Real estate vs cash or gold

[Anonymous]

Some more confused ramblings.

When we say dollar will decline, are we saying that it is against just the ‘real’ stuff like gold/oil/houses, or also against other (fiat) currencies.

I understand it might be a mix of the two, but lets see how it might turn out, by taking extremes conditions of the two cases.

Lets consider the first scenerio:
If it is against just the stuff, and other currencies also decline (more or less same amount), it implies a world wide inflation.
Every body in the world just adds a zero to the price of everything.
Savers are loosers, the ones who took a loan (US gov on top of the list) win.
Things go back to the old way.
Only question : Does that require that US houses also inflate ? US Wages ?

What about the other scenerio:
If it the other way, only the dollar falls.
Rest (the real stuff and ‘other’ currencies) remain equally priced in terms of each other.
Is that a stable position ?

What happens then to other stuff?
Anything produced within US remains priced same in US$, anything external/global rises in $ terms.

Lets do a simple projection.
Dollar drops to its one-fourth ‘value’ in around two years.
Possible ? Lets say, yes.

Today:
Yen: 1 cent
Oil: 100 $ = 10K Y
Gold: 1000 $ = 100K Y
US House: 200K $ = 20M Y
US domestic company stock (Not sure an example): 10 $ = 1000 Y
US global company stock (Boeing): 50 $ = 5000 Y

After two years:
Yen: 4 cents
Oil: 400 $ = 10K Y
Gold: 4000 $ = 100K Y
US House: 200K $ = 5M Y
US domestic company stock : 10 $ 250 Y
US global company stock (Boeing): 200 $ = 5000 Y

How can this situation continue? You (americans) wont be able to afford gas.
US Imports will be unviable.

US exporters will be in a great position.
Foreign buyers will buy the US stocks and US houses (now much cheaper for them)
But they need to pay for them in dollars !!
So now they need to buy the dollars again.

I think this is not a stable situation.

The very fact that dollar falls and US stuff is cheaper for others, will encourage them to buy US produce and in turn prop up dollar again.

On the side note:

WHAT will they trade their millions of dollars into? EUROS? GOLD? RMB? Swiss Francs?

IF ‘I’ had lots and lots of dollars, I wont buy gold, Euro etc.
I will buy US houses. They are cheap compared to houses in my third world town, considering the quality of life, infrastructure etc.

Oh wait, I should rather wait for our own little real estate bubble to burst.

[peterb]

Despite what the govt tells us, we’re in a recession that looks to be headed towards a depression. And this may be globally, not just domestic. Demand destruction can really destroy prices. Even with all the currencies sloshing around the planet looking for the next investment/bubble.
Based on the market violence in swings, I’d say this money is having a real problem finding a home it can stay in for a while.
October and November should be blood bath months in the markets as earnings should be exremely bad. And as the market finds out there really isnt a new bubble to get into, it’s going to go to long term hold and safe haven. The Fundementals of most assets are still way outta whack. Prices need to adjust down to make investment sense. This will probably drive gold up in price since most countries will increase debt to save their markets. Like the US is doing now. and as we’ve learned in the RE market, at a certain level debt is a killer.

This is just a train of thought I”ve had latley as I am thinking more about increasing my gold holdings as all currencies look sketchy to me for the next few years.

[peterb]

Despite what the govt tells us, we’re in a recession that looks to be headed towards a depression. And this may be globally, not just domestic. Demand destruction can really destroy prices. Even with all the currencies sloshing around the planet looking for the next investment/bubble.
Based on the market violence in swings, I’d say this money is having a real problem finding a home it can stay in for a while.
October and November should be blood bath months in the markets as earnings should be exremely bad. And as the market finds out there really isnt a new bubble to get into, it’s going to go to long term hold and safe haven. The Fundementals of most assets are still way outta whack. Prices need to adjust down to make investment sense. This will probably drive gold up in price since most countries will increase debt to save their markets. Like the US is doing now. and as we’ve learned in the RE market, at a certain level debt is a killer.

This is just a train of thought I”ve had latley as I am thinking more about increasing my gold holdings as all currencies look sketchy to me for the next few years.

[peterb]

Despite what the govt tells us, we’re in a recession that looks to be headed towards a depression. And this may be globally, not just domestic. Demand destruction can really destroy prices. Even with all the currencies sloshing around the planet looking for the next investment/bubble.
Based on the market violence in swings, I’d say this money is having a real problem finding a home it can stay in for a while.
October and November should be blood bath months in the markets as earnings should be exremely bad. And as the market finds out there really isnt a new bubble to get into, it’s going to go to long term hold and safe haven. The Fundementals of most assets are still way outta whack. Prices need to adjust down to make investment sense. This will probably drive gold up in price since most countries will increase debt to save their markets. Like the US is doing now. and as we’ve learned in the RE market, at a certain level debt is a killer.

This is just a train of thought I”ve had latley as I am thinking more about increasing my gold holdings as all currencies look sketchy to me for the next few years.

[peterb]

Despite what the govt tells us, we’re in a recession that looks to be headed towards a depression. And this may be globally, not just domestic. Demand destruction can really destroy prices. Even with all the currencies sloshing around the planet looking for the next investment/bubble.
Based on the market violence in swings, I’d say this money is having a real problem finding a home it can stay in for a while.
October and November should be blood bath months in the markets as earnings should be exremely bad. And as the market finds out there really isnt a new bubble to get into, it’s going to go to long term hold and safe haven. The Fundementals of most assets are still way outta whack. Prices need to adjust down to make investment sense. This will probably drive gold up in price since most countries will increase debt to save their markets. Like the US is doing now. and as we’ve learned in the RE market, at a certain level debt is a killer.

This is just a train of thought I”ve had latley as I am thinking more about increasing my gold holdings as all currencies look sketchy to me for the next few years.

[peterb]

Despite what the govt tells us, we’re in a recession that looks to be headed towards a depression. And this may be globally, not just domestic. Demand destruction can really destroy prices. Even with all the currencies sloshing around the planet looking for the next investment/bubble.
Based on the market violence in swings, I’d say this money is having a real problem finding a home it can stay in for a while.
October and November should be blood bath months in the markets as earnings should be exremely bad. And as the market finds out there really isnt a new bubble to get into, it’s going to go to long term hold and safe haven. The Fundementals of most assets are still way outta whack. Prices need to adjust down to make investment sense. This will probably drive gold up in price since most countries will increase debt to save their markets. Like the US is doing now. and as we’ve learned in the RE market, at a certain level debt is a killer.

This is just a train of thought I”ve had latley as I am thinking more about increasing my gold holdings as all currencies look sketchy to me for the next few years.

[stockstradr]

When we say dollar will decline, are we saying that it is against just the ‘real’ stuff like gold/oil/houses, or also against other (fiat) currencies.

I’m not sure if your question is rhetorical? (If it isn’t and you really do not have an understanding of the most basic concepts in economics, then suggest you take a community college course in introductory economics)

A decline in the dollar is another way of saying we’ll have inflation. By definition, most things will cost more in nominal dollars. If your salary does NOT keep pace with that inflation (and it won’t for most Americans) then your standard of living will be falling. However, I’m also implying I believe the dollar will fall dramatically in value relative to a basket of foreign currencies. If the dollar is worth less in Chinese RMB, then one would expect every item imported from China will cost more in dollars.

Money is subject to the laws of supply and demand, just like everything. This is why Zimbabwe has hyperinflation. Let’s say that Zimbabwe had one trillion Zimbabwe “dollars” of their currency in circulation. The government leaders wanted to buy more things, pay salaries (and bribes) but obviously they didn’t have any sufficient positive net monetary in-flows. So they literally just printed money, and used that. When they, for example, double the amount of Zimbabwe dollars in circulation from one trillion to two trillion, guess what happens to the prices of everything? Do the math.

We are kinda saying the same thing could happen with the dollar, with shocks from both sides: 1) our government has in fact started printing money now, adding billions into circulation. 2) The world is trading out of dollars, dumping dollars for other currencies. This effectively INCREASES the amount of dollars per capita for those still using dollars, and increases the available dollars in circulation because of a glut of dollars in circulation for fewer dollar transactions.

[stockstradr]

When we say dollar will decline, are we saying that it is against just the ‘real’ stuff like gold/oil/houses, or also against other (fiat) currencies.

I’m not sure if your question is rhetorical? (If it isn’t and you really do not have an understanding of the most basic concepts in economics, then suggest you take a community college course in introductory economics)

A decline in the dollar is another way of saying we’ll have inflation. By definition, most things will cost more in nominal dollars. If your salary does NOT keep pace with that inflation (and it won’t for most Americans) then your standard of living will be falling. However, I’m also implying I believe the dollar will fall dramatically in value relative to a basket of foreign currencies. If the dollar is worth less in Chinese RMB, then one would expect every item imported from China will cost more in dollars.

Money is subject to the laws of supply and demand, just like everything. This is why Zimbabwe has hyperinflation. Let’s say that Zimbabwe had one trillion Zimbabwe “dollars” of their currency in circulation. The government leaders wanted to buy more things, pay salaries (and bribes) but obviously they didn’t have any sufficient positive net monetary in-flows. So they literally just printed money, and used that. When they, for example, double the amount of Zimbabwe dollars in circulation from one trillion to two trillion, guess what happens to the prices of everything? Do the math.

We are kinda saying the same thing could happen with the dollar, with shocks from both sides: 1) our government has in fact started printing money now, adding billions into circulation. 2) The world is trading out of dollars, dumping dollars for other currencies. This effectively INCREASES the amount of dollars per capita for those still using dollars, and increases the available dollars in circulation because of a glut of dollars in circulation for fewer dollar transactions.

[stockstradr]

When we say dollar will decline, are we saying that it is against just the ‘real’ stuff like gold/oil/houses, or also against other (fiat) currencies.

I’m not sure if your question is rhetorical? (If it isn’t and you really do not have an understanding of the most basic concepts in economics, then suggest you take a community college course in introductory economics)

A decline in the dollar is another way of saying we’ll have inflation. By definition, most things will cost more in nominal dollars. If your salary does NOT keep pace with that inflation (and it won’t for most Americans) then your standard of living will be falling. However, I’m also implying I believe the dollar will fall dramatically in value relative to a basket of foreign currencies. If the dollar is worth less in Chinese RMB, then one would expect every item imported from China will cost more in dollars.

Money is subject to the laws of supply and demand, just like everything. This is why Zimbabwe has hyperinflation. Let’s say that Zimbabwe had one trillion Zimbabwe “dollars” of their currency in circulation. The government leaders wanted to buy more things, pay salaries (and bribes) but obviously they didn’t have any sufficient positive net monetary in-flows. So they literally just printed money, and used that. When they, for example, double the amount of Zimbabwe dollars in circulation from one trillion to two trillion, guess what happens to the prices of everything? Do the math.

We are kinda saying the same thing could happen with the dollar, with shocks from both sides: 1) our government has in fact started printing money now, adding billions into circulation. 2) The world is trading out of dollars, dumping dollars for other currencies. This effectively INCREASES the amount of dollars per capita for those still using dollars, and increases the available dollars in circulation because of a glut of dollars in circulation for fewer dollar transactions.

[stockstradr]

When we say dollar will decline, are we saying that it is against just the ‘real’ stuff like gold/oil/houses, or also against other (fiat) currencies.

I’m not sure if your question is rhetorical? (If it isn’t and you really do not have an understanding of the most basic concepts in economics, then suggest you take a community college course in introductory economics)

A decline in the dollar is another way of saying we’ll have inflation. By definition, most things will cost more in nominal dollars. If your salary does NOT keep pace with that inflation (and it won’t for most Americans) then your standard of living will be falling. However, I’m also implying I believe the dollar will fall dramatically in value relative to a basket of foreign currencies. If the dollar is worth less in Chinese RMB, then one would expect every item imported from China will cost more in dollars.

Money is subject to the laws of supply and demand, just like everything. This is why Zimbabwe has hyperinflation. Let’s say that Zimbabwe had one trillion Zimbabwe “dollars” of their currency in circulation. The government leaders wanted to buy more things, pay salaries (and bribes) but obviously they didn’t have any sufficient positive net monetary in-flows. So they literally just printed money, and used that. When they, for example, double the amount of Zimbabwe dollars in circulation from one trillion to two trillion, guess what happens to the prices of everything? Do the math.

We are kinda saying the same thing could happen with the dollar, with shocks from both sides: 1) our government has in fact started printing money now, adding billions into circulation. 2) The world is trading out of dollars, dumping dollars for other currencies. This effectively INCREASES the amount of dollars per capita for those still using dollars, and increases the available dollars in circulation because of a glut of dollars in circulation for fewer dollar transactions.

[stockstradr]

When we say dollar will decline, are we saying that it is against just the ‘real’ stuff like gold/oil/houses, or also against other (fiat) currencies.

I’m not sure if your question is rhetorical? (If it isn’t and you really do not have an understanding of the most basic concepts in economics, then suggest you take a community college course in introductory economics)

A decline in the dollar is another way of saying we’ll have inflation. By definition, most things will cost more in nominal dollars. If your salary does NOT keep pace with that inflation (and it won’t for most Americans) then your standard of living will be falling. However, I’m also implying I believe the dollar will fall dramatically in value relative to a basket of foreign currencies. If the dollar is worth less in Chinese RMB, then one would expect every item imported from China will cost more in dollars.

Money is subject to the laws of supply and demand, just like everything. This is why Zimbabwe has hyperinflation. Let’s say that Zimbabwe had one trillion Zimbabwe “dollars” of their currency in circulation. The government leaders wanted to buy more things, pay salaries (and bribes) but obviously they didn’t have any sufficient positive net monetary in-flows. So they literally just printed money, and used that. When they, for example, double the amount of Zimbabwe dollars in circulation from one trillion to two trillion, guess what happens to the prices of everything? Do the math.

We are kinda saying the same thing could happen with the dollar, with shocks from both sides: 1) our government has in fact started printing money now, adding billions into circulation. 2) The world is trading out of dollars, dumping dollars for other currencies. This effectively INCREASES the amount of dollars per capita for those still using dollars, and increases the available dollars in circulation because of a glut of dollars in circulation for fewer dollar transactions.

[34f3f3f]

I hope we don’t end up with Zimbabwe inflation. I understand dollar value to be measured against a basket of currencies, but the dollar isn’t the only currency declining, and countries have been offloading their US dollar reserves for some time, and as far as I aware the printing presses have been whirring for some time, so nothing new there. The dollar may not remain the dominant currency, but much smaller currencies have survived economic turmoil. China is driven by an export market, and depends on US for imports, so I wouldn’t think is going to bite the hand that feeds it, at least just yet. The danger is if countries with large US$ reserves, decide to dump the dollar for belligerent, or global political leverage.

[34f3f3f]

I hope we don’t end up with Zimbabwe inflation. I understand dollar value to be measured against a basket of currencies, but the dollar isn’t the only currency declining, and countries have been offloading their US dollar reserves for some time, and as far as I aware the printing presses have been whirring for some time, so nothing new there. The dollar may not remain the dominant currency, but much smaller currencies have survived economic turmoil. China is driven by an export market, and depends on US for imports, so I wouldn’t think is going to bite the hand that feeds it, at least just yet. The danger is if countries with large US$ reserves, decide to dump the dollar for belligerent, or global political leverage.

[34f3f3f]

I hope we don’t end up with Zimbabwe inflation. I understand dollar value to be measured against a basket of currencies, but the dollar isn’t the only currency declining, and countries have been offloading their US dollar reserves for some time, and as far as I aware the printing presses have been whirring for some time, so nothing new there. The dollar may not remain the dominant currency, but much smaller currencies have survived economic turmoil. China is driven by an export market, and depends on US for imports, so I wouldn’t think is going to bite the hand that feeds it, at least just yet. The danger is if countries with large US$ reserves, decide to dump the dollar for belligerent, or global political leverage.

[34f3f3f]

I hope we don’t end up with Zimbabwe inflation. I understand dollar value to be measured against a basket of currencies, but the dollar isn’t the only currency declining, and countries have been offloading their US dollar reserves for some time, and as far as I aware the printing presses have been whirring for some time, so nothing new there. The dollar may not remain the dominant currency, but much smaller currencies have survived economic turmoil. China is driven by an export market, and depends on US for imports, so I wouldn’t think is going to bite the hand that feeds it, at least just yet. The danger is if countries with large US$ reserves, decide to dump the dollar for belligerent, or global political leverage.

[Author]

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