Is currency devaluation inevitable in the US?

Great Debates
21

Since no-body else is touching this…I will try. However, I am NOT and expert and you should just take what I write as a small part of your research…and if it disagrees with other research - discard it :slight_smile:

I also do not feel comfortable with U.S. dollars…however be VERY careful. I tend to be contrarian…and that philosophy has been good to me so far. If everyone is concerned about the U.S. dollar and wanting to dump it then it probably is a good idea to not do this (contrarian). The reason being is that a large number of people have already done so and, in addition, when the news turns more positive, demand will go up for the dollar. The dollar is possibly at its low right now and may actually get stronger…so acting to dump dollars may hurt you at this time.

Remember…the dollar has gone up 40% in the ‘stock market’…in that the stock market has decreased 40%… :smiley: So owning dollars short term can be GOOD GOOD! :slight_smile:

What you want is to not own dollars over the long haul. This looks simple…but the problem is that your salary is in dollars :frowning: and the vast majority of the other people around you deal with dollars. So, when they hurt, you will hurt even if you don’t have much dollars.

Land/house, for example…not dollars. However, if other people are hurting, your land/house will get less in dollars. However, in theory, your land/house is worth what it is worth and if dollars inflate hugely…it’s theoretical valus is the same. Stocks as well. A company is worth what it is worth…and the currency is irrelevant. If the dollar deflates, the stock should be worth ‘the same’ as it was before.

However, in practice the value can go down as demand goes down because people are hurting.

So, you need something disconnected from the U.S. dollar AND your fellow citizens. Well…you could just pick up some foreign currency. 2 big problems with that:

  1. Owning currency is bad. Currency is DESIGNED to decrease in value over time. You don’t want to own something designed to lose value.

  2. The cost of trading dollars for Euros and back again is too high.

You could own foreign stock. The stock market is great in that it allows you to pick up foreign companies without going to that countries stock exchange. Many foreign companies trade on the U.S. stock exchanges. Over the past few years I’ve own stock in a South Korean telecommunication company (that one was good "), a Polish vodka distribution company…a Brazilian mining company and many others. However, the global market is getting more in synch and when bad times hit…they all seem to be affected.

You could own gold or other precious metals. However, be leary of this because people tend to buy or sell these at the wrong time (contrarian again).

So, what do you do? Well, what I have done and am doing now is studying the markets…getting out when technical analysis tells me to and going back in when things look like I should. It has done me well but it takes work.

If you do not want to do all the work…then possibly look at global mutual funds and domestic ones as well. Yes, you will have sickening downs and exhilirating ups…but is probably the safest one can be against inflation.

22

Well, the poor, those not bothering to ever want to work or hold down a job during hardly any time in their lives, yep, they are pretty much a drain, and pay little taxes. A great deal of working America could be put in the poor category, however. I agree that many people in the higher income brackets are paying plenty of taxes, but percentage wise, the levels drop off considerably, with the super wealthy in the lowest percentage category. From one of Cecil’s columns, here it how it was broke down in ’92.

After the George W. Bush years, it would be interesting to see how these stats break down today, with his drive to reduce the taxes on the rich.

Although Orwell Rolls in His Grave gets us a bit further away than what this thread is about, it still offers up many interesting statistics about primarily corporations and government, and their influence and control over the media, and gives us an idea of what kind of road we are going down, and helps explain how the wealthy are getting wealthier, while the poor, and working poor, are pretty much stagnant, and working harder than ever before.

23

Not too sure what you mean there by “lowest percentage category.” The top “twentieth of 1 percent” of people pay 10% of the total income tax take in this country, not a tax rate of 10%. If you had 10,000 filers and $1,000,000 in taxes paid, the top “twentieth of 1 percent” would be five people paying $20,000 per.

24

I’d like to see some cites for this. The population of Spain has grown quite a bit over the last deade or two and I believe the pension system is in no worse shape than in other countries so, I’d like to see proof to the contrary.

In any case, cultures and countries need to learn to adapt to zero population growth because any system based on growth is ultimately going to fail.

25

The official Spanish pension system is – like for the most of the rest of Western Europe – not based on savings, but on taxing the younger generation to pay for the older. The Spanish fertility fall happened a little later, but was much more dramatic and has since the 80s been one of the lowest in the world. Currently averaging around 1.2-1.3 children per women. (use Old CIA World Fact Books for stats for the last 16 years). Some regions of Spain under 1 child per women – almost unprecedented in the history of mankind. The population has still been growing due to population momentum and increasing lifespan.

What do you think will happen when all those very small generations born since the 80s are going to have to pay for all those much larger older generations?

Perhaps. But zero population growth means a birth rate of around 2.1-2.2 children per woman. 1.3 is population decline of almost 50% per generation.

26

I re-read Cecil’s column, and you’re right. Thanks for the correction.

27

Exactly like the USA then. Not only that but both have the same “trust fund” system. So now you need to show that the Spanish trust fund and pension system is in significantly worse shape than America’s. I do not believe that is the case at all but I could be wrong. That is why I am asking for hard data.

So what? population has grown due to immigration.

“Population momentum”? WTF is that? Populations grow either by reproducing or by immigration. Spain’s has been growing by immigration. So what? Immigrants work and pay taxes just like the native born.

The same as in America and every other country. Spain is no different in this respect.

You are trying to find differences where there are none. Or you need to prove it.

28

The difference is not in the system itself but in the size of the relative difference in the generations going on pension to the generations following them which have to support them. Due to much lower birth rates, Spain and Italy will have a much smaller working population to its pensioner population compared to the USA and will consequentially be much harder hit. And the hard data is in the demographic data from CIA World Fact Book I gave before.

A recent EU report concluded that immigration will not solve Europe’s demographic problems, mostly due to immigrants themselves growing old and quickly aligning their birth rate to the nations they immigrate to. I will try to dig it up.

Besides, a matter of personal taste for sure, but I personally dislike in the extreme such nations around the world with a small indigenous population sitting on top of a massive foreign worker population doing all the dirty work, so they themselves can dedicate themselves to the more pleasant aspects of life. Spaniards should depend on an ever increasing number of foreigners to come and clean their houses and change their dirty diapers in their old age, because they couldn’t be bothered to have any children themselves…I rather think that is not going to work out as well as they would wish.

Population can grow or shrink faster or slower for a number of reasons, reproducing, immigration or reducing the mortality rate, lengthening the life span. Spain’s population has mainly been growing because of an aging population. What is seen is much like what you have in the USA, except a bit later in the century and more dramatic. There is the bulk of the “baby-boomers” moving through the age-brackets of the population pyramid (which isn’t much of a pyramid anymore) like a fat band and the following generations much smaller.

Population momentum or demographic momentum is when the population continue to grow for a while even though there are not born enough children to reproduce itself, because there previously had been born a surplus of children, giving a large number of young people. China introduced the one-child rule some 30 years ago. Only recently has it begun to measure any actual small decline in the population growth. But it will be many years on before there will be any actual population decline. Likewise Spain’s population has been growing, but once the large generations start to drop off, it will fall off quickly enough. But it’s the long span from when the large generations stop working to they start dying in large numbers, which are going to really hurt.

Yes, that’s what I said, the same principle as for America. Only it’s going to worse in places like Spain and Italy.

Only difference in the size of the problem. Their “baby-boomer” generation is that much larger. And the proof has already been provided.

29

I am simply making the point that not taxing the wealthy progressively enough is not the same as taxing the poor to benefit the wealthy, which is the inference I took from your comment that we have a system analagous to Robin Hood in reverse.

Most tax reductions of any kind preferentially benefit the higher-income cohort because they pay the most taxes.

30

You assert this like it’s obvious fact. And I believe you are just making it up.

Oh, please! Give me a break! You really think linking to the wikipedia page which explains what the CIA factbook is a valid cite? Please!

Please link to actual data and show how it supports your hypothesis. Otherwise it’s worthless.

Yes, please do. And ïmmigrants growing old is a problem now? The age faster than natives? Why do you have this thing that immigrants are not as good for an economy as natives?

I think your true colors are showing a bit.

Look, I am not saying there may not be a hidden kernel of truth somewhere in all your posts but you certainly hide it in a lot of bunk which makes it difficult to find.

31

The part of the cite you were meant to use was the bottom part with links to CIA World Fact Book 16 years back in time. I can’t be bothered to give individual links to all 16 years of CIA WFB when they are at the bottom of the page I have already given. What is the problem? Is it that you don’t think CIA is a valid source and that the Spanish birth rates are actually much higher? I don’t think there actually is anybody who seriously thinks the Spanish birth-rates are substantially higher.

Here is Nationmaster: 1.3 children born/woman; 204th of 225 (up from 1.26 in 2003) – but I think Nationmaster actually just are using CIA WFB numbers for these statistics, so that is not going to be much better if you think CIA is untrustworthy. Note that Nationmaster also project the population of Spain will shrink by 22.71% by 2050.

It’s very simple. Italy and Spain has had a number of years with very low birth numbers, which will make it hard for them to finance their pension systems in the future and especially since there are larger generations going on pension.

As for the OP. Yes I think USD currency devaluation in the form of high inflation is inevitable. You are not going to pump in $10 trillion extra dollars into the economy and have the money stay the same value. It’s going to be more dollars for less goods. Basically it’s a form of taxation, but one that hits the less well off the hardest.

“Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” - John Maynard Keynes

32

No, what’s very simple is that you are making up stuff and discounting what you do not want to count. You keep talking about birth rates and ignoring there are other ways for the population to grow.

File:Population growth rate world.PNG - Wikipedia shows western Europe and the USA have about the same population growth rate.

Stop talking about irrelevant birth rates. Birth rates are irrelevant. We are talking population growth rates.

33

If you feel it must be a separate thread, fine, but I’d like to hear the discussion.

34

Birth rates are irrelevant. Check. Look, I’m not going to argue this with you, and I’m not going to sum all up the Western European growth rates. Who knows where Wikipedia gets it information from, but again from CIA you get population growth rates from the five largest Western European nations:

Germany: -0.044%
France: 0.574%
Italy: -0.019%
Spain: 0.096%
UK: 0.276%

And for the USA:
USA: 0.883%

A Projection of Spanish Pension System under Demographic Uncertainty

MAIN CHARACTERISTICS OF THE PENSION SYSTEM

35

OK, finally something I can deal with. I do not share that analysis at all and I’ll tell you why. It is too far into the future and, again, although they are related, what counts is not the size of the population but the size of the economy. A country can import immigrant population at any time and Spain has done so extensively already as needed. If Spain (and every other country) can have an economy which can or cannot support the pension system, that’s the question and it is only indirectly related to population. If the economy grows you just import the necessary workers.

My dislike for the present system is that it is a Ponzi scheme which relies on a continuously growing population and this is, clearly, unsustainable in the long term. But the common thinking these days is that “in the long term we’re all dead” anyway.

36

No.

Their numbers aren’t reliable. This “healthy growth” could potentially be negative if you account for seasonal adjustment, but they don’t yet know how to do a seasonal adjustment. Their idle labor pool is growing, but that’s not counted toward unemployment percentage if the jobless head back to the country where they can’t be counted. And to top it off, we have no way of knowing if anybody has their thumb on the scales. Maybe they’re doing the best they can with the data and statistical techniques they have available. Then again, maybe they’re fudging things to make themselves look better.

China has not yet proved itself to be resilient to the world downturn. I’d bet against it. Exports are down, factories are closing. Even if they’ve managed to delay recession so far, it’s not a risky call to predict that they’ll be joining the rest of the world soon enough. The political implications of this are pretty much impossible to see, so I personally won’t be anticipating “revolt”, but it also doesn’t do to paint the situation rosier than what it might actually be.

37

Some claim China over-reports and some that China under-reports growth. I suppose statistics can be manipulated everywhere. At any rate, I’d rather go with the more reputable and reliable sources:
World Bank cuts 2009 China growth forecast to 7.5%
The Asian Development Bank (ADB) notched down its forecast for China’s annual economic growth next year to 8.2

38

China getting nervous dollar will tank. Demand assurances.

China Needs U.S. Guarantees for Treasuries, Yu Says

Jim Rogers agree. Thinks “the USA is drowning in debt” and expects a massive fall of the dollar and likely on its way towards destruction within two-three years. Investor-guru: USA can die of debt within 2-3 years (Danish)

39

Dang! I knew I should have paid better attention in my Danish class in high school. :slight_smile:

40

It’s never too late. Danish isn’t so hard for an English speaking person to learn to read fairly quickly. Although you’ll probably never learn to pronounce it correctly and Danes won’t love you for trying. Alternative you can take it to Google and have them give it a try.