$1 USD, that's like $1 CAD?

[Egeides]

Of course, one of the dirty little secrets of economics is that there is no intrinsic value in ANY currency, of any kind, ever.

The value of money comes from one thing and one thing alone - the fact that you can exchange money for goods and services. Why are you able to do this, exactly? Well, frankly, only because everyone else is doing it. People are simply used to the idea that money has value and can be exchanged for stuff. Originally, of course, money was invented because it was more convenient than barter, but nobody thinks about that today. People don't consciously choose money over barter; they use money because that's The Way Things Are. So, basically, money has value only because everyone thinks it does.

Money never had any inherent value, and paper money is no different than gold or silver in this. Gold is not a terribly useful metal; it looks all nice and shiny, but that's about it. Yes, it has a number of modern applications in microelectronics, but for most of human history it had no practical use whatsoever beyond looking nice. As a result, gold derived its value almost entirely from being a convenient substance to use as money (it is convenient because it does not rust, meaning that money made out of gold won't go poof if you store it in a damp place).

Lenin said that gold was only worth paving public bathroom floors with. Do you imply something like that?

[Dunenewt]

Money is used as a comparative, giving us something to value and compare the worth of services and goods, that's how I see it.

[Dante]

I subscribe to Edric's point of view. Money is worth something only because we say it is, or rather not even us but some other people and a complicated system that seems to be largely independent of any centralised control.

[Andrew]

Media outnumber AIG protestors, while tea party with thousands of people goes unreported

AIG protesters all came on one bus.

Tea party had thousands.

Media picks whatever sells best.

[exatreide]

Very good point edric, I have to agree with you on it.

[Andrew]

US poised to unveil $1 trillion bank bail-out package

More bailout for banks, didn't they get $1 trillion last year? Or was that just for the failing banks?

I guess they have to do everything possible to prevent derivatives market from failing. That would cause worldwide depression.

The amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion

EDIT:

According to the stock market today the recession is over ::)

So everyone can move back into mcmansions with ARMs, and continue spending more than you make.

[Egeides]

My impression is that Edric's point is pushed too far if it goes to the point of saying like Lenin that gold is worth nothing. The reason for this is that, in daily life, trust that it'll work is often worth more than the object by itself.

[chatfsh]

Are the days of the USD hegemony really over?  A U.N. panel says that the world should ditch the dollar.  It seems that China, Europe and Russia are all calling for a change in the world reserve currency which for the last sixty years has been the USD as established at the Bretton Woods conference shortly after WWII. 

As a result of the financial crisis of which the U.S. is at the epicenter, the global community is rethinking which currency should be used to for international pricing.  China, France and Russia seem to be leading the charge in denouncing the USD in favor of a shared basket of currency.

[Andrew]

Are the days of the USD hegemony really over? A U.N. panel says that the world should ditch the dollar. It seems that China, Europe and Russia are all calling for a change in the world reserve currency which for the last sixty years has been the USD as established at the Bretton Woods conference shortly after WWII.

As a result of the financial crisis of which the U.S. is at the epicenter, the global community is rethinking which currency should be used to for international pricing. China, France and Russia seem to be leading the charge in denouncing the USD in favor of a shared basket of currency.

Yes having one currency is bad. USD was bad during bretton woods when USA decided to have expansion which caused worldwide inflation. European countries basing currency rates on Germany was bad in early 1990s, because after the berlin wall fell Germany went through an expansionary phase, and Germany increased interest rates to combat inflation. This caused all other European countries to raise interest rates (to maintain currency rates within +-1.5%) which caused a recession in those countries because they were not going through an expansionary phase (which meant they had to change currency rates to within +-15% because of speculation attacks).

Now Paul Krugman is saying that the euro could be a bad idea.

Spanish doldrums

Good read from a current economist who is quite popular. Very short read.

EDIT:

China calls for new global currency

China holds $1 trillion USD debt. If people stop using USD for transactions, you can bet it will depreciate.

[chatfsh]

China calls for new global currency

China holds $1 trillion USD debt. If people stop using USD for transactions, you can bet it will depreciate.

I will be interested to hear what comes out of the G20 meeting in London next week.  The Chinese, Russians and French are pushing for a new reserve currency but it doesn

[SandChigger]

I haven't been paying a lot of attention to the story, so dumb question, but what are the Chinese proposing instead of the dollar, the renminbi?

There's something deeply amusing about that ... "communist" currency, capitalist economy.  :D

[chatfsh]

Friction growing between Obama and Europe over the U.S. spending policies.

"At the same time, there is a growing impression across Europe that the Obama administration is inept and inefficient and increasingly poorly managed."

A top European Union politician on Wednesday slammed Obama's plans for the U.S. to spend its way out of recession as "a way to hell."

Message to U.S. Congress

[Andrew]

But everyone online is telling me this massive deficit spending is necessary! Just like the deficits of Bush for the war on terror were needed to protect americans from terrorists.

Actually last night I was arguing with some trolls about how fiscal and monetary expansion causes inflation. They didn't believe me, and eventually I figured out they were a troll when I provided many sources they "requested" and they stopped responding.

It is very sad to see Americans arguing online either republican or Democrat and have to defend/attack each other. There are the pro Bush people who said Bush was great and everything he did was necessary (iraq war, deficit spending). Now they are against obama and his deficit spending.

And you have the anti-Bush people who were against everything he did (deficit spending). Now that Obama is going to have deficits much larger than Bush they are defending Obama. "Oh Obama is spending it to fix the economy so it is ok", and "Obama only just started so we can't judge him yet", and "the budget will include iraq war costs so that is why it is so high"

How can you not judge Obama already when he is going to have $2 trillion deficit in first year? I think Bush maxed out at ~$600 billion for deficits for a single year. Not much change.

[Dante]

The way I see it, either Obama will succeed, or send the USA down the plughole, dragging most of the world along with it, irrepairably damaging his country's reputation and stability.

In other words, win-win.

[Andrew]

House panel approves $3.45 trillion budget

The nonpartisan Congressional Budget Office last week estimated that Obama's budget would balloon the deficit by $9.3 trillion over the next decade.

For some reason when I read that I lol uncontrollably.

So Bush doubled the debt during his term, and now Obama is going to double the debt.

Here's the updated version of the "McCain is a fiscal conservative" comic.

another image:

Yep, that looks sustainable.

EDIT:

I also love how some people online are calling this a depression which makes it ok for Obamas spending. It's not a depression. Get over it.

[Dunenewt]

The way I see it, either Obama will succeed, or send the USA down the plughole, dragging most of the world along with it, irrepairably damaging his country's reputation and stability.

In other words, win-win.

So you'd wish for more of an anarchical situation in the World?

[Andrew]

So you'd wish for more of an anarchical situation in the World?

Probably the only way to fix things.

Like the French Revolution, American Independence, or American civil war etc.

EDIT:

United States public debt

2008 estimate of gdp to debt ratio was 74%. That is when debt was at 10 trillion.

Add another 2 trillion of debt this year...

So gdp to debt ratio will probably reach near 100% in the next couple years. Wonder what will happen.

[Dante]

Probably the only way to fix things.

Like the French Revolution, American Independence, or American civil war etc.

That's one possibility, which I wouldn't particularly mind. The system is crap, knock it down and start over. I like that idea.

Alternatively, another superpower would arise to take centre stage. Or maybe a group of them. That wouldn't be as nice as the first possibility, but I could live with it.

[Andrew]

Jobless Claims Show Small Increase; GDP Fell 6.3 %

Revised numbers for 2008.

Another 4% and we are near depression.

[chatfsh]

[rant]Anarchy may be closer than we think.  I swear, right now the senate and house are acting like a bunch of dumb-ass wussies.  The world is screaming that Obama

[Dante]

Oh I don't know, some of those bankers are turning a lovely shade of vermillion.

[Andrew]

The funny thing about the current bank crisis is that many banks will go bankrupt, and other banks will absorb the bankrupt banks, making themselves larger, so that when the next financial crisis hits, there will be more "too big to fail" banks out there.

Also, all those banker execs (any large company execs for that matter), even if out of a job, will get $1 million in retirement payments for the rest of their lives. So do they have any reason to care whether they do a good job? They do what they think is best and whether it works or not they still get paid.

Corporate exec positions need to be reformed. Would be interesting to see what companies do. and none of this "$1" salary, which is compensated with stocks/bonuses etc.

EDIT:

Remember back in 1999 when Glass-Steagal Act was removed?

New York times wrote in 1999:

CONGRESS PASSES WIDE-RANGING BILL EASING BANK LAWS (11/5/99)

The decision to repeal the Glass-Steagall Act of 1933 provoked dire warnings from a handful of dissenters that the deregulation of Wall Street would someday wreak havoc on the nation's financial system.

''I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010,'' said Senator Byron L. Dorgan, Democrat of North Dakota.

DAMN! Someone give that senator a Nobel prize for accurately predicting the current financial crisis.

EDIT:

Canada won't commit to more stimulus spending

Good. Wait and see what the current stimulus will do before spending more. Don't want to overspend and create unnecessary debt and inflation.

[chatfsh]

I

[Andrew]

Well, in the USA (and other countries) if you lose your job does it matter (life or death)? Get unemployment cheque, then sit back and apply for jobs and then watch TV all day long. There is not enough motivation to get a job as soon as possible. Unless you have lots of bills because you had no financial plan. No long lineups outside of factories of people waiting for jobs. Not many people hopping aboard trains and moving around the country looking for work.

No job does not equal no food in western countries. At least not yet for the 10% unemployed. Once it gets near that then people will complain. But now the biggest motivation to have job is so you can continue to keep up with Jones (consume consume consume!). And people still have lots of left over consumables that they bought over the past 5 years.

Just think what people during great depression would think of so called people out of work today (especially when many families have two people working!), who have a house, car, computer/tv/electronics, electricity, household appliances etc. We are so much better off that even if "shit hit the fan" we'd be able to survive in much better living conditions.

Hopefully we come out of this recessions much better and plan for long term, with slow growth as a goal to avoid the next recession in 10 years. But sadly I'm sure the DJI will be back at 14,000 and housing prices will double within 10 years.

Kind of funny looking at List of recessions in the united states

It's like clockwork. Every 10 years or so there will be a recession.

EDIT:

Now for some thoughtful discussion.

What will the next recession be caused by?

1990 was partly housing bubble, but more about increased output/inflation

2001 recession was tech bubble (yep, I want to order dog food online and have them ship it to my door WTF?)

2008 recession was housing/financial bubble

I'm guessing something to do with technology, or services (to do with BRIC brazil/russia/india/china?). I dunno, 10 years from now computers will be quite advanced. Were at the point where we have very small and fast enough computers to do basic stuff. Computers are now almost a necessity like the phone/tv, and cheap compared to 10-20 years ago. It's very easy for anyone to get a computer (poor people can get 5-7 year old computers for free basically, otherwise they get thrown out).

Will we see the downfall of bric and mortar stores as internet shopping is quite easy? Will they simply have some retail spots for people to look at some items (and order in store online), but have stuff shipped around to be most efficient?

I know during dotcom bubble they predicted this, and it has not occured yet, but many chains have gone under due to competition (that US electronic retailer, umm?).

I know after I purchased electronics online and had it shipped to my door 4 days later for good price, I'll probably always do that now, and make sure everyone knows to order online as it is cheaper.

[chatfsh]

I must agree with you.  I think that the Americans have unemployment checks to live off of at least for the short-term.  Not to mention that some of the better jobs offer pretty good severance packages.

For example:  If I were dismissed from my job, I would receive 9 months pay (either in lump sum or regular periodic payments).  On top of that, there is the state unemployment check.  I