Author Topic: Are the Libertarians Wrong about the dollar crisis?  (Read 3796 times)

Steeze

  • Stubble
  • **
  • Posts: 139
  • Age: 31
  • Location: The NYC Area of Earth
Are the Libertarians Wrong about the dollar crisis?
« on: September 16, 2018, 07:25:40 PM »
Libertarians such as Ron Paul and Peter Schiff are, as always, talking about an impending dollar crisis, stagflation, and in the most extreme scenarios financial collapse and political unrest leading to some sort of socialist fascist mad max end game.

I can't tell whether these guys are truly visionary or just want to sell gold. Also Schiff, being a huge advocate of trading dollars in for gold, I find it odd that one of his businesses is trading gold for dollars. If he thinks gold is so great, why not be a buyer not a seller?

What do you guys think, impending doom or business as usual? I can remember reading about the iminent collapse of the dollar 15 years ago when I was in high school.

Looking for oposing views - why are cyclical asset bubbles,  unlimited debt, QE, and deficit spending sustainable, thanks!

Financial.Velociraptor

  • Handlebar Stache
  • *****
  • Posts: 1275
  • Age: 46
  • Location: Houston TX
  • Devour your prey raptors!
    • Financial Velociraptor
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #1 on: September 16, 2018, 08:00:03 PM »
Libertarians such as Ron Paul and Peter Schiff are, as always, talking about an impending dollar crisis, stagflation, and in the most extreme scenarios financial collapse and political unrest leading to some sort of socialist fascist mad max end game.

I can't tell whether these guys are truly visionary or just want to sell gold. Also Schiff, being a huge advocate of trading dollars in for gold, I find it odd that one of his businesses is trading gold for dollars. If he thinks gold is so great, why not be a buyer not a seller?

What do you guys think, impending doom or business as usual? I can remember reading about the iminent collapse of the dollar 15 years ago when I was in high school.

Looking for oposing views - why are cyclical asset bubbles,  unlimited debt, QE, and deficit spending sustainable, thanks!

I won't say that unlimited debt is sustainable.  But I will say that Paul et.al. are being alarmist.  Inflation is driven by the money supply TIMES the velocity of money.  Since the 2008 crisis, US money velocity has been quite depressed.  I also think you have to look at comparable economies to get a feel for how much debt can be sustainable.  We are carrying less debt per unit of GDP than Japan (by a lot!) and Japan hasn't exactly cratered in an inflationary death spiral (Japan actually has the opposite problem).  Debt and deficits can grow perpetually so long as GDP growth is keeping pace or exceeding it.  Not happening right now but it is theoretically possible.  I'd also note that despite some inflationary moves by the Fed, the dollar is quite strong versus the Euro and Yen because our interest rates are higher.  Economies do not exist in a vacuum.  We don't necessarily need to be "strong", just "less weak" than the alternatives.

This is worth what you paid for it.  I am mildly inebriated and it has been a little over 20 years since I completed a BBA in Economics. 

ILikeDividends

  • Bristles
  • ***
  • Posts: 341
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #2 on: September 16, 2018, 10:15:34 PM »
Just to tag along with what FV has said (being on the west coast, I am slightly earlier in the inebriation cycle than he is), Peter Schiff has been strumming the same single note on his dusty old banjo for at least the last 20 years; probably longer.

Someday he might turn out to be right.  He probably had some told-ya-so moments, briefly, when gold went on a tear about a decade or so ago, but anyone who has followed him intently, over the entire period of his public prognostications, has missed out on amassing a fortune so far.  He's what you call a perma-bear.

His bread is buttered by selling his mediocre advice, not by following it.  I can only guess that Ron Paul has had to hop onto the same bandwagon because he's been listening to Peter Schiff for too long, and therefore needs to cash in on his own name recognition while he still can.

I'm not suggesting that joining the ranks of internet marketing is such a huge demotion, as compared to the role of a sitting representative in congress, but it's certainly not a great leap of a promotion, either.

No matter what his current career might be, Ron Paul has less than zero credibility in predicting what future equity returns might turn out to be in the actual future.
« Last Edit: September 17, 2018, 05:05:38 AM by ILikeDividends »

maizeman

  • Magnum Stache
  • ******
  • Posts: 2856
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #3 on: September 16, 2018, 11:21:45 PM »
Moderate deficit spending is sustainable if GDP is growing because even as the absolute debt grows, debt as a percent of GDP (and as a percent of tax receipts) stays constant.*

We may see substantial dollar inflation at some point in our lifespan. But that doesn't mean gold is the answer. Long term, assuming society doesn't collapse (at which point we're all doomed anyway so why worry), investing in stocks provides plenty of protection against inflation because ultimately revenue and profits inflate, leading to stock market prices inflating.

Even in Venezuela the stock market has shot up (in nominal terms, not real terms) as hyperinflation has taken hold.

*We're certainly growing the deficit and the debt faster than this rate right now.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1214
  • Age: 38
  • Location: Texas
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #4 on: September 17, 2018, 10:05:25 AM »
I used to be libertarian. The problem with their economics is that they try to take an Austrian school of economics model and apply it to an economy like the US and it just doesn’t work. The model breaks down. There’s nothing in their model that takes into consideration the United States is a fiat currency which creates its own currency, and pays back its debtors in dollars which we control.

Now, perhaps the Austrian school describes an ideal society and ideal economic model, but it just doesn’t work in today’s society unless you apply it to a third world country or maybe someone in the EU like Greece or Italy.

The US has a lot more flexibility with its currency and debt, that the libertarians just don’t understand.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1091
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #5 on: September 17, 2018, 01:32:18 PM »
This is the nexus between ideas / ideology and products. A certain class of salesperson will write a rant about some proposed forecast (new energy discoveries, peak oil, high inflation, debt fueled economic collapse, conspiracy theories, etc.) wherein the only logical scenario is to buy their favored investment product. Sometimes they or an associate are actually SELLERS of the investment, as the OP observed, and they want to sell their holdings for a profit after personally increasing its demand (i.e. "pump and dump"). The later scenario explains the hype about cryptocurrencies on this board 10 months ago.

The question is, why buy an investment where one must spend time and energy essentially working as a street preacher or circus announcer just to keep the price propped up? Today, weed stocks are all the rage (among weed smokers or pro-legalization folks), even though actual legalization would make this once high dollar street drug a decorative yard plant you buy at Lowe's with a flat of petunias. A lot of "alternative energy" stocks are pumped to environmentalists.

Ideological lenses are a weakness, and upon every weakness there are parasites feeding off of them.

aasdfadsf

  • 5 O'Clock Shadow
  • *
  • Posts: 80
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #6 on: September 17, 2018, 02:00:44 PM »
Peter Schiff has been predicting that hyperinflation will strike any day now since at least the '08 financial crisis. Ron Paul has been predicting it for about 40 years. Yeah, I'd say they're wrong. I'm no expert in monetary economics, but with inflation having been low and manageable all this time, you eventually have to conclude that these guys are operating under very wrong beliefs about how money works.

MrDelane

  • Bristles
  • ***
  • Posts: 495
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #7 on: September 17, 2018, 02:06:38 PM »
Schiff, being a huge advocate of trading dollars in for gold, I find it odd that one of his businesses is trading gold for dollars. If he thinks gold is so great, why not be a buyer not a seller?

You realize that you've essentially said here is, "I don't understand why the guy who owns the gold selling business keeps saying he thinks its a good idea to buy gold."
I suspect that if he were selling cars or timeshares you wouldn't have the same reaction or concern.

Steeze

  • Stubble
  • **
  • Posts: 139
  • Age: 31
  • Location: The NYC Area of Earth
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #8 on: September 17, 2018, 05:07:01 PM »
Schiff, being a huge advocate of trading dollars in for gold, I find it odd that one of his businesses is trading gold for dollars. If he thinks gold is so great, why not be a buyer not a seller?

You realize that you've essentially said here is, "I don't understand why the guy who owns the gold selling business keeps saying he thinks its a good idea to buy gold."
I suspect that if he were selling cars or timeshares you wouldn't have the same reaction or concern.

Hah, yeah I realize that is silly. Just seems so obviously flawed that why would anyone fall for it? "Everyone should by gold, its the only safe investment, that is why I'm selling mine!" I was hoping that I was missing something.

aasdfadsf

  • 5 O'Clock Shadow
  • *
  • Posts: 80
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #9 on: September 17, 2018, 08:51:04 PM »
I imagine that when Schiff "sells gold", he's not actually selling his personal holdings, he's selling a fund that invests in gold or he's selling physical gold from the commodities market from which he gets management fees and/or a commission.

Schiff actually put his money (or more precisely, that of his investors) where his mouth was in the aftermath of the financial crisis. Among other things, he invested heavily in Europe, believing that the EU's austerity measures were the correct response to the recession (they weren't). He also invested heavily in commodities, believing that stimulus measures would cause commodity prices to go nuts (they didn't). Basically, all the funds he managed performed like shit and anyone who followed his advice took a bath. In a fair and just society he'd be living on food stamps, but this is America, so not only is he still rich, he hasn't even admitted he was wrong.
« Last Edit: September 17, 2018, 11:24:26 PM by aasdfadsf »

wotan

  • 5 O'Clock Shadow
  • *
  • Posts: 34
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #10 on: September 18, 2018, 08:03:46 AM »

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #11 on: September 18, 2018, 08:41:42 AM »
Rand Paul (son of Ron Paul) also thought the over-spending by the Federal government would lead to a crisis. But he voted in favor of the Tax Cut and Jobs Act in December 2017, so he must have not been that worried.

bwall

  • Bristles
  • ***
  • Posts: 443
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #12 on: September 18, 2018, 09:51:22 AM »
Rand Paul (son of Ron Paul) also thought the over-spending by the Federal government would lead to a crisis. But he voted in favor of the Tax Cut and Jobs Act in December 2017, so he must have not been that worried.

+1

Just watch and wait; I'm sure that when the other party is in charge then these same people will claim how social security and food stamps are bankrupting our country.

aasdfadsf

  • 5 O'Clock Shadow
  • *
  • Posts: 80
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #13 on: September 18, 2018, 10:19:34 AM »
yup. read this guy.  https://www.armstrongeconomics.com/
I honestly cannot tell if that site is intended to be a parody.

Steeze

  • Stubble
  • **
  • Posts: 139
  • Age: 31
  • Location: The NYC Area of Earth
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #14 on: September 18, 2018, 04:57:29 PM »
I imagine that when Schiff "sells gold", he's not actually selling his personal holdings, he's selling a fund that invests in gold or he's selling physical gold from the commodities market from which he gets management fees and/or a commission.

Schiff actually put his money (or more precisely, that of his investors) where his mouth was in the aftermath of the financial crisis. Among other things, he invested heavily in Europe, believing that the EU's austerity measures were the correct response to the recession (they weren't). He also invested heavily in commodities, believing that stimulus measures would cause commodity prices to go nuts (they didn't). Basically, all the funds he managed performed like shit and anyone who followed his advice took a bath. In a fair and just society he'd be living on food stamps, but this is America, so not only is he still rich, he hasn't even admitted he was wrong.

That makes much more sense. Just a salesman working for a commission, not necessarily an owner who is selling his own assets.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 11852
  • Age: 37
  • Location: Toronto, Ontario, Canada
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #15 on: September 18, 2018, 05:37:43 PM »
Most Libertarian theory (including econonomic) is based on bad premises and false initial assumptions.  Find a single working real world economy running on Libertarian principals to study before you start buying into the rhetoric.

aspiringnomad

  • Pencil Stache
  • ****
  • Posts: 729
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #16 on: September 18, 2018, 07:08:32 PM »
Big-L Libertarians' understanding of macroeconomic reality leaves a lot to be desired, and they're especially clueless when it comes to monetary economics. I can see the appeal of a philosophy that pretty much any college kid can understand after watching a Netflix documentary, but it just doesn't hold up in practice.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #17 on: September 19, 2018, 07:39:34 AM »
Most Libertarian theory (including econonomic) is based on bad premises and false initial assumptions.  Find a single working real world economy running on Libertarian principals to study before you start buying into the rhetoric.

Challenge accepted: https://www.cato.org/publications/commentary/why-estonia-country-future

Note: going full-on into Free to Choose has not been unambiguously successful. Paul Krugman--who inspires strong reactions from both the left and the right--entered into a feud with their PM because he thought their recovery from the worldwide slump in 2008 was...weak.

BicycleB

  • Stubble
  • **
  • Posts: 228
  • Location: Live Music Capital of the World
  • Older than the internet, but not wiser... yet
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #18 on: September 19, 2018, 08:06:17 AM »
Steeze, to me it looks like "being Libertarian" and "believing the dollar is going to inflate to oblivion, buy gold" often overlap. I think it's because both stances are based on similar logic: a simple theory that if you believe it, seems to help you understand the world. The people who want a simple, logical-sounding political theory also gravitate to a simple, logical-sounding economic theory.

In my opinion, both theories oversimplify, which leads them to produce incorrect results. Incorrect as in their predictions are wrong more often than right, and their suggested course of action is frequently a poor choice compared to alternatives. Re the dollar, there are several factors preventing the huge inflation that goldbugs obsess about. Velocity of money was mentioned upthread. So was the fact that debt is manageable if means to pay it exist; it appears to be in bounds, though close enough to the edge that caution is warranted. Other factors exist too - for example, as technology advances and spreads, costs naturally go down. Most economists think that inflation in the world's largest economies, especially USA, is manageable and reasonably safe. One of the current arguments is whether it is more likely to have a tendency toward inflation or deflation. At present there is something close to balance, as I understand it (just a schmuck, but a couple decades in to reading this stuff for fun).

Bear in mind that governments have some influence on interest rates. Since the world's main currencies switched to "paper" (fiat) basis instead of gold-backed in the 1970s, the initial bout of dollar inflation was tamed. Ever since, dollar inflation has lessened periodically, to the point where it now roughly appears to oscillate around the target rate of 2% that economists think is most productive for the economy. Smaller countries periodically give examples of how to screw it up, and of course it is conceivable that the US could do so too, but screwing it up to the point of hyperinflation appears unlikely.

If you want deeper understanding, a productive though challenging habit to develop is to read some of the remarks made by the chair and board members of the Federal Reserve. Their periodic public statements discuss the underlying factors and decision making in detail. Each time you see an unfamiliar term, Google it until you can follow what they're saying. Eventually you'll see that while different individuals involved can differ as to exact details of policy, they are working within a general frame that is pretty logical, just more complex than goldbug economics. You'll also see over time that, in an amazingly large majority of cases, the Fed (the agency that has the most direct impact on inflation) correctly recognizes in advance roughly what will happen. They then tweak their own actions to try to optimize the outcome. To me the comforting part is how many things that surprise some people were clearly understood in advance by the actual people who are most necessary for avoiding problems like a "dollar crisis."

Every 10 or 20 years (meaning once in a while, not any specific timeframe) a big enough surprise will happen that everyone is caught off guard, including the Fed. Goldbugs and others then quote those example to prove their own theories. Their theories are still wrong much more often than the mainstream ones.

TL;DR - Yes, probably "the Libertarians" (meaning the ones who do obsess about gold) are wrong. But you can learn a much more accurate framework if you want.
« Last Edit: September 19, 2018, 08:18:26 AM by BicycleB »

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 11852
  • Age: 37
  • Location: Toronto, Ontario, Canada
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #19 on: September 19, 2018, 08:08:33 AM »
Most Libertarian theory (including econonomic) is based on bad premises and false initial assumptions.  Find a single working real world economy running on Libertarian principals to study before you start buying into the rhetoric.

Challenge accepted: https://www.cato.org/publications/commentary/why-estonia-country-future

Note: going full-on into Free to Choose has not been unambiguously successful. Paul Krugman--who inspires strong reactions from both the left and the right--entered into a feud with their PM because he thought their recovery from the worldwide slump in 2008 was...weak.

I love Estonia, they've done a lot of sensible things to utilize technology to make their government more efficient.  It helps that they started from nothing too . . . they just bypassed having a lot of the older legacy systems and processes that present a drag on quick change and adaptation in other countries.  I'm not entirely sure how you're calling 'em a Libertarian country though.

30% payroll taxes, 18 month maternity/paternity leave, 80% of health care costs paid by the government, complicated permit process to own a firearm, government project that put computers in every public classroom in the country, and 500 Euros a month for having three kids . . . this stuff is all awesome, but not commonly thought of as Libertarian.  The Cato Institute article somehow forgot to mention them though.  Can you specify exactly which parts of Libertarian economic philosophy you believe are responsible for Estonia's success?

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #20 on: September 19, 2018, 08:27:27 AM »
Your response is a very good one. There does seem to be an ample state in Estonia based on what you describe, even if it is greatly reduced from the Soviet era. If I were going to look for a country to serve as beacon of Libertarianism, I'd probably start at the very top of the Human Freedom Index or Economic Freedom index that Cato cites in the article lauding Estonia. Indeed it is an interesting list that ought to make us rethink what is truly meant by guarding the liberties of individuals.

HongKong is the top country. I imagine Cato sees China as having shown remarkable restraint in their administration thereof. Next is Switzerland--probably no surprise--then Ireland and New Zealand. Anecdotally, I've come to believe that NZ has a large welfare state. I think I'm coming to see your point, GuitarSteve.

https://www.cato.org/human-freedom-index

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1091
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #21 on: September 19, 2018, 10:43:35 AM »
Ideology is narrative-based.

Left wingers construct a narrative that the rich are the villains and it's their fault we're so unhappy.

Right wingers construct a narrative that minorities and non-conformists are the villains and it's their fault we're so unhappy.

Libertarians construct a narrative that the government is the villain and it's the government's fault we're so unhappy.

If you subscribe to the libertarian narrative, it makes sense to blame the government for your lack of wealth, and tell stories about how they are conspiring to reduce the value of your savings through inflation. However, the government does not get credit for educating you, ensuring you grew up drinking clean water, imprisoning the maniac who otherwise would have murdered you, providing the infrastructure and standards that allowed your safe travel, preserving your property rights against stronger parties who could otherwise take it away with force or fraud, or dozens of other things.

A libertarian economy (minimal taxes, regulation, and government) would look something like Haiti, Somalia, or Afghanistan. All top-performing economies collect taxes to subsidize education, infrastructure, healthcare, and a safety net.

This is something of a sad outcome for libertarianism, because its core value - freedom - is more practical than liberal equality and more noble than conservative supremecy-for-my-type.

I suspect a lot of people have a core value of freedom, but dismiss the government-villain narrative. For whatever reason, these folks tend to call themselves liberals and sit just to the center of the Marxists, with whom they actually have little in common.

Many conservatives consider the government to be the villain because of the Republic's defense of minority interests and the fantasy that their wealth is being redistributed to minorities. They call themselves libertarians even though they'd like to use the coercive power of government to oppress the freedom of others.

I think there is a left-libertarian consensus just starting to emerge that says prosperity requires basic services to be provided by the government but that ensuring individual freedom is the best way to promote the most happiness for the most people. This is a non-narrative, flexible, experience-based anti-ideology, and I hope it takes root so that we can move beyond oscillating between oversimplifications.

toganet

  • Stubble
  • **
  • Posts: 204
  • Location: Buffalo, NY
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #22 on: September 19, 2018, 02:25:51 PM »
I think there is a left-libertarian consensus just starting to emerge that says prosperity requires basic services to be provided by the government but that ensuring individual freedom is the best way to promote the most happiness for the most people. This is a non-narrative, flexible, experience-based anti-ideology, and I hope it takes root so that we can move beyond oscillating between oversimplifications.

I've been thinking about this lately as well, though you articulated better than I would have.

WRT to Libertarians, the folks I know who label themselves that seem to be more like "disagreeable authoritarians."  They want freedom to do what they want, but have a lot of ideas about what other folks shouldn't be allowed to do.

maizeman

  • Magnum Stache
  • ******
  • Posts: 2856
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #23 on: September 19, 2018, 02:45:22 PM »
I think there is a left-libertarian consensus just starting to emerge that says prosperity requires basic services to be provided by the government but that ensuring individual freedom is the best way to promote the most happiness for the most people. This is a non-narrative, flexible, experience-based anti-ideology, and I hope it takes root so that we can move beyond oscillating between oversimplifications.

I've been thinking about this lately as well, though you articulated better than I would have.

WRT to Libertarians, the folks I know who label themselves that seem to be more like "disagreeable authoritarians."  They want freedom to do what they want, but have a lot of ideas about what other folks shouldn't be allowed to do.

Unfortunately I think this becomes self reinforcing. In an ideal world I'd probably call myself a libertarian (or a "left libertarian"), but there is an awful lot of negative baggage associated with the term, both in terms of people who take the basic philosophy ("giving people freedom of choice is generally good unless society has a compelling reason not to") to extremes, and the people who are really just extreme right wing republicans who want to be able to smoke pot.

In principle libertarianism is not anarchism,* just like socialism is not communism, but life is too short to spend it arguing both with with people who don't like the concept of libertarianism because they don't understand the distinction AND the people who consider themselves libertarians because they don't understand the distinction. It's a shame because it would a useful word to describe a specific political philosophy (one that doesn't require you to buy vast amounts gold, or really any at all) otherwise.

*The common argument that countries like Somalia are examples of libertarian philosophy taken to extreme is a good example of failing to grasp the distinction between libertarianism "government should protect individual rights and freedoms" and anarchism "government is bad so the best government is no government."

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 11852
  • Age: 37
  • Location: Toronto, Ontario, Canada
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #24 on: September 19, 2018, 06:16:23 PM »
In an ideal world I'd probably call myself a libertarian (or a "left libertarian"), but there is an awful lot of negative baggage associated with the term, both in terms of people who take the basic philosophy ("giving people freedom of choice is generally good unless society has a compelling reason not to") to extremes

I consider myself a supporter of large governments and would comfortably also say I'm a follower of that philosophy.  I've never remotely identified as a Libertarian (although in my youth was quite enamored of communism).

aspiringnomad

  • Pencil Stache
  • ****
  • Posts: 729
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #25 on: September 19, 2018, 06:23:55 PM »
This conversation has taken a turn towards a broader discussion about libertarianism/liberalism, including civil libertarianism and the philosophy of individual freedom which I'd wager most here would support.

But the OP was pretty clearly talking about the Libertarian party in the US, and its members' frequent, perhaps unhealthy fixation on gold as a hedge against some impending fiat money crisis. Whether it's better to hold gold, fiat money, stocks, or any investment vehicle isn't a question of freedom in the US, because since 1975 anyone has been free to own gold in whatever form their heart desires. It's a question of whether to make investment choices based on Silly Conspiracy Theories which seem to be all the rage these days.
« Last Edit: September 19, 2018, 06:26:24 PM by aspiringnomad »

maizeman

  • Magnum Stache
  • ******
  • Posts: 2856
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #26 on: September 19, 2018, 09:01:56 PM »
In an ideal world I'd probably call myself a libertarian (or a "left libertarian"), but there is an awful lot of negative baggage associated with the term, both in terms of people who take the basic philosophy ("giving people freedom of choice is generally good unless society has a compelling reason not to") to extremes

I consider myself a supporter of large governments and would comfortably also say I'm a follower of that philosophy.  I've never remotely identified as a Libertarian (although in my youth was quite enamored of communism).

That's why libertarians really like that test that asks you questions to place yourself on a two axis graph of "social liberty" and "economic liberty" and then divides people into four quadrants. Because when asked questions like that, the majority of people agree with the underlying philosophy regardless of their other political affiliations. 

OTOH, "big L" Libertarians tend to get wrapped up in a lot of anarchism ("all government is bad") and goldbug/prepper stuff (like the original subject of this thread) that has nothing to do with the original political philosophy that gave birth the the term in the first place. Which is why I find it is no longer a useful label to describe my own political beliefs.

Radagast

  • Handlebar Stache
  • *****
  • Posts: 1192
  • Location: West of the Mountains, East of the Sea
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #27 on: September 19, 2018, 10:43:01 PM »
When I first learned about investing the Permanent Portfolio was widely discussed, and as a lurker I stumbled across a gigantic debate among the PP practitioners about whether the Fed and general government policy was inflationary. The people who thought it was inflationary ("Austrians") lost the debate so soundly they were effectively driven off the thread and many even stopped posting on the PP forum. That result was hilarious and deeply informative for noob-me. The Permanent Portfolio allocates 25% to gold and was invented by a two-time Libertarian Party candidate for president, so the fact that even that crowd realized a "dollar crisis" was not in the making was very telling.

I consider myself a supporter of large governments and would comfortably also say I'm a follower of that philosophy.
I've realized that I don't really care what the size of the government is a long as it results in a good outcome for as many people as possible, with many achieving extraordinary outcomes and few ending in bad. Now I wonder if I am a closet Utilitarian.

Classical_Liberal

  • Pencil Stache
  • ****
  • Posts: 980
  • Age: 42
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #28 on: September 19, 2018, 11:25:55 PM »
Inflation is driven by the money supply TIMES the velocity of money.  Since the 2008 crisis, US money velocity has been quite depressed. 

This is correct. 

Let's ponder on this a bit and try to determine why velocity has been so depressed.  My theory it's related to the fact we are seeing a disproportionate amount of this money sitting in the hands of the already very wealthy.  They have no need to move the money. Call it stratospheric, because a lot of it sits in limbo, unused, never coming back down to Earth. Partly it's invested causing asset bubbles (see CAPE), partly it's being used in riskier ventures (see rise in angel investing), tart of it is sitting as dead weight. 

Now this has repercussions, both good and bad. Good in that more available capital for riskier business ventures could lead to innovation, bad in that most will bomb and it will be completely wasted. Good in that rich equity valuations and more money could lead to companies investing in more future production (hopefully sustainably) and employee training (hopefully leading to better pay), bad in that it could just encourage buybacks and bigger executive compensation, further enriching the rich.

The bottom line is that if the Fed decreases balance sheet too slowly (like they are, very, very slowly) and the people decide Pareto distribution of money has gotten too our of wack in the meantime.  They may demand a bit of redistribution*, velocity could pick up quickly. 

*Imagine a world where Bernie Sanders won the presidential election, Tax the rich and provide benefits to everyone else. This would pull a bunch of money out of the stratosphere very quickly, my bet inflation would be hitting us a lot harder right now.

There’s nothing in their model that takes into consideration the United States is a fiat currency which creates its own currency, and pays back its debtors in dollars which we control.

This is a great point, it's also why in a world of weak fiat currencies, the winner is the one who holds the reserve fiat currency. Just look at the shit-storm a strong dollar is causing to emerging markets right now.

While this very well may insulate the dollar from many inflationary pressures, it's not exactly ethical either.  It's essentially the modern equivalent of conquering, then looting your colonies of labor and resources.  It pleases my bank accounts, but hurts my soul.

GuloGulo

  • 5 O'Clock Shadow
  • *
  • Posts: 22
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #29 on: September 20, 2018, 08:13:40 AM »
yup. read this guy.  https://www.armstrongeconomics.com/
I honestly cannot tell if that site is intended to be a parody.

Their front page says "This cycle has been exasperated[sic] by government mismanagement and...socialism." Which I initially thought was an intentional wink at the reader but now I'm not so sure.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #30 on: September 20, 2018, 08:27:11 AM »
Inflation is driven by the money supply TIMES the velocity of money.  Since the 2008 crisis, US money velocity has been quite depressed. 

This is correct. 

Let's ponder on this a bit and try to determine why velocity has been so depressed.  My theory it's related to the fact we are seeing a disproportionate amount of this money sitting in the hands of the already very wealthy.  They have no need to move the money. Call it stratospheric, because a lot of it sits in limbo, unused, never coming back down to Earth. Partly it's invested causing asset bubbles (see CAPE), partly it's being used in riskier ventures (see rise in angel investing), tart of it is sitting as dead weight. 

Now this has repercussions, both good and bad. Good in that more available capital for riskier business ventures could lead to innovation, bad in that most will bomb and it will be completely wasted. Good in that rich equity valuations and more money could lead to companies investing in more future production (hopefully sustainably) and employee training (hopefully leading to better pay), bad in that it could just encourage buybacks and bigger executive compensation, further enriching the rich.

The bottom line is that if the Fed decreases balance sheet too slowly (like they are, very, very slowly) and the people decide Pareto distribution of money has gotten too our of wack in the meantime.  They may demand a bit of redistribution*, velocity could pick up quickly. 

*Imagine a world where Bernie Sanders won the presidential election, Tax the rich and provide benefits to everyone else. This would pull a bunch of money out of the stratosphere very quickly, my bet inflation would be hitting us a lot harder right now.

There’s nothing in their model that takes into consideration the United States is a fiat currency which creates its own currency, and pays back its debtors in dollars which we control.

This is a great point, it's also why in a world of weak fiat currencies, the winner is the one who holds the reserve fiat currency. Just look at the shit-storm a strong dollar is causing to emerging markets right now.

While this very well may insulate the dollar from many inflationary pressures, it's not exactly ethical either.  It's essentially the modern equivalent of conquering, then looting your colonies of labor and resources.  It pleases my bank accounts, but hurts my soul.

This is interesting, because it describes one form of inflation (asset prices) that seems to have precluded standard inflation (consumption prices). But there are certain luxury goods--health care, real estate, higher education--that have shown big price increases.

PDXTabs

  • Pencil Stache
  • ****
  • Posts: 653
  • Age: 35
  • Location: Vancouver, WA, USA
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #31 on: September 20, 2018, 08:33:48 AM »
HongKong is the top country. I imagine Cato sees China as having shown remarkable restraint in their administration thereof. Next is Switzerland--probably no surprise--then Ireland and New Zealand. Anecdotally, I've come to believe that NZ has a large welfare state. I think I'm coming to see your point, GuitarSteve.

Every one of these has socialized medicine, and most of them have tons of government spending on infrastructure such as public transit (have you been to Hong Kong?). I can't wait for the US to be libertarian!

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1091
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #32 on: September 20, 2018, 11:16:51 AM »
Inflation is driven by the money supply TIMES the velocity of money.  Since the 2008 crisis, US money velocity has been quite depressed. 

This is correct. 

Let's ponder on this a bit and try to determine why velocity has been so depressed.  My theory it's related to the fact we are seeing a disproportionate amount of this money sitting in the hands of the already very wealthy.  They have no need to move the money. Call it stratospheric, because a lot of it sits in limbo, unused, never coming back down to Earth. Partly it's invested causing asset bubbles (see CAPE), partly it's being used in riskier ventures (see rise in angel investing), tart of it is sitting as dead weight. 

Now this has repercussions, both good and bad. Good in that more available capital for riskier business ventures could lead to innovation, bad in that most will bomb and it will be completely wasted. Good in that rich equity valuations and more money could lead to companies investing in more future production (hopefully sustainably) and employee training (hopefully leading to better pay), bad in that it could just encourage buybacks and bigger executive compensation, further enriching the rich.

The bottom line is that if the Fed decreases balance sheet too slowly (like they are, very, very slowly) and the people decide Pareto distribution of money has gotten too our of wack in the meantime.  They may demand a bit of redistribution*, velocity could pick up quickly. 

*Imagine a world where Bernie Sanders won the presidential election, Tax the rich and provide benefits to everyone else. This would pull a bunch of money out of the stratosphere very quickly, my bet inflation would be hitting us a lot harder right now.

There’s nothing in their model that takes into consideration the United States is a fiat currency which creates its own currency, and pays back its debtors in dollars which we control.

This is a great point, it's also why in a world of weak fiat currencies, the winner is the one who holds the reserve fiat currency. Just look at the shit-storm a strong dollar is causing to emerging markets right now.

While this very well may insulate the dollar from many inflationary pressures, it's not exactly ethical either.  It's essentially the modern equivalent of conquering, then looting your colonies of labor and resources.  It pleases my bank accounts, but hurts my soul.

This is interesting, because it describes one form of inflation (asset prices) that seems to have precluded standard inflation (consumption prices). But there are certain luxury goods--health care, real estate, higher education--that have shown big price increases.

I agree that widening inequality has slowed the velocity of money in the economy as funds move towards investments (stocks, treasuries, real estate) and away from middle-class-driven consumption/production cycles. This raises concerns from anyone planning to live off of stock market returns. Will there be enough consumers with enough purchasing power to fuel the continued and perpetual growth of Proctor & Gamble, Toyota, Amazon, Visa, Coca Cola, etc? Can stock markets grow in countries where the middle class is shrinking and the role of government is shifting toward taxing workers so it can pay interest to elites? It's a brave new world that doesn't look like our 20th century reference points, but may have parallels in "developing" countries with large inequalities.

I also think a couple decades of free trade has suppressed U.S. inflation by making the importable portion of the CPI/PPI "basket of goods" cheaper than it would be otherwise. Rapid price inflation has been limited to the portion of goods/services that are not easily importable. Healthcare, education, and real estate costs have gone through the roof because relatively few of their inputs can be made in foreign countries at a lower cost.

Experts say the latest 10-25% tariffs (a) will go directly to prices, and (b) won't affect inflation all that much. I'm not sure that even makes sense...

TheHobbit

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #33 on: September 22, 2018, 02:54:21 PM »
Libertarians such as Ron Paul and Peter Schiff are, as always, talking about an impending dollar crisis, stagflation, and in the most extreme scenarios financial collapse and political unrest leading to some sort of socialist fascist mad max end game.

I can't tell whether these guys are truly visionary or just want to sell gold. Also Schiff, being a huge advocate of trading dollars in for gold, I find it odd that one of his businesses is trading gold for dollars. If he thinks gold is so great, why not be a buyer not a seller?

What do you guys think, impending doom or business as usual? I can remember reading about the iminent collapse of the dollar 15 years ago when I was in high school.

Looking for oposing views - why are cyclical asset bubbles,  unlimited debt, QE, and deficit spending sustainable, thanks!

The surest way to go broke is to mix your investing with your political ideology or listen to those who do.  Ignore these nincompoops, and keep in mind.... *their* retirement strategy is to sell newsletter subscriptions & books to those susceptible to conspiracy theories.  Lastly, if you read anything about buying gold, run in the other direction as well (the S&P returned over 40x more than gold over the past century); this is a common theme among these folks.
« Last Edit: September 22, 2018, 03:26:35 PM by TheHobbit »

Vienna4ever

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #34 on: September 30, 2018, 06:30:14 PM »
Peter Schiff has been predicting that hyperinflation will strike any day now since at least the '08 financial crisis. Ron Paul has been predicting it for about 40 years. Yeah, I'd say they're wrong. I'm no expert in monetary economics, but with inflation having been low and manageable all this time, you eventually have to conclude that these guys are operating under very wrong beliefs about how money works.

That's if you believe that inflation is being calculated correctly. Because it's not.

Peter Schiff predicted to an audience of Mortgage Bankers about the real estate crash. Nobody listened to him. Guess what - Peter Schiff was right.  He even told them he was shorting the real estate market.

https://www.youtube.com/watch?v=jj8rMwdQf6k

It's well worth the watch, because it shows how much Peter knows and understands.

You can argue that a broken clock is right twice a day, but nobody can argue against Peter's logic and understanding of macroeconomics. It is ironic that everyone on this forum agrees that nobody can time the market, that it is impossible. Yet they turn around and complain that Peter cannot time his predictions. Ok, but somebody please tell me where he is flawed after watching that video.

Yes, I know he is a gold bug and must be taken with a grain of salt. I also remain skeptical about the gold or his investment strategy. But it is good to listen to all sides. If anyone has a convincing counterbalance podcaster to Peter Schiff I would really appreciate if they could share them with me. I also like to get as many opinions and find the truth in the middle.

bacchi

  • Magnum Stache
  • ******
  • Posts: 3070
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #35 on: September 30, 2018, 08:43:36 PM »
Peter Schiff predicted to an audience of Mortgage Bankers about the real estate crash. Nobody listened to him. Guess what - Peter Schiff was right.  He even told them he was shorting the real estate market.

There were a lot of people predicting a real estate crash. Schiller did and even wrote it about in a 2005 book.

The Case-Schiller futures started showing a decline in mid-2006. There was some easy money to be made if you had shorted real estate in August 2006 and covered in August 2009.

https://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index#/media/File:Case_shiller_janv09.jpg

Unfortunately, I shorted in 2005 and bailed too early in 2006. I missed a good entry point and a good exit point, which is the problem with market timing. "Irrational exuberance" and all.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #36 on: October 01, 2018, 06:54:10 AM »
Peter Schiff has been predicting that hyperinflation will strike any day now since at least the '08 financial crisis. Ron Paul has been predicting it for about 40 years. Yeah, I'd say they're wrong. I'm no expert in monetary economics, but with inflation having been low and manageable all this time, you eventually have to conclude that these guys are operating under very wrong beliefs about how money works.

That's if you believe that inflation is being calculated correctly. Because it's not.

Peter Schiff predicted to an audience of Mortgage Bankers about the real estate crash. Nobody listened to him. Guess what - Peter Schiff was right.  He even told them he was shorting the real estate market.

https://www.youtube.com/watch?v=jj8rMwdQf6k

It's well worth the watch, because it shows how much Peter knows and understands.

You can argue that a broken clock is right twice a day, but nobody can argue against Peter's logic and understanding of macroeconomics. It is ironic that everyone on this forum agrees that nobody can time the market, that it is impossible. Yet they turn around and complain that Peter cannot time his predictions. Ok, but somebody please tell me where he is flawed after watching that video.

Yes, I know he is a gold bug and must be taken with a grain of salt. I also remain skeptical about the gold or his investment strategy. But it is good to listen to all sides. If anyone has a convincing counterbalance podcaster to Peter Schiff I would really appreciate if they could share them with me. I also like to get as many opinions and find the truth in the middle.

Why not check out the NPR "Planet Money" podcast? They started in the throes of that financial crisis, but they've done a good job of covering economists who are very skeptical of the gold standard as well? Their most recent episode actually featured Modern Monetary Theory, which is the opposite of the gold standard. Stephanie Kelton versus Schiff is a debate i would love to see!

Vienna4ever

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #37 on: October 01, 2018, 09:18:52 AM »
Why not check out the NPR "Planet Money" podcast? They started in the throes of that financial crisis, but they've done a good job of covering economists who are very skeptical of the gold standard as well? Their most recent episode actually featured Modern Monetary Theory, which is the opposite of the gold standard. Stephanie Kelton versus Schiff is a debate i would love to see!

Thank you ! This is great - just what I wanted. I will definitely check it out. I have been listening to Schiff's podcast, and wanted to find someone who has the opposite opinion but with clear explanation/arguments.
 

genesismachine

  • 5 O'Clock Shadow
  • *
  • Posts: 96
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #38 on: October 01, 2018, 10:21:50 AM »
When someone says very publicly that they are 100% certain about something, and then their prediction doesn't come true, then comes back the next year and says they are 100% certain about something, they are an ideologue not a credible person.

Now, if he came back the next year and said 'you know, my assumptions were wrong, maybe it's more like an 80% chance now' and injects a lot of uncertainty in their prediction, that can make it more believable. But after 10 years of this, he is still chanting the same tune. Eventually he will be right for the same reason a broken clock is right twice a day.

Humans are very imperfect, structurally imperfect. Read some behavioral economics books and it'll blow your mind. How can you predict the behavior of billions of irrational actors acting in unbelievably complicated interconnected webs? You can't. The point is antifragility towards macro economic trends, not predicting them. Something that is lost on the ideologues...

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #39 on: October 03, 2018, 09:22:07 AM »
It seems like modern libertarians have completely discarded everything Milton Friedman did for their cause by going for the gold standard instead of Friedman's monetarism.

hodedofome

  • Handlebar Stache
  • *****
  • Posts: 1214
  • Age: 38
  • Location: Texas
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #40 on: October 03, 2018, 11:59:55 AM »
Peter Schiff has been predicting that hyperinflation will strike any day now since at least the '08 financial crisis. Ron Paul has been predicting it for about 40 years. Yeah, I'd say they're wrong. I'm no expert in monetary economics, but with inflation having been low and manageable all this time, you eventually have to conclude that these guys are operating under very wrong beliefs about how money works.

That's if you believe that inflation is being calculated correctly. Because it's not.

Peter Schiff predicted to an audience of Mortgage Bankers about the real estate crash. Nobody listened to him. Guess what - Peter Schiff was right.  He even told them he was shorting the real estate market.

https://www.youtube.com/watch?v=jj8rMwdQf6k

It's well worth the watch, because it shows how much Peter knows and understands.

You can argue that a broken clock is right twice a day, but nobody can argue against Peter's logic and understanding of macroeconomics. It is ironic that everyone on this forum agrees that nobody can time the market, that it is impossible. Yet they turn around and complain that Peter cannot time his predictions. Ok, but somebody please tell me where he is flawed after watching that video.

Yes, I know he is a gold bug and must be taken with a grain of salt. I also remain skeptical about the gold or his investment strategy. But it is good to listen to all sides. If anyone has a convincing counterbalance podcaster to Peter Schiff I would really appreciate if they could share them with me. I also like to get as many opinions and find the truth in the middle.

I initially followed Schiff because he was so right on the financial crisis. Then the crisis subsided but his tune didn’t. I realized he was following a model that only works in the right conditions. However, if the conditions change his model doesn’t work and therefore he’s wrong the for the rest of the time.

He’s not worth following if you’re trying to make money from his philosophy. You would have lost a ton over the past 10 years.

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1091
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #41 on: October 04, 2018, 02:37:18 PM »
It seems like modern libertarians have completely discarded everything Milton Friedman did for their cause by going for the gold standard instead of Friedman's monetarism.

Maybe it was hard for them to reconcile Friedman's message that the government could precisely target inflation with their other message that government cannot do anything well?

aasdfadsf

  • 5 O'Clock Shadow
  • *
  • Posts: 80
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #42 on: October 05, 2018, 10:31:47 PM »
Peter Schiff has been predicting that hyperinflation will strike any day now since at least the '08 financial crisis. Ron Paul has been predicting it for about 40 years. Yeah, I'd say they're wrong. I'm no expert in monetary economics, but with inflation having been low and manageable all this time, you eventually have to conclude that these guys are operating under very wrong beliefs about how money works.

That's if you believe that inflation is being calculated correctly. Because it's not.

There are many different ways of measuring inflation if you'd like that will all show that it has been very low since the '08 crisis. There is no secret measure of inflation that will reveal something that is non-obvious to people who participate in the economy on a daily basis. If prices were ramping up by 50% a year, you would know that. All you have to do is be a person who goes and buys stuff on occasion, and that alone makes it clear that we haven't experienced hyperinflation. Predictions of hyperinflation were obviously wrong, and those who made it were clearly incorrect in their predictions.

Tom Bri

  • Pencil Stache
  • ****
  • Posts: 608
  • Location: Small Town, Flyover Country
  • More just cheap, than Mustachian
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #43 on: October 06, 2018, 02:42:39 AM »
This argument was popular back in the 1970s when I was in high school, during the stagflation era. Its roots are much deeper, and you can find books all through the 20th century and earlier touting the argument. Every few generations, they are right. The 1930s, the 1970s (sort of). Quite a few times in the 1800s, though money issuance was different then.

Someday, they will be right again, spawning a whole new era of doom-prognosticators. Trouble is, like the stock market, it is essentially unpredictable when the ball will drop. Now? Twenty years from now? 50?

My take, keep your lifestyle in check, and stay out of debt.

Telecaster

  • Handlebar Stache
  • *****
  • Posts: 1317
  • Location: Seattle, WA
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #44 on: October 07, 2018, 11:38:35 PM »
Peter Schiff has been predicting that hyperinflation will strike any day now since at least the '08 financial crisis. Ron Paul has been predicting it for about 40 years. Yeah, I'd say they're wrong. I'm no expert in monetary economics, but with inflation having been low and manageable all this time, you eventually have to conclude that these guys are operating under very wrong beliefs about how money works.

That's if you believe that inflation is being calculated correctly. Because it's not.


You positive?  MIT has a program called the "Billion Prices Project"  started in 2008 which tracks prices of 15 billion items in 60 countries.  Not substitutions, but prices of actual items.

Turns out, the BPP measure of inflation tracks the CPI pretty closely. 

http://www.thebillionpricesproject.com/

Schiff has been so wildly wrong for so many years that he's devolving into conspiracy theories to support his past failed predictions.  There is no conspiracy.  Schiff is just wrong. 


effigy98

  • Stubble
  • **
  • Posts: 248
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #45 on: October 08, 2018, 09:02:45 AM »
I think the libertarians are right about the dollar crisis, it is just that other countries are reacting in kind so "everyone else is doing it" which is probably keeping the whole thing afloat for longer. It could happen soon, 100 years from now, or never, not sure. And by then, we may have created technology to fix the problem and start living within our means, or maybe we fly asteroids with a billion resources close to earth and mine them, or maybe the crazy amounts of high value helium 3 on the moon will avoid a crisis.

However, if you play around with back testing, you will find gold can stabilize a portfolio unlike any other asset class. It is kind of like an everything else that could go wrong hedge, there is nothing really like it.

https://portfoliocharts.com/

US Stocks, REITs, real estate, and international stocks do seem like the best middle ground for inflation and growth though during medium inflation if that is what you are worried about.


bwall

  • Bristles
  • ***
  • Posts: 443
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #46 on: October 08, 2018, 11:36:01 AM »
However, if you play around with back testing, you will find gold can stabilize a portfolio unlike any other asset class. It is kind of like an everything else that could go wrong hedge, there is nothing really like it.

Beginning in 1980 gold had a 20 year one directional price movement. Guaranteed. So stabile was the directional move, that in the late 1990's some central banks began selling their gold reserves as they were considered superfluous.

The only reason that gold recovered from their all time lows was the increased demand from China and India. Based on their historical experiences regular citizens in these countries would rather own gold as savings than put their savings in a bank.

effigy98

  • Stubble
  • **
  • Posts: 248
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #47 on: October 09, 2018, 08:14:49 PM »
However, if you play around with back testing, you will find gold can stabilize a portfolio unlike any other asset class. It is kind of like an everything else that could go wrong hedge, there is nothing really like it.

Beginning in 1980 gold had a 20 year one directional price movement. Guaranteed. So stabile was the directional move, that in the late 1990's some central banks began selling their gold reserves as they were considered superfluous.

The only reason that gold recovered from their all time lows was the increased demand from China and India. Based on their historical experiences regular citizens in these countries would rather own gold as savings than put their savings in a bank.

Gold is not good for people who fixate on a single asset class in your overall portfolio and ignore the entire portfolios performance. Best to just go with a single fund in that case.

talltexan

  • Handlebar Stache
  • *****
  • Posts: 1930
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #48 on: October 19, 2018, 08:59:43 AM »
Unfortunately, there is going to be a boom/bust cycle (with accompanying bubbles) as long as humans are on this planet. We made the mistake of thinking we'd conquered the business cycle in 1999 if you'll recall.

The other things you list are all actions taken by a sovereign government. QE ended a while ago, and we're actually seeing a Federal Reserve that is tightening monetary policy quite a bit. This should please hard-money/progold people. I'll take on the unlimited debt/deficit spending:

set aside how you feel morally about debt and think about it through the eyes of a business: issuing debt is done based on income. Because people will eventually retire and die, our earning power is limited, so we have to pay off our debts. But entities that will not die: Chevron, Procter and Gamble, the Federal government, will continue to have earning power indefinitely. These entities need only service their debt--within the marketplace for capital--not pay it off.

In the case of a business, its earning power is its ability to generate earnings in the market place. Sears is facing "bankruptcy" this week because the profits from its stores have fallen to the point at which it cannot make necessary payments to service its debt. You're welcome to review this article https://seekingalpha.com/article/4178310-earn-39-percent-annualized-yield-sears-holdings-bonds-maturing-less-5-months that discusses how high the yields on Sears bonds have gotten as they get more and more distressed.

The equivalent of earnings for the Federal government is the tax revenue it collects out of the American economy. And the market for capital has concluded that this source of earnings is quite safe, as 30-year treasure bonds are only yielding a little over 3%. (versus the 39% figure cited regarding Sears)

genesismachine

  • 5 O'Clock Shadow
  • *
  • Posts: 96
Re: Are the Libertarians Wrong about the dollar crisis?
« Reply #49 on: October 19, 2018, 11:43:52 AM »
A business takes out money in loans to expand its revenue/profit. One could say the government stimulus was along those lines. What we are doing now is akin to taking out loans for no reason. Plenty of businesses have failed because they were unable to service debts that were taken out to fund failed business ventures. Especially if interest rates increased substantially suddenly and they had enough short term loans coming due. This could lead to a downward spiral where the credit rating takes a hit, which causes interest rates on the debt to rise, which causes a further credit deterioration, etc...

I don't think we're at that point yet with the US government, but we certainly seem to be in a rush to get there.