Is the other shoe about to drop?

[islandman]

Oh, sorry...I didn't think you would take that as me suggesting even sarcastically that YOU "won" -whatever that means.

I meant your mirth documented the "win" for me, as it is always the out when someone has no rebuttal.

In that case, you totally won. The fact that you can read others' analysis and make them your own soup-to-nuts - while not standing for any hole-poking - you don't find that very often on the internet.

And in the face of that, I can offer no rebuttal. I can't imagine anyone would.

 

[JohnnySavage]

I start with the premise that a sovereign nation that doesn't control it's money supply is not really sovereign.

From there we can agree (I think) that there's no way for the US to control the gold supply.

Finally, I trust the Fed to control the US money supply more than I do Russia, China, South Africa, India, or any other country with hordes of gold.

 

[Que]

In that case, you totally won. The fact that you can read others' analysis and make them your own soup-to-nuts - while not standing for any hole-poking - you don't find that very often on the internet.

And in the face of that, I can offer no rebuttal. I can't imagine anyone would.

Thanks! ~beams~

 

[Que]

I start with the premise that a sovereign nation that doesn't control it's money supply is not really sovereign.

From there we can agree (I think) that there's no way for the US to control the gold supply.

Finally, I trust the Fed to control the US money supply more than I do Russia, China, South Africa, India, or any other country with hordes of gold.

The money supply (in this case the M1) is nothing more or less than a means of exchange for things of value.

The US, had we stayed on the gold standard, would not have suddenly have had no way to exchange for things of value if the supply of gold located in the US reached some theoretical limit.

If some third world county discovered a huge gold deposit, they could trade 10-20 oz of it for an American car, for example.

The fact that another country happens to produce something that we both want for its intrinsic value and something that we happen to use as our medium of exchange doesn't give them any more leverage than OPEC already has with oil.

The problem would not be if another country worked hard and found some gold...the problem would be if we didn't produce something that they would want to exchange their gold for.

 

[JohnnySavage]

So how do you grow an economy with a finite money supply, without causing inflation?

 

[Que]

I actually DON'T think that gold being the standard (or sea-shells) or not to be a major problem one way or the other.

Fiat currency in and of itself harmless, and as good a means of exchange as "scrip" or whatever.

The problem is that fiat currency in the hands of the Government enables the sort of manipulation identified above.

If we had a strong central bank that did NOTHING but accounting and left the business of lending money to actual bankers looking to earn a profit, there would be none of these phoney cycles created by artificially low interest rates.

I don't think even Madison would like quantitative easing.

 

[Que]

So how do you grow an economy with a finite money supply, without causing inflation?

There is no such thing as a finite money supply.

Every time someone removes gold, copper, iron ore, molybdenum, gypsum wealth is created. Of course that wealth was always there but unrealized.

Every time someone pumps a barrel of oil or a cubic foot of natural gas...wealth.

Every time a farm produces a busshel of wheat or raises a hog...wealth

Every time a new chip is designed, software is produced... wealth

The traders of all of these things on various exchanges deal in wealth, help facilitate the conversion of wealth into exchangeable assets ie money of some variety, but they do not create wealth...even if they get wealthy in the process..

All of those things mean that those wealth creators have money (call it a bucket of seashells) to exchange with those in the service economy, or for goods they don't produce or whatever.

I have had to come around on my way of thinking about so-called "trade imbalances" Everything we seel overseas means we have to spend those yuan, or euros at some point in those countries, and vice versa. Sometimes there is a lag....

Even if we don't dig the gold we do something that someone wants to exchange for gold. Sometimes fiat currency these days is really only facilitating the transfer of actual gold.

A lot of world-wide gold production ends up in Peoria Illinois.

or look at construction or oil...I had forgotten brown and roote is now KBR :http://www.kbr.com/About/Global-Presence/

27000 people earning some version of gold all over the world and a portion of that ends up back here.

Instead of thinking about the M1 (all the actual cash bank accounts, your wallet, mattress, drug dens, strip club safes, whatever -lets leave gold out of it for now) as a limiting thing..(it is a finite number at any given time)

Think of all of the capital in the country. Capital has a LOT of forms. People make little patronizing nods to "human capital" but it is huge. Who do we have working in or out of the country on behalf of the interest of an American flagged company? Who do we have available that is not working? How trained is that workforce... (and no having more liberal arts degrees does not increase the value economically speaking of our pool of human capital)..

Next, what do we have in the way of natural resources? What are the barriers to exploiting them. (yes we exploit them...we may or may not do a good job planning for future generations and environmental concerns but...) it is capital and can be called upon to build wealth.

Next what do we have in actual capital assets that make things? machine tools, millions of square feet of roof, belt lines, trucks, dozers, drills, etc?

What do we have in intellectual property? Is it being priced and offered in ways that maximizes wealth production? Remember when RIAA fought MP3, now the standard, they lost a DECADE of profits from downloads.

And a small portion of our capital is M1...cash sitting around, trying to find something to be spent on, if it is spent in a way that creates more, it is a god use of capital...govt does a shitty job of capital allocation.

Accountants and tax lawyers GET wealthy...but they do not BUILD wealth...they defend it from confiscation and it is a poor application of some bright minds.

AFTER a company allocates capital and does something...if successful, it gets a return on investment...

Someone pays them...in seashells fake money gold, cocaine....

That profit is now liquid capital and can be but to work, sent out to shareholders, or retained as reserves for anticipated opportunities or to weather hard times...

the BIGGEST single impediment right now to growth in the US is those retained earnings. US tax policy provides a perverse incentive to sit that in the bank at in one of their foreign subsidiaries.

Yelling about it and passing laws will do no good..the money does not come back until it makes financial sense to risk it here.

 

[mandoscot]

In the fifty years just since the removal of silver from out coinage, the actual value remaining of fiat currency compared to silver is about 12-16%. At that rate of inflation, in 2065 the value remaining in fiat currency compared to a 1964 Silver dollar will be 2 cents.

MMMMWWWwwwahhhhhhh

That was MY two cents worth

 

[Adre]

Over the years I've noticed some people know how to talk about money, while others just concentrate on making some.

 

[Que]

MMMMWWWwwwahhhhhhh

That was MY two cents worth

I think I paid about $16 for the two cent piece in my collection.

-----------------------------------------------------------------------

Over the years I have noticed that people that were surprised to accumulate a small amount of money that far exceeded their talents or expectations tend to work hints about their pile-o-cash into casual conversation.

People that are really good at making money tend to sock it away, and you would never hear a hint that they had it.

 

[Adre]

So we can assume you're a talker and not a maker. Enjoy getting up for work tomorrow, GasBag.

 

[Que]

So we can assume you're a talker and not a maker. Enjoy getting up for work tomorrow, GasBag.

...he said in case no one got his earlier point about how comfortably retired he is.

Enjoy being "entertainment" at those nightly cocktail parties.

 

[4est_4est_Gump]

But, but, everyone is buying gold. Oh wait, it's down thirty percent, never mind.

Not from the price I bought it at.

 

[4est_4est_Gump]

But, but, everyone is buying gold. Oh wait, it's down thirty percent, never mind.

Actually, everyone is buying stock and hoping to be out when the crash comes because with the Fed keeping interest rates so low, inflation eats away at all other investments.

 

[4est_4est_Gump]

In other words, you are tying the value of one marker with no intrinsic value to the value of another marker with no intrinsic value.

Gold has utility, hence it will always have more value than government paper.

 

[4est_4est_Gump]

So how do you grow an economy with a finite money supply, without causing inflation?

Because it causes deflation which benefits the consumer.

 

[4est_4est_Gump]

...he said in case no one got his earlier point about how comfortably retired he is.

Enjoy being "entertainment" at those nightly cocktail parties.

Yet celebrating us picking up the tab for his insurance because he could not afford to self-insure.

I enjoyed your back and forth in this thread; you have a great command of the subject.

Every time I wanted to jump in, you did it better.

 

[Ishmael]

Gold has utility, hence it will always have more value than government paper.

Gold has the benefit of being universally fungible. You can take a unit of gold virtually anywhere in the world and trade it for goods, services, or local fiat money. Quite unlike fiat money that usually requires the you go through a money exchange to obtain local currency. And, as you pointed out, it has utilitarian value as well.

Ishmael

 

[Que]

Yet celebrating us picking up the tab for his insurance because he could not afford to self-insure.

I enjoyed your back and forth in this thread; you have a great command of the subject.

Every time I wanted to jump in, you did it better.

There are so many misconceptions on how money works and what it actually is (a medium of exchange) let alone all of the naysayers on gold, that I don;t realistically expect to convince anyone. We lost the back-up of a bi-metal system before i was born, and then gold standard (and for a while the right to own gold at all!)

Most people have lived with the inflation and see things like their annual across the board, non-performance related raises at work as "progress."

They sense that it is a little harder to get by but aren't sure why.

When that bill hits them, mechanic, home repair, whatever they seize on that as the problem and not both from the erosion of their earning's power (and hence savings potential) and the encouragement of consumerism (and the dis-incentives for savings)

I don't know what my dad made when I was born..maybe $8-10,000 a year. That was a nice amount of money then.

 

[Ishmael]

But, but, everyone is buying gold. Oh wait, it's down thirty percent, never mind.

Interestingly enough, so is the price of copper. So in terms of exchanging commodities the price of gold has remained constant. X amount of gold will still buy you Y amount of copper. So when you get down to it the only thing that has changed is the perceived value of the fiat currency.

Ishmael

 

[Que]

Interestingly enough, so is the price of copper. So in terms of exchanging commodities the price of gold has remained constant. X amount of gold will still buy you Y amount of copper. So when you get down to it the only thing that has changed is the perceived value of the fiat currency.

Ishmael

Yep..and inside baseball...but when copper was $4 a lb and big copper concerns had the next two years supply of 12' tires already contracted for, the gold mines were having trouble getting tires, and Cat parts and so forth...there was quite a waiting list for D11s.

Now gold mines are at capacity.

 

[Adre]

Yet celebrating us picking up the tab for his insurance because he is not stupid enough to self-insure.

FYP...and I'm not complaining about helping to pick up the tab for your unemployment benefits, either.

 

[4est_4est_Gump]

FYP...and I'm not complaining about helping to pick up the tab for your unemployment benefits, either.

My employer and I paid for any benefits I may, or may not, be receiving.

 

[4est_4est_Gump]

There are so many misconceptions on how money works and what it actually is (a medium of exchange) let alone all of the naysayers on gold, that I don;t realistically expect to convince anyone. We lost the back-up of a bi-metal system before i was born, and then gold standard (and for a while the right to own gold at all!)

Most people have lived with the inflation and see things like their annual across the board, non-performance related raises at work as "progress."

They sense that it is a little harder to get by but aren't sure why.

When that bill hits them, mechanic, home repair, whatever they seize on that as the problem and not both from the erosion of their earning's power (and hence savings potential) and the encouragement of consumerism (and the dis-incentives for savings)

I don't know what my dad made when I was born..maybe $8-10,000 a year. That was a nice amount of money then.

Yeah, that has been a common theme of recent, things are just getting worse for the Middle Class. We try to tell them why and they tell us we're idiots, we do not get it, economics is something they truly understand and if Republicans would just go away, then they could fix everything, but as, I think you pointed out, when they had the Republicans out of the way, economics and the economy were the furthest thing from their minds unless it was to tell us what a bon the ACA would be to our economy and how Republicans would never, ever again control any aspect of government outside of the South.

 

[Ishmael]

Yep..and inside baseball...but when copper was $4 a lb and big copper concerns had the next two years supply of 12' tires already contracted for, the gold mines were having trouble getting tires, and Cat parts and so forth...there was quite a waiting list for D11s.

Now gold mines are at capacity.

Well, that's the way it rolls. (Couldn't resist that one.)

And that 'boom and bust' cycle that you outlined is precisely what Keynesian economics is purported to eliminate. And while it can be argued, to an extent, that that school will help prevent price erosion during a downturn, it actually exacerbates the price run up during a boom cycle. It virtually guarantees an inflationary economy.

Ishmael