WHAT'S THE VALUE OF A U.S. DOLLAR?
THE SHORT ANSWER IS "NOT MUCH", BUT IT'S A LITTLE COMPLICATED.
THE VALUE OF AMERICAN CURRENCY LIES IN ONLY THREE (3) CATEGORIES (BECAUSE IT IS NOT, NOT BACKED BY EITHER GOLD NOR SILVER):
1~ FOREIGN EXCHANGE RATE, WHAT A BUCK WILL BUY IN A FOREIGN MARKET.
The U.S. DOLLAR INDEX (USDX) "measures the strength of the dollar against six of the most widely-traded currencies. They, and their countries, are: euro (the 13 countries in the European Union that have adopted the euro), yen (Japan), pound sterling (Great Britain), dollar (Canada), krona (Sweden) and franc (Switzerland)."
WHILE THE WORLD HAS 185 CURRENCIES, ONLY A HANDFUL ARE 'UNIVERSALLY' PREFERRED AND MOST COMMONLY USED IN GLOBAL TRADE.
2~ U.S. TREASURY NOTES.
WHAT A TOPIC THAT IS!
OUR TREASURY NOTES (T-NOTES) GO ON THE GLOBAL AUCTION BLOCK EVERY DAY, EITHER ABOVE OR BELOW "FACE VALUE".
CHINA HAS A LOT OF THESE!
MORE ON THAT LATER.
3~ FOREIGN CURRENCY 'RESERVES', OR, HOW MUCH USDs OTHER NATIONS HANG ONTO IN A DAY, AND WHETHER OR NOT THEY TRADE OFF USDs FOR A BETTER DEAL IN ANOTHER CURRENCY.
SO WE SEE HOW A USD HAS ANY VALUE IS BASED ON THESE 3 THINGS, ALL OF WHICH RELY ON THE REST OF THE WORLD'S PERCEPTION OF THE VALUE OF A BUCK, BUT WAIT!
THERE'S MORE TO IT THAN EVEN THAT!
THERE ARE REALLY TWO "KINDS" OF THE SAME DOLLAR!
~ A DOLLAR CONTROLLED BY GOVERNMENT REGULATION AND TAXATION, AND
~ A DOLLAR CONTROLLED BY YOU (CALL THIS A "USEABLE" $)
EXAMPLES:
1~"CONTROLLED DOLLARS"
HOME EQUITY IS IN $$$ YOU CAN'T REALLY USE UNLESS YOU SELL THE HOUSE OR BORROW MONEY AGAINST THAT EQUITY, BUT THAT'S ALL REGULATED AND WHAT YOU GET DEPENDS ON A LOT OF FACTORS LIKE MARKET VALUE, CURRENT TAX RATES, "PUBLIC SERVICE" REGULATIONS THAT CAN MAKE A HOUSE LOOK LIKE A GOOD BUY OR MAKE BUYERS RUN AWAY.
OTHER THINGS LIKE YOUR 401(k) ARE ALSO FEDERALLY CONTROLLED AND NOT USEABLE $$$.
BACK DURING BUSH'S LAST YEARS IN OFFICE, WE SAW TOO MANY FOLKS LOSE THEIR, UMMM, "ASSETS" BY THINKING THE ABOVE-MENTIONED WERE GREAT INVESTMENTS/NEST EGGS, WHATEVER... THINGS CHANGE IN THE TWINKLING OF AN EYE!
IF ONE TOOK ADVANTAGE OF A "STEAL" ON A HOUSE FOR $250,000 AND NOW IT WON'T SELL FOR EVEN $100,000, THAT'S REALLY BAD NEWS!
WE ALL RECALL HOW HARD 401(K) ACCOUNTS WERE HIT.
NOBODY BAILED AMERICAN CITIZENS OUT LIKE WALL STREET GOT BAILED OUT OF THAT BIG MESS LEADING INTO 2007!
WE LOST AND IT'S STAYED LOST!
2~"USEABLE DOLLARS"
ACTUAL USEABLE $$$ ARE WHAT YOU SEE SITTING IN THAT COOKIE JAR, OR BANK, OR ANY "READY ACCESS ACCOUNT", TAXES ALL PAID, JUST REALLY "YOUR" MONEY.
THAT USEABLE $$$ IS WHAT WE HAVE TO GUARD!
WHERE CAN WE SEE THE (SORT OF) REAL VALUE OF OUR USD?
AT THE GAS PUMP AND AT THE LOCAL GROCERY STORE, MAINLY.
EVERYBODY SELLING ANYTHING KNOWS WE ALL HAVE TO HAVE GAS TO GET TO WORK AND WE HAVE TO HAVE FOOD TO LIVE SO WE CAN MAKE IT THROUGH A WEEK TO COLLECT THOSE PAYCHECKS.
GAS AND FOOD, THE TWO AREAS WHERE WE DAILY GET GOUGED, BECAUSE, LET'S FACE IT, WE HAVE PAID AND WILL CONTINUE TO, AS LONG AS WE CAN, PAY WHATEVER IS DEMANDED AT BOTH PUMP AND GROCERY CHECKOUT LINES.
SURE, WE MAY BITCH AND COMPLAIN, BUT WE SHELL OUT WHATEVER WE'RE REQUIRED TO AND HOPE FOR BETTER DAYS.
WHEN FOOD AND GAS BEGIN TO SOAR, YOU CAN BET THE FARM THE VALUE OF THE USD HAS GONE DOWN
IT BECOMES A VICIOUS CYCLE, A CIRCLE OF DEMAND VERSUS SUPPLY, AND WE PAY THOSE HIGHER PRICES, DRIVING PRICES UP EVEN MORE, THEN DECIDE TO CUT BACK, SO OUR GAS AND FOOD PRICES MAY DROP A WEE BIT, THEN WE BUY, BUY, BUY AGAIN, AND... THERE'S THE RUB.
SO WHAT'S A "HEALTHY" ECONOMY?
IF ANYONE CARES TO BELIEVE THE FEDERAL RESERVE, IT'S WHEN THE "CORE INFLATION RATE" GOES UP "ONLY" ABOUT 2% A YEAR.
THAT'S NICE.
"CORE INFLATION RATE" APPLIES TO EVERYTHING THAT IS NOT ENERGY AND FOOD.
HERE'S THE KICK IN THE TEETH OF THAT LITTLE IDEA...
THE AVERAGE AMERICAN'S INCOME MUST GO UP A BIT MORE THAN THAT 2% TO HANDLE THE HIGHER PRICES OF EVERYTHING IN THE ABOVE-MENTIONED 'VICIOUS CYCLE.
IF THAT DOESN'T HAPPEN, OUR 'STANDARD OF LIVING' STARTS SLIDING INTO THE SEWER.
DOES 'AVERAGE JOE'S' INCOME GO UP MORE THAN 2% EACH YEAR?
WELL, NO!
NO IT DOES NOT!
LOOKING BACK AT THE YEARS 2000 TO 2006, WHILE AMERICAN WORKERS INCREASED PRODUCTIVITY OF THEIR COMPANIES BY AROUND 15%, INCREASED CORPORATE PROFITS BY ABOUT 13%, AMERICAN WORKERS' WAGES REMAINED EITHER FLAT OR EVEN DECREASED AS COMPANIES LAID-OFF WORKERS, MOVED BUSINESS OVERSEAS, OR FURTHER INCREASED THEIR PROFITS BY NOT HIRING FULL-TIME WORKERS (WHICH WOULD BE MORE EXPENSIVE TO THEM IN PAYING 'BENEFITS' TO FULL-TIMERS).
AMERICAN WORKERS, FRANTIC TO KEEP THEIR JOBS, AGREED TO CUTS IN PAY, BECOMING "PART-TIMERS", AND/OR WORKED MORE HOURS FOR THE SAME PAY.
DO YOU FEEL APPRECIATED KNOWING THAT?
COMPANIES WON BIG-TIME, AMERICAN WORKERS LOST.
YEAH, THAT 'BITES', DOESN'T IT?
THEN IT MAY ALSO BITE TO KNOW THAT CORPORATIONS INVOLVED IN GLOBAL MARKETS LIKE A DECLINING USD.
A DECLINING DOLLAR MEANS OTHER NATIONS CAN BUY MORE FROM THE U.S. COMPANIES THAT COUNT ON EXPORTS FOR PROFITS.
EXPORTS FROM THE U.S. INCREASE AS DOLLAR VALUE SINKS.
BUT WE WIND UP PAYING MORE FOR IMPORTS!
GO FIGURE!
[HAVE A READ OF THE NEW YORK TIMES' OLD ARTICLE FROM 2013,
The Rich Get Richer Through the Recovery, September 10, 2013.]
HERE'S ANOTHER AREA WHERE MANY AMERICANS HAVE THE WRONG IDEA....INFLATION VERSUS DEFLATION.
IN DEFLATION, THE VALUE OF A BUCK ACTUALLY INCREASES.
IN INFLATION, AN AMERICAN DOLLAR'S VALUE GOES DOWN.
THINK OF IT LIKE THIS...
WHEN THE HOUSING MARKET WENT TO HELL IN A HAND BASKET IN 2007 TO ROUGHLY 2011 (THOSE MAY BE CONSIDERED ONLY THE "WORST" YEARS SINCE THE MARKET IS STILL NOT BACK UP TO PAR), WE EXPERIENCED A TIME OF MASSIVE DEFLATION.
SURE, FOLKS COULD BUY HOUSES FOR ALMOST A SONG, BUT WHEN, OH, WHEN WOULD THE VALUE OF THOSE CHEAP HOUSES GO UP?
WHEN THEY DIDN'T GO UP, AND STILL DIDN'T GO UP, MANY PANICKED.
ON THE OTHER SIDE OF THAT COIN, FOLKS STUCK WITH HUGE DEBT FOR THE HOME THEY'D PAID BIG BUCKS FOR AND STILL OWED FOR GOT INTO "SUBMARINE RACES", MORTGAGES THAT EXCEEDED THE VALUE OF THEIR HOMES ONCE THE PROVERBIAL MANURE HIT THE FAN, CREDITORS CLOSING IN.
NOW WE HAVE TO ADD TO THE THREE WAYS TO COUNT THE VALUE OF A USD THAT HATEFUL "COST OF LIVING".
WHAT DO WE HAVE TO EARN AND HAVE ON HAND TO PAY FOR DAY-TO-DAY NECESSITIES?
WHAT DOES IT COST EACH OF US TO LIVE IN AMERICA?
WE USUALLY TURN TO THE CONSUMER PRICE INDEX (CPI) TO FIND THAT OUT.
IT WILL TELL US WHAT WE'LL EXPECT TO PAY FOR A GROCERY BUGGY FULL OF ESSENTIALS IN ANY GIVEN MONTH...HOPEFULLY.
AGAIN, THINGS CHANGE QUICKLY.
IS THE CPI RATIONAL, LOGICAL IN ASSUMING WHAT WE NEED TO EARN TO HAVE A CERTAIN STANDARD OF LIVING?
NOT REALLY.
A "LIVING WAGE" MEANS JUST THAT, WHAT WE MUST MAKE TO BARELY SQUEAK BY AND IT DOES NOT INCLUDE EATING OUT AT RESTAURANTS, GOING ON VACATION, OR SAVING FOR OUR CHILDREN'S COLLEGE DAYS.
AND THAT IS WHERE SO MANY MISS THE BOAT WHEN THEY LOOK AT THE OLD 'CPI'.
"OH, I ONLY NEED "$X" TO MAKE IT THIS MONTH? YAAAY!"
NOPE.
YOU NEED $X TO EKE OUT AN EXISTENCE.
NOT PAY FOR CABLE TV, INTERNET, A MOVIE, OR A DRIVE IN THE COUNTRYSIDE.
YOU NEED $X TO BUY JUST BARELY ENOUGH GAS AND JUST BARELY ENOUGH FOOD TO GET BY ON, AND YOU ARE PRETTY MUCH SCREWED IF THERE'S A FAMILY EMERGENCY THAT LAYS OFF THE HOUSEHOLD'S BREAD-WINNER(S), OR LITTLE JOHNNY LOSES HIS BAND INSTRUMENT AND NEEDS A REPLACEMENT.
DOES THE CPI COUNT PET FOOD, VETERINARIAN VISITS, ETC?
NOPE.
NEW TIRES FOR 'OLD BETSY'?
NOPE.
DAUGHTER GETTING DIVORCED AND NEEDING TO MOVE IN WITH THE KIDS FOR A LITTLE WHILE?
NOPE.
NOR INSURANCE PAYMENTS.
NOR PROPERTY TAXES.
NOR HOME REPAIRS.
NOR CHILD CARE.
HOW MANY AMERICANS TAKE THE TIME TO SIT DOWN AND REALLY CONSIDER HOW MANY "LITTLE THINGS", LITTLE UNEXPECTED THINGS CAN HAPPEN TO MAKE ROWS AND ROWS OF DOMINOES ALL FALL AT THE SAME TIME?
NOT MANY, APPARENTLY.
HOW MANY MIDDLE OR LOWER THAN MIDDLE CLASS AMERICANS BRING HOME ENOUGH TO STUFF SOME OF THAT PAYCHECK INTO AN EMERGENCY SAVINGS ACCOUNT?
FEWER AND FEWER EACH YEAR.
SO OUR CPI ISN'T REALLY COMPLETELY HONEST ABOUT THE COST OF LIVING IN AMERICA.
IF YOU COUNT ON THE CPI, COUNT ON IT ONLY TO TELL YOU WHAT YOU NEED TO STAY OUT OF A HOMELESS SHELTER, KEEP YOU OFF THE MEAN STREETS.
MIT CAME OUT WITH A LIVING WAGE CALCULATOR A FEW YEARS BACK, AS DID THE 'ECONOMIC POLICY INSTITUTE', BOTH SEEMED TO TAKE THINGS INTO CONSIDERATION THAT THE CPI DOES NOT, LIKE CHILD CARE AND MOST TAXES, SO IF YOU'D LIKE TO PLAY WITH THOSE, HERE ARE THE LINKS, BUT BE AWARE THAT THE EPI HAS NOT UPDATED SINCE 2008, AND MIT LAST UPDATED IN 2012:
FOR MIT: http://livingwage.mit.edu/
FOR EPI: http://www.epi.org/resources/budget/
[THE EPI DOES STATE THEIR CALCULATOR IS FOR A "MODEST" LIVING... BARE BONES, SHALL WE SAY?]
THOSE ARE EYE-OPENERS, AREN'T THEY?
AND THEY'RE BOTH OUT OF DATE!
THE EPI CALCULATION FOR ONE PARENT AND ONE CHILD IN HILO, HAWAII, FOR ONE MONTH, FALLS JUST SHY OF $5,000.
IS THAT FOR REAL?
TO SEE CPI DATA ON COST OF GOODS, GO <HERE> AND TRY TO SORT IT ALL OUT.
TO SEE ITS INFLATION INDEX, GO <HERE>.
ABOUT CHINA
China is more and more concerned it seems that the trillions it holds in U.S. dollars will be worth a LOT less if dollar inflation sets in.
This would surely happen as a result of increased U.S. deficit spending and printing of U.S. Treasuries to support U.S. debt.
BOTH OF THOSE ARE HAPPENING AS I TYPE.
China HAS INDEED called for the International Monetary Fund (IMF) to develop a currency to REPLACE the dollar, TIME AND TIME AGAIN.
(Source: FT.com, China Calls for a New Reserve Currency, March 23, 2009)
The U.S. debt to China was $1.224 TRILLION, as of February 2015.
The U.S. DEBT TO ALL NATIONS WAS $6.1 TRILLION AT THAT TIME.
[SEE: "Who Owns the U.S. National Debt?"]
Owning U.S. Treasury notes GROWS China's economy by keeping its currency, the YUAN, weaker than the USD, which keeps exported CHINESE products cheaper than U.S. products, and, hypothetically, creates more jobs for its 1.4 billion people.
CHINA HAS US AT A DISADVANTAGE, AND IT'S BEGINNING TO LEVERAGE THAT IN "NEW AND IMPROVED" WAYS.
AS AMERICA'S BIGGEST LENDER, CHINA HAS OFTEN THREATENED TO SELL OFF ITS T-NOTES, WHICH WOULD ALMOST INSTANTLY RAISE AMERICAN INTEREST RATES.
AND THEN SOMETIMES CHINA HAS SET UP A SQUAWK TO REPLACE THE USD WITH SOMETHING ELSE FOR INTERNATIONAL TRADE.
CHINA HAS THE 3RD LARGEST ECONOMY IN THE WORLD, WITH ONLY THE U.S. AND THE ENTIRE EUROPEAN UNION COMBINED TOPPING IT IN SALES TO THE GLOBAL MARKET.
AT ANY TIME, CHINA COULD CALL IN ALL ITS U.S.DEBT, BUT WILL MOST LIKELY NOT DO SO TO AVOID WORLDWIDE FINANCIAL CHAOS.
INSTEAD, CHINA WILL JUST SLOWLY UNLOAD ITS AMERICAN DEBT TO OTHER NATIONS AND GET OUT OF ITS POSITION AS MAIN "BANKER" TO THE USA.
SUCH A MOVE WOULD BE, AND HAS BEEN IN THE PAST, A SIGNAL TO OTHER NATIONS TO DUMP AMERICAN T-NOTES AND BUY OTHER CURRENCIES...ALL BAD NEWS FOR THE U.S.
ALTHOUGH MANY U.S. COMPANIES HAVE MOVED TO CHINA, CHINA CAN BOOT THEM OUT AT ALMOST ANY TIME.
RECENT CLASHES BETWEEN CHINA AND JAPAN AND THE PHILIPPINES HAVE RATTLED A FEW NERVES BECAUSE IT LOOKS LIKE CHINA IS RAMPING UP, MILITARILY SPEAKING.
RUSSIA SNUGGLING BACK UP WITH CHINA HAS ALSO GIVEN SOME CAUSE FOR MILD ALARM.
CHINA'S RELATIONSHIPS WITH NATIONS LIKE IRAN AND SEVERAL AFRICAN AS WELL AS SOUTH AMERICAN NATIONS MAKE A LOT OF FOLKS A LITTLE NERVOUS. WE'VE SEEN CHINA PROVIDE CERTAIN THINGS TO CERTAIN COUNTRIES THAT THE U.S. AND EVEN THE U.N. DISAGREED WITH AND HAD RULES AGAINST.
GIVEN ALL THE ABOVE, ALL OF IT TAKEN TOGETHER, CAN WE REALLY SAY WHAT A U.S. DOLLAR IS ACTUALLY WORTH?
IF WE ASK, AS MORE AND MORE NATIONS ARE ASKING, WHAT DOES AMERICA HAVE TO BACK UP ITS CURRENCY, THEN WE MAY REALIZE WHAT WE'RE TOLD IS THE VALUE OF A USD IS NOT AT ALL WHAT THE ACTUAL VALUE IS.
AMERICA IS SLOWLY SLIDING OFF THE TOP OF THE HEAP.
WE'VE ANGERED A LOT OF PEOPLE ALL OVER THE GLOBE WHILE SOME CRAFTIER NATIONS HAVE BEEN GOING IN BEHIND US ENDEARING THEMSELVES TO THE COUNTRIES WE'VE PISSED OFF.
MORE AND MORE, PEOPLE FROM ALL NATIONS SEE CHINA AND JAPAN AS BETTER SOURCES OF CHEAPER GOODS THAN AMERICA OFFERS.
AS AMERICA GETS RID OF MORE TRADE REGULATIONS IN HER DRIVE TO CREATE NEW "NAFTA" DEALS WITH EVERYBODY, THINGS CAN ONLY GO DOWNHILL FOR AMERICAN WORKERS.
WHO CAN FORGET THE NUMBER OF JOBS THAT LEFT AMERICA RIGHT AFTER NAFTA WENT INTO EFFECT?
THE FED AND OUR GOVERNMENT ARE SCRAMBLING NOT TO FALL OFF THE TOP, BUT IT LOOKS TO ME LIKE EVERYTHING THEY DO IS DRAGGING US FURTHER DOWN.
IS THE DOLLAR WORTH ANYTHING?
IF WE CUT THE SAME SHAPE OUT OF THE COMICS SECTION, WE MIGHT JUST HAVE MORE INK IN IT.
BUT WHO OF US CAN EXTRACT INK TO SELL?
I'VE SAID FOR YEARS AND YEARS THAT AMERICANS REALLY OUGHT TO GET BACK TO A BARTER SYSTEM AS MUCH AS POSSIBLE, TRADE OR BUY LOCALLY AS MUCH AS POSSIBLE, REFUSE TO BUY CHINESE OR JAPANESE OR ANYTHING MADE OUTSIDE THE U.S. AS MUCH AS POSSIBLE, AND BUY QUALITY SO THINGS LAST, OR LEARN TO CREATE THINGS OURSELVES AS MUCH AS POSSIBLE.
THE USD... A PIECE OF ODD PAPER WITH THE FACES OF DEAD GUYS ON THE FRONT.
HOLLOW.
NOTHING TO BACK UP ITS WORTH.
NO GOLD, NO SILVER, JUST PAPER AND INK.
IF THE GLOBAL COMMUNITY BEGINS TO LOOK AT IT LIKE THAT, IF EVEN CHINA DECIDES THAT'S IT, NO MORE T-NOTES, NO MORE MONOPOLY MONEY, THEN WHAT?
MAYBE WE SHOULD THINK ABOUT THAT...VERY SERIOUSLY...BEFORE IT HAPPENS.
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