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Subject Consequences of living in and on a bubble: Your money just isn't worth the same anymore!

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[quote:Anonymous Coward 301389:MV80NDA1MzNfNjgwNjI4OV83MTg0MEVEQw==]
[quote:FRENCHY 301389]
Consequences of living in and on a bubble: Your money just isn't worth the same anymore. 
[/quote]

What is happening in America in terms of housing, valuations, and everything that those two effect – the good times of the 2000's were fake, they couldn't be sustained, they were unnatural, and they are now coming undone in dramatic fashion. Millions of people are going to lose their homes. Those millions of people won't be making major purchases any time soon and that will act as a drag on the rest of the economy. The Fed still seems content with pleasing Wall Street instead of reacting to this situation how they should: by leaving it alone. Stupid people (in banks) made stupid decisions to loan to people who should have never been loaned to, those people defaulted, and soon they will have to as well. Instead of letting the market work itself out as it does, the Fed has decided to keep shocking this dying patient, hoping one of the hits will get a regular heart beat reestablished.

In the meantime, those dollars in your pocket just aren't worth what they used to be. The rest of the world is moving on and America is bleeding profusely from a massive self-inflicted wound.

Gains on Wall Street just aren't worth what they used to be. The Dow is quoted in dollars. For example: a “Dow 14,000!” in 2007 USD is actually “Dow 10,000!” in 2007 Euros. If there were a “Dow 14,000!” in the late 90's, when 1USD = 1.25 EUR, would have been “Dow 17,500!”. The point of the example is that as the dollar falls, rises in prices still wind up being falls when adjusted for what has happened to the currency. So in order to catch up to a “real” rise, a price on something would have to rise further, most likely faster than the rate of a wage increase, which leads to inflation, which leads to a sluggish economy, which feeds this monster some more.

If you bought a loaf of bread imported from Canada for $1USD when the exchange rate was $1USD = $1.75CAD, you see yourself paying $1 and are on your way. If the price of that loaf rises to $2CAD, and the value of your currency falls to $1USD=$.99CAD, that loaf of bread went up in price to $2.01 from $1. Now get rid of the bread example and do this for all the goods that aren't made in America, which is to say mostly all of them. Harder times are ahead, and we the people are in line to suffer. From the housing market to the grocery store, harder times are ahead.

And of course, don't forget, all this mess, all these words, it's only one part of the problem. You may begin to let your head spin now.
[/quote]

Original Message Consequences of living in and on a bubble: Your money just isn't worth the same anymore.

For the first time in thirty years, the U.S. Dollar sank below the value of the Canadian Dollar. The Canadian Dollar isn't “funny money” anymore, and at the rate things are heading, that deliniation will soon be reserved for the U.S. dollar in short order. Against the Euro, the Dollar continues to set record low after record low. It is only a matter of time before a slew of records begin against the British Pound. Just how did we get here?

On September 18, the Federal Reserve led by Ben Bernanke did something it does not often do – it moved the federal funds rate, the rate at which banks can loan money to each other, down by half a percent in order to stave off a perceived financial crisis. On the face of it it seems like a good thing for Americans: lower borrowing rates means the rates on variable loans comes down which means people can borrow more which means that good old economy will heat right back up and everything will be fine once more!

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