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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 02/12/2009 : 18:56:28
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Dollar Devaluation To Fix The Great Recession
Frank Beck, 12.09.08, 01:00 PM EST
A quick dollar devaluation would work wonders for submerged borrowers. Don't kid yourself: It could happen.
What began as government social tinkering--with implied threats to banks and mortgage companies to extend home loans to even the most marginal of borrowers--led to a greed-blinded mortgage banking business and the meltdown we are experiencing today. Now we are asked by the same congressional leadership to go along with taxpayer-funded bailouts of the very banksters who, while making millions, created the mess.
Despite the trillions of dollars already expended recapitalizing banks, there is very little, if any, progress to show. Will a few trillion more do the trick? That seems to be the consensus among Congress and the banks. "They are simply too big to let fail," or are they really just too big to save? We can go back to "Plan A" and buy the toxic assets. If so, at what price? What if a few trillion does not remove enough toxic waste from the system or doesn't get credit flowing again and the economy bustling?
Some argue that it is time to help Main Street, not Wall Street. So, we should "forgive" some of the mortgages for those who are 90 days or more behind on their payments. Have you quit paying yet?
If we are to save bankers, shouldn't we at least distinguish between those who possess the intelligence to renegotiate their loans to workable terms? If we are to save homeowners, should not we first define the term "homeowner?" Perhaps it is not only someone who agreed to and signed a mortgage and is living in a house. Just perhaps, it should also include the stipulation that this individual paid some amount of a down payment: 20%, 5%, a dollar. I can tell you who is not a homeowner. It is not someone who paid zero down and ridiculously low payments for two years; that, my friend, is a renter.
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Think positive. |
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Ardent Listener
Administrator
USA
4841 Posts |
Posted - 02/12/2009 : 19:24:06
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| Along with huge inflation, a dvaluation will allow us to all "share and sacrifice" our way out of this economic mess together. Doesn't that make some of you feel warm inside? |
Realcent.forumco.com disclosure. Please read.
All posts either by the members, moderators, and the administration of http://realcent.forumco.com are for your edification and amusement only. It is not the intent of realcent.forumco.com or its host to provide investment, medical, matrimonial, legal, security or tax advice and nothing posted here should be considered to be so. All rights reserved.
Think positive. |
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fb101
Administrator
USA
2856 Posts |
Posted - 02/12/2009 : 19:24:51
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| Yes. about 9000 degrees. |
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Nickelless
Administrator
USA
5580 Posts |
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El Dee
Penny Hoarding Member
USA
547 Posts |
Posted - 02/13/2009 : 11:28:23
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FDR devalued the dollar in 1933...59%...from $20.67 per ounce of gold to $35 per ounce.
To do this, FDR made gold ownership illegal.
The economic consequences of these actions put the Great into the Great Depression. |
Trust the government? Ask an Indian. |
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Nickelless
Administrator
USA
5580 Posts |
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Delawhere Jack
1000+ Penny Miser Member
USA
1680 Posts |
Posted - 02/13/2009 : 16:03:38
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quote:
Originally posted by Nickelless
Is there really enough gold in private hands in the U.S. for this to be practical? What other means would be available for the dollar to be devalued since we're no longer on the gold standard?
Survey says! PRINTING PRESS! |
"Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." Thomas Jefferson
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El Dee
Penny Hoarding Member
USA
547 Posts |
Posted - 02/13/2009 : 17:50:13
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quote:
Originally posted by Nickelless
What other means would be available for the dollar to be devalued since we're no longer on the gold standard?
Since our currency "floats", and isn't tied to anything, what determines its value is whatever the folks at the Fed say it is worth relative to other currencies.
Also affecting it is amount of currency in circulation, in bank accounts, stuffed in mattresses, whatever. Since money today is only cheap paper and electronic 1's and 0's, it is virtually unlimited as to supply - witness what happened in Zimbabwe most recently, and Germany in the 1920s most famously. |
Trust the government? Ask an Indian. |
Edited by - El Dee on 02/13/2009 17:50:49 |
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psi
Penny Collector Member
Canada
399 Posts |
Posted - 02/13/2009 : 21:24:42
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quote:
A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments.
...
Only debt would remain the same. All other assets would immediately be worth more (in nominal terms), whether it be a home, a stock, an ounce of gold or a used car. Bank balance sheets would immediately improve, as many loans would be moved from non-performing to performing status. Banks would be paid with devalued dollars, but they made millions creating the mess. The current use of government stimulus through the creation of dollars will certainly lead to a similar or worse devaluation, so this is likely a net gain for the banks too.
Why do this by measuring everything but (mortgage?) debt in smaller dollars though? Wouldn't it be simpler to just pass a law forcing the banks to forgive a percentage of those debts directly? |
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Nickelless
Administrator
USA
5580 Posts |
Posted - 02/13/2009 : 21:41:59
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quote:
Originally posted by psi
quote:
A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments.
...
Only debt would remain the same. All other assets would immediately be worth more (in nominal terms), whether it be a home, a stock, an ounce of gold or a used car. Bank balance sheets would immediately improve, as many loans would be moved from non-performing to performing status. Banks would be paid with devalued dollars, but they made millions creating the mess. The current use of government stimulus through the creation of dollars will certainly lead to a similar or worse devaluation, so this is likely a net gain for the banks too.
Why do this by measuring everything but (mortgage?) debt in smaller dollars though? Wouldn't it be simpler to just pass a law forcing the banks to forgive a percentage of those debts directly?
Yes, but TPTB couldn't screw the American public as much compared to devaluing their currency. But then again, devaluing the currency would pi$$ off the Chinese, which might be kinda fun to watch since without the U.S. buying their junk, the Chinese are equally screwed. |
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Delawhere Jack
1000+ Penny Miser Member
USA
1680 Posts |
Posted - 02/13/2009 : 21:50:30
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quote:
Originally posted by Nickelless
quote:
Originally posted by psi
quote:
A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments.
...
Only debt would remain the same. All other assets would immediately be worth more (in nominal terms), whether it be a home, a stock, an ounce of gold or a used car. Bank balance sheets would immediately improve, as many loans would be moved from non-performing to performing status. Banks would be paid with devalued dollars, but they made millions creating the mess. The current use of government stimulus through the creation of dollars will certainly lead to a similar or worse devaluation, so this is likely a net gain for the banks too.
Why do this by measuring everything but (mortgage?) debt in smaller dollars though? Wouldn't it be simpler to just pass a law forcing the banks to forgive a percentage of those debts directly?
Yes, but TPTB couldn't screw the American public as much compared to devaluing their currency. But then again, devaluing the currency would pi$$ off the Chinese, which might be kinda fun to watch since without the U.S. buying their junk, the Chinese are equally screwed.
Not so sure how fun it would be for us. The Chinese have a domestic market of over a billion people. We don't have any significant shoe manufacturers.
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"Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." Thomas Jefferson
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Nickelless
Administrator
USA
5580 Posts |
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Bluegill
1000+ Penny Miser Member
USA
1964 Posts |
Posted - 02/14/2009 : 10:16:51
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That Frank Beck is an idiot. It case he hasn't noticed, the Fed has already devalued the dollar 98% since 1913. How well has that worked out..? The 30% he's talking about, he is going to get that sooner than he realizes. It's called hyper inflation. Ask Weimar Germany or Zimbabwe how well that turned out.
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DEVALUATION TO FIX THE GREAT RECESSION
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