mannfm11 wrote:There must be some really good new drugs out there. If Obama sent everyone $50,000, we might go to zero. Where would he borrow it?
"But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost." - Bernanke
http://www.federalreserve.gov/BOARDDOCS ... efault.htm
For anyone who believes deflation is a hard problem in a fiat money system that whole paper is worth reading, but particularly the next 2 paragraphs:
"The conclusion that deflation is always reversible under a fiat money system follows from basic economic reasoning. A little parable may prove useful: Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal."
"What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation. "
It is reasonable to view the S&P as a currency traded for dollars. On most days that the dollar goes down significantly the S&P goes up and vice versa. If the dollar were to crash over night I would expect the S&P, measured in dollars, to go up. If it became clear that Russia and China no longer wanted to pay the US inflation tax and were trying to get out of their dollars, the dollar could crash in a very short time period.
http://pair.offshore.ai/38yearcycle/
I would also point out that like the US other people have printing presses. Their ability to print dollars that look just the same as US dollars is getting really good. In the island that I live on and the next island over many stores will not take $100 US bills as the counterfeits are so good that the machines used to detect counterfeits and the training papers for how humans can detect counterfeits are no longer able to tell. If the counterfeit guys move to $20 bills I think that US money would be in big trouble. Since passing $100 has to be much harder, I would expect them to move to $20s.