Good points peakok. The Bretton Woods and Federal Reserve thing are huge.
In 1873 there was no option for the government to simply deflate the dollar by 50% which is essentially what congress is voting on this week.
The relevant press release being the one saying that FDIC insurance will now cover bank deposits up to a maximum of $250,000 instead of $100,000.
What that means is that in a year or two all wages and prices will be about twice what they are today except for real estate. Real estate values will just sort of hold steady.
This is not true. The bailout is a cash giveaway to people who should really be jailed, but it is also structured to avoid a massive drop in the value of the USD. The reason is simple: it is an attempt to exchange good debt (government debt) for bad debt (private debt).
If things were handled differently, the Fed would have to promote liquidity by increasing the money supply. They are scared to do this in part because rates are already low and they don't have much breathing room. Also out of fear that any increase in the US money supply will trigger a run on the dollar.
That would force the US to raise interest rates to attract the currency to cover its debt. The exchange of debt for debt is technically non-inflationary as it takes the same amount of paper assets out of private hands as it puts into them.
In 1873 there was no option for the government to simply deflate the dollar by 50% which is essentially what congress is voting on this week.
The relevant press release being the one saying that FDIC insurance will now cover bank deposits up to a maximum of $250,000 instead of $100,000.
What that means is that in a year or two all wages and prices will be about twice what they are today except for real estate. Real estate values will just sort of hold steady.