Friday, March 14, 2008

It's all relative.

How appropriate that it's Einstein's birthday. This morning's headline story on NBC's Today was about the economy. "Gosh," they exclaim breathily, "Everything's going up!" Wheat futures are up. Gold is up. Oil is up. The Euro is up. Everything's going up, up, up!

What a splendid display of things being relative to the viewpoint of the observer: Standing on the deck of the U.S.S. Dollar and exclaiming "Captain! Look! Sea level is going up!"


staghounds said...

PERFECT parable.

But they all cooperate in the fiction, don't they?

I wonder if those people in Weimar Germany with their baskets full of marks were saying "Wow, bread is just so expensive now!"

Mark said...

You need to slap a beverage alert on that one, Tam...!

Anonymous said...

CPI numbers are out...gas prices down, food prices flat....Fed steps in this morning and bails out Bear Stearns....taking toxic AAA mortgages as colateral... the taxpayer is once again the lender of last resort... free market my a**

Anonymous said...

Well, at least the Amero is supposed to be backed by precious metals.

Matt G said...

Well done.

Earl said...

I was wondering what that tin full of foreign currencies and coins was for, now I know, so I will have some money with value - oops, they changed to the Euro. Nevermind, I am almost broke, again.

staghounds said...

Back when Sterling was about $1.40, I came back from England with about L4500 in cash. Best investment I ever made, and it was because I couldn't be bothered to change it.

Turk Turon said...

So lemme see if I got this right:
1) Wall Street traders make millions in bonuses trading bonds that

2) Use shaky mortgages as collateral and when

3) The sub-prime mortgage market tanks

4) The government steps in and guarantees billions in mortgages but then the

5) Banks are encouraged to lend to consumers, so

6) The Fed lowers the prime to encourage lending and

7) The Bureau of Printing and Engraving prints more currency to “stabilize” paper money reserves at member banks.

And all so the Wall Street traders can keep making millions in bonuses.

Nawwwww! That CAN’T be!

Turk Turon said...

I see my mistake!

Make that "billions" in bonuses.

Sigivald said...

Wheat prices are up against all currencies, because supply is down this year.

Likewise, oil demand continues to rise, and supply doesn't keep pace in realtime (especially with Chavez trying his best to destroy Venezuela).

Further, declines in the dollar vs. some other currencies (not all), indicate as much that the other economies are doing well as anything else.

As I have no intention of buying expensive European imports or going on vacation there, a weaker dollar vs. the Euro is fine by me; it strengthens the US export position as naturally as the reverse situation weakens that and encourages imports.

Neither, in strict economics terms, indicates much about the "strength" of the economy as a whole.

(When we get significant inflation due to a deliberately inflationary monetary policy, that's a real danger sign.

But that's something the Fed tries very hard to avoid - and with great success - having learned at least *some* lessons from the past.)

Tam said...


Re: Oil. Yes, the price is rising, but the global price of oil is denominated in US$. So that light, sweet crude is actually not going up much, if not actually getting cheaper if you're buying it with euros or pounds sterling.

As far as inflationarily tinkering with the money supply, the recent Fed-backed mortgage bailouts amount to the same thing done differently.

Anonymous said...

When they next revise the design of the ten-dollar bill, they should depict Hamilton as crying.

Anonymous said...

Good one, A.M.!

Anonymous said...

"Further, declines in the dollar vs. some other currencies (not all), indicate as much that the other economies are doing well as anything else."

Uh, no, it indicates the Fed is printing cash and throwing it at every problem seen. That isn't a good thing.

staghounds said...

No, it indicates that The United States
is not the
only country
to destroy its
own citizens' independence
through the
watering down
of fiat money.

For almost twenty years, the United states has been letting financial institutions create cash at almost no cost. We have been writing checks to provide subsidies to the unproductive and fight a war. All on credit.

The only surprise is that it's taken this long.

And the "dollar only" slide you're talking about happened in 2002-3.

And it's not just "Wall Street", or "bankers", or any group. We all let it happen because we like the short term apparent effects. Because we all act as though money was a constant.

Read your Friedman.

Fletch said...

Nice. I told my coworker, "The economy's not going down the toilet. The economy's doing OK. It's just that the whole bathroom is sinking."

phlegmfatale said...

The msm are just like chickens: every day's a whole new day.

As Gomer Pyle said so eloquently, "Goooooolly!"

dave said...

If economics is the study of scarcity, wouldn't our monetary policy put the dollar outside that field entirely?