Comments on: Is Greece the End of Fiat Currency?

By: enigwe chaigozie

enigwe chaigozie — Sat, 09 Oct 2010 15:54:00 +0000

i think money have go to the next stage where by we no longer use paper as currency,………a situation where by money can no longer be touched phiscally but can be viewed or seen,which also bring a stop to inflaion,deflation and crime on scam……………………………………………..that would be my theory as an economics,ask me how this is possible within six mounths to a year of the resumption of a moneyless economy

By: MoneyEnergy

MoneyEnergy — Sat, 08 May 2010 18:30:56 +0000

@blue monkey – yes, if it is true that over a third of the Greek population is all public sector, that does seem high. But cutting back on the military budget – if they have one – well, the U.S. would do well to heed that advice first.

By: blue monkey

blue monkey — Sat, 08 May 2010 02:57:12 +0000

Greece and Spain won’t pay back. The only thing Germans can do is:
REPOSES 170 Leopard 2AEX Battle Tanks from Greece, and 190 Leopard 2A6E Battle Tanks from Spain.
U.S.A must REPOSES 170 F-16 Jet Fighters from Greece, … the rest is gone with the wind …forever …
Greece must stop paying lucrative pensions with borrowed money, reform the free health care system, and cut down, 4 times the military budged.

By: MoneyEnergy

MoneyEnergy — Fri, 07 May 2010 04:31:53 +0000

Between a rock and a hard place… I don’t think the Fed will be raising rates this year. And with the escalated levels of the perceived Euro crisis, the ECB probably won’t be, either. That might mean a lot of inflation in the pipeline…

By: Philip Brewer

Philip Brewer — Tue, 04 May 2010 14:05:48 +0000

Paying interest on excess reserves is the Fed’s plan for keeping those reserves from gushing into the money supply. (Along with a few other things—they can also start selling the trillion or so in mortgage-backed securities, if the market for those stabilizes to the point that doing so won’t crush the banks or housing.)

The Fed seems very sure that it’ll work, but it’ll only work if the Fed is willing to pay almost as much as an ordinary borrower. Why should the bank lend to the Fed at 2% or 3% when it can make a mortgage, car loan, or credit card loan at 6%, 12%, 22% or whatever? And if the Fed will pay, let’s say, 6% to keep the reserves from turning into money, that’ll mean that anyone else who wants money will have to pay more. That’ll just crush the economy.

By: MoneyEnergy

MoneyEnergy — Mon, 03 May 2010 17:43:05 +0000

I also don’t think actual hyperinflation will occur in the US for as long as the USD is still the major world reserve currency. But I agree with you that nevertheless the big bout of “ordinary inflation” is going to be on its way no matter what. Just a question of when it really kicks in. Australia, India, China, Canada and Brazil, certainly, are already seeing at least the usual normal levels of inflation again – Australia’s real estate market has shot up by 20% in the past year alone and it will probably be raising rates again next month.

The US market is different, of course. But there are waves of excess liquidity sitting in store at the banks which have not trickled out into the broader economy yet. As I understand it, the Fed is actually paying the banks interest on this money, so the banks don’t have the same incentive to lend it out yet.

By: Philip Brewer

Philip Brewer — Mon, 03 May 2010 17:15:30 +0000

The central bank can always stop inflation—including hyperinflation—by stabilizing the money supply, if the board of governors have the nads to accept the resulting recession. A weak board will sometimes tolerate a level of inflation that’s quite harmful to the economy—10% or even 15%—rather than take the abuse that results if they do what it takes to grind inflation out of the economy.

Hyperinflation, though, usually has a different cause. Mere reluctance to tolerate a recession usually gives way when the inflation rate gets high enough to inflict real pain on ordinary voters. Hyperinflation results when the government loses both fiscal control and the trust of their borrowers. If they can neither hold the line on spending nor fund the spending through taxes, nor borrow the money, the only remaining choice is to print the money—and that ruins the currency very quickly. (It makes me glad that California and Illinois don’t have their own currencies.)

It may be foolish of me, but I have considerable confidence that the US will be able to bring its budget adequately into balance to prevent hyperinflation.

I’m rather more worried about the big burst of ordinary inflation due once the economy improves enough that the excess bank reserves created to address the panic start flowing into the economy. Solving that would kick us right back into a recession, and I see no sign that the board of governors of the Federal Reserve has what it takes to do what it takes.