It will be helpful if Geithner can show us some arithmetic

“It will be helpful if Geithner can show us some arithmetic.” That’s a quote from Chinese economist Yu Yongding, poking fun at Geithner’s mission to assure the Chinese that their investments in the U.S. are safe. The U.S. dollar is now starting to lose value, which affects China in two ways: one, it reduces the value of all the bonds and U.S. securities that the Chinese government owns; and two, it raises the price of Chinese exports from the standpoint of the U.S. consumer.

There is no mopping up of all the trillions of dollars that the Fed has injected into the world economy. There is no way to prevent the increase in interest rates without also funding the gargantuan deficit of the U.S. government. These are the symptoms of an incipient hyper-inflation: interest rates shoot up as the currency value dives down.

Gold has started to creep up as the dollar has gone down. There will be another panic, and it will be worldwide. The panic will result in an extreme rout of the dollar. Imagine the dollar losing half of its current value, and you will start to understand the kind of panic that will ensue.

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About ctapang

I am a Software Design Engineer. I have just abandoned the huge army organized to make .Net programming the one dominant programming system. I now program in Typescript which (surprise) is also from Microsoft. Aside from my day job as a programmer, I am also involved in a movement (http://correctphilippines.org) to correct the Philippine constitution. It's an ambitious undertaking in itself, and there's no guarantee that improving our constitution will improve things. However, one thing is certain: if we don't establish a rational constitution, we will continue on our path of self-destruction. What kind of government is best? For me the best government is that which governs the least. We need the government not because it can provide for us but because it keeps us from running into each other. The proper function of government is that of a traffic light: it prevents us from bumping each other, but it does not tell us where to go.
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