Until disco came back to me at dance clubs and via the great “Boogie Nights” in the 1990s, I didn’t recall a whole lot from my childhood in the 1970s. Trying to build my own “Speed Racer” and being in awe of the rock group KISS stand out.
“Too many dollars chasing too few goods” was another. That was the catchphrase used to describe the inflationary times, and it would be the last time monetary issues/policy would make sense to me for many, many years.
It’s not my favorite topic to deal with in class. Explaining money on the other hand, is pretty straightforward.
Technically, we don’t need it to survive. We simply need to be able to produce a good or service of some value to others. Since trying to translate that into terms of what another person produces (bartering) tends to gum up the gears of commerce, we have money.
At various points in time, salt has been used as currency, as has tobacco. George Washington wrote about using wampum. Whatever is in steady supply at the time, and holds an agreed-upon value can be used as money. For much of our history, it was gold.
Rather than having to produce all that is necessary to survive, money allows us to specialize in just one or two tasks. We can then trade with others to get what we need, or possibly want.
Needless to say, the more productive we are, the more we can earn, and the stronger our currency, the more we can get with it. More importantly, a stable currency is conducive to investment, imperative even to the groundbreaking variety.
It’s no coincidence that was the order of the day before the link to gold was severed, and then in the booming 1980s and 1990s. Since then, policymakers have become seduced by a weak dollar, and we’ve paid the price.
We went from a housing bubble that was pushed to a bursting point under President Bush, to an oil and gas balloon he handed to, and that subsequently ruptured under President Obama. The oil market blew-up anew and crashed even harder in Obama’s second term, only to be outdone earlier this year.
And now we have “big-time … institutional investors” pouring capital into farmland. This is typical of what happens when the dollar deteriorates.
When such a trend takes hold, a currency is necessarily losing stability. This makes returns on investment more uncertain, and likely less thanks to the devaluation. Who would invest $1 now if odds are increasing that eventual gains will be less than that $1? Hence, investment tends to migrate in part, to already-established goods as a way to hold value.
A weak dollar is why a product that is generally in steady demand, for which there is a steady supply, sees its price soar from time to time. There is no reason the price of oil, or gas, should ever fluctuate much. But since it is priced in dollars, when their value dwindles, it takes more to buy it.
The seduction is so powerful that society views as an “investment” something so basic as the roof over our head.
Nevertheless, some, including President Trump, are smitten with the notion of a weak dollar due to the supposed trade benefits it confers. The weakening trend since he took office (or really since his candidacy started gaining steam in 2016), and particularly over the last couple years, is no surprise given his administration’s rhetoric and moves to raise trade barriers.
The theory goes that a devalued dollar increases exports by making them cheaper than foreign goods in international markets. There is truth to that, but there are also drawbacks.
First, workers will be paid in dollars that are worth less, offsetting gains possibly realized by exporting industries. Second, other countries could very well view this as currency manipulation with the aim of gaining such a trade advantage, and therefore move to weaken their own in response.
Perhaps just as importantly though, is the message it sends about how officials view their country’s past, its future, and its people.
When a government intervenes in the market to give its domestic industries a leg up, it is focusing on what is/has been. At best, it is attempting to forcibly solidify their position in the world. At worst, its efforts aid ailing companies.
In addition to the increased costs incurred by all of us for the benefit of a few, this comes at the increasing expense of a country’s future.
Since investors are repelled by a weak dollar, their money gravitates elsewhere, and our lead role paving the way to the future is eroded.
All this demonstrates a lack of faith in the capacity of people in existing industries to compete, in the ability of displaced workers to adjust, and an obliviousness to the fact that we’re kneecapping the ability of American innovators to access capital to push forward into new frontiers.
This tendency toward protectionism has shades of countries that go full-bore into state control. Rather than allow their people to flourish unimpeded, the former Soviet Union and Venezuela for example, cannibalized what they had up to that point in their respective history.
It’s ironic then, that President Trump has nominated for positions at the Federal Reserve, candidates who have spoken favorably about the gold standard, and by extension a strong dollar regime. It seems to work against his desire, and frankly that of most politicians, to manipulate markets.
Make no mistake. When those politicians use past association with the president as a pretext to oppose nominations like that of Judy Shelton, it’s nothing more than masking a fear of giving up control. The opportunity to ride to the rescue when bubbles of their inflation burst is too valuable to give up.
And it’s only going to get worse the more power modern monetary theorists (MMT) gain. Gone will be whatever last little bit of respect political busybodies had for the value of work as measured by the earnings which accrues to it. The printing press will go into overdrive while the dollar will cheapen to the level of the tissue you blow your nose into.
It’s reasons like this is why I look forward to the start of every school year, and the opportunity to implore students to “keep it simple” (KISs) when considering what we learn, or just in general. One of the first things I tell them is that I’m merely putting flesh on the bones of things they already know.
They know a night out with their friends is the (opportunity) cost of instead choosing to hang out with their family. They know the ultimate decision on how many chicken strips they’ll eat depends upon when they’re satisfied; their diminishing marginal utility.
Even my daughters know me cutting those strips in half wouldn’t mean the total quantity of food has doubled, yet that’s exactly how policymakers will try to snooker them as adults by manipulating our fiat currency.
“Too many dollars chasing too few goods” was another. That was the catchphrase used to describe the inflationary times, and it would be the last time monetary issues/policy would make sense to me for many, many years.
It’s not my favorite topic to deal with in class. Explaining money on the other hand, is pretty straightforward.
Technically, we don’t need it to survive. We simply need to be able to produce a good or service of some value to others. Since trying to translate that into terms of what another person produces (bartering) tends to gum up the gears of commerce, we have money.
At various points in time, salt has been used as currency, as has tobacco. George Washington wrote about using wampum. Whatever is in steady supply at the time, and holds an agreed-upon value can be used as money. For much of our history, it was gold.
Rather than having to produce all that is necessary to survive, money allows us to specialize in just one or two tasks. We can then trade with others to get what we need, or possibly want.
Needless to say, the more productive we are, the more we can earn, and the stronger our currency, the more we can get with it. More importantly, a stable currency is conducive to investment, imperative even to the groundbreaking variety.
It’s no coincidence that was the order of the day before the link to gold was severed, and then in the booming 1980s and 1990s. Since then, policymakers have become seduced by a weak dollar, and we’ve paid the price.
We went from a housing bubble that was pushed to a bursting point under President Bush, to an oil and gas balloon he handed to, and that subsequently ruptured under President Obama. The oil market blew-up anew and crashed even harder in Obama’s second term, only to be outdone earlier this year.
And now we have “big-time … institutional investors” pouring capital into farmland. This is typical of what happens when the dollar deteriorates.
When such a trend takes hold, a currency is necessarily losing stability. This makes returns on investment more uncertain, and likely less thanks to the devaluation. Who would invest $1 now if odds are increasing that eventual gains will be less than that $1? Hence, investment tends to migrate in part, to already-established goods as a way to hold value.
A weak dollar is why a product that is generally in steady demand, for which there is a steady supply, sees its price soar from time to time. There is no reason the price of oil, or gas, should ever fluctuate much. But since it is priced in dollars, when their value dwindles, it takes more to buy it.
The seduction is so powerful that society views as an “investment” something so basic as the roof over our head.
Nevertheless, some, including President Trump, are smitten with the notion of a weak dollar due to the supposed trade benefits it confers. The weakening trend since he took office (or really since his candidacy started gaining steam in 2016), and particularly over the last couple years, is no surprise given his administration’s rhetoric and moves to raise trade barriers.
The theory goes that a devalued dollar increases exports by making them cheaper than foreign goods in international markets. There is truth to that, but there are also drawbacks.
First, workers will be paid in dollars that are worth less, offsetting gains possibly realized by exporting industries. Second, other countries could very well view this as currency manipulation with the aim of gaining such a trade advantage, and therefore move to weaken their own in response.
Perhaps just as importantly though, is the message it sends about how officials view their country’s past, its future, and its people.
When a government intervenes in the market to give its domestic industries a leg up, it is focusing on what is/has been. At best, it is attempting to forcibly solidify their position in the world. At worst, its efforts aid ailing companies.
In addition to the increased costs incurred by all of us for the benefit of a few, this comes at the increasing expense of a country’s future.
Since investors are repelled by a weak dollar, their money gravitates elsewhere, and our lead role paving the way to the future is eroded.
All this demonstrates a lack of faith in the capacity of people in existing industries to compete, in the ability of displaced workers to adjust, and an obliviousness to the fact that we’re kneecapping the ability of American innovators to access capital to push forward into new frontiers.
This tendency toward protectionism has shades of countries that go full-bore into state control. Rather than allow their people to flourish unimpeded, the former Soviet Union and Venezuela for example, cannibalized what they had up to that point in their respective history.
It’s ironic then, that President Trump has nominated for positions at the Federal Reserve, candidates who have spoken favorably about the gold standard, and by extension a strong dollar regime. It seems to work against his desire, and frankly that of most politicians, to manipulate markets.
Make no mistake. When those politicians use past association with the president as a pretext to oppose nominations like that of Judy Shelton, it’s nothing more than masking a fear of giving up control. The opportunity to ride to the rescue when bubbles of their inflation burst is too valuable to give up.
And it’s only going to get worse the more power modern monetary theorists (MMT) gain. Gone will be whatever last little bit of respect political busybodies had for the value of work as measured by the earnings which accrues to it. The printing press will go into overdrive while the dollar will cheapen to the level of the tissue you blow your nose into.
It’s reasons like this is why I look forward to the start of every school year, and the opportunity to implore students to “keep it simple” (KISs) when considering what we learn, or just in general. One of the first things I tell them is that I’m merely putting flesh on the bones of things they already know.
They know a night out with their friends is the (opportunity) cost of instead choosing to hang out with their family. They know the ultimate decision on how many chicken strips they’ll eat depends upon when they’re satisfied; their diminishing marginal utility.
Even my daughters know me cutting those strips in half wouldn’t mean the total quantity of food has doubled, yet that’s exactly how policymakers will try to snooker them as adults by manipulating our fiat currency.
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