(Click for bigger pic, pdf.)
The chart above is from the New York Fed. Or, Federal Reserve Bank. I point it out today because of some really stupid stuff I've heard over the past few days. Stuff that some dippy model, not an economic model, but a model model, is refusing to be paid in dollars. (Even though her sister says these reports are untrue. Imagine, untrue media stories. Silly, no?) So, perhaps, dippy is the wrong adjective. I will confess, when I first heard these reports, my reaction was "dippy". I've got to take it back because it appears that the meta-narrative "US Doomed" was more important than facts.
So why the chart?
Charts are easy ways to convey a lot of information quickly. From the chart you can easily see that at the end of the Carter administration core CPI inflation was out of control. It took seven years for the change of administrations--from Carter to Reagan--to drive the core inflation rate to a rate of around four percent. For those of us holding productive employment--non-government--in the late '70's and early '80's, this reduction in the inflation rate was a godsend. Anybody, anybody who says that Carter knew "s#it" about our national policy, or was "doing good things" for the national economy is a twit, a moron, a cretin or a Democrat. The Lefty/Progressive agenda was an economy killer, would be an economy killer and will be an economy killer.
But, for the meta-narrative--US Doomed!--to work, pinheads like Krugman or Chait have to write books and articles purporting to show Alarming Trends. That's why I like the Gray Men of the Federal Reserve. These are guys, who, if found on the deck of the Titanic, would be accounting for the utilization rates of lifeboats and arguing over the value of any particular lifeboat against all life boats in general. That is to say, that while the Fed's role is prescriptive, it relies upon the descriptive. And while the NY Fed is the "big bank", I'm especially fond of the St. Louis Federal Reserve Bank. St. Louis has a reputation of having a calmer, rational view of the world...one of the effects of being outside the world's largest media market.
So, click on the pic above to open it in a new window. Then click this link (pdf) open in a new window. This second link shows you the growth of the money supply.
I know it's easier to write an "America Doomed!" story based on hysteria isolated from the facts. But compare the meta-narrative with the information in the charts. While the core inflation rate has remained low--anybody remember Okun's law?--the core inflation rate has remained low. Historically low. Compared to the inflation rates of the '60's and '70's, unbelievably low. (If you're curious about Okun's Law, try looking for info on Arthur Okun. The experience will do you good.) One of the more interesting clues to look for are any spikes that have occured in the money supply, and the timing of those spikes. If you have no clue as to why spikes might have occured, feel free to leave a comment, and I'll remind you of the terrorist attack on America in the Fall of 2001.
So, why the current hysteria about The Dollar? Because people are getting hurt.
Not us. Not Americans. It's everybody else. And in a world run by meta-narratives and a definite paucity of education it's not unthinkable that those attempting to guide the meta-narrative have their own agenda. But, who are "they"? Fair question, because I'm not suggesting a conspiracy. Least of all the Democrats. They lack the basic fundamentals of a comprehensive education to make a conspiracy of this magnitude possible. (Which is not to fault Robert Reich, who I enjoy watching on MSNBC's "Kudlow & Company" trying to adjust intelligence to the meta-narrative. He is an intelligent man. And, his loyalty is truly noteworthy.)
No. For Democrats the meta-narrative "America is Doomed!" is only important because it gives them "talking points" about how horrible President Bush, the Republican Party, and common sense are. So, this is not a grand conspiracy. This is idiot's mouthing the latest incantation of something they were told was bad, so pass it along. Far from conspiratorial, but par for the course for the morons of the Democrat/Progressive/Lefty Party.
But, if Democrats aren't being hurt--and they aren't, after all they are Americans and Americans are doing well--who is being hurt?
What happens when the value of the dollar declines? And declines, compared to what? Anybody?
Let's say that Nancy has certificates for kisses. And Sally has certificates for kisses.
(This is Nancy.)
(This is Sally.)
I've used Progressive/Lefty chicks in this example to show that political affiliation or ideological beliefs have nothing to do with the validity of the expression.
A dollar is a store of value. Just like a certificate from Sally or Nancy can be converted into a kiss, a real good or service, so can a dollar be converted into a real good or service.
A dollar's worth. Or, for Sally and Nancy, a kiss' worth. I guess it's important to note an important difference here. A dollar can be used to buy "anything". A Sally (SN) or Nancy (NN) note is only useful for one thing, a Sally or Nancy kiss. But given that a SN or NN is only worth one thing, one time, what is the comparative value of an SN versus a NN? If you impulsively suggest that a Sally Note is worth more, then why? Nancy has a good job, makes lots of money and flies on Air Force jets. Sally gets high. But rarely, if ever, on an Air Force jet.
So why does one thing have a greater or lesser value for you? When one looks at the dollar and gauges its value, one does so against a market-basket of goods. How much one can buy. So, determining the attractiveness of a dollar should be determined by what part, or how much, of that market-basket one dollar can provide you. And, if you look at the charts I've provided you, you can see that the value of what you can purchase with that dollar has remained amazingly stable over the past twenty years. Did you look up Okun's Law yet?
But what determines the value of a SN or a NN? A NN gives an opportunity to closeness with the Nancy. A SN allows even greater closeness to the Sally. So each of these notes has a "fixed value". Unfortunately, even with a fixed value, the comparative value may differ. Why? Because tastes and preferences differ. This ineluctable condition is at root the one thing that Lefties/Democrats can't affect, though they try. The simplicity of choice. It is this one human feature that drives the meta-narrative, since the meta-narrative is an attempt at conditioning human responses to choice. And why the meta-narrative is so often comedically stupid.
Ted has a SN. Alphonse has a NN. Ted and Alphonse aren't into women. But both are into the Lefty/Progressive agenda. Alphonse is giddy with excitement. Ted is repulsed. Ted offers Alphonse a swap. Value for value, right? After all, this is the meta-narrative pushed by GLBT rights advocates, Equal Rights Amendment advocates, Immigration Rights advocates and any and all labor and teacher unions. Discernment of value is racist, sexist, specieist, genderist, anything-ist. I am right to be offended by Ted. How can Ted not value a SN as equal to a NN?
But Ted can find a secondary market for his SN. OregonGuy wants a SN. He's willing to shake hands with Ted in exchange for the SN. Ted's happy, OregonGuy is happy. What's wrong with a handshake?
Now, OregonGuy has something of greater value than before. His labor was worth one SN. And that value is stored. It will be worth one Sally kiss today, tomorrow and next week. Ted has consumed the value of his SN. He got a handshake. He's better off, and OregonGuy is definately thinking that he is better off. In the meantime, Alphonse has been able to pick up various Sally notes through exchanges of his own. While their value, as a net asset to Alphonse, is low, there might be an opportunity to exchange these Sally notes for something of higher value. Alphonse has a lottery, in which the winner will receive one hundred Sally notes, on the promise of a handshake. (Yes, OregonGuy is still keeping his distance. Alphonse is an okay guy, but...sheesh.)
And, through the fates, OG wins the lottery, gains the Sally notes, and pays the price. Before, he traded one handshake for one SN. Now he has gained 100 Sally notes for one handshake. But, does that mean that the value of a SN has been reduced? Again, the value of the Sally note, like that of the Nancy note, or the dollar, depends on the tastes and preferences of the holder of the note. If a dollar tends to hold its value in its ability to purchase a share of a fixed market basket of goods, more dollars simply increase the wealth of the holder. And the stability of its worth will be a measure of its ability to perform as a store of value.
But let us look again at Sally. Go ahead, scroll up and take a look. There aren't any more pictures below.
What happens to the value of Sally after her first kiss? Her second kiss? After she's given her thousandth kiss? There is, it seems, a reason why we use dollars instead of bananas to store value. While bananas are portable, they tend to be poor stores of value over time. Just as with bananas, after Sally's ten thousandth kiss, the prospect of gaining the 10,001st kiss are less attractive than gaining the 1st. And perhaps, the Nancy note is in fact the more solid investment. After all, it was a well-handled banana to start with.
So, too, must one step back and consider the current state of the dollar in the world economy. The Euro was intended to supplant the dollar in international trade. No one made a secret of that when it was introduced as an idea back in the 1980's. Dominating a contract in one's preferred choice of currency enables the country of currency a lot of immunity from changes in market values. But, as was noted above, the definition of a thing is not the only thing that determines value. A kiss is a kiss is a kiss. Right?
But recent awareness of the comparative value of the dollar versus other currencies has let to all kinds of sophistry. Falling currency values, increasing deficits, free trade agreements, all the chatter from the Moronic Class greets you on a daily basis of "America Is Doomed!" and few of us have the tools to sort the wheat from the chaff. So take a look at the two charts I've given you and ask the question, "Over time, has the value of goods and services in the United States tended toward stability or instability?" and "Is the dollar a good store of value if you live in the United States?"
So if we're not being hurt, who is? As the value of the dollar declines in international markets, goods and services produced in the United States become more attractive to export markets. Conversely, imports become less attractive. So, a good guess would be the people who are being hurt are those who export more to the United States. US producers of goods and services are advantaged. Price stability? Yes. Store of value? Yes. Better competition in international markets? Yes. We're better off? Yes.
Big imports come from where? China? Yes? Then, could China be under pressure? Hmm.
Next time, boys and girls, let's look at Currencies Pegged to the US Dollar. But let me leave you with one thought: Why is it that Lefties/Progressives/Democrats scream "America is Doomed!" all the time? And, is it true? You can make your own conclusions. Just think, would I rather have a kiss from Sally or a kiss from Nancy. What you dream about at night is your own affair.
Apologies to Herman Hupfeld.
UPDATE: Here's the latest from Yahoo.
Hilarious! Zero Report: Merkley "Dragged Into IRS Scandal" - Really? That's amazing, because Oregon's junior Senator jumped in with both feet; he joined such luminaries as Chuckles Schumer and Smilin' Al Franken in a l...
20 minutes ago