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Tapering..... in China.

roman_mir (125474) writes | about a year ago

User Journal 5

and so it starts. The Chinese government decided to stop buying up US Treasuries and they are likely not going to roll over the US bonds that they already own, that would be Trillions of dollars that the Fed will have to print to buy up this incoming flood of the old Treasuries and without the Chinese in the US bond market, the Fed will have to buy up all of the new issued debt as well.

and so it starts. The Chinese government decided to stop buying up US Treasuries and they are likely not going to roll over the US bonds that they already own, that would be Trillions of dollars that the Fed will have to print to buy up this incoming flood of the old Treasuries and without the Chinese in the US bond market, the Fed will have to buy up all of the new issued debt as well.

In this case what is good for the Chinese is bad for the Americans, Chinese are going to see a long needed deflation finally, while the Americans will see massive amounts of inflation, so much of which was exported to China previously, coming back.

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If they were smart... (2)

rhodium_mir (2876919) | about a year ago | (#45487807)

I'm sure all the idiots who have bought gold because they think it's intrinsically valuable would love to see some inflation right about now.

Gold Price Performance USD
Today -14.10 -1.12%
30 Days -99.00 -7.37%
6 Months -134.00 -9.73%
1 Year -484.60 -28.04%

Re:If they were smart... (1)

XcepticZP (1331217) | about a year ago | (#45488857)

Gold isn't being used much as a day-to-day currency, so I'm not surprised that it's sorta failing to keep the value that we believe it has as a currency. Precisely because it's not being used as a currency anymore. Once fiat money finally get's exposed, and things crash, then we'll see a resurgence of hard currencies. But until then, gold isn't much of a shelter from the slow-coming crisis.

Re:If they were smart... (1)

fustakrakich (1673220) | about a year ago | (#45497821)

A currency's only "real" value is in its convenience as a medium of exchange. Scrip is easier to carry than heavy metals. Everything else is purely entertainment. The "intrinsic" value of gold and diamonds is that it gets you laid.

Re:If they were smart... (1)

countach74 (2484150) | about a year ago | (#45499145)

Bank notes are a lot easier to carry than gold, but theoretically are backed by the gold[1]. I see your point, but I don't think we really can know this yet, as government interventionism in currency has squandered any opportunity for money to advance with technology as it would in a free society. It remains to be seen if moneys that lack intrinsic value would ever take hold without the intervention of governments to force it into acceptance.

[1] Of course banks have this tendency of expanding credit whenever they can get away with it; one should never expect bank notes to be backed by gold when legislation is in place to make it possible for banks to run smaller reserves than would otherwise be possible (sanely) in the free market. That's not to say that in the free market, banks would maintain 100% reserves: only that they would be more inclined to keep more in reserve than we see now.

Re:If they were smart... (1)

Arker (91948) | about a year ago | (#45506993)

An old-school bank note, backable in something intrinsically valuable, is one thing. Pure fiat currency is another.

Have you ever pondered the concept of counterfeiting? What exactly is the difference between the 'real' dollar and the 'fake' dollar made from the same paper and the same ink using a plate that is for all intents and purposes identical?

With real money, counterfeiting meant adulterating the value - mixing lesser metals so that each coin contained less gold or silver. Since there is nothing intrinsically valuable in fiat money, this sort of counterfeiting cannot occur. But in effect, the official state press has a license to counterfeit - they can effectively adulterate the currency supply - inflate it - at will.

A currency's primary value is indeed as a medium of exchange - but if it's too easy to 'counterfeit' or adulterate then that value is compromised. Gold and silver are not perfect, but in comparison to printed paper? Supplies of gold and silver are limited, and adulteration is detectable and thus refusable.

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