Economic people out there - when does money become worthless and what happens then?

[debbierlus]

?

I don't understand economics very well. However, it seems that the wealthy have taken the working population hostage, and their actions have devalued currency to nil. Doesn't removing the correlation between money and work, in effect, make money worthless?

The bailout has done nothing but keep money locked in the banking system, and it has allowed giant banks to eat some of the smaller ones. It all seems slight of hand.

And, we know that the Treasury has pumped out dollars, but we aren't allowed to know how many. If we knew, would the dollar just be a piece of paper to burn in our fireplaces?

My questions, how long can this shell game continue? Economists are saying that Obama's current plans are not big enough to keep the economy at its current depressed state, so what happens if Obama remains conservative and the rescue plan doesn't work.

Realistically, what do you think will happen? What do you predict?

Thanks

[Teaser]

1. money is worthless, if people dont value it.

It's purely psychological. If people stop believing money has any worth, then it's worthless.

We're a long way from that point.

[lonestarnot]

2. Oh we are? A long way?

[EstimatedProphet]

5. Yeah, a long way

When peole start insisting they get paid in goods and services instead of currency, then we'll be there. Even people wo live on the barter economy aren't rejecting cash.

[Richardo]

3. You've got a collapse of confidence in the currency.

People are gonna panic. There's gonna be gold riots, atonal music, political chaos, mass suicide.

Right? It's Germany before Hitler. You can see that.

[Zuiderelle]

4. Atonal music!

:rofl:

[Richardo]

6. I know, right?

:D

[Javaman]

7. it won't become worthless!!!

it makes great wall paper!! or bird cage lining. :) LOL

[northernlights]

8. inflation equals too many dollars

chasing too few goods.

I'm no squat about the economy, but I've read the above saying many, many times in my fruitless quest to understand the economy.

It seems to me that it doesn't matter how many dollars the feds create, as long as the banks they stupidly gave them too hoard them, use them to pay themselves bonuses, buy other banks with them, and do anything *except* lend them out. Because they aren't going to spend any more on "goods" or hire any more people than they already did before. In fact, as they acquire other banks, they'll fire more people for "efficiency."

So any inflation is a long way off. I'm more concerned about a total collapse of the banking system. I'm hoping they'll set up a national bank and do direct lending to small businesses and homeowners screwed over by deregulation, infuse the stafford loan system and, even better, restore and expand Pell Grants to anybody who needs to retool due to death of their industry/field, along with those entering college for the first time.

In the meantime, I think the military that is being deployed back here will be less about "martial law" (not enough of them versus us) as "food distribution." If everything breaks down, and the supermarket shelves are empty cuz they can't get loans or the shippers can't get loans or whoever, the government will have to take over to prevent mass starvation.

I don't think Obama is as conservative as he appears. I think he's very, very, very smart. He put out a package with some bones that the rethugs could buy into. Now it goes to congress, where it will be changed to be more direct spending, and maybe even reverse the tax cuts for the wealthy. If you look at tax levels over the past 50 or 60 years, the wealthy are paying out less than at any time before. FAR LESS. It's past time for them to pay their fair share.

The rw rethugs will cry, whine, pout, throw tantrums. But I suspect the moderate rethugs will go along in order to get help for their states. For example, Maine is seriously hurting and it would behoove Collins and Snowe to cross the aisle in exchange for am extra cash infusion from the feds. Same is true of a number of purple states. So the hardright wingers will cut off their state's noses to spite their face. But the moderates will go along to protect themselves from angry voters. We're simply not as beaten down up here in the north as southerners seem to be. Gotta be tough to survive the winters here.

[exboyfil]

9. My question is what happens when currency debasement

meets COLAs (cost of living adjustments). S.S. and other government pensions are tied to the cost of living. Also some treasuries are tied to cost of living. The folks who are really going to get hit are those in fixed income pensions and with assets that don't appreciate with inflation.

Expecting something like this I put a significant portion of my retirement savings into Treasury Inflation Protected Securities.

The next few bond offerings are going to be really interesting. I am strongly thinking about further allocation of my portfolio to TIPS.

[stubtoe]

10. Zimbabwe provides a current object lesson in worthless money.

http://www.nytimes.com/2006/05/02/world/africa/02zimbabwe.html?scp=2&sq=hyperinflation&st=cse

[ThomWV]

11. Money becomes worthless when no one will accept it in trade - we're no where near close

Throughout this argument I want you to keep one very basic fact in mind - well, maybe its two facts. We are the world's largest exporter of grain and if much of the rest of the world does not want to starve to death they have no choice but to find US dollars to pay for that grain. As long as our farmers continue to grow - and they will so long as their is a healthy export market - our money continues to have value.

[closeupready]

12. That's a silly argument. Many other countries export grain, too.

Is the US really the only source of grain for countries that are not self-sufficient in grain production? I seriously doubt it.