Dollar index remains in decline

With crude oil back up, the dollar has resumed it’s slide vs the other currencies. And odds are West Texas crude converges to Brent, which remains over $10 per barrel higher at about $124/barrel when/as the Cushing supply issues clear up.

However, with food and energy, at least for now, remaining a relative value story, this could largely be the other currencies deflating rather than the dollar inflating.

The US is a large importer of finished products and with relatively weak aggregate demand here this means downward price pressures on those who export to the US to sustain their export volumes and market share.

And with US unit labor costs not rising, US companies can price aggressively overseas and keep foreign margins under pressure as well.

So looks to me like the world shortage of aggregate demand/dangerously high unemployment will continue for a considerable period of time, now exacerbated by rising food and energy costs which takes purchasing power from high propensity to consume individuals and transfers it to low propensity to consume states, corporations, investment funds, etc.

While at the same time this (at least for the near future) relative value story gets treated like an inflation story by most of the world’s governments, who are consequently prone to take measures to further reduce aggregate demand.

No nation wins in this process, just some losing less than others.

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26 Responses to Dollar index remains in decline

  1. Tom says:

    thanks warren, that did help. man, you must feel like pulling your hair out on a daily basis listening to these fools who babble about things they dont understand. I’m no economist and the little I know compared to you all still causes me to get mad every time I see some random idiot speak about how we’ll be bankrupt tomorrow.

    Reply

    WARREN MOSLER Reply:

    yep!

    Reply

  2. Tom says:

    Thanks Warren.

    I forget if I came across this in some of the readings…but is it more beneficial for the USD to be the reserve currency, or is it a negative?

    Which readings are best to understand currency value in relation to MMT? That seems to be what I need to catch up on most. Its tough because I’m not educated in economics…I’m a biologist so I had to start from scratch on economics….but MMT intrigued me so Ive been reading a boat load about it.

    Reply

    WARREN MOSLER Reply:

    if others want to save in your currency, you get to net import that much more, and that means superior real terms of trade, etc.

    try ‘exchange rate policy and full employment’ and let me know if that helps!

    Reply

  3. Tom says:

    What would be the proper answer to something like this? I know they don’t really get it, but as I’m relatively new to MMT, my explanations aren’t always the best.

    I get that as you spend more/tax less (add more to the non government sector) there will be an increase in supply to keep up with the new demand up until full employment. Is that basically the answer to what this person was saying to me. It started as an argument over oil prices. Ill post it here.

    Here is their blerb back to me:

    “Devaluation of any currency is the greatest threat to a society – it punishes those who had saved, rather than spent. It robs the middle class, and transfers to the wealthy.
    I suggest you check inflation.us – they talk about it. Oil prices …shot up in 2008, not because of war, or speculation or anything else – it was because of the rebate checks that were sent out. The first place any income goes is food and energy – people will cut back on movies, and electronics, but not gas, not food.

    Anyone who thinks that oil is their biggest problem is in for a very rude awakening. This devaluation and inflation is EVEN WORSE with food. Look at milk, look at beef, look at corn, wheat, soy, rice, eggs, fish, poultry. The main driver is that there is more money, chasing the same, or fewer, goods, and it is a recipe for disaster.”

    Reply

    Tom Hickey Reply:

    Confuses relative price volatility with inflation, which is define as ongoing general price rise, including wages (price of labor). Sophomoric.

    ” it was because of the rebate checks that were sent out.”

    Really?

    Reply

    Tom Reply:

    Thanks. And yeh, I thought the same thing when I read that part. I might have said “Really?” out loud to myself. :D

    I didn’t even know how to respond to all that nonsense which is why I came here. Thanks again

    Reply

    Tom Reply:

    So, what is the best explanation to go with when people bring up the fact “printing money” leads to a devalued dollar? Is it as simple as the fact that if the govt spends more/taxes less, then the increase demand will be matched my an increased supply up to full employment? And should devaluation or inflation continue further, taxes can be used to control that devaluation or inflation?

    WARREN MOSLER Reply:

    taxing is a deflationary bias
    spending is an inflationary bias

    the trick is to get the right mix

    (and of course not all taxing and spending are created equal with regard to most outcomes)

    Tom Hickey Reply:

    Tom, read these posts:

    What is Inflation?

    Modern monetary theory and inflation – Part 1

    The Austrians

    Craig Reply:

    “taxing is a deflationary bias”
    “spending is an inflationary bias”

    along that line of thinking i’m guessing you would consider savings a deflationary bias while investment is neither inflationary nor deflationary because general inflation is not associated with capital goods. correct?

    WARREN MOSLER Reply:

    investment is inflationary from the demand side but hopefully deflationary from the supply side

    Craig Reply:

    actually let me expand on these a little more

    – spending is inflationary
    – printing money is inflationary
    – taxes is deflationary
    – savings is deflationary
    – issuing treasury bonds is deflationary
    – productivity is deflationary
    – monopolists / speculators are inflationary
    – investment is a neither inflationary or deflationary

    WARREN MOSLER Reply:

    - spending is inflationary
    YES
    – printing money is inflationary
    NO
    – taxes is deflationary
    YES
    – savings DESIRES ARE deflationary
    – issuing treasury bonds is deflationary
    NO
    – INCREASING productivity is deflationary
    YES
    – monopolists / speculators are inflationary
    CAN GO EITHER WAY
    – investment is a neither inflationary or deflationary
    INFLATIONARY ON THE DEMAND SIDE AND HOPEFULLY DEFLATIONARY ON THE SUPPLY SIDE

    Craig Reply:

    thanks warren. let me qualify

    – printing money to fund spending is inflationary
    – issuing treasury bonds is deflationary according to mainstream but not MMT :-)

    Reply

    WARREN MOSLER Reply:

    printing money to fund spending is inflationary
    THE SPENDING IS INFLATIONARY
    WHAT IS THE DISTINCTION YOU ARE MAKING REGARDS ‘PRINTING’?
    – issuing treasury bonds is deflationary according to mainstream but not MMT :-)
    YES

  4. save america says:

    ESM, didn’t you say you were in washington DC now? That you were astonished with the wealth? They are talking on the local radio about 6 out the 10 richest counties in the USA are right around washington DC. I visited the springfield, virginia mall last night to do some recon on the shopping machine spoiled princesses. It looks like princesses credit card finally got cancelled, it is a massive 2 story mall and I would say maybe 60% or more of the storefronts are closed. The mall felt just like a real ZOMBIE – resident evil movie, it was that desolate, and the few people walking around were zombified and had no shopping bags, crying out saying where is my never ending credit extensions?! :) LOL!

    I really liked this mall for this reason though, wide open spaces, not too many people, I didn’t feel closed in and trapped like a chicken in an overstuffed chicken farm. However the same cannot be said for the parkways and restaurants I visited all over fairfax. Too much traffic, too much stress, the food was not good and cost too much. (I am used to fresher food for almost nothing, not this freshly frozen garbage they are serving up here) The million dollar new homes may have a high dollar PRICE and therefore these slaves may think they are RICH and WEALTHY. However when you have to live that close to your neighbor, and suffer all that congestion, I view that as a sign of poverty and ignorance, not one of wealth and riches. Ed Bernays would be proud how these suckers around this area have been sold the propoganda lie that they are rich and wealthy while they fight each other for 3 hours to get a seat at joe’s crab shack and another 4 hours on the parkway to go 5 miles – pathetic, people are really stupid idiots sometimes.

    Reply

    save america Reply:

    Below we have ANOTHER example of more ed bernays propoganda at work, this guy thinks because we are the world’s largest importer, our currency is terrible, but because singapore has a huge currency surplus, that place is wonderful, even jim rogers got sold on this lie and moved his family to singapore. Don’t they know the goal is to be the spoiled princess scarlett o’hara running the plantation sitting on your butt all day while the rest of the world slaves away working the farm for you? Imports are a benefit, exports a cost. Buffet said we are selling off the farm though as we let the means of production go to asia, is dat true?

    http://www.businessinsider.com/where-to-find-the-anti-dollar-hint-its-not-gold-2011-4

    Reply

    save america Reply:

    http://www.zerohedge.com/article/hitler-and-comex

    One of those hitler parodies about the end of the monetary system and krugman and blythe masters – LOL! All you MMT grads out there, why don’t you do one of these hitler parodies with MMT? Peter D? Erickson? Buehler? Anyone?

    Reply

  5. save america says:

    I have been in Dillon, South Carolina, Ben Bernankes Home town, unemployment is unbelievable. Read about my adventures below – Bernanke used to work at this truck stop, was a bellhop at the motel and wore a sombrero hat while transporting luggage:

    http://siliconinvestor.advfn.com/readmsg.aspx?msgid=27324199

    http://siliconinvestor.advfn.com/readmsg.aspx?msgid=27326291

    Here is a picture of the bank in bernankes hometown that is now a chinese buffet:

    http://www.picvalley.net/v.php?p=u/1743/46863557316075910601303444235a34j7dQmGD2aOdrRH3V7.JPG

    Here I am in my Mosler T-Shirt at South of the Border truck stop wearing a sombrero like Bernanke used too that I took yesterday.

    http://www.picvalley.net/v.php?p=u/1988/7401533359240636001303444411aV6mNJkSv1kJ0MEIYuQ4.JPG

    What do you guys think about the worlds top banker being a former bellhop called Pedro at the South of the Border truck stop? Is he really qualified to do his job regulating all those crony crooks? Warren? Speak up!

    Reply

  6. J Bleu says:

    The Krugmanites slam the Moslery:

    Reply

  7. roger erickson says:

    Surely, even among a sheople electorate, this presages a period of volatility waiting for a blow up?

    In the past, this would be seen as the prime time for aristocracy to start a war, wherever valuable assets could be stolen easily from the aftermath.

    Look for another provocation to be fabricated?

    Reply

    save america Reply:

    I am at southoftheborder truck stop in bernanke’s home town spreading MMT trying to undo the damage he has done

    http://www.picvalley.net/v.php?p=u/1988/7401533359240636001303444411aV6mNJkSv1kJ0MEIYuQ4.JPG

    Reply

    save america Reply:

    For those that want to read how I personally brought MMT to bernanke’s hometown yesterday until Michael can fix the censorship issues, sit down and have a cheap mexican beer:

    http://siliconinvestor.advfn.com/readmsg.aspx?msgid=27324199

    Reply

    Peter D Reply:

    Strawberry, is that really you? You DO have a green Mosler Economics T-shirt, yay! Very nice to meet you :)

    save america Reply:

    Thats me dude, bringing MMT to bernanke’s home town and former employer:
    http://www.thesouthoftheborder.com/

    Yes I told everyone before, make sure you get a mosler econ shirt in GREEN, so that everyone knows you are serious about money, this really gets the female econ grads excited when I go to the colleges. ;) In fact I owe Mosler a great debt of gratitude, riding his MMT coattails has gotten me dates that I would never have gotten otherwise. Make sure you read the links I posted below about bernanke’s hometown and give me some feedback, I am going to be in washington DC for a few months wearing my mosler shirt and passing out his book, I got tired of expecting anyone else to do it, even warren, so I am taking matters into my own hands, ayn rand would be proud! :) We got to fix this unemployment issue before they blow up the world! I am scared dude!

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