How would you respond to someone saying this:
"Since we have the strongest economy in the history of the world, it would be pretty amazing to see a dollar that hadn't lost 98% of its value"
Didn't the US have a decent economy when the dollar still had value?
I'd tell them they're out of their [freaking] mind.
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I'd say that that doesn't mean anything.
It's also literally like saying, after half of your money has been stolen "hey, I'm still the richest man in town! Ha, it doesn't even matter!"
I don't think you can measure the value of money over time.
Nielsio: I don't think you can measure the value of money over time.
You technically can, but it's also technically incorrect and meaningless. With this being said we all know that it is, in principle true.
Why aren't inflation-adjusted 2005 dollars good enough?
Wheylous: Why aren't inflation-adjusted 2005 dollars good enough?
Was the production structure in 1913 the same as in 2005? If not then there would be fundumental shifts in price anyway, and therefore the prices are not equivocable. For instance, if another dollar had never been printed since 1913, then ratios for things would have shifted. Eggs that were 1/4 the price of a pound of ham would have changed to 1/3, and because of the fact that there are new inventions on the market (amazingly so), one cannot say, even if the ratios between existing products were identical, that the dollars were the same. Someone with 50,000 dollars today is not 98% poorer than someone with 50,000 dollars in 1913, I would argue that they are far richer because no amount of 1913 dollars can buy a single ipod, television, or modern entertainment
That has opened up my eyes. I thank you.
limitgov: How would you respond to someone saying this: "Since we have the strongest economy in the history of the world, it would be pretty amazing to see a dollar that hadn't lost 98% of its value"
What does having a strong economy mean? Is it GDP? GDP per capital? Asset? What metrics are being used?
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
limitgov:"Since we have the strongest economy in the history of the world, it would be pretty amazing to see a dollar that hadn't lost 98% of its value"
That doesn't even make idiotic sense. It sounds like he's saying the stronger your economy gets, the weaker the currency gets.
Wheylous: That has opened up my eyes. I thank you.
Lol no problem, it's what I do ;P
It sounds like he's saying the stronger your economy gets, the weaker the currency gets
I am assuming they mean that a weaker dollar encourages foreign investment.
Wheylous: It sounds like he's saying the stronger your economy gets, the weaker the currency gets I am assuming they mean that a weaker dollar encourages foreign investment.
Which is why the entire world is just pouring into Zimbabwe, right?
Straw man. Zimbabwe also has weaker infrastructure, established factories, market, and a different culture + work ethic. The tech knowledge there is not as high and people are not as used to Western ideas like wage (I assume).
The British modernized Zimbabwe in 1880s and mostly for its raw materials. It was never built as a self-sustaining nation. It gained independence in 1965. It doesn't have a tradition of a strong economy or much entrepreneurship.
But in countries which do have the opposite of all of the above, the argument of weak currency has not been refuted. I'm not saying your position is ultimately wrong. I'd just like you to support it with something I myself could repeat to others knowing it is fool-proof.
Wheylous:But in countries which do have the opposite of all of the above, the argument of weak currency has not been refuted.
"Investment,devaluation,and foreign currency exposure: The case of Mexico" (PDF)
"Currency Devaluation and Economic Growth"
"Until Economic Growth Roadblocks Are Removed, U.S. Economy Will Continue Crawl"
"Whats Behind the Currency War"
"A Falling Dollar Hurts Our Importers, Too"
"Are lower interest rates really better for the economy?"
"A Closer Look at China's Currency Manipulation"
"Currency Wars"
"The Folly of Competitive Currency Devaluations"
You were saying? (what's really funny about that last one is in the comments someone says:
"If you have an unskilled population and have not completed the transition to an urbanized and industrialized economy a weak currency is a good way to attract FDI and investment. This works well with tax incentives to boost investment. However, there is little to recommend a weak currency for mature economies hoping to restart export lead growth.")
He's arguing your point and still saying the exact opposite of your claim.
I misspoke. You did not refute them in your previous post. What you just posted is what I was looking for, thanks.
P.S.
Zimbabwe has plenty of natural resources to exploit. A "weak infrastructure" (and poor "work ethic"?) are not going to stop investors from taking advantage of that. A dilapidated economy due to a repressive regime and a (literally) worthless currency will. You purport to know so much about the country's history yet seem completely unaware it used to be called the "breadbasket of Africa"...
From Africa’s bread basket to economic basket case, life in Mugabe’s Zimbabwe
From Breadbasket to Dustbowl
How To Kill A Country
Zimbabwe, The Former Bread Basket Of Africa
Crumbs all that's left in Africa breadbasket
Zimbabwe: From bread basket to basket case
Different work ethic. And I apparently am wrong, then.
This isn't a tee-ball league. You're either better at something or you're not. Either your "work ethic" is productive and encourages growth and investment, or it doesn't. You can't hide behind politically correct terms and claim "I didn't mean their economy sucks and investors aren't interested in it because their work ethic was poor...I just meant it's 'different'". That stuff only works in public schools and Oprah Winfrey Specials.
What you say is true in regard to my post above. I was using "different" as a weasel word.
Yet would you say that Africans had a better work ethic than Native Americans when it came to slavery? The Africans seemed to be the slave of choice. Disregarding disease resistance, Africans were still more economically useful. Maybe "work ethic" is then the wrong word. Perhaps different values and measures of utility?
Wheylous:Yet would you say that Africans had a better work ethic than Native Americans when it came to slavery? The Africans seemed to be the slave of choice. Disregarding disease resistance, Africans were still more economically useful. Maybe "work ethic" is then the wrong word. Perhaps different values and measures of utility?
First you claim that investors aren't interested in an African country because the people have a shitty work ethic...now you're saying their work ethic was so good it made them the "slave of choice"? Are you sure you even know what you're saying any more?
Zimbabwe not = all of Africa
I ceded that I was wrong in the work ethic bit. But I stand on culture. Because in the modern day, we don't wanna go into Africa to develop agriculture, really. And that is what slaves were used for. Africans know/knew how to farm. That's not what is relevant these days (or is this another assumption I make?)
Wheylous: Zimbabwe not = all of Africa I ceded that I was wrong in the work ethic bit. But I stand on culture. Because in the modern day, we don't wanna go into Africa to develop agriculture, really. And that is what slaves were used for. Africans know/knew how to farm. That's not what is relevant these days (or is this another assumption I make?)
Then what the heck was the point of that entire last post?
I'll read more about Zimbabwe before bashing by head against a topic I'm not familiar with. Hopefully I will the be able to then clarify my last post or refute it myself.
But do you really think that Zimbabwe is a sound refutation of the idea that money goes to nations with weaker currencies? What about when someone brings China into the equation, saying that China has a weak currency and keeps it that way to draw investment? I'm asking to learn now, not to argue. Well, I mean that's always my goal, but more so now.
Wheylous: But do you really think that Zimbabwe is a sound refutation of the idea that money goes to nations with weaker currencies?
But do you really think that Zimbabwe is a sound refutation of the idea that money goes to nations with weaker currencies?
If you sufficiently devalue your house, car, truck, cattle, and farm produce (i.e. offer them at sufficiently low prices) then money will go to you, as well.
I don't think that's the same case :P If your currency weakens, foreigners see greater investment opportunities (as their currency's purchasing power grows) and invest more in your country. No such dynamic exists in your scenario.
I also want to ask another question. I'm reading about "Dutch Disease," where the Dutch discovered large natural gas reserves and experienced a boom in that sector. The spike in exports drove the Dutch currency up, making life more difficult for other exporters. Is it really the appreciation of the currency that hurt the Dutch or something else (movement of capital towards natural gas, weakening other manufacturing sectors which promote more long-term growth)?
Wheylous:I don't think that's the same case :P If your currency weakens, foreigners see greater investment opportunities (as their currency's purchasing power grows) and invest more in your country. No such dynamic exists in your scenario.
I was just pointing out that "money coming to you", in and of itself, may not always be the most optimal outcome for you.