Author Topic: Gold - I we still cavemen?  (Read 36906 times)

Mr Mark

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Re: Gold - I we still cavemen?
« Reply #50 on: July 17, 2014, 08:43:54 PM »
http://www.nytimes.com/2014/07/18/opinion/brutality-in-new-york-city-jails.html?rref=opinion&module=Ribbon&version=context&region=Header&action=click&contentCollection=Opinion&pgtype=article


On cue.

I still say gold are super tulips. But even if the market for shiny gold jewelry in India and China stays this high, and gold matches inflation, that is a bad investment long term.

Fleeing a country? Moving to a distant village with no banking? Gold is excellent.

Else?  Count me out.

AdrianM

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Re: Gold - I we still cavemen?
« Reply #51 on: July 18, 2014, 12:03:11 AM »
And yet in the current time of  aggressive expansion of the American monetary supply,  inflation remains at historic lows.

Thank god everyone laughs at the tinfoil hat wearing goldbugs. Their predictions are worse than random. They are just plain wrong.

Seeing as your fond of Keynes

There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose". -John Maynard Keynes

Keep your Tinfoil hat and chanting "this time its different."

« Last Edit: July 18, 2014, 12:09:09 AM by AdrianM »

AdrianM

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Re: Gold - I we still cavemen?
« Reply #52 on: July 18, 2014, 12:14:55 AM »
http://www.nytimes.com/2014/07/18/opinion/brutality-in-new-york-city-jails.html?rref=opinion&module=Ribbon&version=context&region=Header&action=click&contentCollection=Opinion&pgtype=article


On cue.

I still say gold are super tulips. But even if the market for shiny gold jewelry in India and China stays this high, and gold matches inflation, that is a bad investment long term.

Fleeing a country? Moving to a distant village with no banking? Gold is excellent.

Else?  Count me out.

Its also good in case of Bank Holidays.

grantmeaname

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Re: Gold - I we still cavemen?
« Reply #53 on: July 18, 2014, 12:16:24 AM »
If our currency is being debauched, why isn't our economy barrelling towards destruction?

AdrianM

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Re: Gold - I we still cavemen?
« Reply #54 on: July 18, 2014, 05:48:41 AM »
If our currency is being debauched, why isn't our economy barrelling towards destruction?

LOL who's not been paying attention in school.

What is your interest rate at in the UK ?  0.5%
Half a percent. Sounds like your economy is BOOMING... NOT!

Hang on a sec you went ZIRP in 09 its 14 now so 5 years and you still need ZIRP to function.
The UK printed $375,000,000,000 Pounds on top of that and still no booming economy.

To quote Buffet "You only find out who is swimming without trunks when the tide goes out"

Put interest rates back to before GFC levels and see what happens.
Bingo there would be your economic destruction.

So all you have is a stay of execution.
Mind you if you follow Japans lead you can stay on death row for a couple of decades.

I think the question you should be asking is, What comes next for our modern monetary system?





johnhenry

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Re: Gold - I we still cavemen?
« Reply #55 on: July 18, 2014, 08:50:35 AM »
Quote
Best. President. Ever.

And quite Keynsian, years before Keynes was even born.

As a progressive I especially love this one;

"   “The wages of men should be recognized as the structure of government and in the social order as more important than the wages of money.  "

It seems he too agreed With the future Warren Buffet, that by any measure of decency, Warren Buffets and Mitt Romneys should be taxed at a higher rates than their secretaries.

Agreed.  If you liked that quote, you are likely to appreciate this one concerning the value of labor vs. capital.

Quote
Labor is prior to and independent of capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.



johnhenry

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Re: Gold - I we still cavemen?
« Reply #56 on: July 18, 2014, 09:28:23 AM »
Got to love it when people just spam out quotes to justify their point. You would have been better served by publishing the whole speech from which your sound bites are taken.
http://www.businesscycles.biz/docs/lincolnpolicy.htm

I have no problem admitting that Abe said it better than I ever could.  As I said in my post, these are just a collection of eloquent statements on the subject from a very informed man.  But as I also pointed out, there is plenty of current, detailed, academic information available on Modern Monetary Theory explaining how our current fiat money system works.   

I loved this soundbite the most as it actually as it could be interpreted to argue for the opposite of your position. So was surprised to see you let it through.

    “Government should stand behind its currency and credit and the bank deposits of the nation. No individual should suffer a loss of money through depreciated or inflated currency or bank bankruptcy. bold was my doing


So was Abe arguing for sound money? or just more government intervention?

He obviously favored a "sound money" that would serve as a reliable store of value.  What he believed that you don't is: A government can achieve that goal much easier than a precious metal.

While we are quoting dead white men with beards, I will counter your argument with my own dead bearded white men.

Lord Acton said "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
And Amschel Rothchilds said "Give me control of a nations money supply, and I care not who makes it’s laws"

In the end, any monetary system controlled by a small group, is used to specifically benefit that group.
The reason the gold standard is always portrayed as bad, as it robes the insiders of their power and shackles the reckless spending of governments weather it be Bread and Circuses or War.

Those quotes are equally powerful and equally accurate.  I'm in complete agreement with them.  But a society that chooses to denominate the obligations of its citizens in chunks of precious metal rather than with it's laws does not protect itself from powerful interests or corrupt government.

milesdividendmd

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Re: Gold - I we still cavemen?
« Reply #57 on: July 18, 2014, 09:55:07 AM »
If our currency is being debauched, why isn't our economy barrelling towards destruction?

LOL who's not been paying attention in school.

What is your interest rate at in the UK ?  0.5%
Half a percent. Sounds like your economy is BOOMING... NOT!

Hang on a sec you went ZIRP in 09 its 14 now so 5 years and you still need ZIRP to function.
The UK printed $375,000,000,000 Pounds on top of that and still no booming economy.

To quote Buffet "You only find out who is swimming without trunks when the tide goes out"

Put interest rates back to before GFC levels and see what happens.
Bingo there would be your economic destruction.

So all you have is a stay of execution.
Mind you if you follow Japans lead you can stay on death row for a couple of decades.

I think the question you should be asking is, What comes next for our modern monetary system?

So your point is that monetary expansion prevented stagflation and helped the economy and that this is a bad thing?  Are soup lines and 20% unemployment your thing?  If so bring back the gold standard.

Your Japan example is particularly poorly chosen as their austerity agenda and conservative monetary policy contributed to them being stuck in a liquidity trap for 20 years.  And in the time of Abenomics, whaddya know, their economy is growing again.

(An investor would have done very well to have gone all in on the japanese stock market on day one of Abenomics.)

DirtBoy

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Re: Gold - I we still cavemen?
« Reply #58 on: July 18, 2014, 10:11:35 AM »
If you are going to quote Abe I think it is relevant that he was talking of Greenbacks not Federal Reserve Notes.  Greenbacks were controlled by congress.  With FRNs that control has been given to a private bank. 

johnhenry

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Re: Gold - I we still cavemen?
« Reply #59 on: July 18, 2014, 12:49:30 PM »
If you are going to quote Abe I think it is relevant that he was talking of Greenbacks not Federal Reserve Notes.  Greenbacks were controlled by congress.  With FRNs that control has been given to a private bank.

  You are correct that Greenbacks became the currency of the day, to fund the war.  You are correct that they were issued under Congressional authority.  But our central bank, the Federal Reserve, was also created by an act of Congress.  I will grant that the details are messy and that the existence of the Federal Reserve or any central bank as a separate entity from the Treasury, makes the money creation process harder to follow.  There is a great MMT paper here that can "explain it both ways".  The "consolidated" model is often used to present the government as one entity to make the transactions easier to follow.  Because at the end of the day, the Fed is a creation of Congress and a creature of the laws that govern it.  After all, it is not technically possible for the Treasury to default unless it chooses to do so.  Yes, the Fed is where the Treasury banks, but the Fed cannot stop the Treasury from spending money into existence.

But if you want to see a breakdown of the unconsolidated model, this paper can offer that as well.

http://www.levyinstitute.org/pubs/wp_778.pdf

NorCal

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Re: Gold - I we still cavemen?
« Reply #60 on: July 18, 2014, 06:41:38 PM »
The future value of gold is no more predictable than the future value of the stock market or bond market.  Only fools think they can reliably predict the future value of gold.

The value of gold in a a diversified portfolio is that it will likely rise in value in the future (as will all physical assets), and it is negatively correlated to the stock market.  There are very few negatively correlated asset classes out there.

To create a simple example, I built a portfolio of three asset classes including US stocks, long term bonds, and gold.  As you can see in the table below, the variance (a standard measure of financial risk) varies from 0.44 to 0.73.  The higher the variance, the more risky your portfolio.

Ticker   6 Month Return   Variance   Standard Deviation
SPY          9.2%               0.44           0.66
TLT          6.1%                0.41            0.64
GLD        -1.0%               0.73            0.85 

Since these asset classes are negatively correlated, I can reduce overall volatility by combining them in a portfolio.  By using the "solver" function in Excel, I can calculate a Minimum Variance portfolio.  By creating a portfolio of 50% SPY, 31% TLT and 19% GLD, I would have a portfolio variance of only 0.05.  This is significantly less risky than owning only stocks, or even only bonds.

Disclaimer:  I am not trying to claim that a Minimum Variance portfolio is an optimum portfolio.  Also, my variance calculations use the last 120 days of trading data.  Variance changes significantly over time, and should be monitored if you are using this as an investment criteria.

If you need a primer on variance, see http://www.investopedia.com/walkthrough/corporate-finance/4/return-risk/expected-return.aspx

grantmeaname

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Re: Gold - I we still cavemen?
« Reply #61 on: July 19, 2014, 09:56:00 AM »
LOL who's not been paying attention in school.

What is your interest rate at in the UK ?  0.5%
Half a percent. Sounds like your economy is BOOMING... NOT!
Did you get tired of making straw man arguments against the American economy? I said nothing about the United Kingdom. But if anything it supports what I'm saying - the UK's had less accomodating monetary and fiscal policy than the US and a worse recovery as a result. Your tinfoil theory would seem to predict that the US would be really barreling towards economic destruction while the UK was only mildly barreling towards economic destruction. Curious how facts get in the way of pithy quotes from famous dead people.

Quote
Put interest rates back to before GFC levels and see what happens.
Bingo there would be your economic destruction.
"would be" as in "there's no evidence right now that it's happening but I think it's going to". I said "where is the economic destruction?", not "can you imagine any scenario in which something bad could happen to the economy under any sort of alternative circumstance you can think of?"

So let me repeat again. The currency is "being debauched" right now. Why is there no evidence for the notion that we are "barreling towards destruction"?

AdrianM

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Re: Gold - I we still cavemen?
« Reply #62 on: July 21, 2014, 07:39:55 PM »
Grantmeaname,

No I only used the UK as you had as your location. If i was to use the US it is worse.

I don't need straw men to make my arguments.

There are a lot of crazy things happening in the world right now
You have the Ukraine - Russia thing.
More of the same in Gaza, the Middle East and Iraq
You have China and the nine dash map.

The US is losing its power to tell the rest of the world what to do.
You now have a lot of rising powers starting to flex there newly acquired muscle.

This creates a lot of serious and deep risk factors and all of these have just been shrugged of by the market place
These are things not to be ignore and rational, thinking people should be paying close attention to.

Having all your eggs in 1 basket, Saying yeah i'll just park all of my money in the stock market.
And keep all my funds in one country that happens to be bankrupt and that will probably be a victim in a global economic war.
Does not sound like a wise decision to me.
That is why I choose to invest in physical gold through a PP strategy.
And would encourage others to do so.
(The one caveat to that is that you will possible not reach FIRE as early)

Some possible scenarios.
Dumping of indebted government bonds on the open market.
Bypassing of US as the world banking clearing house.
Sidelining of IMF through the construction of alternate banking structure.

As for some evidence of the the currency is "being debauched" right now
If the price stays the same but the portion gets smaller is it inflation or deflation?
http://www.bostonglobe.com/lifestyle/food-dining/2014/02/11/the-incredible-shrinking-package/Ti6VwQCCcg0whLdr8bHnyJ/story.html

A new challenger to the western banking system.
http://in.reuters.com/article/2014/07/15/brics-summit-bank-idINKBN0FK08620140715

Countries beginning to bypass USD via direct currency swaps
http://en.wikipedia.org/wiki/Internationalization_of_the_renminbi

An while we are there you can go and FATCA your self (a lesson in how to not win friends and influence poeple)
http://www.sovereignman.com/finance/top-finance/the-us-government-tells-the-whole-world-to-go-fatca-themselves-14638/


milesdividendmd

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Re: Gold - I we still cavemen?
« Reply #63 on: July 21, 2014, 08:43:39 PM »
AdrianM,

My philosophy is that when investing it is better to think like an actuary than a prophet.


For you to be right several improbable world events must line up in direct succession. Could happen, but not likely.

Your predictions sound quite dramatic. But 99 times out of 100 you are wrong and you have lost money.

And if your 1% outcome comes true, what then? 

If the monetary Armageddon that you so confidently predict, with so little evidence comes about, then the last thing we'll all be worrying about is asset allocation. We'll be busy searching for potable water for our families.

And one final question: if your paranoid brand of Austrian economics is so right, why are all your predictions wrong?



AdrianM

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Re: Gold - I we still cavemen?
« Reply #64 on: July 22, 2014, 12:09:47 AM »
You said I am wrong. I just say I am early.

Let history sort out who is right or wrong.

As for losing money, that is a long bow to draw.
How is the money lost if it never exists in the first place?

How many times in the last century was there monetary chaos?
3 times by my count.
1914, 1939, 1971
Each collapse was followed by a turbulent period, before stability is restored by a new monetary system.
1914 WW1 - new highly flawed gold standard
1939 WW2  - Brenton Woods
1971 Nixon closes gold window - Fiat Currency and 18% interest rates.

As for improbable events history is full of them.
Take Arch Duke Ferdinand assassination. (only chosen due to the 100 year anniversary)
http://www.history.com/this-day-in-history/archduke-franz-ferdinand-assassinated
4th paragraph explains the improbable events that lined up.

It doesn't take Armageddon to pollute the water supply just a simple industrial accident or act of god can do those.
If you need to get water for you family then there are many devices you could purchase or steps you can take beforehand.
You might seem a little loony to some but others would think your actions prudent and your family would thank you.

Afterwards good luck.

milesdividendmd

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Gold - I we still cavemen?
« Reply #65 on: July 22, 2014, 12:45:12 AM »
Always early never right.

Your theory predicts that if "a" happens then "b" will necessarily happen.

Then "a" happens but "b" doesn't, and you say "wait"

Even a broken clock is right twice a day. And just like a broken clock this kind of prediction is valueless.

Just like religious quacks predicting an Armageddon that doesn't come. Anyone can predict, but predicting accurately is something else entirely.

Here then are my predictions.

Some day there will be hyperinflation again.

Some day there will be deflation.

Some day America will get entangled in another war.

There will be a depression.

There will be a period of great economic expansion.

Please use this information wisely.

The best way to capitalize on this valuable forecast is to invest in a broadly diversified low cost multi asset class portfolio. (You can even mix in some gold.)
« Last Edit: July 22, 2014, 01:21:45 AM by milesdividendmd »

pom

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Re: Gold - I we still cavemen?
« Reply #66 on: July 22, 2014, 03:01:35 AM »
I definitely agree with Buffet, if you believe that things will go bad, why don't you buy land or real estate? At least you can extract income from it, even if it is small  because the world is a mess,  $100 a month is better than nothing.

The only gold that has and will ever have any value to me is my wedding ring.

AdrianM

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Re: Gold - I we still cavemen?
« Reply #67 on: July 22, 2014, 03:08:13 AM »
(You can even mix in some gold.)
Chuckles....

Glad you agree.

ect

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Re: Gold - I we still cavemen?
« Reply #68 on: July 22, 2014, 09:50:04 AM »
Couple points ...

Regarding the assertion that the skeptics have been proven wrong ... it's all fun and games while the bubble is inflating. Check back with me when short rates are being raised on the way to 5%+ and the Fed is selling the bonds it purchased.

Gold as an investment is problematic as noted, but direct metal exposure is not the only way to protect against inflation and currency debasement. At current valuations, my preference is to tilt my equity holdings toward the basic materials sector, emphasizing miners of precious metals.

Mr Mark

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Re: Gold - I we still cavemen?
« Reply #69 on: July 22, 2014, 05:19:53 PM »
http://www.nytimes.com/2014/07/18/opinion/paul-krugman-addicted-to-inflation.html?partner=rssnyt&emc=rss

damn. This was the link I meant to post!

and gold doesn't actually track inflation very well either.

so, a mix of income producing asset classes for me please.




http://www.nytimes.com/2014/07/18/opinion/brutality-in-new-york-city-jails.html?rref=opinion&module=Ribbon&version=context&region=Header&action=click&contentCollection=Opinion&pgtype=article


On cue.

I still say gold are super tulips. But even if the market for shiny gold jewelry in India and China stays this high, and gold matches inflation, that is a bad investment long term.

Fleeing a country? Moving to a distant village with no banking? Gold is excellent.

Else?  Count me out.

Its also good in case of Bank Holidays.

waltworks

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Re: Gold - I we still cavemen?
« Reply #70 on: July 22, 2014, 06:15:43 PM »
The folks selling the blue jeans and whiskey (and the fun-time gals) made all the money in the gold rushes, no? Because you can wear a pair of blue jeans, and drink a whiskey sour.

Since I don't have the looks or the gender to be a fun-time gal, and I don't know how to make whiskey, I'll take me some stock in companies selling real stuff, some real estate, etc. The only way I see inflation as a problem is if you're stuffing benjamins in your mattress. The world is a great place because people like to make new cool stuff and exchange it with each other. I assume it will continue to be that way and I want in on the making and exchanging stuff. I don't really care if dollars or renminbi or seashells are the way we smooth out those transactions, so I don't give a rat's ass about gold. If the world does go to hell, at least I won't have spent my life worrying all the time.

-W

TomTX

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Re: Gold - I we still cavemen?
« Reply #71 on: July 23, 2014, 08:33:47 PM »
Ah the Cult of Buffet followers.

They always miss it.

He benefited from the greatest credit boom in history.
Right place, right time.

Nothing special. So how has he done for the last decade???????

Sadly the proof is in the pudding.
Gold smashed his wrinkle behind.

Over the last 10 years
Gold up 240%
BRK.A up 60%

And that is using today's prices.

Not bad for just sitting there doing nothing.........

Ah, how about a more appropriate (longer) timeframe, say 30 years?

Hmmm... BRK.A going from $1,260 to $192,205
Hmmm... Gold going from $350 to $1299 per ounce.

Lets say I bought one share of BRK.A and you bought $1,260 in gold (3.6 ounces) in 1984

Today I have $192,205 in BRK.A, you have $4676 in gold.

To put it another way, I could sell my BRK.A and buy 148 ounces of gold, while you still have 3.6 ounces.

Lest you think I was cherry-picking, the oldest data I could find quickly put BRK.A at $340 in 1980 when gold was $580. The result for gold is even more bleak.

Start me with one share of BRK.A in 1980, and you start with 0.6 ounces of gold.

Today, I end up with 148 ounces of gold in value, while you still have 0.6 ounces of gold.

S&P 500 30 years ago? 166. Today? 1987. Roughly 12x, while gold is less than 4x.

Shall we go on?

AdrianM

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Re: Gold - I we still cavemen?
« Reply #72 on: July 24, 2014, 07:39:37 AM »
Ah the Cult of Buffet followers.

They always miss it.

He benefited from the greatest credit boom in history.
Right place, right time.

Nothing special. So how has he done for the last decade???????

Sadly the proof is in the pudding.
Gold smashed his wrinkle behind.

Over the last 10 years
Gold up 240%
BRK.A up 60%

And that is using today's prices.

Not bad for just sitting there doing nothing.........

Ah, how about a more appropriate (longer) timeframe, say 30 years?

Hmmm... BRK.A going from $1,260 to $192,205
Hmmm... Gold going from $350 to $1299 per ounce.

Lets say I bought one share of BRK.A and you bought $1,260 in gold (3.6 ounces) in 1984

Today I have $192,205 in BRK.A, you have $4676 in gold.

To put it another way, I could sell my BRK.A and buy 148 ounces of gold, while you still have 3.6 ounces.

Lest you think I was cherry-picking, the oldest data I could find quickly put BRK.A at $340 in 1980 when gold was $580. The result for gold is even more bleak.

Start me with one share of BRK.A in 1980, and you start with 0.6 ounces of gold.

Today, I end up with 148 ounces of gold in value, while you still have 0.6 ounces of gold.

S&P 500 30 years ago? 166. Today? 1987. Roughly 12x, while gold is less than 4x.

Shall we go on?

Lets go longer

Take a look at a longer time frame chart 100+ years, called the Dow to gold ratio.
Your starting point is the perfect time to have sold gold and bought stocks.
Since the dot-com bubble the ratio has been trending in the opposite direction.

So while your argument may appear to have wings, I believe devil is in the detail.
Gold has been stronger since the bursting of the dot-com bubble, which was the high point for stocks

What I believe is important to note is the oscillation in the ratio over the course of generations.


waltworks

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Re: Gold - I we still cavemen?
« Reply #73 on: July 24, 2014, 09:08:24 AM »
Why the heck would you use a log scale? Also, if this is really the dow/gold ratio, it's saying you're wrong (ie the Dow goes up much, much faster than gold over long periods of time).

-W

pom

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Re: Gold - I we still cavemen?
« Reply #74 on: July 24, 2014, 11:59:35 AM »
Does this chart take dividends into account?

Mr Mark

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Re: Gold - I we still cavemen?
« Reply #75 on: July 24, 2014, 07:13:23 PM »
Exactly.

AdrianM

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Re: Gold - I we still cavemen?
« Reply #76 on: July 24, 2014, 10:44:38 PM »
Does the Dow take dividends into account?

The best i can offer you is to use two ETFs as proxies for the question. Sadly they do not go far enough back in history to provide much insight.
DIA
GLD

But for the last 10 years GLD was the better performer.


« Last Edit: July 24, 2014, 11:22:41 PM by AdrianM »

fixer-upper

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Re: Gold - I we still cavemen?
« Reply #77 on: July 25, 2014, 12:51:33 AM »

Got to love it when people just spam out quotes to justify their point. You would have been better served by publishing the whole speech from which your sound bites are taken.
http://www.businesscycles.biz/docs/lincolnpolicy.htm

I loved this soundbite the most as it actually as it could be interpreted to argue for the opposite of your position. So was surprised to see you let it through.

    “Government should stand behind its currency and credit and the bank deposits of the nation. No individual should suffer a loss of money through depreciated or inflated currency or bank bankruptcy. bold was my doing

So was Abe arguing for sound money? or just more government intervention?

While we are quoting dead white men with beards, I will counter your argument with my own dead bearded white men.

Lord Acton said "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
And Amschel Rothchilds said "Give me control of a nations money supply, and I care not who makes it’s laws"

In the end, any monetary system controlled by a small group, is used to specifically benefit that group.
The reason the gold standard is always portrayed as bad, as it robes the insiders of their power and shackles the reckless spending of governments weather it be Bread and Circuses or War.

And yet in the current time of  aggressive expansion of the American monetary supply,  inflation remains at historic lows.

Thank god everyone laughs at the tinfoil hat wearing goldbugs. Their predictions are worse than random. They are just plain wrong.

"Government Stated" inflation remains at historic lows.  For the rest of us, beer and bacon are up 50+ percent over the last few years.

On the value of gold, there are several variables:

Numismatic, or collector value performs well in times of economic stress.  A problem free $20 saint is worth considerably more per ounce than a modern eagle, and more stable in price.  Both may be gold, but they certainly aren't equal.

Bullion value should be derived from a combination of demand, scarcity and production (fuel) costs, but is often affected by the whims of the central banks who understandably fight against non-inflationary currencies.  I don't like the games the bankers play with slamming shorts and taking out stops, but I digress.  The saying don't fight the fed certainly applies.

Every type of investment has its advantages and disadvantages, and people who rail against gold bugs (or fiat) tend to be very unimaginative black and white thinkers, while those who can see the shades of gray tend to come out ahead. 

milesdividendmd

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Re: Gold - I we still cavemen?
« Reply #78 on: July 25, 2014, 12:59:55 AM »


Got to love it when people just spam out quotes to justify their point. You would have been better served by publishing the whole speech from which your sound bites are taken.
http://www.businesscycles.biz/docs/lincolnpolicy.htm

I loved this soundbite the most as it actually as it could be interpreted to argue for the opposite of your position. So was surprised to see you let it through.

    “Government should stand behind its currency and credit and the bank deposits of the nation. No individual should suffer a loss of money through depreciated or inflated currency or bank bankruptcy. bold was my doing

So was Abe arguing for sound money? or just more government intervention?

While we are quoting dead white men with beards, I will counter your argument with my own dead bearded white men.

Lord Acton said "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."
And Amschel Rothchilds said "Give me control of a nations money supply, and I care not who makes it’s laws"

In the end, any monetary system controlled by a small group, is used to specifically benefit that group.
The reason the gold standard is always portrayed as bad, as it robes the insiders of their power and shackles the reckless spending of governments weather it be Bread and Circuses or War.

And yet in the current time of  aggressive expansion of the American monetary supply,  inflation remains at historic lows.

Thank god everyone laughs at the tinfoil hat wearing goldbugs. Their predictions are worse than random. They are just plain wrong.

"Government Stated" inflation remains at historic lows.  For the rest of us, beer and bacon are up 50+ percent over the last few years.

On the value of gold, there are several variables:

Numismatic, or collector value performs well in times of economic stress.  A problem free $20 saint is worth considerably more per ounce than a modern eagle, and more stable in price.  Both may be gold, but they certainly aren't equal.

Bullion value should be derived from a combination of demand, scarcity and production (fuel) costs, but is often affected by the whims of the central banks who understandably fight against non-inflationary currencies.  I don't like the games the bankers play with slamming shorts and taking out stops, but I digress.  The saying don't fight the fed certainly applies.

Every type of investment has its advantages and disadvantages, and people who rail against gold bugs (or fiat) tend to be very unimaginative black and white thinkers, while those who can see the shades of gray tend to come out ahead.

Only the price of bacon and beer is not up over 50% in the last few years.

http://mobile.nytimes.com/blogs/krugman/2014/07/19/always-inflation-somewhere/?smid=tw-NytimesKrugman&seid=auto

Your false claim to the contrary convinces me that you might be one of those "black and white thinkers" that you are railing against. 

At least your claim is "imaginative. "







ect

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Re: Gold - I we still cavemen?
« Reply #79 on: July 25, 2014, 08:36:12 AM »
Only the price of bacon and beer is not up over 50% in the last few years.

http://mobile.nytimes.com/blogs/krugman/2014/07/19/always-inflation-somewhere/?smid=tw-NytimesKrugman&seid=auto
Wow.

Your link does not refute the claim, and lol at quoting Krugman as a factual resource.

I casually looked at the CPI tables on BLS.gov. For each month chosen, I used the unadjusted indexes from table 1.

Meats/poultry/fish/eggs: 157 (Oct 00) ... 211 (Oct 08) ... 252 (May 14)
That's an increase of 20% since 08, 60% since 00.

Alcoholic beverages: 176 (Oct 00) ... 217 (Oct 08) ... 237 (May 14)
That's an increase of 10% since 08, 35% since 00.

I don't have exact data for bacon or beer, but the claim is sufficiently vague (depending on the definition of "few"), that it can't be unambiguously tested.

One of the problems with CPI data is that it can't necessarily be taken at face value. Factors such as hedonic adjustments distort the accuracy of historic comparisons.

And the point I tried to make earlier is that our economic circumstances are incredibly abnormal, with extraordinarily extended manipulations of interest rates, and bizarre accumulations of debt. It seems likely to me that an extreme outcome is baked into the cake ... or cured into the bacon. It could be inflationary or deflationary depending on the nature of the inevitable policy responses, but the problems are not solved.

milesdividendmd

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Re: Gold - I we still cavemen?
« Reply #80 on: July 25, 2014, 08:53:30 AM »
20% is not 50%, and 14 years is not a few years. So even with your chosen data your claim about a 50 % increase in food prices in the last few years is dramatically wrong. (150% wrong in fact)

Reality is tough when it doesn't fit into your preconceived little box isn't it?

The chart shows a 17 % increase in CPI for food from 2008.

Suffice to say reality disagrees with you here.

And before we get into a ridiculous semantic argument about the meaning of "a few,"
I will sign off...







ect

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Re: Gold - I we still cavemen?
« Reply #81 on: July 25, 2014, 09:15:01 AM »
20% is not 50%

And it's not bacon-specific, as I noted.

I'll try a link:

http://www.businessinsider.com/bacon-prices-inflation-2014-7

If you zoom in on the first chart, you'll see a 6-year increase in bacon price from about 4.40 to about 6.60, i.e., 50%.

I think we're off on a tangent, but you probably disagree with my broader viewpoint anyway, so no harm I guess :)

ect

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Re: Gold - I we still cavemen?
« Reply #82 on: July 25, 2014, 10:19:42 AM »
Commenting more broadly on inflation, the Fed maintains an official, "long-run" target rate of 2%:

http://www.federalreserve.gov/faqs/economy_14400.htm

But indications are that they would welcome higher inflation as a "temporary" measure to "help" the economy. Here's one of Janet Yellen's most infamous quotes, dating back to Alan Greenspan's tenure as chairman:

"To me, a wise and humane policy is occasionally to let inflation rise even when inflation is running above target."

We're seeing similar attitudes internationally. Central bankers are nearly unanimous in their disdain for legitimately stable prices.

It's a scenario that suggests sharply higher prices ahead, IMO. At an inflation rate of 4%, prices will increase 50% per decade.

It's possible that central bankers may be prevented from acting on their impulses, but that would require a major shift in either market conditions or public opinion.

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Re: Gold - I we still cavemen?
« Reply #83 on: July 25, 2014, 12:00:13 PM »
20% is not 50%, and 14 years is not a few years. So even with your chosen data your claim about a 50 % increase in food prices in the last few years is dramatically wrong. (150% wrong in fact)

Reality is tough when it doesn't fit into your preconceived little box isn't it?

The chart shows a 17 % increase in CPI for food from 2008.

Suffice to say reality disagrees with you here.

And before we get into a ridiculous semantic argument about the meaning of "a few,"
I will sign off...

CPI is calculated under the assumption that you'll switch to something cheaper as prices rise, so your argument there isn't valid.  Suffice to say, reality disagrees with government stats.

If you spent some time in the grocery store instead of proving you're right on the Internet, you'd know that beer and bacon were up ~50%.  A six pack of decent beer is pushing $9 from $6 a few years ago.    Packages of bacon are smaller AND much more expensive.

waltworks

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Re: Gold - I we still cavemen?
« Reply #84 on: July 25, 2014, 12:19:30 PM »
I buy a lot of beer and at least for a microbrew/snobby 6er, the price is pretty much the same as it was 5 years ago - ie $8-10 depending on ethanol content.

Don't eat bacon so I can't comment there but I'll just say if inflation is out of control I'm not seeing it in my daily life.

-W

milesdividendmd

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Re: Gold - I we still cavemen?
« Reply #85 on: July 25, 2014, 12:30:25 PM »
Right.

No one likes inflation in isolation.

But focusing on inflation alone blinds you to other possibly more destructive factors.

As an example  I would take 4% inflation and full employment over "stable prices" with high unemployment.





milesdividendmd

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Re: Gold - I we still cavemen?
« Reply #86 on: July 25, 2014, 12:36:00 PM »

20% is not 50%, and 14 years is not a few years. So even with your chosen data your claim about a 50 % increase in food prices in the last few years is dramatically wrong. (150% wrong in fact)

Reality is tough when it doesn't fit into your preconceived little box isn't it?

The chart shows a 17 % increase in CPI for food from 2008.

Suffice to say reality disagrees with you here.

And before we get into a ridiculous semantic argument about the meaning of "a few,"
I will sign off...

CPI is calculated under the assumption that you'll switch to something cheaper as prices rise, so your argument there isn't valid.  Suffice to say, reality disagrees with government stats.

If you spent some time in the grocery store instead of proving you're right on the Internet, you'd know that beer and bacon were up ~50%.  A six pack of decent beer is pushing $9 from $6 a few years ago.    Packages of bacon are smaller AND much more expensive.

You're confusing "chained CPI," with  CPI.



ect

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Re: Gold - I we still cavemen?
« Reply #87 on: July 25, 2014, 01:14:43 PM »
As an example  I would take 4% inflation and full employment over "stable prices" with high unemployment.

And if 4% inflation doesn't produce full employment, they'll try 6%. Or 8. Just a matter of getting the dosage correct.

johnhenry

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Re: Gold - I we still cavemen?
« Reply #88 on: July 25, 2014, 01:19:10 PM »
Whether we agree with how our government is currently run or how our money operates, there's no doubt that Modern Monetary Theory (or Modern Monetary Dynamics) provides a macroeconomic framework that accurately portrays the relationship between government, taxes, currency.  Although there are slight variations in central banking operations and regulations from among nations, this framework applies to all sovereign governments that issue their own currency, not just the US.

You may disagree with the way the government handles our business and the monetary policy it implements.  But that warrants changing government direction by exercising the political power you have, not advocating a return to a monetary system tied to finite resources like gold or silver. 

If you believe in the need for a government at all, then you should be able to realize the need for the government to issue it's own currency.  Without that ability, it cannot serve the public purpose without catering to the demands of those who already have "money".  In a nutshell, either you believe there is a need for a government to serve the public interest or you don't.  If you do believe that government is necessary, then you either believe that it should be granted the right to create/issue it's own money (as ours was via the constitution), or you believe that money is somehow a natural resource and to use money to do it's work, government must borrow it or otherwise obtain it from those who control that resource.  If you believe that government can best serve the public good by issuing money that it controls, you understand there is a balancing act between provisioning private resources for the public good (the very description of government purpose), and maintaining a currency that serves as a reliable store of value for those who choose to save.

These broad principles (from this site: http://bilbo.economicoutlook.net/blog/?p=25961) attempt to convey why citizens should not be alarmed by a government that can "print as much money as it needs".  Those who agree with these principles recognize that government is necessary, that it's purpose is to serve the public good, and that it can best (only) serve that purpose if it has the power to issue money.
 
1. The Government is Us!

2. The government is our agent and like all agents we cede resources and discretion to it because we trust that it can create benefits for all of us that each on of us individually cannot achieve. We understand scale.

3. Governments invest in our immediate well-being by providing essential services without the need for profit.

4. Governments invest in the next generation’s well-being through building productive infrastructure that delvers services for decades.

5. We empower governments with unique characteristics so that it can pursue our interests without the constraints we face ourselves.

6. We understand that a deficit for us means we have to find funds to cover it, whereas a deficit for our agent, the currency-issuing government means it is funding our spending and saving choices.

7. A government deficit enhances our freedom because it boosts our income and allows us more options.

milesdividendmd

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Gold - I we still cavemen?
« Reply #89 on: July 25, 2014, 01:19:15 PM »
"And if 4% inflation doesn't produce full employment, they'll try 6%. Or 8. Just a matter of getting the dosage correct."


But for you it appears that 0% inflation is the only metric that matters.

I'll gladly take the nuanced policy of Yellin, Bernanke, Krugman et all when it comes to macroeconomic analysis, over the simplistic prescriptions of the gold fetishists.

For one thing they are better at predicting outcomes.
« Last Edit: July 25, 2014, 01:22:46 PM by milesdividendmd »

ect

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Re: Gold - I we still cavemen?
« Reply #90 on: July 25, 2014, 01:39:50 PM »
I'll gladly take the nuanced policy of Yellin, Bernanke, Krugman et all when it comes to macroeconomic analysis, over the simplistic prescriptions of the gold fetishists.

For one thing they are better at predicting outcomes.

We're probably slipping too far into politics here, so I'll counter by simply recommending three alternative sources of analysis: Ron Paul, Peter Schiff, Henry Hazlitt.

waltworks

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Re: Gold - I we still cavemen?
« Reply #91 on: July 25, 2014, 02:04:11 PM »
Inflation = feature, not bug. You don't want to live in a 0% inflation (or worse, deflation) world. This is one of the things that baffles me about gold standard (and now bitcoin) people - we know very well what happens with deflation. It's very, very bad and makes everyone poorer in the end. There's literally no controversy about that. So why would you advocate for a monetary system with deflation built in?

If you want to debate the *environmental* consequences of consumption/growth oriented policies such as targeted inflation levels, that's another debate. If you just want to talk about money, though, there's no controversy - inflation is a good thing within reason.

-W

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Re: Gold - I we still cavemen?
« Reply #92 on: July 25, 2014, 02:18:37 PM »
Quote
But for you it appears that 0% inflation is the only metric that matters.

+1.  There are some intelligent members on this forum, and it can be expected that most are net savers.  I guess I shouldn't have been so surprised to see that so many are hung up on wishing for a monetary policy that targets 0% inflation since that would preserve the wealth they have accumulated.

I'd much rather live in a world where I'm forced to chase enough money to combat a low, constant rate of inflation, than one focused on preserving the wealth I already have.  As walt points out, it's deflation that can set us all back in real terms.

I understand that I can't pay my taxes each year unless my government spends something into existence that I can get my hands on. I realize that it's not "my money" but "our money" that I'm playing with (and using to pay my tax).  It's hard to believe that some (probably because they have managed to save) are naive enough to think that their taxes are something being taken from them instead of something they are giving part of back.


ect

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Re: Gold - I we still cavemen?
« Reply #93 on: July 25, 2014, 02:35:12 PM »
No need to quote, I disagree with everyone, lol.

I'll refer you to chapter 22 ("The Mirage of Inflation") of Henry Hazlitt's brilliant "Economics in One Lesson," freely available as a PDF online.

But let me give you the key quote from chapter 1:

"The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

In a nutshell, that's the problem with mainstream economic analysis. It trumpets obvious benefits, while ignoring the ... bad stuff. (I need a thesaurus.)

waltworks

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Re: Gold - I we still cavemen?
« Reply #94 on: July 25, 2014, 02:48:06 PM »
Why don't you provide us the anti-inflation argument in a nutshell? I'd love to read a pro-deflation or zero-inflation essay that makes any sense at all but I've never come across one. Economies depend on exchange of real goods/services, and when the medium of exchange itself is gaining value, nobody wants to use it for exchange: economy collapses.

I mean, it's happened in the real world. http://en.wikipedia.org/wiki/Deflation#Effects

-W

No need to quote, I disagree with everyone, lol.

I'll refer you to chapter 22 ("The Mirage of Inflation") of Henry Hazlitt's brilliant "Economics in One Lesson," freely available as a PDF online.

But let me give you the key quote from chapter 1:

"The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

In a nutshell, that's the problem with mainstream economic analysis. It trumpets obvious benefits, while ignoring the ... bad stuff. (I need a thesaurus.)

ect

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Re: Gold - I we still cavemen?
« Reply #95 on: July 25, 2014, 03:03:44 PM »
Why don't you provide us the anti-inflation argument in a nutshell?

That could be a problem because I don't comprehend the arguments in favor of inflation. Clearly it benefits particular groups depending on how it's implemented, but I don't see the broad benefit. It's a gimmick.

But I guess I would point you to the USA's developmental period. Here's a long-term CPI chart (figure 1):

http://www.ecominoes.com/2013/01/the-definitive-inflation-chart.html

You can see that prices were stable to negative for the period of over a century before the Fed.

And here's a GNP chart:

http://en.wikipedia.org/wiki/Economic_history_of_the_United_States#mediaviewer/File:US-GNP-per-capita-1869-1918.png

I'm looking for data on the entire 19th century, but it seems to have been a period of strong economic growth from a low level, no inflation required.

johnhenry

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Re: Gold - I we still cavemen?
« Reply #96 on: July 25, 2014, 03:18:55 PM »
No need to quote, I disagree with everyone, lol.

I'll refer you to chapter 22 ("The Mirage of Inflation") of Henry Hazlitt's brilliant "Economics in One Lesson," freely available as a PDF online.

But let me give you the key quote from chapter 1:

"The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups."

In a nutshell, that's the problem with mainstream economic analysis. It trumpets obvious benefits, while ignoring the ... bad stuff. (I need a thesaurus.)


The problem with mainstream economic analysis is that it obfuscates the real political discussions that could be taking place by makings it's arguments within a framework that doesn't represent reality.  So much of the early thinking in economics (Marx, Keynes, Hayek) was done by those living in and explaining economics in a gold-standard world (it was all they knew).  Mainstream economists have been educated in that tradition, which could be described as valid and accurate for it's time.  But the media, the public, and even many professional and academic economists have yet to realize the complete paradigm shift that occurred when the gold standard was abandoned.  Instead of letting go of their classical education or at least viewing it from this side of the paradigm shift, they jump back and forth, not realizing that the old gold-standard framework is no longer valid.

Here are some of the common propositions by mainstream economics that just don't reflect reality.  Alongside are the realities.


Mainstream macroeconomics                                      Modern Monetary Theory
Budget deficits are bad                                              Budget deficits are neither good nor bad and are required where the spending intentions of the   
                                                                                  non-government sector are insufficient to ensure full utilisation of available productive resources.

Budget surpluses are good                                      Budget surpluses are neither good nor bad and may be harmful in some circumstances if they involve a drag 
                                                                                  on growth in situations where there are idle resources.

Budget surpluses contribute to national saving     There is no sense to the concept that a currency-issuing government saves in its own currency. Saving is an
                                                                                 act of foregoing current spending to enhance future spending possibilities and applies to a financially-
                                                                                 constrained non-government entity. The government never needs prior funds in order to spend and thus
                                                                                 never needs to “save”.

Budget should be balanced over the business cycle    Budget should be allowed to adjust to the level of net spending required to achieve and sustain full
                                                                                        employment given the spending decisions of the non-government sector, irrespective of the state of the
                                                                                        business cycle.

Budget deficits drive up interest rates
because they compete for scarce private saving           Private saving is not finite and is related to income. Spending always brings forth its own saving because
                                                                                       saving rises and falls with income movements, which are directly related to movements in spending.

Bond markets determine funding costs of government    Central bank sets interest rate and can control any segment of the yield curve it chooses. The costs of
                                                                                        government spending are the real resources that are utilised in any particular public program.

Budget deficits mean higher taxes in the future            Budget deficits never need to be paid back. Every generation can freely choose the level of taxation it
                                                                                        pays.

The government will out of fiscal space (money)            Fiscal space is more accurately defined as the available real goods and services available for sale in the
                                                                                        currency of issue. The currency-issuing government can always purchase whatever is for sale in its own
                                                                                        currency. Such a government can never run out of its own currency.

Budget deficits equals big government                            Budget deficits may reflect large or small government. Even small governments will need to run
                                                                                        continuous deficits if there is a desire of the non-government sector to save overall and the policy aim is 
                                                                                        to maintain full employment levels of national income.

Government spending is inflationary                            All spending (private or public) carries an inflation risk. Government spending is not inflationary while
                                                                                        ever real resources are idle (ie. There is unemployment). All spending is inflationary if it drives nominal
                                                                                        aggregate demand faster than the real capacity of the economy to absorb it.

Issuing bonds to the private sector
reduces the inflation risk of deficits                                     There is no difference in the inflation risk attached to a particular level of net public spending when the
                                                                                         government matches its deficit $-for-$ with bond issuance relative to a situation where it issues no
                                                                                         debt. The inflation risk is embodied in the spending rather than the monetary arrangements that are
                                                                                         associated with it (bond-issuance or not).


Intergenerational burdens are linked to inherited
budget deficits in the form of debt that have to be paid back.    Intergenerational burdens are linked to the availability of real resources. For example, a
                                                                                                        generation that exhausts a non-renewable resource imposes a burden on the next
                                                                                                         generation. A future generation cannot transfer real resources back in time.

Unemployment is used to control inflation rate    Employment is used to control inflation rate

Sovereign issuer of currency is at risk of default    Sovereign issuer of currency is never at risk of default. The issuer of a currency cannot always meet any
                                                                                 liabilities it incurs in that currency.

Taxpayer money                                                    Public currency. The taxpayer does not fund anything. Taxes are a device to free up real resources so our
                                                                                agent, the government can instigate a socio-economy program for our collective benefit.
Humans make rational decisions
based on self-interest                                             Humans are complex and rarely predictable, reason and emotion are inseparable.


If you understand all that and still advocate a monetary policy that targets 0% inflation..... I'm not sure what else can be said.

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Re: Gold - I we still cavemen?
« Reply #97 on: July 25, 2014, 03:26:16 PM »
If you understand all that and still advocate a monetary policy that targets 0% inflation..... I'm not sure what else can be said.

To be honest, I don't advocate any monetary policy. I would convert the Federal Reserve into a petting zoo.

waltworks

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Re: Gold - I we still cavemen?
« Reply #98 on: July 25, 2014, 03:29:10 PM »
I just explained it - inflation encourages everyone who participates in the economy to participate actively by producing goods or services or at least investing in productive companies. In a deflationary situation, the incentive is reversed - I want to sit on my hoard of gold coins and starve as they appreciate, since everyone else is likewise sitting on their pile.

-W

waltworks

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Re: Gold - I we still cavemen?
« Reply #99 on: July 25, 2014, 03:29:58 PM »
Wow. That's not saying you are pro/anti inflation. That's saying you want to pull the rudder off the ship! Fun times.

-W

If you understand all that and still advocate a monetary policy that targets 0% inflation..... I'm not sure what else can be said.

To be honest, I don't advocate any monetary policy. I would convert the Federal Reserve into a petting zoo.