Monetary Deflation Through Increased Demand?

[JordanL]

I was looking at the dollar index today, wondering how in the world it's up at 81, and a thought occurred: this whole debacle could have one very long lasting effect. A move towards the dollar as a true world currency.

Is the market anticipating increased global adoption of dollars as a day to day currency? That would explain unmitigated increases in the dollar relative to other currencies, and would in some ways make sense. Yes, the dollar would be losing value, but the assets the dollar would be chasing would vastly increase by adding more markets.

 

[gonegolfin]

I was looking at the dollar index today, wondering how in the world it's up at 81,

The Dollar has been moving up because investors are dumping significant quantities of equities and commodities and rushing to US Treasuries. At this time, investors are more fearful of deflation than inflation.

Brian

 

[SevenEyedJeff]

I don't know who in their right mind would want the US dollar as a global currency. Look at the national debt (including future obligations) and the exploding budget deficit. Not too mention good paying jobs have moved overseas, leaving the government in a position of receiving reduced revenue as well.

I think the only thing worthy of global currency is physical gold and silver (or maybe even copper) coins. Otherwise the government will, as it is doing in the USA right now, find ways to destroy your wealth through inflation.

 

[Paulitician]

Many people have explained how deleveraging has caused the dollar to rise during this period--it's not necessarily a sign of monetary deflation (though it could be). Jim Willie made that point today. You can hear his reasoning at the Korelin Economics Report

direct link here: http://www.kereport.com/DailyRadio/Daily100608-2.mp3

 

[gonegolfin]

Many people have explained how deleveraging has caused the dollar to rise during this period--it's not necessarily a sign of monetary deflation (though it could be). Jim Willie made that point today. You can hear his reasoning at the Korelin Economics Report

direct link here: http://www.kereport.com/DailyRadio/Daily100608-2.mp3

I agree. However, the banks hoarding cash and hunkering down (this includes hoarding customer deposits) and individuals pulling out cash and storing it themselves is deflationary in the short term. Eventually that money will be unleashed and there will be a bigger base for lending, which is obviously quite inflationary. But not now.

Brian

 

[nate895]

We can, if the Fed doesn't continue to give money to the banks see deflation down to $800 Billion circulating in the economy, since that is the amount of physical currency there is, but that is highly unlikely. There is around 8 trillion+ in available money, 90% of which originated from the fractional-reserve banking money-multiplying system.