What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby SillyWilly » 22 Apr 2012, 23:55

Numbers were wrong. Apologies. :oops:
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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby Abacus » 23 Apr 2012, 02:52

You really have a problem with numbers. Do you really think that 15,000/yr was the avg wage in 1913? Perhaps you missed the adjustment that your new misread chart made. The entire graph is in 2006 DOLLARS. According to your graph wages have risen 4x faster than inflation (factored into the graph).
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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby SillyWilly » 23 Apr 2012, 08:14

Abacus wrote:You really have a problem with numbers. Do you really think that 15,000/yr was the avg wage in 1913? Perhaps you missed the adjustment that your new misread chart made. The entire graph is in 2006 DOLLARS. According to your graph wages have risen 4x faster than inflation (factored into the graph).


Don't know what I was thinking with $15,000. It was close to 1am and I clearly wasn't thinking. Will look for correct numbers. Thanks for being gracious about it.
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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby SillyWilly » 23 Apr 2012, 12:30

From this graph it is clear that wage growth has outstripped the general price level (CPI-U) from 1948 to 2008 by a factor of at least 2.5. And it would be accurate to assume that wage growth has far outpaced CPI inflation since 1913.
Image

That said, major expenses such as gasoline, medical care, and college tuition have spiraled out of control.
WTI Oil price have increased by a factor of 120x since 1948 to 2008.
Image

College tuition has increased 4x faster than CPI inflation since 1985. College tuition inflation has outpaced even wage growth since 1985.
Image

Medical care inflation makes gasoline inflation and education inflation seem mild or even negligible. Medical costs have inflated by a factor of 360x since 1948.
Image

The problem of course is that the CPI-U is continually readjusted and individual component weights changed.
According to the Bureau of Labor Statistics the following weights are applied to:
1. Gasoline 5.46% of total CPI-U.
2. Medical care 7%
3. Tuition 3%
So a total of 15.5% of the CPI-U is devoted to the most inflated components of the index even though they make up a much larger part of your monthly budget.

Maybe wage growth has outpaced CPI-U inflation, but does that mean people are better off in real terms? Not after CPI-U adjustments, but rather after real gasoline expenses, real medical costs, and real college tuition bills are paid? Probably not. How does inflation destroy a currency? Surreptitiously.

One more chart before I'm finished. If people were really 2.5x better off compared to CPI-U since 1948, would almost 47 million (14%) of them be on food stamps? Probably not.
Image
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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby headhonchoII » 23 Apr 2012, 13:18

Yes, the question should be, WHO is better off and WHO is worse off. You've finally put something together worth reading SW :wink: .

I think the double income versus single income is important. Obviously what happened (and this happened where I am from too), is that when women started to enter the workforce in numbers this just allowed the size of mortgages to increase along with costs for childcare, in the end many families now have two people working for a lesser quality of life.
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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby Abacus » 23 Apr 2012, 13:28

headhonchoII wrote:Yes, the question should be, WHO is better off and WHO is worse off. You've finally put something together worth reading SW :wink: .

I think the double income versus single income is important. Obviously what happened (and this happened where I am from too), is that when women started to enter the workforce in numbers this just allowed the size of mortgages to increase along with costs for childcare, in the end many families now have two people working for a lesser quality of life.


finally he wrote something coherent but it has nothing to do with the original topic. Everybody knows about these issues that the US faces and continues to ignore. There are some big problems but none of this supports some of the ridiculous nonsense that has been spouted off in this thread. Imo some have been reading the scaremonger financial websites a little too much and can't think for themselves anymore.
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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby headhonchoII » 23 Apr 2012, 14:02

Zerohedge ..folks sure get carried away there. Still the debt problem is a serious issue that needs to be dealt with by inflation or default in many cases. Not the end of the world as we know it yet, but certainly a whole heap of pain and adjustments.
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China Pays for Iranian Oil with Gold.

Postby SillyWilly » 24 Apr 2012, 09:56

With US sanctions in place against Iran, China decided to pay for oil with gold.
Admittedly, I'm surprised since China is stockpiling gold like crazy, but now wants to pay for oil with it. Guess they were forced to react this way. I don't really view this as a positive move away from the US dollar; more as a desperate measure by China. They have gold and need oil. Barter it is.

Here's the source: http://www.forbes.com/sites/gordonchang ... -buy-gold/
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US Dollar Performance Since Start of 2012

Postby SillyWilly » 25 Apr 2012, 11:33

Since the first of the year the dollar has lost:

1.6% against the Aussie dollar,
5.5% against the New Zealand dollar,
1.3% against the Swedish krona,
3.2% against Norway’s krone,
1.9% against the Swiss franc,
6.4% against Hungary’s forint,
7.2% against Poland’s zloty,
7.9% against the Russian ruble,
5.5% against Mexico’s peso,
8.6% against Columbia’s peso,

3.3% against India’s rupee,
3.8% against Malaysia’s ringgit,
3.7% against the Singapore dollar,
2.9% against the Philippine peso,
2.5% against Taiwan’s dollar and,
0.9% against EURO. - despite the ECBs massive money-printing.

Source: http://www.munknee.com/2012/04/larry-ed ... heres-why/
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Re: What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?

Postby GuyInTaiwan » 25 Apr 2012, 12:19

With the forint and the zloty, isn't that because many of Eastern Europe's economies were in the toilet a year ago?
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