Value of the dollar

[Chaz]

Got a question for you political geared guys. I saw a commercial that said because we have printed so much money for bailouts and such, the value of the dollar has decreased like 20% or something. So it made me curious, if someone who had a substantial amount of money, well into the billions, were to destroy every last cent of it, would this have any effect on the value. Now I know the Government has printed trillions of dollars, but would several billion make a difference?

[Farbin Kaiber]

P&R subforum, bring your questions there, you'll get reamed for posting this here in OT.

[joshh]

I don't think it would effect it at all because Government is still printing. Cash is backed by confidence. It's more about what Government is doing vs the rest of the economy as opposed to a single rich person. And a ton of other economic factors.

[Mercury[BKM]]

I rather take tips and donations in pounds sterling vs any our own currency

[george graves]

Great post OP. Would read again.

[Ryan Stewart]

LOL, "printing money."

[Farbin Kaiber]

LOL, "printing money."

I'm shocked that the masses are so ill educated on the facts, that they assume the Fed has to physically print the money they create/inject into the economy.

[318isbmw]

I'm shocked that the masses are so ill educated on the facts, that they assume the Fed has to physically print the money they create/inject into the economy.

Its scary to think they still don't know.

To answer your question without going into politics, yes it would have an impact, but most of it as mentioned earlier is based off of people's perception and is reactionary. If the government were to stop "printing" it would have a much larger impact because then everyone reads into what they're doing and banks and international companies will sell because the "printed" money out there will increase in value due to more of a demand. Also people will react at home because of the news and adjust. Them doing this creates another reaction and that's what keeps us going, the constant changes and reactions what what everyone else is doing.

[svn2002s]

Let's assume there are ten people living in an island completely isolated and they use pebbles as currency. Each person has one pebble and the total number of pebbles is constant (there are no more pebbles available). Now, the production of apples in the island is ten units and there's nothing else to buy in the island. At a macro level the price for each apple is one pebble (everything else remains ceteris paribus). You won't try to save anything because there's nothing else to buy. if there are no more apples available, your pebbles are worthless. (Weimer Republic hyper inflation).
Now Obama moves to the island and dumps 10 pebbles into the system (1 each) and leaves. In theory, the price of each apple is 2 pebbles. Production didn't change and money supply skyrocketed. That's inflation. The pebble currency lost value.
A super simplistic way to explain a very complex situation/phenom. There are dark days ahead for sure.

[rwh11385]

Let's assume there are ten people living in an island completely isolated and they use pebbles as currency. Each person has one pebble and the total number of pebbles is constant (there are no more pebbles available). Now, the production of apples in the island is ten units and there's nothing else to buy in the island. At a macro level the price for each apple is one pebble (everything else remains ceteris paribus). You won't try to save anything because there's nothing else to buy. if there are no more apples available, your pebbles are worthless. (Weimer Republic hyper inflation).
Now Obama moves to the island and dumps 10 pebbles into the system (1 each) and leaves. In theory, the price of each apple is 2 pebbles. Production didn't change and money supply skyrocketed. That's inflation. The pebble currency lost value.
A super simplistic way to explain a very complex situation/phenom. There are dark days ahead for sure.

Your analogy, and possibly you, are too simplistic to be useful in this discussion.


The useful money supply in the US is not based solely on the bills out there, but instead multiplied by the banks who take in deposits and lend out using leverage. Since they now aren't as leveraged as before, there needs to be a bigger base in the meantime to get the money supply closer to where it needs to be in order to limit deflation which we were experiencing. Hence, Quantitative easing is used since lowering the interest rate isn't feasible and that is the general way they usually increase the money supply and encourage banks to leverage more.

[svn2002s]

I am not simplistic asshole. But you are arrogant.

[Farbin Kaiber]

^He is, he really is, but you get used to it. I'm surprised he didn't even break out any charts or graphs.

[Wiglaf]

If the billionare keeps his money in a safe vs setting it on fire, it's really all the same to us. It's still money that's not being spent.

If it had been in a bank, well they re-loan most of it in the money creating process so that would actually serve to increase inflation.

There's a good (and LONG) video about how banks create money on youtube. It's worth watching.. but here's the spoiler: The only truly sustainable economy where there's no inflation is one where you cannot charge interest on a loan.

[Massimo]

^
So someone should start a new contry with a constant interest rate and it would be the greatest country ever? I like this my finances would be so organised.

[rwh11385]

^
So someone should start a new contry with a constant interest rate and it would be the greatest country ever? I like this my finances would be so organised.

Um, Switzerland? Seriously. They don't give a F about the rest of the world and keep their money worth nearly the same YOY. (at least best at it)

Of course, their economic growth rate stays right around 1% too, staying between 2% and -1%. Tight money has its limitations...