No $1,000 for kemp? 

See, this is starting to show me a pattern: I need to suddenly transform my political ideology so I can get a $1,000 debate offer. 

[EDIT: Fine... *storms out of the room*]

Challenge: Does that mean, for the record, that I can post every individual argument which you have failed to answer, and you'll provide an answer with which we can have a debate?

> xeno syndicated wrote:

> "That being said, that isn't a need.  That's a want"

In a FREE MARKET ECONOMY, the investor should be able to invest in whatever he or she WANTS to invest. 

If the investor WANTED to invest in other markets, that investor would suffer the effects of the devaluation of the currency.  Why shouldn't he be able to write-off that loss?

This is an ethical issue, Zarf.  If you believe in the free market system, you have to agree with me that it is a potential loss, and should at least be considered.

I'm not restricting their right to make any investment they want.  However, every investment has with it the probability of gain or loss.  A free market is a system in which I have choices, but take responsibility for bad choices.  So yes, I am fully capable within a free market to throw all my money into We're Going To Screw Our Investors Over Incorporated, but the circumstances of that investment should determine my motivations (i.e., I should be discouraged from making bad investments).

> "blaming the stock market as a whole "

I'm not blaming the stock market.  I'm blaming the thye deficiency of a financial system based on fiat currencies which can be manipulated in unethical, ANTITRUST ways.

You are so taking that out of context.  X(

Okay, I get it.  Makes sense now.

That being said, that isn't a need.  That's a want.  The investor could choose to keep the funds inside the US.  He is actively making the choice to invest abroad.  This has two implications.  First, it means not all consumers investing in markets to counter inflation actually incur this cost (and therefore, it isn't representative of consumers as a whole) and second, those consumers which do enter that market enter with the recognition that they must take currency values into consideration, so they have an expectation of higher gains to accommodate the currency issue.

Additionally, as I mentioned, not all mutual funds even invest abroad.  So if I wanted currency exchanges to make absolutely no difference, I could invest in a domestic-only mutual fund.

It's no different than if I invest in any stock and the stock decreases in price.  Yes, I lost value relative to other stocks.  However, blaming the stock market as a whole is disingenuous because in the process of entering the agreement, I understand the conditions under which I would participate in the market.

> xeno syndicated wrote:

> "So.... how does the math work, then, that a currency depreciation hurts the investment?"

You are considering the investment is in Chinese yuan.  If so, then it would have appreciated, yes.  But if it were invested in the US, then it would have depreciated over that period.

Okay.  Now tell me what part of this scenario you described below is an investment in the US:

> xeno syndicated wrote:

> "Even if a US investor is at a disadvantage in investing in Chinese rare earth metals, the American consumer is completely separate from that equation.  Therefore, in the context of our discussion (the consumer accommodating for inflation), exchange rates are not to be added on top of inflation in our calculation."

I disagree.  The American consumer of mutual fund units, someone who cashes in say a bond mutual fund and wants to get into a mutual fund that holds investments in Chinese mining companies, will face an inflated price of the units of the fund due to currency exchange rates.

The scenario you described there is the scenario in which US currency depreciation would matter.  In that scenario, as I described mathematically above, the investor would see a profit from the depreciation of the dollar.  If, as you said most recently, though, the individual is investing in the US, exchange rates are 100% irrelevant because the individual would not need to make any currency exchange to begin with to make an investment in the US since they're already in the US.

Now, at the consumer end (when the consumer is actually purchasing whatever they finally decide to purchase after savings have matured), exchange rates only matter if I am purchasing foreign goods (i.e., a depreciating dollar will increase the cost for me to import foreign goods, encouraging me to buy domestically).  So unless you're talking about a person who only imports goods, we're still at the point where the consumer is not affected at this point.  Additionally, the scenario you described above also isn't a hindrance in terms of currency depreciation.

So... again... what's the scenario under which currency depreciation operates in a way which both negatively affects the investor/consumer and is additive with inflation?  Moreover, where is the scenario in which a consumer/investor has no way to insulate themselves from the effects of depreciation?

Wait a second!  I knew something was off here!

2000: I invest in a mutual fund.  The mutual fund invests in the Chinese economy.

Assume the exchange rate is 1 dollar/1 yuan.

So I put in $100,000.

2010: The currency depreciates to half.  So 2 dollar=1 yuan.

I pull my currency out (since my investment is in a Chinese industry, it is in yuan.  Even if the investment was flat, because the dollar's value dropped by half, I would receive $200,000.

So.... how does the math work, then, that a currency depreciation hurts the investment?

Granted, if I was to try investing in 2010, I'd have to pay a premium over what I would have needed to pay.  However, that isn't anything special.  When stocks increase in price, people have to pay higher costs to invest in that stock following its increase. 

So in fact, if you wanted to consider someone in the US who was investing abroad, that 40% depreciation would have in itself accounted for almost all of the losses you've noted.

Closed: No content in 1st post, and very clearly headed toward useless flame-fest-land.  If you want a legitimate debate, make a substantive 1st post.  Oh, and play nice, people.  You too, Kemp!  X(

Yay!  I knew my years of economics courses didn't go to waste! 

> xeno syndicated wrote:

> I recognize that exists.  However, that is part of inflation, not a separate entity from inflation.

I think you are not quite right here.

Relative currency devaluation should be considered as a loss of the purchasing power in addition to the loss that occurs due to the devaluation of the purchasing power of the currency due to "printing money" BECAUSE prices of capital could rise in ADDITION to the average rate of inflation due to high demand / scarcity.  Foreign investment, into an economy from a foreign currency devalued by inflation, MIGHT be in a situation where it COULD be doubly affected, and because it is therefore a potential DOUBLE loss, it SHOULD be considered as yet another potential loss.

Actually, a decreased US currency value in exchange markets historically has quite the opposite effect in foreign investment considerations.  Think of China, where currency values are depreciated relative to the dollar.  This gives foreign investors a discount in buying goods from China, so they both invest in Chinese production (because they can use Chinese goods to construct the facilities and hire employees, at a discount) and buy Chinese goods.  In fact, it was you who said:

> xeno syndicated wrote:

> Additionally, the US would lose its monopoly on the use of its currency for international trade, and so you'll get the collapse - err I mean diminished value of the US currency that it needs in order to be competitive in exports once again.

I'm kind of confused on why you're flip flopping on whether or not you absolutely love diminished currency exchange rates! 

But still, that is irrelevant when the discussion which you and I were having was one of the consumer's buying power, not a foreign investor's buying power.  The consumer does not experience any sort of double penalty, therefore it's a bad calculation in that context.

> xeno syndicated wrote:

> > Zarf BeebleBrix wrote:

> This is actually a fun little exercise, xeno! 

I'm glad you like it.  Are you beginning to see why I am railing against what is happening to the poor and middle class?

The debate's still far from over.  Want me to hash out my side?

> xeno syndicated wrote:

> Also, Zarf, do you recognize the losses resulting from the relative devaluation of the US currency over the last 10 years?

I recognize that exists.  However, that is part of inflation, not a separate entity from inflation.  I'm noting that you don't add the devaluation to inflation to show total degradation of the currency, because they represent the same economic effects.