It May Be Time for the Fed to Go Negative

[bsrsharma]

Greg Mankiw, A professor at Harvard and an adviser to previous administration is suggesting demonetization as a way to prevent depression.

“Imagine that the Fed were to announce that, a year from today, it would pick a digit from zero to 9 out of a hat. All currency with a serial number ending in that digit would no longer be legal tender. Suddenly, the expected return to holding currency would become negative 10 percent.”

http://www.nytimes.com/2009/04/19/business/economy/19view.html

My question is: why resort to such a cockamamie idea instead of old fashioned inflation to prevent people from hoarding cash. If the Fed just buys about $1T of treasury paper from market every month, it should easily be able to set at least a 10% p.a. inflation. At that rate, most assets will be bought.

[4plexowner]

I don’t understand what the article is getting at – real interest rates have been negative for several years – that is part of why gold has gone from $300/oz to $900/oz

“real interest rates — interest rates measured in purchasing power — could become negative”

it’s just that the sheeple haven’t yet realized that real interest rates are negative and have been for years

~

the article also assumes that there are no alternatives to spending/loaning depreciating dollars – no mention of the fact that intelligent people with excess cash would be trying to preserve their purchasing power by putting the excess cash into tangibles like silver and gold [but again, this article is aimed at the sheeple]

~

another interesting game the Fed could play currency-wise: declare all $100 bills null and void (sorry, Mr. Franklin) – most $100’s circulate outside the USA so this game would mostly screw foreigners and not Americans – the rationale (spin) would be that the $100 bill has been counterfeited to the point of worthlessness so we are removing it from the currency – presto-magico, massive reduction in the supply of US dollars circulating

[4plexowner]

I don’t understand what the article is getting at – real interest rates have been negative for several years – that is part of why gold has gone from $300/oz to $900/oz

“real interest rates — interest rates measured in purchasing power — could become negative”

it’s just that the sheeple haven’t yet realized that real interest rates are negative and have been for years

~

the article also assumes that there are no alternatives to spending/loaning depreciating dollars – no mention of the fact that intelligent people with excess cash would be trying to preserve their purchasing power by putting the excess cash into tangibles like silver and gold [but again, this article is aimed at the sheeple]

~

another interesting game the Fed could play currency-wise: declare all $100 bills null and void (sorry, Mr. Franklin) – most $100’s circulate outside the USA so this game would mostly screw foreigners and not Americans – the rationale (spin) would be that the $100 bill has been counterfeited to the point of worthlessness so we are removing it from the currency – presto-magico, massive reduction in the supply of US dollars circulating

[4plexowner]

I don’t understand what the article is getting at – real interest rates have been negative for several years – that is part of why gold has gone from $300/oz to $900/oz

“real interest rates — interest rates measured in purchasing power — could become negative”

it’s just that the sheeple haven’t yet realized that real interest rates are negative and have been for years

~

the article also assumes that there are no alternatives to spending/loaning depreciating dollars – no mention of the fact that intelligent people with excess cash would be trying to preserve their purchasing power by putting the excess cash into tangibles like silver and gold [but again, this article is aimed at the sheeple]

~

another interesting game the Fed could play currency-wise: declare all $100 bills null and void (sorry, Mr. Franklin) – most $100’s circulate outside the USA so this game would mostly screw foreigners and not Americans – the rationale (spin) would be that the $100 bill has been counterfeited to the point of worthlessness so we are removing it from the currency – presto-magico, massive reduction in the supply of US dollars circulating

[4plexowner]

I don’t understand what the article is getting at – real interest rates have been negative for several years – that is part of why gold has gone from $300/oz to $900/oz

“real interest rates — interest rates measured in purchasing power — could become negative”

it’s just that the sheeple haven’t yet realized that real interest rates are negative and have been for years

~

the article also assumes that there are no alternatives to spending/loaning depreciating dollars – no mention of the fact that intelligent people with excess cash would be trying to preserve their purchasing power by putting the excess cash into tangibles like silver and gold [but again, this article is aimed at the sheeple]

~

another interesting game the Fed could play currency-wise: declare all $100 bills null and void (sorry, Mr. Franklin) – most $100’s circulate outside the USA so this game would mostly screw foreigners and not Americans – the rationale (spin) would be that the $100 bill has been counterfeited to the point of worthlessness so we are removing it from the currency – presto-magico, massive reduction in the supply of US dollars circulating

[4plexowner]

I don’t understand what the article is getting at – real interest rates have been negative for several years – that is part of why gold has gone from $300/oz to $900/oz

“real interest rates — interest rates measured in purchasing power — could become negative”

it’s just that the sheeple haven’t yet realized that real interest rates are negative and have been for years

~

the article also assumes that there are no alternatives to spending/loaning depreciating dollars – no mention of the fact that intelligent people with excess cash would be trying to preserve their purchasing power by putting the excess cash into tangibles like silver and gold [but again, this article is aimed at the sheeple]

~

another interesting game the Fed could play currency-wise: declare all $100 bills null and void (sorry, Mr. Franklin) – most $100’s circulate outside the USA so this game would mostly screw foreigners and not Americans – the rationale (spin) would be that the $100 bill has been counterfeited to the point of worthlessness so we are removing it from the currency – presto-magico, massive reduction in the supply of US dollars circulating

[peterb]

Yes, inflation has been way higher in the past than the return of CD’s and bank deposits in general. That’s the govt scam.
Tables are turned now. Deflation is putting the breaks on their ambitions of inflation. Debtors get killed in a deflationary environment. And the govt is the biggest debtor of them all.

[peterb]

Yes, inflation has been way higher in the past than the return of CD’s and bank deposits in general. That’s the govt scam.
Tables are turned now. Deflation is putting the breaks on their ambitions of inflation. Debtors get killed in a deflationary environment. And the govt is the biggest debtor of them all.

[peterb]

Yes, inflation has been way higher in the past than the return of CD’s and bank deposits in general. That’s the govt scam.
Tables are turned now. Deflation is putting the breaks on their ambitions of inflation. Debtors get killed in a deflationary environment. And the govt is the biggest debtor of them all.

[peterb]

Yes, inflation has been way higher in the past than the return of CD’s and bank deposits in general. That’s the govt scam.
Tables are turned now. Deflation is putting the breaks on their ambitions of inflation. Debtors get killed in a deflationary environment. And the govt is the biggest debtor of them all.

[peterb]

Yes, inflation has been way higher in the past than the return of CD’s and bank deposits in general. That’s the govt scam.
Tables are turned now. Deflation is putting the breaks on their ambitions of inflation. Debtors get killed in a deflationary environment. And the govt is the biggest debtor of them all.

[4plexowner]

[img_assist|nid=10871|title=Inflation|desc=|link=node|align=left|width=100|height=64]

[img_assist|nid=10872|title=Prime Rate|desc=|link=node|align=left|width=100|height=51]

look at the inflation chart for 2000 to 2008 – gold bottomed in 2001 and hit $1000 in 2008 and again in 2009 – interesting

NOTE: click on the charts to get a larger view

[4plexowner]

[img_assist|nid=10871|title=Inflation|desc=|link=node|align=left|width=100|height=64]

[img_assist|nid=10872|title=Prime Rate|desc=|link=node|align=left|width=100|height=51]

look at the inflation chart for 2000 to 2008 – gold bottomed in 2001 and hit $1000 in 2008 and again in 2009 – interesting

NOTE: click on the charts to get a larger view

[4plexowner]

[img_assist|nid=10871|title=Inflation|desc=|link=node|align=left|width=100|height=64]

[img_assist|nid=10872|title=Prime Rate|desc=|link=node|align=left|width=100|height=51]

look at the inflation chart for 2000 to 2008 – gold bottomed in 2001 and hit $1000 in 2008 and again in 2009 – interesting

NOTE: click on the charts to get a larger view

[4plexowner]

[img_assist|nid=10871|title=Inflation|desc=|link=node|align=left|width=100|height=64]

[img_assist|nid=10872|title=Prime Rate|desc=|link=node|align=left|width=100|height=51]

look at the inflation chart for 2000 to 2008 – gold bottomed in 2001 and hit $1000 in 2008 and again in 2009 – interesting

NOTE: click on the charts to get a larger view

[Author]

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