From the 2 August 2001 number of the Washington Post, Mr. Robert Samuelson writes of "The Plundering Baby Boomers" and the inability to make choices by the same; quoted for educational use only:


Nothing better illustrates the politics of denial than Social Security and Medicare. President Bush wants to modernize both -- a worthy project that seems doomed to fail for many reasons. Here are three: (1) Bush's own blunder in considering changes for the two programs separately; (2) the unshakable partisanship of most Democrats, who will attack Bush for anything but an expansion of benefits; and (3) the steadfast unwillingness of most Americans to recognize that the aging of the baby boom generation will make Social Security and Medicare unaffordable, socially unjust, or both.



We need (as I have written before) to reinvent retirement to reflect the longer life expectancy and greater wealth of older Americans. People should phase out of work more slowly and pay more of the costs of their old age. Eligibility ages for Social Security and Medicare should be raised gradually to somewhere from 68 to 70. People should be given the right to buy into Medicare at age 65, with subsidies for the poor. Once they become eligible for Medicare, wealthier retirees should pay higher premiums. Similarly, Social Security benefits should be fully taxed and trimmed for wealthier retirees.



President Clinton should have championed these changes. His failure may have set Social Security and Medicare on automatic pilot -- their costs steadily increasing until some crisis occurs. Then, Congress might cut benefits or raise taxes abruptly; the first would be unfair to retirees, the second to workers. Let's review some numbers:
? By 2030, about 20 percent of the population will be 65 and older, up from 12 percent now. That's 70 million people, double the number today. Social Security's actuaries expect gains in life expectancy of almost two years. At age 65, life expectancy is now 16.3 years for men and 19.6 years for women.



? Lower birth rates mean slower labor-force growth and fewer workers to support each retiree. From 2010 to 2050, the labor force is projected to increase 0.3 percent annually, down from 2 percent between 1960 and 1989 and 1 percent from 1990 to 2009. By 2030, that would mean 2.1 workers per retiree compared with 3.4 today. (Workers' payroll taxes cover most Social Security costs; likewise, workers pay 87 percent of Medicare spending.)



? Because Medicare costs are rising faster than national income (gross domestic product) -- reflecting new health technologies and longer life expectancy -- the program already represents a growing share of federal spending. From 2001 to 2011, the Congressional Budget Office (CBO) expects annual costs to increase from $237 billion to $499 billion -- from 13 percent to 19 percent of federal spending.



? Enacting a Medicare prescription drug benefit -- without offsetting cuts -- would obviously add to spending. Over the decade 2002 to 2011, CBO estimates drug spending by Medicare recipients at nearly $1.5 trillion. Recipients, private insurance and other government programs now pay these costs.
We ought to be debating generational fairness: how to provide decent support for the old without overburdening younger workers with taxes. The young may have an obligation to protect the old; but the old also have an obligation not to plunder the young. The burden does not consist of Social Security alone. Or Medicare alone. What counts is the combined impact, along with other federal retirement programs. In 2000, Social Security and Medicare cost $622 billion and equaled 6.3 percent of GDP. The CBO expects that to reach almost 12 percent of GDP by 2030 -- without a drug benefit. The estimate is admittedly crude; still, it's almost an eighth of national income.



Bush hasn't spoken candidly about generational conflict. Instead, he's appointed a task force to consider "personal" investment accounts for Social Security; and he's undertaken a parallel effort aimed at "strengthening and improving" Medicare. By not linking Social Security and Medicare -- by not considering retirement programs as a coherent whole -- he sacrifices the possibility of a grand bargain. In exchange for a Medicare drug benefit, make changes that lighten the load of retirement programs. Higher eligibility ages. More cost sharing. Introduce changes slowly, but fast enough to blunt the spending on baby boomers.



There is no overriding purpose to Bush's approach. Predictably, the Social Security debate has degenerated into a confusing discussion of "trust funds" and rates of return (stocks vs. bonds). Bush's ambiguity may be calculated to find a generational balance without arousing fatal opposition. If so, the strategy seems a loser. Unless he succeeds at changing public opinion, any hint of cuts in Social Security or Medicare will trigger strident Democratic denunciations. Indeed, the Social Security commission's first report did just that. Given the evenly divided Congress and Republican insecurities, the political implications are clear. Only benefit increases (starting with a drug benefit) will stand a chance of passage. In isolation, that would worsen the long-term problem.


What Americans won't admit is that Social Security and Medicare no longer simply aid the needy. They also subsidize the retirement of millions of people who are fairly healthy and financially well off. The young are increasingly compelled to underwrite the vacations of the old. As baby boomers move into their sixties, this will become more widespread. Baby boomers will flaunt their youth and energy, and their huge numbers will make it even harder for politicians to discuss what everyone can plainly see.


At 55, I harbor no hostility toward baby boomers. But I believe that, as a generation, we have a responsibility to restrain our selfishness and to temper the burden on our children. Our generational political leaders have ignored that responsibility. Clinton evaded unpopular questions about retirement programs and exploited Social Security and Medicare for partisan advantage. Bush either doesn't understand the underlying problems or is timid in addressing them. The result is a country resolutely refusing to prepare for a visible and unavoidable future.



VKS:Bold mine. That Boomers who have been reared with the word "entitled" stamped on their ever fervid brows would do the right thing by other Generations coming along seems doubtful. When GenX complains it will be taken as whinging; only the Millennials might have the ability to make us see things sensibly or a good whack on the head by the Crisis. HTH

There is a fundamental problem with Social Security. Back in the thirties, most people were OLD by the time they reached 60. Today, seventy-year-olds like my colleague in the cubicle next to mine (who works out at the health club ever day) and my mother (who skis and travels around the world) are living like middle-aged people. Looking at them, it is easy to say "raise the retirement age to 70".

However, lots of people are still OLD at 60. One example are people who have had manual hard labor jobs. Job injuries, the stress of standing on one's feet for 40-plus years, etc.... can make someone grow old fast.

The other group have sedentary jobs but because of obesity suffer from diabetes, heart problems, and the like. Again, they age much faster than your typical Boomer bobo.

I'm not sure what the answer is. Currently, Social Security disability standards are very strict. Maybe they can be looser after 60. I also don't know if people receiving Social Security disability payments also qualify for Medicare, but they should.

I guess where I come out is that if you are reasonably healthy, a seventy-year-old retirement age makes sense (I hope to be working at interesting work at 70, myself). Gen-Xers raising kids should not have to subsidize their parents' trips to China. But we do need some kind of option for those of us (mostly lower income) who are truly old at 62 or 65.

Once upon a time, there was such a thing as "community" (say ko - MUN - it - tee) where the people knew who lived near them looked after each other, and when you were old you were respected, valued, and cared for by your juniors, probably family if not your church. What a BACKWARD and DECREPID ERA!!

I know, sounds kind of quaint if not crazy, doesn't it? Taking care of those who need it YOURSELF and not the pro's in state-run social services...the NERVE!

Anyway, WHO needs sweet caring individuals to look after each other when we have the SWEETER and MORE CARING and gentle hands of FEDERAL BUREAUCRACY to manage the affairs of millions upon millions of those in dire need?

After all, anyone who could possibly oppose the expansion of such programs is almost certainly GREEDY, right? Or WORSE, maybe they want it done more locally and responsive to the individual needs of each community--not 100% federalized--now that SURELY belies a desire to return to the days of JIM CROW! Yeah that's it. They're all GREEDY and RACIST. Probably SEXIST, too!

My goodness. What we ever do without such help from our benevolent State? What if disaster, national emergency, or economic cataclysm (1930s style) happened again? What if there was a breakdown in government services for a time? Could new communities form and respond to "hard times" like they once could?

(But seriously folks... [tongue now out of cheek] )

I seriously doubt it. Not with 75% of Americans glued to their TVs--flatlining--safe away from all the "strange" and "bad" people. I worry that because public has entered so many areas once considered private, we are strangely more isolated from each other than ever before, and this could jeopardize us in the long run. There is no easy solution to this dilemma.

I wrote a crude analysis of the social security situation here:
http://csf.colorado.edu/authors/Alex...ike/SocSec.htm

The model is very approximate, but it captures the main issues. My point is social security can be operated successfully after the Boomers retire if we want it to be. It won't require beggaring the younger generation or for Boomers to work until they drop.

It is not PC to discuss these issues during a Boomer-saturated unraveling. So we don't. Instead (Boomer) libertarians rail about government jackboots and liberals about insensitive conservatives. Come the Crisis and the rise of more grounded Xers and Millies (who will actually run the numbers--imagine that!--instead of merely pontificating about the issue) and they will be able to solve this issue quite handily.

Dr Alexander,

You present a solution that seems to work. I'll grant you that. I'll also grant you that human freedom is not optimal in a state of chaos.

There needs to be foundations, institutions on which human potential can be realized. I'll agree with liberals and conservatives here on that. Maybe social security is one such bedrock. Perhaps without it there would indeed be chaos and nobody would benefit.

But pardon me if my "looney-tarian" bone is showing. Let me ask a rhetorical question(s).

Where does the expansion of top-heavy government end? Why do we never hear of limits on its scope and influence, only new and more brazen and hubristic ways of spending your hard-earned taxpayer dollars? Couldn't we be happier with a reversal in our investiture in Washington and switch that level of spending to, say, local or state? Why does anyone think that problems managed from greater distance are solved more efficiently?

I don't think of Federal employees as jackboots. They are human beings performing real services that often benefit people. Most are nice folk whom I would be more than happy to go bowling with. Why they can't be in the service of local yokels, I don't know, though. Why their work can't be more personal, I don't know (have you ever tried to play phone tag on the IRS info line?). Heck, some of it is so impersonal that it implements "policy" from 30,000 feet in the sky, behind the controls of a laser guided munition.

No I am not a boomer. I believe in working within the system (not smashing it to bits), but I expect it to falter and fail like the humans who run it, in classic Xer form. When that happens, don't blame me. Don't say I didn't warn you.

So how does this relate to Social Security and Mike Alexander's comments? Yeah his plan might save it, but I am still perhaps naively grasping for alternatives that could be even more humane... we humans are after all genetically programmed for life in hunter-gatherer society, tribes of 50 or so who all stuck together, fought together, worked together, loved each other.

Something about an Authority that keeps expanding--claiming to speak for 280 MILLION VERY DIFFERENT individuals strikes me as rather dissonant with our inner nature. Can we really expect Social Security to be either Social or Secure when run in such a way?

Jon asks: Where does the expansion of top-heavy government end? One could also ask: Where does the expansion of corporate power end?

Concentration of power is always potentially harmful. Our society contains substantial concentrations of private power as well as public (governmental) power. Public power is checked by the polling booth. Private power is checked by public power. Local governments are too weak to check the larger concentrations of private power, hence we rely on the national government. But we need to watch the national government.

At the end of an unraveling/Kondratiev fall, we have little to fear from governmental power, and much to fear from private power. Of course people don't think this way (the reason government is weak and business strong now is because of two decades of anti-government and pro-business public opinion).

Conversely, at the end of the High (Kondratiev spring) we have much to fear from government (were I a few years older my government would have sent me to Vietnam to fight and possibly die in a pointless war), and less to fear from big business. Yet ordinary people probably still feared big business more than big government then.

Since you are not rich, and so have no particular vested interest in your political viewpoint, you may find your views changing in interesting directions over the next couple of decades.

Mike, one quibble with your link. You state that at age 50, most people have finished child-rearing expenses. I would dispute that. Even a fairly average traditional family, with a husband 2-3 years old than the wife, where the man marries at 25, waits a couple of years before having kids, and spaces the kids 2-3 years apart, will be having the younger child when the man is about 30. At age 50, dad will be steeped in college payments.

And of course, with lots of people having children in their thirties, many fifty-year olds will still have kids in high school or even middle-school. Even ignoring the small but growing number of people who have children beyond age 40 (lots of dads in second marriage, by the way) I think it is fair to say that child-rearing expenses for large numbers of Americans aren't really complete until age 55 or even 60.

I don't know what effect that has on your model, but I had to point it out.

I suppose I wasn't clear. What I mean is past age 50 people no longer expect a rising standard of living. They are pretty much comfortable with what they have and don't want or need a bigger house, or more stuff. They don't need to have the latest in conspicuous consumption, like they did when they were younger. This means they can fix their requirements for what constitutes a satisfactory lifestyle at the level they achieved at age 50. By the time they reach average retiree age of 73, the defintion of acceptable income by today's workers will have advanced 58% beyond what they consider acceptable (and are receiving).

This is the key idea behind how social security works. As a example I'll use my wife's family. Her Lost grandmother in the 1980's lived in a shack in Wyoming and slept on a mattress with springs sticking out of it. Her daughter lives in a dumpy house w/o AC, but much better than the shack. Their kids (our age) live in nice homes with central air. Now grandma left a $0.3 million estate and the daughter has more than that. Grandma lived in the shack because that's where she had always lived and she didn't need a new mattress, thank you, because the springs weren't on the side of the bed that she used. She had running water, electricity and a phone that had been put in around 1950 and that was enough.

The next generation had achieved a much higher standard of living by the 1970's than grandma had and then they too had enough and stagnated at that level. Now in my forties I find myself less and less interested in the next new thing. Come ten years I will become stuck in my ways and content to live at my then current standard of living for the rest of my life.

It is the advance of the standard of living (which grows with per capita GDP) of those paying into the system beyond the fixed standards of old fuddy-duddies (who are recieving from the system) that constitutes the "return" on social security.

Subject: Inflation/Deflation

Ten years ago during our last decannual recession (the one that got Bill Clinton elected remember?) there was a controversy among the gloom and doom community about whether we would see an INFLATIONARY depression or a DEFLATIONARY depression. An inflationary depression is like Germany in the 20's, the government prints paper money to try and prevent a debt collapse. A deflationary depression is like what we had here in the US in the 30's, defaults in the bond market.

The point is no matter which one occurs (if we have a depression at all) Social Security won't come out too well. In the INFLATIONARY case you'll be paid in increasingly worthless funny money. In the DEFLATIONARY case the government will probably just say "sorry, we can't pay your Social Security", in other words a debt default.





<font size=-1>[ This Message was edited by: Robert on 2001-08-04 20:14 ]</font>

<font size=-1>[ This Message was edited by: Robert on 2001-08-05 08:03 ]</font>

Subject: Productivity Warning

Last week equity strategist Albert Edwards from Dresdner Kleinwort Wasserstein predicted a selloff in the stock market on Tuesday the 7th (tomorrow) based on radically downward revisions in corporate profitability and GDP growth based on productivity.

Of course Dr. Richebacher has been ranting about this in his newsletter for several years now. The profitability boom was the result of Al Green$pan's counterfeiting operation at the Federal Reserve. The productivity boom was just the result of building vast quantities of computers and nothing else.

When (and if) investors realize this it won't be good for the stock market.

This will liven the discussion a bit. One of the predictions made by Strauss and Howe, and by Harry S. Dent and others, is that the large aging baby boom generation will eventually draw money out of the economy for their retirement instead of putting in money for it, and that the result will be a major economic depression, what Dent calls "The Mother of All Depressions". I now say this is not going to happen. This is because one of the premises to this prediction has now turned false. The Baby Boomers are no longer a bigger generation than Gen X'ers, mainly because of immigration. Strauss and Howe point out that Gen X, and nomad generations in general, contain lots of immigrants, many of whom are in their 20s and 30s. This one contains so many that it caused the population to swell between 1990 and 2000 much faster than demographers have predicted, from about 261 million to 2000's 282 million. This, together with an increased work in retirement ethic of the boomers, will prevent the decline and the depression in the economy from taking place. I.e., we boomers in our later years will be supported by immigrants - the implications of this to me are unclear. This does not mean the crash and the depression will not happen. Geologists predict that the world will run out of oil around 2010, just as the US did in 1970. When that happens, there will be no extraterrestrials to import oil from (like foreigners in the 1970s) and this may cause an economic setback that could very well cause a crash and a depression. But to me it now looks like aging boomers will not be a factor in our economic future.

Subject: Immigration

I can't see it. There is always plenty of immigration in every Third Turning but that doesn't seem to forestall economic troubles.
Think of all the immigrants who came from Europe to America in the Teens and Twenties yet we had the worst Depression ever in the Thirties. Someone who is new to the United States is usually penniless. Not the best person to buy the assets of a well to do retiree.

And, according to the Census Bureau, the 1990's wave of immigration contained more Boomers and Millies than Xers. Of course the Census Bureau has different Xer/Boomer boundaries than S&H and many of the so-called Boomers would be S&H's 13ers. But, in any event there are still more people in the US born in the 40s and 50s than in the 60s and 70s.

Subject: Abolish the Federal Reserve not the penny!

Congressman Jim Kolbe Republican from Arizona has a bill in Congress to do away with the penny. Of course he's right the penny is nothing more than a nuisance. No one wants them. I take a 3 mile walk every day. It's amazing how many pennys there are just lying in the street. People apparantly just throw them away. Even homeless people won't take them.

Forty years ago when I was little the penny was still worth something. A penny would still buy a considerable amount of candy. If I could scrape together ten pennys I could buy a Donald Duck comic book with them.

Alas, inflation has done away with all of that. Who's responsible? Of course our friendly counterfeiters over at the Federal Reserve.

The financial pundits are in a tizzy over the US's NEGATIVE savings rate. Is it any wonder our savings rate is negative? With Al Green$pan and his elves at work you would be a fool to actually SAVE money. You're guaranteed that it will ALWAYS be worth LESS next year.

Instead of abolishing the penny lets abolish Al Green$pan and his Federal Reserve!

<font size=-1>[ This Message was edited by: Robert on 2001-08-12 09:48 ]</font>

Abolish the Federal Reserve??? That would be more than a tad drastic, I would say. For what it's worth, Mr. Greenspan and Company have been doing a more-than-adequate job in keeping inflation at 2-3% for the past decade.

Can you imagine, Robert, if we'd have had inflation rates in the 1990s of 12-20% like we saw in the late seventies and early eighties? An average new car today would cost $40,000 instead of $20,000; a typical home would be $400,000 rather than $200,000. In light of this reality, I think firing Greenspan and abolishing the Fed would be a very, VERY bad idea!

What might be a good idea however, with regard to increasing the national savings rate, is for the Feds to do away with counting the interest on savings as taxable income. Indeed, where is the incentive put money into a savings account that pays at most 5% (rather than into stocks, or real estate)? After inflation, the net interest paid is only 2% at best.

...oh, I almost forgot!

About the penny, the Congressman from Arizona is right-- let's get rid of the damn things! Loose pennies add up fast, cause more clutter on my end table than junk mail, and rolling them up isn't worth the time spent doing so. We can round everything off the nearest nickel, as many businesses are unofficially doing now anyway with their "take a penny, leave a penny" trays at cash registers.

While were at it, let's also get rid of one-dollar bills. GW's are to my wallet what pennies are to my end table-- needless and stress-inducing clutter! Now that we have golden dollar coins, what good are single bills except to provide nostalgic comfort for aging GIs and Silents?

Subject: Inflation

Most people are so ignorant of economics they only think of Consumer Price Index Inflation (higher prices for beans and tennis shoes and beer and cars and things like that) whenever they hear the word "inflation". However inflation can take many forms. It all depends on where the people who borrow the funny money the Federal Reserve creates spend that money which determines where the inflation will manifest itself.

In the late 60's and 70's the Baby Boomers were leaving home. They needed furniture and cars and TVs and any sort of commodity item you could think of so all the inflation ran into the CPI. In the late 70's and 80's the Baby Boomers were in their family formation phase and spent vast sums of funny money on Real Estate which caused the Real Estate Bubble to begin to inflate. In the early 80's the Baby Boomers began to think about retirement and began to buy stocks in a vain attempt to "make" enough money (only the Federal Reserve "makes" money) to retire on. Thus was born the Great Bull Market.

So you see there are many forms of inflation. The latest and greatest is the inflation in share prices which has occured since 1982.

If you look at the rate of increase in Total Aggregate Debt that will tell you the real rate of inflation. In 1998 it was 10%, in 1999 it was 9.5% and in 2000 it dropped to 6.9% (which is the reason for our present difficulties). So far in 2001 it is only 5.25%. Again I'm speaking of total inflation not just CPI inflation.

Over the last 30 years Aggregate Inflation has averaged 9.4% per year. Anything much below that and the US falls into recession (such as now).

The point is inflation is false economics. You aren't increasing the supplies of houses or beer or cars or anything. All you're doing is printing more money and ONLY the Federal Reserve can do that.

By the way, it is IMPOSSIBLE to beat inflation. There is no asset I can think of (with the possible exception of gold) which will increase in value faster than the Fed can print money. Also by the way the Fed and the other central banks of the world have conspired to hold down the price of gold during the 90's.

<font size=-1>[ This Message was edited by: Robert on 2001-08-13 16:56 ]</font>

How about I bonds from the US Treasury for wealth maintaining?

Subject: I Bonds

The trouble with the inflation adjusted bonds is that they are just adjusted for CPI inflation not for aggregate inflation.

I don't believe the gov't pays for bills by printing money, otherwise why would they need to issue T-Bills? The bills are printed to replace existing ones and to grow the money supply in relation to the growth of the economy (imagine if there were only so much money in circulation now as there was during reconstruction).

I am a bit hazy, however, about how this new money is introduced into the economy, but I believe it has to do with a multiplier effect when banks loan money?

In any case, money is an abstract concept and I don't see any reason why it should be tied to a certain amount of yellow metal.

The age-old problem, i think, is that our money has its value not from anything really tangible (such as gold or platinum or kilowatts of stored energy)--but from the sale of debt.

Based on models, the Fed loans out play money to banks at a certain interest rate. Banks pay back into the Fed. The Fed loans more.

Typically, the Fed loans out far more $$ than exists in reality. Based on its models, it expects this money to be repaid to it, largely in full. In fact, for every dollar loaned out by the Feds, it can only reimburse about 10 cents at any given time (or something like that).

By the time you, the consumers, deposit money in the bank, the bank can only reimburse about 5% of what is deposited in total.

Thus, if half of America decided to stuff their bank accounts under the mattress, we'd be in deep doo doo. The FDIC would not be able to keep up with all the failed banks. We'd be in financial meltdown from this house of cards.

Of course, a full-on bank run is only the worst case scenario. The more mundane, troublesome thing about the Fed is that it has the authority to manage the entire economy centrally, dictatorially, when in reality we could do fine without it. The other problem with the Fed is that, based on its lending/credit policies, inflation is the natural result even in times of prosperity.

One can only guess what might happen if "alternative currencies" arose, those tied to actual wealth or value rather than expected value or the mass psychology on consumers. Perhaps we'd finally be free of this mess. Yes, debt and credit would continue, but perhaps more cautiously and not in a way that bails out the recklessness of the rich at the expense of the poor.

Who knows? Am I making sense? Robert? Mike Alexander? Economics is not my bag so feel free to verify these statements for accuracy.

Subject: Accounting 101 and Economics 101

Most people don't know this but our financial system is based on nothing but debt.

Money is created by the following process:

The US Treasury prints up a Treasury Bond with NO backing behind it.
They give the bond to the Federal Reserve which claims the Treasury Bond as an asset and gives the US Treasury a Federal Reserve Check (also unbacked) to pay for the Bonds.
The US Treasury takes the check and "deposits" it with the Federal Reserve which is after all nothing more than a bank.
The US Treasury then uses the deposit to pay for everything from paper clips to jet fighters.
The money the government used to pay for stuff is then deposited by the people who sold them the stuff back with the banks and is loaned again.
The depositing and reloaning goes on and on until the amount of TOTAL debt is 10 times the amount of GOVERNMENT debt.
So you see the money supply is based on GOVERNMENT DEBT. Some months ago a move was afoot in Congress to use the Surplus to pay off the National Debt instead of giving the taxpayers rebate checks. Mr Green$pan was asked about this and he got real huffy. Of course he knows if the National Debt were paid off the ENTIRE economy, being backed by nothing would collapse.

If this is the beginning of a new depression the surplus will quickly disappear and the Government will be forced to borrow more money(issue more bonds). This will result in a huge wave of new inflation as those bonds are "monetized" by the above process.

I wouldn't worry too much about the nature of the currency being an unbacked one. It has a dynamic balance, instead of a static value. The Federal Reserve tries to maintain a stable value, using the levers at its control, to essentially keep a low rate of inflation, without drifting into either high inflation or deflation.


The basic backing of most national currencies, including the US, is the ability of its government to collect taxes, and whatever assets that government might have. If that ability were lost, US residents would have more to worry about than their dollar based currency and accounts losing value. For people outside of the US who use US dollars as a store of value, that is an investment decision that is based upon their belief that in the long run, the US dollar is more stable than the alternatives.


Similarly, US residents, who believe that the dollar is likely to decline in value relative to other currencies or gold, or other asset classes, are free to invest in those assets.
A free market without exchange controls is one of the best ways to provide a market test of a currency.


If the dollar became instead a backed currency, based on stores of gold, or wheat, or petroleum, it would actually be less stable, since all commodities periodically have extreme changes in value (in what they can be exchanged for).

Subject: Price Stability

I get the impression some of you are rather young. Anyone who lived through the inflation of the 70's would have precisely zero faith in the Fed's ability to preserve price stability. After all Al Green$pan is merely an unelected politician. He'll do whatever he has to do to keep his masters happy. This could include either massive inflation (the 70's) or massive delflation (the 30's). Study a little bit of history, the Fed has engineered both in the past.

A managed currency is actually a rather primitive system subject to the foibles of whomever is running it. I would prefer to have a system 100% based on gold and silver. God only put so much gold and silver in the Earth's crust and even Al Green$pan has'nt figured out a way to manufacture more of it (that's why they call it God's money).

<font size=-1>[ This Message was edited by: Robert on 2001-08-15 15:52 ]</font>

The dollar is falling
http://www.thetimes.co.uk/article/0,...283717,00.html
What now?

The devaluation of American currency is enough to tip the nation into recession, but what happens when the bloated Real Estate bubble bursts? People will not be able to pay their mortgage in an era of rising home prices and higher loans, but a souring economy. I think it is inevitable that the real estate market will crash, but what will be the catalyst? Will rising defaults be a catalyst? Will the falling dollar be a catalyst? With Xers entering midlife, they want to now start forming families. But however, they are doing very bad economically, and it is only getting worse. But home prices are rising, and rising loan costs means that many will not be able to pay. What then?

When Nasdaq crashed in March 2000, lots of people transferred their investments into the real estate market, making the bubble bloated. If they hadn't done it, we would be in a world of crap right now. But they didn't stop the recession; they only delayed it. So, when the bubble finally bursts, that's probably when the crap really starts to hit the fan. If the real estate market crashes, I would think that there is a danger of panic, with a possible Dow crash and a fast drop of the US dollar. Please correct me if I am wrong.