i'm going to show you how during the housing bubble, the value of the houses never actually increased, but that the dollars we were using to pay for these houses actually decreased in value and gave the illusion that the houses themselves were gaining in value. It works kind of along the lines of how my father use to give me a $20 bill, but he would give my little sister 1000 pennies($10 for those not so good with math). The actual physical amount of pennies astounded my little sister and she believed that she had way more money than i did. our government has been playing that same game with us.

Let's use gold for the purposes of this example. The value of gold has held steady throughout it's history. In fact, many countries have based the value of their currencies on the value of gold as far back as ancient times. It's value has stayed so constant that you can actually gauge the value of a country's currency by the current price of gold at any given time.

Next, for the purpose of this example,we will be using the federal reserve notes that have been our country's currency (money) for 96 years now. Unlike gold, the value of this money fluctuates, decreasing or increasing in value. this fluctuation is caused by a very simple process, if you want the money to increase in value, you would decrease the availability of it to the general public. When you increase the value of the money, it's effects are seen as the price of an item going down. this is done by any method that takes money back from the people's pockets which creates a deficit (higher taxes, higher interest rates on loans, etc..). once a deficit is created, the money's perceived value will increase.

The reason the money's value will increase is due to a phenomenon that we can all relate to and that is, the more scarce something becomes, the more valuable it becomes. So, the more scarce the money becomes, the more valuable the money becomes.

The opposite applies to when you want to decrease the value of the money in circulation. When you decrease the value of the money, it's effects are seen as the price of an item going up. The item's value has not changed, but since the money's value decreased, it takes more of your money to buy the same item. when the money's value is increased it takes less money to buy the same item.

so just remember, these points:
A)
1) the more scarce the money is, the more it's value increases.
2) the more abundant the money is, the more it's value decreases.

B)
1) in order to make money scarce you have to take some away.
2) in order to make money more abundant you have to add more money.

given these 4 points, ask yourself what was happening to the money when we went into the housing bubble.

people were getting never before heard of loans which increased the money supply by very large amounts. what does this do to the value of money? it decreased the value of the money, which means that it would take more dollars to buy a house after the bubble, than it would before the bubble started. because remember, the value of the house never changed. the value of the dollar dropped in proportion to the amount of surplus money that was pumped into the system at that time.

When the value of the money dropped, it gave the illusion of the house's value increasing just because it took more of this devalued money to buy the house.

when bush and paulson put forth the bailout plan, this plan would essentially add to the money supply. which subtracts from the value of the money.

same goes for Obama, his so called stimulus plan will add to the money supply thereby decreasing the money's value even more.

it's taken 96 years to accrue a debt of 54 trillion dollars to the federal reserve. which means that we have been going into debt at a rate of around 580 billion dollars a year. the value of our dollar has decreased 96% in 96 years which means that it would take 1 dollar today to buy 4cents worth of items back in 1913.

Take the 12 billion dollars per month we spent on just the iraq war so far which totals out to around 8.6 trillion dollars currently, plus the 1.4 trillion total bailout from Bush and the 3.5 trillion from Obama, adds up to about 13.5 trillion dollars that will have been pumped into the system soon!
which means that a quarter of the amount of the 54 trillion, which took 96 years to accumulate, will be pumped into our system in a matter of maybe a year or two. tell me what this is going to do to the value of your money. tell me how this is going to help you.

Just an FYI, 99.9% of those on the internet do not understand economics 101. I've been trying to explain it for over 2 years now unsuccessfully.

lol. if they only knew.

I've been reading your posts to learn about it.

i love that!!!! lol

Thank you. I pretty much realize the fact that almost nobody listens, but I'm glad when at least one person at least listens even if they do not agree.

I didn't say that I don't agree. lol I'm still learning.

well, i haven't heard anyone comment on the actual post itself.

I agree that Bush lied. Dont see how the economy is Obamas fault. It all started when Bush was in there. Obama is just trying to fix what Bush screwed up

you didn't read the article up top, you're just throwing comments around willy nilly.

It's bush's fault that obama help acorn sue the clinton administration to force banks to make loans to people that couldn't finance a vhs machine? that doesn't wash.. it's bush's fault that the senate ovesight comittee that came about as a result of maccain and bush calling for more oversight of fannie and freddie swept early warnings under the rug?

http://www.youtube.com/watch?v=_MGT_cSi7Rs

how is obama trying to fix what bush did, by doing what bush did? makes not a bit of sense.

well the value of my dollar is going to continue to decrease.

housing costs are going to decrease....because their are many houses that are in foreclosure right now.

The housing price increases were based on supply and demand. Ill give you an example. In 1993 my father bought a beachfront condo for $90,000. In 2002 he sold it for $400,000. It didn't have anything to do with the value of currency, it was a property that was in demand. When greedy developers saw the increase in demand for beachfront property, they began paying absurd amounts of cash to purchase as many parcels as they could. They hired illegal aliens to do the work at a much lower cost, and tried to maximize their profits. When the banks began their risky loan programs they increased the demand even more. You had people that couldn't get loans for beachfront properties all of the sudden being encouraged to do so, at inflated prices.. As more and more condos replaced older properties, the tax assessments began to rise dramatically. As the towns saw their revenues increase they pushed for even more development. In 1993 there were about 1500 condo units here. Now there are 15,000. When the foreclosures started the demand began to decrease. Empty houses, empty condos, equals depreciation in value of the entire neighborhood.

All I cansee is presidents being presidents...They all[yes, all] theink they are " changing" the USA for the better, but EVERY single one ends up screwing it up for the next one

apparently you don't understand the meaning of perceived value. when these people saw that they could get large loans real easy, they were more prone to buy more expensive houses. the value of that money that they were loaned, decreased.

when the value of money is decreased it is because people are willing to spend more than what something is worth.
if you had 1000 dollars you wouldn't worry about a 5 dollar pack of cigs. you would just spend the 5 dollars. if you had only 10 dollars to your name, you might be more willing to not buy that 5 dollar pack of cigs. thats because when you had the 1000 bucks, that 5 dollars wasnt worth crap to ya.

when you only had 10 bucks, that 5 dollars looks like a whole lot of money. that 5 dollars now is more valuable to you than when you had the 1000 dollars.

I thought there was some sort of "price fixing" set forth by economic advisors of both Bush's and Obama's administration. Not 100% sure what that is supposed to mean, but many, many people were complaining about the "Price fixing" and that the market should decide the value of things, not the government...