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Apparently, it’s “healthy” to erode your money’s value by 2% every year. Healthy for whom? Certainly not for anyone trying to save money in the bank.
I posit it would be much healthier to go through a deflation of 2% a year for the foreseeable future. Then many would be encouraged to leave their money in the bank.
Problem solved.
MAGA.
That's simply not true. I don't know why someone would suggest anything of the sort as primary dealers are required to bid. We can't technically have a bid-to-cover ratio below 1.Robert, Kiyosake, author of "Rich Dad, Poor Dad", suggests hyperinflation may soon be here. His argument is that during a recent treasury auction there were not enough bidders to cover the offering so the Treasury Department purchased 50B worth of it own treasury notes.
It's not.If this is accurate
Again, this is not accurate. Other nations buy U.S. Treasury securities because they run current account surpluses with the U.S., and failure to do so would cause their currencies to rise at a pace that would negate their trade balance in the future.I'm betting it is a result of China and other nations selling of the US notes they own in retaliation to tariffs imposed by the current US admin.
Even more inaccuracy. The Treasury will change interest rates if the resulting yields begin to diverge from the issued coupon. Make no mistake about it... a very large portion of the demand for Treasuries is directly tied to the trade deficit of the United States.The market is flooded, the Treasury will have to raise the interest rate it is offering in order to secure the funds required.
Banks pay interest. An inflation rate in the 2%-4% range incentivizes consumers and businesses to put their money to work.Apparently, it’s “healthy” to erode your money’s value by 2% every year. Healthy for whom? Certainly not for anyone trying to save money in the bank.
All you have to do is look at the data.Hasnt the FED been buying US treasuries for years?
An inflation rate in the 2%-4% range incentivizes consumers and businesses to put their money to work.
They aren't saving. People generally keep their money in the bank, and cash doesn't lose purchasing power that fast with a reserve currency unless the rest of the world is up against similar pricing pressure.1) So savers lose: a 2 - 4% annual loss in value punishes people who don’t want to speculate.
Even if they didn't purchase assets, keeping your money in the bank earns interest. Right now, CPI and PCE are are 2.3% and 2.65% YoY respectively. You can get 4.5% to 5% parking the same money in savings as we speak.2) Forcing people to invest out of fear of their money losing value means more bad investments.
For black market entities. If you are weird enough to keep vast sums of cash hidden for years upon years in the modern era...3) It's yet another hidden tax.
Is there anyone that saves a significant portion of their net worth in cash?Certainly not for anyone trying to save money in the bank.
If it's not been motioned already, the Fed buys and sells Bonds from the private market, to affect reserve levels (which are not the same as dollars). Most people know this as "Open Market Operations"Hasnt the FED been buying US treasuries for years?
1) So savers lose: a 2 - 4% annual loss in value punishes people who don’t want to speculate.
No. We've got a very long way to go before that becomes a possibility.
Once the world economy becomes more balanced the USD will have seen its relative value drop, while currency of country's with high trade surpluses will go up. That will see the GDP of China and South Korea for example increase in USD terms, perhaps making the Chinese economy the largest in the world in USD terms (already largest in PPP terms).
I agree with much of your post, except this part. There is nothing about running trade surpluses that should affect a country's currency; a trade surplus merely allows a country to amass foreign currencies, which don't do much. China's currency should be super valuable, right? But it's still cheap to buy Chinese stuff.
It is true that trade deficits should (theoretically) lower the value of your currency on the world market, because more of your currency is out there, looking for something to buy and/or being traded for other currencies, but I don't see a lot of this effect, either. Things are pretty stable, even though most countries run their trade surpluses or deficits pretty regularly. There is only so much you can do with a pile of foreign currency, really, and if it isn't used to buy goods denominated in that currency, it is ultimately saved (in the form of bonds) by *somebody.* That's why countries own lots of U.S. debt. It would be great if they spent that on American goods, but that doesn't always align with their economic goals. China would much rather just produce stuff themselves, if they are able, and grow their own economy.
China is printing a lot of Rmb to fund domestic devices, which drives its currency down and inflation up.
Up until recently China did have quite a bit of domestic inflation.
So you are correct my post was rather simplistic as to what would occur in a vacuum. Heck with the government spending in Japan inflation should have it hard years ago. But consumer spending has been deflationary
China I believe has been using USD to fund the OBOR program rather than to buy more US government debt.
As for US goods, outside of items China can't make or grow enough US made products are too expensive
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