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General : The Federal Reserve and The M3 Money Supply
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Message 1 of 10 in Discussion

From: HoratioBunce (Original Message)

Sent: 6/12/2008 4:05 PM

Dear friends,

I'm no economist, and I don't pretend to be one. However, with many years on these boards, and especially with Hayekian's help, I've learned a little bit about the way the Federal Reserve operates.

The Federal Reserve Bank has been printing more and more U.S. Dollars....almost as though they have a huge supply of excess paper clogging their warehouses. hehehe. Since 2000, the number of U.S. Dollars in circulation has increased tremendously.

Maybe somebody (Hayekian?) could step in here to tell us a little bit about the overall affect this additional money has had on the U.S. economy.

As I see things, this huge increase in additional money has had a direct role in the price of oil on the world market. The value of the U.S. Dollar has been in a steady rate of decline, since President Bush took office (Democrats, and their damned spending habits! Bush is the best Democrat we've ever had as President) With the decreased purchase power of the Dollar, everything naturally costs more than it did when money was harder to get our hands on. The increase in available money makes the Dollar nearly worthless........and this, in no small way, plays a role in the price of imported oil.

When the Dollar goes down in value, everything we buy costs more. Foreign nations, who sell oil to the U.S., now must ask for more U.S. Dollars in order to make up for the lost revenue.

Am I Correct, or am I Wrong? Aren't oil prices inversely proportional to the value of the U.S. Dollar? Maybe not exactly....due to supply and demand factors......but it seems to me that the falling value of the U.S. Dollar and the increased price of crude oil are very closely related.

OK.......let me have it with both barrels. I can take the criticism.

Joel

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Message 2 of 10 in Discussion

From:

Hayekian

Sent: 6/12/2008 6:27 PM

They don't print many dollars - less than 7% of dollars on the books exist as coin or currency.

Most dollars are created when loans are made - they exist as data entered on a ledger, maintained in computers. They are markers that represent a unit of value - like a "degree" on a thermometer.

Aren't oil prices inversely proportional to the value of the U.S. Dollar?

Relative to prices measured in other currencies, yes. The dollar has declined against the euro by 50% - thus, while prices in Europe have risen from $6 to $9, the prices in the United States have risen from $2 to $4 (doubled). (I didn't take the time to research the precise numbers, those are representative - fuel is still more expensive in Europe than it is in the United States).

Part of the price increase is supply and demand, part is from currency valuations.

The relationship of the value of the dollar, our economy, and our debt is quite complex. It is my opinion that the Fed is devaluing the dollar as a way of managing foreign debt - essentially the equivalent of writing off half the value of the debt held by China. The $1 trillion China holds is now worth half what it used to be worth ...

The same holds true with American debt - essentially, wealth is being transferred from those who trusted the United States government enough to loan their money to the government, to the benefits paid for by those dollars. As inflation rises, the future cost to pay back that debt falls - at the expense of the debt holder.

This lacks integrity - but it worked in the past to lower the United States' real debt, and it seems to be working now.

The risk of currency devaluation is the rise in price of imported goods, and the ability of foreign investment to buy real American property - such as the Belgium InBev beer company about to take over Anheuser Busch for $46 billion. That is only $29 billion euro, where 5 years ago that would have been $55 billion euro.

The advantage of currency devaluation is it makes American workers competitive again - lowering American costs and cutting the trade deficit, putting Americans back to work, and increasing the value of American real property (farmland, real estate, gold, etc.).

(1 recommendation so far)

Message 3 of 10 in Discussion

From: HoratioBunce

Sent: 6/12/2008 7:58 PM

Hayekian,

Many thanks for the reply. Thank you, many times over, for all you have taught me over the years. It is much appreciated.

Thanks to you, I now have a better understanding of the comments made by the fella who wrote the following piece.

http://www.energybulletin.net/12125.html

The above piece helps explain how the U.S. maintains its leverage over foreign nations. And it shouldn't be any surprise to us why Iran is now ENEMY NUMBER ONE.

I'm not sure how accurate this chart is, as it was passed along to me by a friend, with no link to the information, nor the source.

2001 - US$/Eur. = 1.11691 (100%)
2002 - US$/Eur. = 1.06106 (94.99%)
2003 - US$/Eur. = 0.88540 (79.27%)
2004 - US$/Eur. = 0.80510 (72.08%)
2005 - US$/Eur. = 0.80443 (72.02%)
2006 - US$/Eur. = 0.79714 (71.37%)
2007 - US$/Eur. = 0.73096 (65.44%)
2008 - US$/Eur. = 0.65533 (58.67%)

Joel

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Message 4 of 10 in Discussion

Sent: 6/13/2008 1:54 AM

This message has been deleted by the author.

Message 5 of 10 in Discussion

From: codify

Sent: 6/13/2008 2:07 AM

CHRYSLER BUILDING ON THE BLOCK

SOVEREIGN ARAB FUND TO PAY $800M

By LOIS WEISS

June 11, 2008 --

The latest Big Apple trophy being coveted by oil-rich sovereign wealth funds is the landmark Chrysler Building.

Sources say the super-rich Abu Dhabi Investment Council is negotiating an $800 million deal for a 75 percent stake in the Art Deco treasure that has defined the Midtown skyline since 1930.

The Chrysler assets would be purchased from TMW - the German arm of an Atlanta-based investment fund that's been eager to cash out of its Chrysler stake.

The deal follows last month's sale of the GM Building and three other Macklowe/Equity Portfolio properties for $3.95 billion to a group of investors including the wealth funds of Kuwait and Qatar and Boston Properties.

As part of the Chrysler deal, sources said the Abu Dhabi Investment Council would also get part of the skyscraper's signature Trylons retail prize next door.

Tishman Speyer Properties owns the remaining 25 percent stake in the Chrysler Building and operates the landmark at 405 Lexington Ave., along with the Trylons and the newer next door neighbor at 666 Third Ave.

The Trylons space also involves retail portion, which includes the Capital Grille steakhouse and a Citibank branch.

The buildings sit on land owned by Cooper Union, which leased it in a long-term arrangement to others and uses the payments to support tuition for its students.

Recently Tishman Speyer obtained a 150-year extension of the ground lease.

Sources say the deal would leave Tishman Speyer in charge of the building, with the Abu Dhabi fund essentially acting as a silent partner.

Abu Dhabi has also partnered with Tishman Speyer in other deals around the world, sources said. Since TMW and Tishman Speyer sold 666 Fifth Ave. to Kushner Companies for $1.8 billion last year, the Atlanta group began informing the real estate community that it was ready to cash out in the landmark Chrysler Center, as well.

None of the principals involved in the deal had any comment.

Boston Properties closed on its purchase of the GM Building on Monday with investment partners Kuwait and Qatar, and will complete the purchase of three other former Macklowe properties over the next few months.

Developer Harry Macklowe was forced to sell the assets after taking a personal loan on the GM Building and other family assets to raise nearly $7 billion to buy a city package of former Equity Office buildings.

The credit markets tanked right after completing that deal in July and Macklowe was unable to refinance the short-term debt causing him to sell the four buildings to Boston Properties and return the Equity portfolio to lender Deutsche Bank.

http://www.nypost.com/seven/06112008/business/chrysler_bldg__on_the_block_115016.htm

I think there will be more of this happening as our dollars are recycled here. We are no longer creating M3 supplies via oil purchases.

Joel I thought the US/Euro was around 1.20 in 2000, 2001. Could be wrong though.

Message 6 of 10 in Discussion

From:

Hayekian

Sent: 6/13/2008 9:19 PM

The euro was introduced January 1, 1999, with a nominal value close to $1. The formal introduction as circulating currency deadline was February 28, 2002.

The all time high value of the dollar vs. the euro was $1.21, set October 26-27, 2000 (before the euro was fully circulating). The dollar and euro were trading nominally (1 to 1) around November 1, 2002.

The all time low value of the dollar vs. the euro was set April 24 this year - 0.624. The value is now about 0.65 euro.

Message 7 of 10 in Discussion

From:

puma2371

Sent: 6/22/2008 4:43 PM

while we are being distracted by assumptive comparisons, it would serve us well to not forget for a moment that the euro and the dollar are the exact same thing. fiat currency, manufactured, contolled and regulated (manipulated) by the imf/world bank.

the ebb and flow of wealth is entirely contrived.

Message 8 of 10 in Discussion

From:

Dann1776

Sent: 6/27/2008 6:28 PM

Look guys,

It is simply nice to be part of intelligent conversation.

A pleasure...

Message 9 of 10 in Discussion

From:

Dann1776

Sent: 6/27/2008 6:52 PM

Note how the Jap Yen sticks right to the dollar, and no one says a damn thing.

	US Dollar	Jap YEN	Euro
6/21/2003	1.00	118.43	0.8621
1/1/2004	1.00	107.4	0.7952
1/1/2005	1.00	102.44	0.7372
1/1/2006	1.00	117.681	0.8446
1/1/2007	1.00	119.116	0.758
1/1/2008	1.00	112.05	0.6803
6/27/2008	1.00	107.657	0.6371

How can we compete in the jap market if they are allowed to never float. Our Government needs to address these issues.

Message 10 of 10 in Discussion

From:

macroscopic

Sent: 6/28/2008 9:04 PM

"When the Dollar goes down in value, everything we buy costs more."

that is not quite true. everything that is not subject to deflation costs more.

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