What’s a dollar worth~?

Here is a rough transcription of the presentation for people who are hard of hearing. Apologies for the lack of grammar, I am working to improve the automated transcriptions –
need a haircut again well Tuesday year this Exhibit 6 US long-term real interest rate real interest rates inflation taken into account in whatever and you can see goes back to 1919 out I don’t know what to make of much of the first lots of charts and open up to you on the believe up to you_present them as they are so long-term nominal Treasury yields minus estimation friends relation expectations real interest rates 1980 there were high about 10% and have just come down top left bottom right ever since then 30 years they even see the trend from about 10 down to now at what it actually if that’s updated minus that gone from 10% down 2-1 or 2% right moving on and these are interesting for the sake of interest in and leave you to make something of them at 1974 over on the left there lack grey bark is when you needed are nearly one hour of work to buy a bushel of: yes it is a bit odd but you do see the shape of this other 1974 it was it its highest and it came down to this particular one and then save to 2002 because that’s what the others are going to be beaten sake come is from a very high down to a low and then starts taking off again from the start of this millennium and is going up again right this is hours of work needed to buy £100 of cotton these are just things that are used on the commodities markets in these amounts this is why they’re being used by the chart stop and you can see 1974 was the high thing again and it comes down to this is mostly even clearer 2002 way you could say goes along a bit and then goes up but basically from 2000 to the trend has been going up again this is hours of work needed to buy the S&P arm the stock market at the S&P 500 now this is different and I should have put it in another way round but we’ll just have to keep our minds alive here 1974 it’s started to try and get up but never really got going until the 1981 and then it took off all the way up to let’s say 2002 and over 2002 the trend has been down but this is the stock market this is not are real commodities this is the stock market okay going on the hours work needed by an ounce of gold and 1980 again with got this that the two numbers at the start 1974 1980 and this is a 1981 and then that comes all the way down to 2002 and then really rises up an awful lot of you now need 90 hours are of work our standard measuring board bureau of labour statistics whatever and hours world 90 hours worked by an ounce of gold but the the the arm shape is clear it’s either from a 7480 down to 2002 and up again or it was the other way round for the stock market is another one just for fun these is the hours of work needed by metric ton of copper if you wanted a metric ton of copper and using ceded the highest spike is that 74 one again but the whole trend is really coming down from 1966 all way down to 2002 and then it goes off up again and you have to look at now work nearly 4 500 hours to get our your metric ton of copper that you so much need when you only needed 100 hours of work to get you metric ton of copper in 2002 right at the whole CRB index is all of these commodities all lumped together in one index you can follow how things are doing our as a great big lumped together thing and we can see our famous shake 1974 comes all the way down to 2002 and the CRB index that basket of commodities and from 2002 has taken off again Get right now so we can presume this is got something to do with the dollar so I dug into old arm US dollar USD UST X charts and it’s hard to get the one that goes all the way back that is modern as well but this gives us the idea that the the dollar was are right up at 120 now up is relative to where it had come from but it was at 120 in 2002 and as we can see the value of the dollar against bottom basket of other currencies especially the Euro from 2002 to 2008 came down and I’m and this more than definitely gives us why arm everything is becoming so more expensive 2002 was the changing changeover year now this one pays the UST X are think number four is UST X but more up to date the last one ended with it down below 75 but the the great recession panic brought the safety trade back into the dollar and pushed it back from 75 through 78 where this chart starts on up to 88 at the height of the crisis when everyone was panicking in came into the dollar and then through 2000 1011 it’s come down to 74 again but it didn’t go down and it’s Ashley gone up slightly to 80 and this 80 number is the number that I’m saying is is a kind of limit that arm the fed Treasury government will not want the dollar to go higher than that because they’ll be into all this import export stuff that they want to do now and it exports which are taking priority so it said 80 are I’ve no idea if this they have any ideas for numbers 80 might be the ceiling am saying 82 would be an absolute ceiling and they won’t let go above that right I don’t have that been helpful or confusing but it shows us how the factor of how a currency is perceived as currencies are only perceived against other things UST X is against other currencies and the CRB index is a currency against a basket of commodities right getting out of that an out of America and into the world bottom 10 sovereign CBS ranked by spread end of March 2012 you can really save for this these are the countries most likely to default according to CBS spreads am Cyprus Portugal Ukraine Argentina Venezuelan Ireland Hungary he gypped Lebanon and that’s the important one at the bottom in number 10 is Spain Spain has come in its February ranking was 16th and it come up the charts to number 10 and it’s rising far too quickly for Saddam the nice sleep for the Euro mandarins are Spain it’s very dangerous to have Spain in their right or wrong the Euro sorting out things this is quite interesting will not mind the Hindley interesting that is vaguely interest with got the how much it costs to of the by money and that’s what what when you borrow money but money is a commodity and if you want it safer a mortgage you want to buy some money for a mortgage you have to agree to an interest rates the more the interest rate the more price you’re paying for your money in Greece at the top we have in dark blue last year and in grey this year and you can get a mortgage cheaper increase now you can get it mortgage cheaper in Germany now whether you will be able to in three months or not I would like to say because Germany are starting to turn the screws on anything that might cause inflation there putting up bank this that the others trying trying to manage tightening the money so it doesn’t spurt out into Germany Ireland you can get a cheaper mortgage and those of the three that are above the EU average This is vaguely interesting that down at the bottom let’s start with the positive ones that when you got read that means on the right it means that mortgages are more expensive the more expensive this year in France them all expensive this year in Spain more expensive imports will and Italy now this is quite interesting against the Spain you’re having a mortgage/housing crash and now mortgages are more expensive and same their not having a at our housing crash in Italy but the mortgages are more expensive in Italy and Spain but not increase just shows that the whole twisted things going on but obviously mortgages being more expensive in Spain will not help their housing crash nothing in Spain that happening will help their housing crash that kept it under the carpet because banks aren’t accepting the losses and they are recall calls loans so it’s just not easy to arm and your mortgage back in people just been waiting and trying to the live through it through it that Spain is really coming under a lot of pressure now and it is via the mortgage market via the banks that the thing will explode I got one more what got to more I think okay world oil are Iran has stopped now arm selling money and selling oil to Greece Greek Greek Greece can only get oil from Iran really because Iran was desperate to sell Greece was desperate to buy but nobody else would take greases credit except Iran and now not even Iran will give our oil to Greece so others all have to important for them and sell it to Greece may be the EU will have to sort that out for them and finish with this which is on modern monetary realism the site that people should be following arm because modern monetary realism is the new name from one month modern monetary theory but this this this particular one money like instruments part to and card Cardiff Garcia’s awesomeness arm it’s the financial Times article that I spent nearly half an hour will all what all wobbling about and this article is frighteningly hairlike my half-hour video it pulls out just about all the points that I pulled out arm but there are more points in their and you can just by reading it you can see that this fella Michael Sandow ski Simon Cowell ski knows what he’s talking about where I was struggling waffling quite a lot I am so if you were the slightest bit interested in what I was saying in the long time when Kisch video go to this one and get a bit more clear this concise information from somebody who really knows what the talking about Wednesday out

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  • Paul

    Austerity in Spain is not working.  Spain is a basket case.
    Can we add, with certainty, to “The Way Forward” Mystic meta-plan, that “austerity never works”~?

    Germany might be able to contain the Spanish debacle.  But, I can’t see how they can save both Spain and Itlaly, if the contagion spreads.  That same contagion could even spread to France.  Spain, Italy and France are large economies by world GDP rankings; 12th, 8th and 5th, respectively.  Surely, that would have a massive impact on the global economy.  If all three severely contracted, would it cause a global Depression, or are the US, the UK, Japan and China sufficiently insulated because they maintain a sovereign currency?
    A question about Germany.  Why are their bond yields dropping so low?  Their last bond auction wasn’t even covered.  Their rates are now below Japan’s.  The German economy seems stable; low unemployment, stable/rising housing, etc.  Their bonds should be strong as well.  This is probably a dumb question, but what I am missing about the Germany economy that’s causing its bond yields to fall so low?  Rising interest rates affecting the yield to maturity of the older bonds?  I realize Germany is a safe haven, so their bond prices are higher.  But, is there something else happening? 

    free WSJ article with short videos:

    • http://overthepeak.com/wordpress/ Mystic

       Good comment~!
      I say that because it blasted me into a state of `must make a video`………….but then, it was `must make three videos`, but that was to much…So I probably won’t make any videos.

      I don’t think I have mentioned it much, but I see this `economy stuff` as a great big blob. 
      No, a city, would be the better description; because I like it when I find `gates in`.

      I think that `we didn’t ask to be here`, is a gate in.
      It looks like `when can a country do the `austerity thing“, is a gate in.

      A `gate` would be a thing that when you `follow it` mentally, puts you on a path where you get to the heart of the thing (city) quickly and without distraction.

      And when at the city centre, it is all busy with information and before you know it…….you are making a video.

      So, although I may not make a particular video, be knowing that your comments took da mystic on an express ride to the information centre.

      (I better have a lie down now~!)

      • Paul

        OK, get some rest and think on it.  But, when you wake up, I’d appreciate a response.  Be aware of the fact that I did not know, as we say here in the US, “shit from Shinola”, about economics, until I started watching your videos, years ago.  I mean that.  I am a well educated individual, but never in money matters.  You brought me up to a point where I could post a comment like that.  You should be proud of the fact that one of your students has learned a bit, here and there. 
        So, Professor Mystic, you must at least attempt to answer my questions, whether they are stupid or not.  That is the essence of OTP.  You took on the mantle, now express yourself, Boyo~!  You are a great teacher, Nick~!  You missed your true calling.
        I have learned a great deal from you.  Thank you, as always.

        I am going to say that the Austerity Gate leads to a dead end.  Agreed? 
        So, what’s the next piece to the puzzle that we can add or subtract?

        • Paul

          Forgot the imagery.

        • http://overthepeak.com/wordpress/ Mystic

           OK.  First establishing economics is a soft science, but there are some `facty thngs`.
          GDP can be worked out in a `facty` way.
          US GDP is 100% at all times.  We know what goes into that 100% –
          Government Spending +Consumer spending + Business investment ….then +or- for the difference between exports and imports.
          So, let’s work backwards – For the US, that imports more than it exports, we start off with a negative number..then we add the other three things.
          Business investment.  Businesses are not going to invest big (more) unless the consumer is spending and will make the investment pay…….This is where the US is stuck, what with people being in too much debt and all.
          …….And we get to the last component of GDP – The Government~!

          So, we go through the gate of governmental debt and ask `why is the government in debt`~?
          This is a hearty question~!

          Because, we could say, that the economy has been so often crap that they have come in and helped it back to health; but this becomes a political question (and therefore a silly question).

          We are thrown back to two vital questions –
          What is the government for~?
          What is money for~?

          Basically, the system is that the government takes taxes off the economy and with that money lays down the infrastructure for the private people to play.
          The money is similar.  The government supplies it for the private people to play with.

          I think that both government and money need to be established in their roles.
          Everyone should be in no doubt what each is for.
          At the moment, if anyone should take the time to look into it, they find that both are hovering in a kind of `neither here nor their limbo`.

          I think these will both resolve themselves in the government using money in order to boost GDP.
          They are starting to do it now `kinda subconscious like`, but I think they will soon get a sort of `battle plan` on the go, where `economic warfare will be overtly played out around the world. 

          This `limbo-land` stuff cannot last.
          A plan will emerge.
          It will probably really get going under President Romney (or, much more likely President Santorum~!)

          • Paul

            OK, great start,  By the way, Santorum is out.  The Obama vs. Romney race is too early to call.  It really doesn’t matter at this point, because either one will be forced into the same plan.

            So, Govt now has to spend the taxpayer treasury to get the economy rolling again, for the taxpayer.
            If/when the economy stabilizes, said taxpayer will start spending again and demanding more money from the banks to finance a new-found spending lifestyle.  The banks will feel that things are OK, with the govt/fed as a backstop, and will hopefully lend to the hungry consumers/taxpayers, again.  They will create the money out of thin air to make loans to feed the consumer demand for cars, homes, ipuds, widgets and gizmos.  All this silliness will be cajoled and monitored by the govt.  Then, the money will start moving again, GDP will “rise” and we will see a “recovery”, and a regeneration of tax revenue for the govt, which will feed that revenue back into the economy?
            It seems silly, but, I’ll accept it for now.
            However, doesn’t every nation have the same game plan?  Which nation will crack first once the currency wars begin, in a race to the bottom, as every nation seeks to devalue their currency to make their exports more attractive?
            U.S. natural gas dropped below $2/MMbtu’s yesterday.  Does that make the US the front-runner because energy costs will drop manufacturing costs, which will drive exports?  Is this global race to the bottom sustainable?  Aren’t we just propping up our GDP’s will money that we don’t really have?  Is this the MMT way?  Certain countries have a sovereign currency and, if so inclined, they can print billions.  Then, don’t we face the specter of inflation?  We can can control inflation with taxes, but then we disrupt the feedback loop of tax money used to cajole the consumer?  Again, the system freezes, no?  Sorry for so many questions, but I am trying to grasp the concept of MMT money used to drive up the GDP, but limit inflation at the same time.  Won’t the bond vigilantes appear at some point to cry “Foul!”?

            • http://overthepeak.com/wordpress/ Mystic

               Santorum must be favorite for the 2016 games.

            • http://overthepeak.com/wordpress/ Mystic

              “So, Govt now has to spend the taxpayer treasury to get the economy rolling again, for the taxpayer.”

              That is the `old old` system.

              The `old` system was/is to borrow the extra.

              There may be a new system one day.

            • http://overthepeak.com/wordpress/ Mystic

               In the race to the bottom, the US has certain advantages, but the biggest disadvantage is that it is `world leader` and so everyone is watching.
              Keeping the dollar down is going to take a very long lever, (which will visible from the moon).

            • http://overthepeak.com/wordpress/ Mystic

              Please note that I am not advocating for `Keynsian stimulus` or `MMT spending`; I am just saying that without it GDP goes down.

            • http://overthepeak.com/wordpress/ Mystic

               Here we get to inflation and a restatement that economics is not a hard science.

              It is not known what level of government spending (all other things taken into account) will cause inflation of general prices.

              I will take a stab and say that (all other things taken into account), Washington could run 2 trillion dollar deficits for the next five years and not cause any `bad` inflation.

              Now, you should ask – Is that `selling bonds` type spending or `Fed buys the bonds` or `Government just spends`~?
              Anyways, I don’t think it would cause inflation.

              But note~!
              At the end of those five years, the whole idea of debts/money/economics would have to be changed, as everything would be obviously look absurd. 

              • Paul

                I guess the Govt and the Fed could employ various tactics.  You’re right; the “old system” would look ridiculous, when compared to this new system.  The notion of running $2T deficits for 5 years will not be politically acceptable, but they really don’t have any choice, if they want to grow GDP.  People want jobs, income and stuff.  I doubt they will care if we have a $20T national debt, if they get want they want.  Thanks for the inputs.

                • http://overthepeak.com/wordpress/ Mystic

                  It looks to me like a big plan or nothing.
                  Go with the 2 trillion and make it work.
                  Or, go with 1 trillion and get no base for future growth (and bigger deficits to pay).
                  Or, cut the budget to payable levels and get a depression (which will actually make the deficit go up).

                  • Paul

                    Exactly,  Republican or Democrat, they really have no choice. Either grow the GDP with massive Govt. spending, or contract into a Depression.  There are already so many dead-beats on the govt payroll now (Chuck Rose), what’s another 50 million dead-beats to add the coffers~?!  Give all the lazy pricks a govt disability or, for the most industrious, a quasi-govt job in some sort of civil engineering infrastructure; rebuilding public schools, hospitals,  bridges, tunnels, highways, railways, airports, seaports, etc.
                    Is is sustainable?  Doubtful.  Do the have a choice?  Not really.
                    Personally, I say cut all the benefits, welfare (Chuck Rose), pensions and entitlements and re-boot the system.  Of course, the lazy, moronic, ineffectual slobs (50%) will never vote for that plan.
                    Hey, what about our “same fate and deal with it” mentality, right~?  Too bad we can’t all be on a govt disability pension, right, Chucky?  Some of us have to actually work.
                    It really comes down to the entitlements that make the current system unworkable.  We have a choice.  Cut the entitlements and re-boot.  Or, we save the lazy, old bastards, and let the govt take control of our economic future.  Some choice, huh~?  Still, I am for jettisoning the lazy and/or old bastards!  If you can’t hunt, you starve.  If you don’t contribute, then you don’t receive.
                    All past contracts are null and void in a bankruptcy.  Our nations are bankrupt.
                    I hope you folks saved for a rainy day, because it’s hurricane season~!

                    • http://overthepeak.com/wordpress/ Mystic

                      It is one thumping great `I wouldn’t have done it that way~!`…………
                      BUT, they did do it that way…..and here we jolly well are.

                    • Paul

                      Sooner or later, people are going to realize that there is no money to pay for all the promises the system made.  What to do~?  Default on the promises and re-boot?  Lots of pain.  Let the State take over and hope they have a good plan ready for quick implementation?  I don’t have much faith in that option either.  Que sera, sera~! 

                    • http://overthepeak.com/wordpress/ Mystic

                       One thing is for sure, it will not be `fair`.
                      The best we can hope for is that…..1.  something works….and 2. it is not too too unfair. 

                    • Paul

                      Something that works is the most important part.  Fair is relative.  Let’s hope for the best.
                      What about nationalizing all public and private pensions, 401K’s and putting the whole lot into a big pot from which to pay Social Security and Medicare for everyone over 65 years old and aid for the kiddies/sick.  Everyone else works.  Take a chunk of that money, and start an FDR type public works program, including apprenticeships, etc.  (Didn’t Argentina nationalize all the private pensions?)
                      A one for all, and all for one, plan.  Snowball’s chance in hell~?
                      It might just come down to that.  The Govt might have to take drastic measures at some point. 

                    • http://overthepeak.com/wordpress/ Mystic

                       Somats gotta give….(my bet, it’ll be the Fed~!).

                    • Paul

                      How so?

                    • http://overthepeak.com/wordpress/ Mystic

                       Revolution, or
                      money printing~!?

  • CSArichardo

    Great set of slides … always appreciate getting them.  I think the trends were all down from 1974 because energy was getting cheaper in constant US$.  Of course that has all changed now due to a combination of the depreciation of the US$ and the rise in US$ oil price.

    • CSArichardo

      Correction  – I think the trends were all down from 1974 because energy was getting cheaper using a —– rising — US$. Of course that has all changed now due to a combination of —- two separate forces —-   the depreciation of the US$ and the rise in US$ oil price.

      • http://overthepeak.com/wordpress/ Mystic

        Yes….I got’cha~!

  • Jetser

    Is Steve Keen’s solution to the financial mess to print more money and hand it out equally with the command that people must use it to pay down debt, thereby converting debt-money into cash-money at a 1:1 ratio and producing no inflation? The idea that shadow money is asset-based shows how this solution is not as fair or inflation-proof as some like to make out.

    For example, consider the bond worth $100. This might have a $200 face value and be owed by someone who can’t repay the whole debt, giving it a real value lower than its face value. But alternatively it might have a $100 face value and be owed by someone who has assets and an income and no problem repaying it. With Keen’s solution people’s ability to repay their debt increases, except where they were already able to repay. Suppose our bond can now be repaid in full; it will now be worth either $200 or $100, depending on the status of the debtor and the initial face value. This means that the value of shadow money will increase by more than the reduction in debt (inflationary) and holders of bad debt see the value of their shadow money increase by more than holders of good debt (non-linear rewards, unfair). The more bad debt there is, the more inflation Keen’s solution will create.

    • Bigcollapso

      The idea of any more money/debt creation helping is insane. It’s like attempting to fix cancer with some “new special” cancer cells that will try to only attack the “really bad” old cancer cells.
      It’s time to admit that we created too much money/debt and liquidate the shit.

      • Paul

        Don’t forgot his debt jubilee idea for the deadbeat spendthrifts!    We are supposed to forgive all the debts accrued by the “owners” of McMansions, BMW’s, boats, expensive vacations, etc.  Now, that’s fucking crazy talk~!  Keen needs to rethink his ideas, before he goes back on the lecture circuit.