10:04 – It’s a standard Sunday around here, and most certainly cooler than usual this time of year. We finally turned on the central heat, because it was down to 66F (19C) in the house, and falling. The high today is to be 59F (15C) and the low tonight 41F (5C), so it’d get a bit chilly in here without the furnace running. I fired up the gas logs to test them. As expected, they burned for a couple minutes and then went out. Time to blow out the oxygen sensor with canned air.
Barbara and Colin are out in the yard blowing leaves and enjoying the cool weather outdoors. I’m working on a couple lab sessions about extracting and visualizing DNA and doing gel electrophoresis, enjoying the warmer weather indoors.
12:04 – This article summarizes the current euro situation pretty well. In short, no matter how bad you think it is, it’s actually far, far worse. If anything, I think the article is overly optimistic. I don’t think we have months left before the crash. We may not have weeks.
Here we go again. Firefox just wanted to update a whole version to 7.x. This, of course, breaks compatibility with almost all of my plug-ins. I do not believe it has been even a month since the last version upgrade. Mozilla seems hellbent on driving users to Chrome. I am upgrading hard drives in a couple weeks. Will take that opportunity to dispense with Firefox.
I have to say I agree with Chuck about Firefox. It seems like just yesterday I was debating upgrading to Firefox 4, and here we are at Firefox 7. What’s with changing the version to the left of the decimal so much? It’s making me think about switching browsers as well.
On the economic front, the fallout from any EU consequence–IMO,–is going to be the same as the 2007/8 debacle in the US: loss of capital wealth. Which will move us backwards in time once again, in terms of the scale of the economy. Dean Baker estimates that the US fallout moved us back to 1992. It has now been 4 years since then, so ostensibly, we should be at about 1996, but growth may have been slower during the last 4 years than it was during ’92 to ’96.
Since the Euro is not the world’s reserve currency, hopefully, capital loss from it will have less of an effect on the US than our own losses did.
With QE over, the value of the dollar is rising again. With over 80% of all debts denominated to be paid in US dollars, that is as it should be. As US dollar debts are paid off the world over, that money (over and above required loan currency reserves) is retired, pulling dollars out of circulation and making what remains more valuable.
That is good for the middle-class–and especially those nearing retirement age. It makes our assets more valuable. That absolutely crazy and suicidal bullshit from Keynesians, that we need to lower the value of the dollar to increase US exports benefits primarily the already super-rich and super-rich corporations, while making everything in ordinary human’s lives more expensive. The vast majority of businesses in the US are not exporting anything, so all a loss of value in the dollar represents to them is a loss in value of their capital assets, making it harder to do–and grow–business and increase the business’ valuation.
Because business is done on long-term contracts, inflation and deflation show up years after the increase/decrease in the money supply occurs–as those contracts play out and new ones at different prices are negotiated and register in the economy. We have just gone through an incredible–perhaps even unprecedented–period of inflationary monetary policy. Hopefully, the current deflation will continue until the dollar has a reasonable valuation against gold, and that will prevent the incredible price inflation that would otherwise occur if gold remains at near $2000/oz. About $600/oz gold–or something even less–would be fine with me. That would help me recover the value of the family house, which has been worth next to nothing since the housing crash of 2007.
Oh, and one more economy thing. Baker is pointing to statistics that show the effect of the productivity gains achieved in the US during the past decade have had the effect of transferring wealth from the middle-class to the super-rich.
I’m beginning to sound like Karl Marx. Guess I lived for too long adjacent to a street in greater Berlin named after him. Seems like a good name. More interesting than Ernst Thälmann.
I’m still using Firefox 3.6.20. As a good conservative, I “just say no”. when it wants to upgrade.
When I got the latest Flash plugin Chrome was unilaterally installed. Very annoying.
Chuck,
“The vast majority of businesses in the US are not exporting anything, so all a loss of value in the dollar represents to them is a loss in value of their capital assets, making it harder to do–and grow–business and increase the business’ valuation.”
If my Economics I memories serve, the increase or decrease in the value of a currency is relative to other currencies, so for a business that does business only internally (inside the USA) there is no increase or decrease in value of its assets.
It may be affected though, if it used imported ground materials to manufacture products or to resell them. Usually a business passes increases on to its clients, so a devalued dollar will have an effect on the internal US economy. Maybe this could be beneficial to get local (to the US) manufacture of gound materials going again, and to relocate jobs back to the US?
Well, as the euro collapses, there will be a lot of unforeseen follow-on effects. One of those that I expect is increasingly shrill calls for protective tarriffs, i.e. Smoot-Hawley II. It wouldn’t surprise me if the US eventually raised a wall around itself and Canada. The UK would probably be invited to join, and would have little choice. Australia, despite its close ties with China, would also have little choice.
Mr. Grigg: Your Kindle has arrived. I opened the box from Amazon to make sure it was OK but I did not open the internal packaging. I don’t have your snail mail address here at work and will have to get it from home this evening. I will then send your Kindle to you tomorrow via USPS.
QUOTE chris els
If my Economics I memories serve, the increase or decrease in the value of a currency is relative to other currencies, so for a business that does business only internally (inside the USA) there is no increase or decrease in value of its assets.
It may be affected though, if it used imported ground materials to manufacture products or to resell them. Usually a business passes increases on to its clients, so a devalued dollar will have an effect on the internal US economy. Maybe this could be beneficial to get local (to the US) manufacture of gound materials going again, and to relocate jobs back to the US?
/QUOTE
First of all, it is a pipe dream that the manufacturing jobs in the US that my generation has thrown away–which my parent’s generation worked so hard to create, so everyone in the US had a chance at a good paying job,–will ever come back. Those jobs are gone for good. But look over to Germany, and you will see that they were not so profligate. They have worked hard to keep manufacturing as one of the cornerstones of their economy. So, it HAS been possible not to lose that sector of the economy. But the US has been more interested in getting rich quick, than it has in preserving the foundations of sound economics for future generations.
I am a realist; I am not a blind American flag-waver who refuses to face reality. Just as America can no longer afford the road infrastructure for personal transportation for everyone (and that is screamingly obvious to me after 2 alignment jobs in one year, and after having lived abroad for nearly 10 years in a place where there is both public transit AND good quality roads for cars), America can neither afford to bring manufacturing back, nor does it have the political will to make it feasible for that to happen. Manufacturing will not be a part of America’s future.
But what you state is exactly the Keynesian view that has been passed out in every school since WWII. However, the fact is that if your currency becomes worth less, then everything in your country costs more–to everyone, including those within the country.
Nothing in the economy happens instantly, except final collapses. The fastest moving items, price-wise, are commodities. When the value of the dollar falls, it only takes a day or two for oil-based commodities to respond with corresponding price increases–as we all have seen. Watch the price of gold (which is the inverse of the value of your currency) and you can rely on the fact that gasoline will follow it correspondingly within a day or two. Does not matter whether that oil comes from imports or from your own wells and refineries. Recently, on a Canadian station whose stream I sometimes listen to, there was a wonderful in-depth piece on how Canada is oil self-sufficient. But gasoline prices to Canadians fluctuate violently, just like in the States. Even using your own domestic resources does not mean price stability when the value of currencies is fluctuating wildly. This seems counter-intuitive, but it is fact. Oil prices have been fluctuating wildly because the value of the dollar has been fluctuating wildly. And I do mean wildly.
Outside of commodities, it takes years for currency devaluations to work themselves through an economy, but our government has been devaluing the currency for enough years now, that I think you can see it everywhere. Gold has risen (the value of our currency has fallen) from under $800/oz a few years ago, to nearly $1900/oz a few weeks ago. Is there anything you buy that has not been going up? Groceries? Clothes? Electric rate? Internet service? Netflix? Computers and parts (excepting hard drives)? Postage and shipping rates? Car wash? Service fees at your bank? Movie tickets? Sports event tickets? Restaurant food?
I am paying more for all those items than I was only a year ago. My McDonald’s breakfast (on video work days), has gone from $3.84 to 4.92 just since March. Percentage-wise, that is one helluvan increase.
Furthermore, the world has become economically linked more than ever with electronic global interconnectedness and Internet communications. You think we can erect trade walls around the US and continue living the life we have to date? So did East Germany.
It is an impossibility to devalue a currency internationally without having prices rise domestically. Impossible.
And who benefits from devaluing a currency? Not you and me! It is nothing more than a subsidy for a special interest group: big business exporters. Let those guys work harder to sell their product. Don’t devalue all my assets to benefit them. Any jobs they might create will never offset the losses you and I will suffer for handing them easy sales by dipping into our pocketbooks and lowering the value of every asset we own. Mercedes took a sales hit a few years back, when the dollar first began to fall significantly. But in the last couple years, they have been able to grow sales, even though their cars have been continually rising in price as the dollar has unrelenting fallen in value. The Germans can do this without devaluing their currency and we can’t? Give me a break.
Hey Ray, Mr. Grigg was my father! My friends call me Bill, and you can too! 😀