tripled?

It's funny, because my point was missed, regardless.

I'm not trying to endorse the devaluation of the dollar, I'm simply pointing out that "what effect has it had on the people" is taken out of context.

Here's a great example of some of the contextual issues missed in EVERY debate like this.

1. This forum exists, because a free market has been let loose. The computer industry, in the last twenty years, has done nothing but produce BETTER quality products, for LESS money, and repeatedly put MORE computer technology in the hands of MORE people....

All the while the value of the dollar has dropped.

Corporate America made it possible.

2. You say that gas prices have tripled, and our wages have not.
Has it yet occured to you, that we paid less for gas for the last sixty years, than any other country in the world?

See if you can find the price of a Liter of gas in Japan, in 2000. It was 4 bucks a gallon then, it still is now. The price has risen slightly, as all market values fluctuate. Only now are we beginning to pay the same price for a gallon of gas, that the rest of the world has.

So... What inequity are you pointing out? Are you saying we should pay less than everyone else, for a gallon of gas?

3. The point I'm trying to make, with both statements is this.

Henry Ford put a car in the hands of every one of his employees, not because of charity. Not because he wanted to be nice, but because he realized, that selling to the masses produced a profit. Henry Ford put an automobile into the US Standard of Living. The influences of the computer industry helped to put computers into that same standard.

Yet you cry that Corporate greed is ruining the country, yet every major leap in the improvement of American Lives (and those of other countries) - has been caused by Big Business.

Cell phones are standard fare now, NOT because the government made it happen, NOT because it was a nice thing to do.

But because someone could turn a profit on it.

My point, and my statement, was that Government is the cause of core inflation, not Business. The government, should have no control over the value of a currency. It's only function, IMO, is basic infrastructure, protection of rights (of both the people and business) and protection from the use of coercive force.

This was largely out of context for the topic of this thread, so it was deleted because it was a hi-jack. Since it was sparked, I've reposted.

The value of the dollar decreases or increases as a result of multiple things - the printing of bills, the spread of wealth, (if everyone has money, then money has no value, or less value) and the international value of US products.

Neshi is correct, but the real problem, is that many companies (i'll cite specifically, GM, Ford, Chrysler) have always tried to influence things like the FRB. - They pushed for huge import tariffs on foreign Vehicles in the 60's and 70's because Japan was producing a better quality product for less money, and rather than operating on a competitive level, they sought to use the government to force Japan out of the market. (And were successful until the 80's)

It's commonplace now. Drop the value of the dollar to try and force foreign companies out - the exchange rate eliminates their profits. It's like an economic twisting of arms.

Basically - it's still coercive control. My point wasn't denouncing the dollar, but rather exalting capitalism as a politico-economic ideal. I'll repost the quote.
(And when reading this, Hobo, understand that I do not support Ron Paul. Aligning yourself with ANY party in an attempt to achieve goals you believe in requires that you sanction ideals that you do not. I realize Ron Paul and the Libertarian party endorse the gold standard, but their goal is still Socialism.)

Kazeko · Apr 13, 2008, 10:23 AM

"So you think that money is the root of all evil? Have you ever asked what is the root of money? Money is a tool of exchange, which can't exist unless there are goods produced and men able to produce them. Money is the material shape of the principle that men who wish to deal with one another must deal by trade and give value for value. Money is not the tool of the moochers, who claim your product by tears, or of the looters, who take it from you by force. Money is made possible only by the men who produce. Is this what you consider evil?

"When you accept money in payment for your effort, you do so only on the conviction that you will exchange it for the product of the effort of others. It is not the moochers or the looters who give value to money. Not an ocean of tears not all the guns in the world can transform those pieces of paper in your wallet into the bread you will need to survive tomorrow. Those pieces of paper, which should have been gold, are a token of honor--your claim upon the energy of the men who produce. Your wallet is your statement of hope that somewhere in the world around you there are men who will not default on that moral principle which is the root of money, Is this what you consider evil?

"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. Try to obtain your food by means of nothing but physical motions--and you'll learn that man's mind is the root of all the goods produced and of all the wealth that has ever existed on earth.

"But you say that money is made by the strong at the expense of the weak? What strength do you mean? It is not the strength of guns or muscles. Wealth is the product of man's capacity to think. Then is money made by the man who invents a motor at the expense of those who did not invent it? Is money made by the intelligent at the expense of the fools? By the able at the expense of the incompetent? By the ambitious at the expense of the lazy? Money is made--before it can be looted or mooched--made by the effort of every honest man, each to the extent of his ability. An honest man is one who knows that he can't consume more than he has produced.'

"To trade by means of money is the code of the men of good will. Money rests on the axiom that every man is the owner of his mind and his effort. Money allows no power to prescribe the value of your effort except the voluntary choice of the man who is willing to trade you his effort in return. Money permits you to obtain for your goods and your labor that which they are worth to the men who buy them, but no more. Money permits no deals except those to mutual benefit by the unforced judgment of the traders. Money demands of you the recognition that men must work for their own benefit, not for their own injury, for their gain, not their loss--the recognition that they are not beasts of burden, born to carry the weight of your misery--that you must offer them values, not wounds--that the common bond among men is not the exchange of suffering, but the exchange of goods. Money demands that you sell, not your weakness to men's stupidity, but your talent to their reason; it demands that you buy, not the shoddiest they offer, but the best that your money can find. And when men live by trade--with reason, not force, as their final arbiter--it is the best product that wins, the best performance, the man of best judgment and highest ability--and the degree of a man's productiveness is the degree of his reward. This is the code of existence whose tool and symbol is money. Is this what you consider evil?

"But money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. It will give you the means for the satisfaction of your desires, but it will not provide you with desires. Money is the scourge of the men who attempt to reverse the law of causality--the men who seek to replace the mind by seizing the products of the mind.

"Money will not purchase happiness for the man who has no concept of what he wants: money will not give him a code of values, if he's evaded the knowledge of what to value, and it will not provide him with a purpose, if he's evaded the choice of what to seek. Money will not buy intelligence for the fool, or admiration for the coward, or respect for the incompetent. The man who attempts to purchase the brains of his superiors to serve him, with his money replacing his judgment, ends up by becoming the victim of his inferiors. The men of intelligence desert him, but the cheats and the frauds come flocking to him, drawn by a law which he has not discovered: that no man may be smaller than his money. Is this the reason why you call it evil?

"Only the man who does not need it, is fit to inherit wealth--the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune. Money is a living power that dies without its root. Money will not serve the mind that cannot match it. Is this the reason why you call it evil?

"Money is your means of survival. The verdict you pronounce upon the source of your livelihood is the verdict you pronounce upon your life. If the source is corrupt, you have damned your own existence. Did you get your money by fraud? By pandering to men's vices or men's stupidity? By catering to fools, in the hope of getting more than your ability deserves? By lowering your standards? By doing work you despise for purchasers you scorn? If so, then your money will not give you a moment's or a penny's worth of joy. Then all the things you buy will become, not a tribute to you, but a reproach; not an achievement, but a reminder of shame. Then you'll scream that money is evil. Evil, because it would not pinch-hit for your self-respect? Evil, because it would not let you enjoy your depravity? Is this the root of your hatred of money?

"Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

"Or did you say it's the love of money that's the root of all evil? To love a thing is to know and love its nature. To love money is to know and love the fact that money is the creation of the best power within you, and your passkey to trade your effort for the effort of the best among men. It's the person who would sell his soul for a nickel, who is loudest in proclaiming his hatred of money--and he has good reason to hate it. The lovers of money are willing to work for it. They know they are able to deserve it.

"Let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it.

"Run for your life from any man who tells you that money is evil. That sentence is the leper's bell of an approaching looter. So long as men live together on earth and need means to deal with one another--their only substitute, if they abandon money, is the muzzle of a gun.

"But money demands of you the highest virtues, if you wish to make it or to keep it. Men who have no courage, pride or self-esteem, men who have no moral sense of their right to their money and are not willing to defend it as they defend their life, men who apologize for being rich--will not remain rich for long. They are the natural bait for the swarms of looters that stay under rocks for centuries, but come crawling out at the first smell of a man who begs to be forgiven for the guilt of owning wealth.

"Then you will see the rise of the men of the double standard--the men who live by force, yet count on those who live by trade to create the value of their looted money--the men who are the hitchhikers of virtue. In a moral society, these are the criminals, and the statutes are written to protect you against them. But when a society establishes criminals-by-right and looters-by-law--men who use force to seize the wealth of disarmed victims--then money becomes its creators' avenger. Such looters believe it safe to rob defenseless men, once they've passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket. And then that society vanishes, in a spread of ruins and slaughter.

"Do you wish to know whether that day is coming? Watch money. Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed. Money is so noble a medium that is does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.

"Whenever destroyers appear among men, they start by destroying money, for money is men's protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values. Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, 'Account overdrawn.'

"When you have made evil the means of survival, do not expect men to remain good. Do not expect them to stay moral and lose their lives for the purpose of becoming the fodder of the immoral. Do not expect them to produce, when production is punished and looting rewarded. Do not ask, 'Who is destroying the world? You are.

"You stand in the midst of the greatest achievements of the greatest productive civilization and you wonder why it's crumbling around you, while you're damning its life-blood--money. You look upon money as the savages did before you, and you wonder why the jungle is creeping back to the edge of your cities. Throughout men's history, money was always seized by looters of one brand or another, whose names changed, but whose method remained the same: to seize wealth by force and to keep the producers bound, demeaned, defamed, deprived of honor. That phrase about the evil of money, which you mouth with such righteous recklessness, comes from a time when wealth was produced by the labor of slaves--slaves who repeated the motions once discovered by somebody's mind and left unimproved for centuries. So long as production was ruled by force, and wealth was obtained by conquest, there was little to conquer, Yet through all the centuries of stagnation and starvation, men exalted the looters, as aristocrats of the sword, as aristocrats of birth, as aristocrats of the bureau, and despised the producers, as slaves, as traders, as shopkeepers--as industrialists.

"To the glory of mankind, there was, for the first and only time in history, a country of money--and I have no higher, more reverent tribute to pay to America, for this means: a country of reason, justice, freedom, production, achievement. For the first time, man's mind and money were set free, and there were no fortunes-by-conquest, but only fortunes-by-work, and instead of swordsmen and slaves, there appeared the real maker of wealth, the greatest worker, the highest type of human being--the self-made man--the American industrialist.

"If you ask me to name the proudest distinction of Americans, I would choose--because it contains all the others--the fact that they were the people who created the phrase 'to make money.' No other language or nation had ever used these words before; men had always thought of wealth as a static quantity--to be seized, begged, inherited, shared, looted or obtained as a favor. Americans were the first to understand that wealth has to be created. The words 'to make money' hold the essence of human morality.

"Yet these were the words for which Americans were denounced by the rotted cultures of the looters' continents. Now the looters' credo has brought you to regard your proudest achievements as a hallmark of shame, your prosperity as guilt, your greatest men, the industrialists, as blackguards, and your magnificent factories as the product and property of muscular labor, the labor of whip-driven slaves, like the pyramids of Egypt. The rotter who simpers that he sees no difference between the power of the dollar and the power of the whip, ought to learn the difference on his own hide-- as, I think, he will.

"Until and unless you discover that money is the root of all good, you ask for your own destruction. When money ceases to be the tool by which men deal with one another, then men become the tools of men. Blood, whips and guns--or dollars. Take your choice--there is no other--and your time is running out."

-- Atlas Shrugged, Ayn Rand, 1957.

Falstaff · Apr 14, 2008, 02:05 AM

My colleagues in the UK refer to American dollars as Monopoly money.
If I wanted to send Zardon 1000 pounds to fund DH I would have to send aboutr 2030 dollars.

Kazeko · Apr 14, 2008, 10:59 PM

Quote:

Originally Posted by Falstaff

My colleagues in the UK refer to American dollars as Monopoly money.
If I wanted to send Zardon 1000 pounds to fund DH I would have to send aboutr 2030 dollars.

What does that make the Japanese Yen...?

@ 104 yen to the dollar, you're talking about 211k Yen.

Good friend of mine in Tokyo just dropped 4.5 million on a new Bimmer...

Ironically, the Japanese Standard of Living.... Is still higher than both the US and the UK (and If I'm not mistaken, may be the highest in the world.)

The other thing I was citing - The value of any given currency, is relative to what it buys you. You, and I, see what our dollar, or pound purchases. The intangible numbers on TV or in varying publications are just that. - Numbers, with subjective value.

Example.

I can buy a BMW 335i in the US for $39k base. ( BMW North America )
I can buy a BMW 335i in the UK for £36k base. ( BMW UK : Homepage )

Apply your "funny money" idea to that, and ask yourself what you get for what you spend.

Draw your own conclusions from that. I'd like to hear them.

Poor dollar values favor US companies in foreign sales by virtue of the exchange rate.

It kills other companies. As an example... go look at what's happened to the Nikkei in the last two years. - Mostly arising from lost profits on exchange rates (Toyota took a HUGE hit as a result.)

Edit:

Want to see something fun? Look at the federal interest rates and currency exchange rates from 1992-2000.

Al_Vampyre · Apr 15, 2008, 05:18 AM

Just a minor point but 'the love of money' is the root of all evil...not money itself, well according to the bible anyway

Kazeko · Apr 15, 2008, 08:26 AM

Quote:

Originally Posted by Al_Vampyre

Just a minor point but 'the love of money' is the root of all evil...not money itself, well according to the bible anyway

"Mammon" do a search on it.
Mammon - Definitions from Dictionary.com

To love something, does not necessitate it's worship, nor it's exaltation above a worldly sense.

Money has a function and ideal attached to it, but that does not make it worthy of religious worship.

[hobo]eclipse · Apr 15, 2008, 11:30 AM

Weak Dollar Blamed for Poor Wii Availability in U.S.

Quote:

Direct Link - Dailey Tech

Michael Pachter, an analyst for Wedbush Morgan, says that the reason for the poor supply if Wii consoles in the U.S. has nothing to do with component shortages or strained production capacity -- it all relates to the weak dollar.

The weak dollar is affecting trade with many countries around the world and Japan-based Nintendo stands to gain a lot more by selling its Wii consoles to its customers in Europe rather than those in the U.S. according to Pachter.

Pachter goes on to note that supply levels in Europe are starting to normalize after Nintendo initially sent its excess production there. It is expected that Nintendo will begin funneling more of its Wii allotments to the U.S. later this year which Nintendo hopes will coincide with a stronger U.S. dollar.

Hate to burst your bubble Kazeko, but there things in this world that cannot be eqauted to one businesses direct sales scheme or the value of the Japanese Yen.