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Pluto
Joined: 19 Dec 2006
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 Posted: Mon Mar 24, 2008 4:16 pm Post subject: |
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| huffdaddy wrote: |
According to Austrian economics. Gee, isn't that like saying if you study Christianity you will discover that all animals were created by God?
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Are you you equating the Austrian Fantasy of Economics to dogma? Where would you get such an idea  |
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ernie
Joined: 05 Aug 2006
Location: asdfghjk
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| Posted: Mon Mar 24, 2008 4:36 pm Post subject: |
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"by stable I mean less deviation from the trend"
sorry, but that's not the kind of stability we're talking about... we mean the ability to buy item X for amount Y now and the ability to buy the same item for the same price at a later date...
what you're doing seems to me like looking at 1 brick building and 7 other straw buildings and concluding that according to standard deviation, the brick building is the LEAST stable...
stability means the ability to retain value over time... the question we should be asking is 'WHY do fiat currencies lose their value?'.... WHO is profiting from the debasement of the world currencies? |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Mon Mar 24, 2008 4:47 pm Post subject: |
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| ernie wrote: |
"by stable I mean less deviation from the trend"
sorry, but that's not the kind of stability we're talking about... we mean the ability to buy item X for amount Y now and the ability to buy the same item for the same price at a later date... |
Umm, no. We were talking about business cycles. Which means deviations from the trend. Periods of expansion and recession. If a 100% gold standard is more volatile for the economy, what's the use of long term value retention?
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| in other words, if you put $100 USD and $100 worth of gold in a vault, 10 years later, what will fetch a higher price on the market? |
Considering that gold is in a bubble, I'm guessing the $100 USD will be more valuable. Don't forget that the price of gold declined during both the 80s and 90s. Besides, only an idiot leaves cash in the vault. I'll take $100 worth of Qs over $100 worth of gold almost any day. |
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ernie
Joined: 05 Aug 2006
Location: asdfghjk
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| Posted: Mon Mar 24, 2008 5:40 pm Post subject: |
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| the problem is that you're talking about economies, and i'm talking about currencies... my hypothetical money in the vault scenario is meant to illustrate inflation... of course, a smart person wouldn't put money in a vault, for the very reason that inflation eats away savings! one of the functions of interest is to counter the effects of inflation... |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Mon Mar 24, 2008 6:58 pm Post subject: |
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| ernie wrote: |
| the problem is that you're talking about economies, and i'm talking about currencies... |
Go back to the previous page in this thread where I responded to this:
| ontheway wrote: |
| The 100% standard ends inflation completely. It ends the business cycle. |
That's what we were discussing. I realize it's more convenient for you to delve off into discussing the role of inflation in gradually devaluing fiat currency. But frankly, I've already conceded that money will slowly lose its real value. Which is why smart people get annual cost of living raises. And why smart people invest their money in real estate or the stock market.
I'm not even sure why you're more concerned about currencies than the economy as a whole. Isn't that akin to worrying about the horseshoe nail?
On to the original point - I'm still looking for empirical evidence that a 100% gold standard ends inflation and the business cycle. Why not choose a country in the last 200 years that was under the gold standard and we'll see if there is data to support the hypothesis. I know inflation data for Britain is available going back to 1750. Are there any years since then that you would consider them to have been on the gold standard? My pretty educated guess says that they will have had inflation, deflation, and business cycles during that time period. |
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ernie
Joined: 05 Aug 2006
Location: asdfghjk
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| Posted: Mon Mar 24, 2008 7:47 pm Post subject: |
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i never said that a gold standard will end business cycles, rather than they will end the manipulation of business cycles by profiteering banksters... this will enable the market to decide interests rates, and will allow investors to make informed decisions rather than being influenced by elite interests... i believe this system will be more stable than what we currently have in place, but it is NOT 100% infallible!
i AM concerned about the economy as a whole, and i believe that one step towards greater stability is either 1) a gold standard or 2) honest people in charge of the money supply... and unless the Fed gives up its counterfeiting operations, i believe a gold standard currency is a more likely outcome... it's more a matter of necessity over preference, IMO... |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Mon Mar 24, 2008 9:05 pm Post subject: |
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| ernie wrote: |
| i never said that a gold standard will end business cycles, |
I never said you did. But that was what I responded to. And you seem to be arguing that the gold standard will produce less extreme business cycles. Do you have any evidence that that is the case?
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| rather than they will end the manipulation of business cycles by profiteering banksters... this will enable the market to decide interests rates, and will allow investors to make informed decisions rather than being influenced by elite interests... believe this system will be more stable than what we currently have in place, but it is NOT 100% infallible! |
Do you have any empirical evidence that such a system is more stable? And by stable, I still mean with less standard deviation.
Look at the recent crisis. Would it have been better for the market to have dealt with higher interest rates and reduced liquidity? Or were the lowered Fed rates and injections in liquidity beneficial?
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| i AM concerned about the economy as a whole, and i believe that one step towards greater stability is either 1) a gold standard or 2) honest people in charge of the money supply... and unless the Fed gives up its counterfeiting operations, i believe a gold standard currency is a more likely outcome... it's more a matter of necessity over preference, IMO... |
Do you have any evidence whatsoever that the gold standard produces greater stability, i.e. less deviation, smaller business cycles, etc? |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Tue Mar 25, 2008 8:12 am Post subject: |
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| huffdaddy wrote: |
| ernie wrote: |
| the problem with economics is that is a SOCIAL science, so absolute scientific 'proof' is impossible and we must use history as a guide... |
Yes, just use historic data to show that countries under the gold standard have more stable economies than countries not on the gold standard. That's all I'm asking.
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| here is a graph to show the tendency for gold to retain value and fiat currencies to lose value... note that the y-axis is EXPONENTIAL, not linear! |
You're confusing slope with standard deviation. I've never disputed that fiat currencies have steady inflation (i.e. slope). I'm looking for evidence that countries on the gold standard are more stable (i.e. standard deviation).
Looking at the graph you linked to, my initial guess is that the dollar is more stable than gold. |
If you actually look at the chart, then you will note the obvious fact that the chart shows the dollars, other currencies and gold measured in dollars. An inflation estimator is then used to determine the loss in value of the dollar versus gold and the other currencies.
Since the dollar is the standard used to measure, the line you see does not in any way indicate stability. The value of your yardstick will always remain constant as you measure other things with it.
If it weren't for the 93% loss in the value of the dollar shown in the chart, the dollar would be a flat line.
Imagine that you use a yardstick to measure a group of growing children and then plot the results over time, and you decide to include a line for the yardstick. It would be constant.
You cannot measure nor get a feel for stability from the chart shown. It only shows that gold has maintained its value near 100% and the dollar and other fiat currencies have lost 93% to 100% of their values excepting the Swiss Franc which stayed closer to the gold standard and ended its link later and has only lost 80%. |
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ontheway
Joined: 24 Aug 2005
Location: Somewhere under the rainbow...
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| Posted: Tue Mar 25, 2008 8:30 am Post subject: |
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http://www.gold-eagle.com/editorials_04/images/greene032104.gif
When looking for stability, you have to measure against something other than the items being compared.
The volatility you see in gold prices is not the volatility of gold, but actually the volatility of the dollar. We are using the wrong yardstick, and people who can't read charts like the one linked are unable to discern the truth.
In my previous post, it would be as if you used a growing child to measure the length of a yardstick: "My god, the yardstick is shrinking!" according to the Federal Reserve and the doofus-cum-economists who defend it.
This dogmatic loyalty to a socialistic monetary system is no different than when the religious authority insisted that we measure the movement of the planets and the sun as if the earth were the center of the universe. Many convoluted systems were devised to allow calculation of the movements and predict their courses over time. These were all false of course.
Now we have the loyal religious followers of the Federal Reserve who believe that the Fed must be the best way, since it was created by the government.
But, the Fed has failed. The dollar has lost 97% of its value AND it is more unstable than a gold backed currency.
There is no way to measure this during an era when we didn't have a gold backed currency. But, we can go back to those periods in history when we were on a 100% gold standard. They were all of short duration, as the government and greedy individuals at various times thought they were smarter or more powerful than the laws of nature and economics.
However, we can see that during the times we were on a 100% gold standard we had strong economic growth, stable prices and a stable economy. We can also see that EVERY recession was preceeded by a period of inflation when we were off the standard.
Those are the historical facts. |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Tue Mar 25, 2008 2:33 pm Post subject: |
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| ontheway wrote: |
| This dogmatic loyalty to a socialistic monetary system is no different than when the religious authority insisted that we measure the movement of the planets and the sun as if the earth were the center of the universe. |
I'm really confused. One minute the monetary system is for the benefit of the evil financiers and bankers. Then the next minute it's socialist. Make up your mind. Which is it? Or is it just an effort to appeal to both ends of the nut house?
| Quote: |
| However, we can see that during the times we were on a 100% gold standard we had strong economic growth, stable prices and a stable economy. We can also see that EVERY recession was preceeded by a period of inflation when we were off the standard. |
cite?
I'm still waiting for empirical evidence that a gold standard economy is more stable, i.e. less volatile, than a non-gold standard economy. That there is no inflation and no business cycle.
Here's another challenge - compare US economic volatility pre-Fed and post-Fed. Which one has more volatility? |
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ernie
Joined: 05 Aug 2006
Location: asdfghjk
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| Posted: Tue Mar 25, 2008 5:40 pm Post subject: |
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there is no confusion in saying that the socialist monetary system is controlled by elite interests, including elite bankers... classic false dilemma fallacy...
part of the difficulty is that it is not clear whether the shift from gold-backed to fiat currency is the cause or the effect of instability... my belief is that the shift from a gold-backed currency to a fiat system is a SIGN of instability, rather than a specific cause or effect of it...
i don't believe that the shift to a gold-standard will eliminate business cycles, but i do think it will reduce their effect by allowing interest rates to be determined naturally by market forces rather than government decree...
one of the typical scenarios is when a ruler gets involved in a war (or series of wars) that (s)he can't finance, so (s)he starts printing money (not backed by gold) as a temporary measure... when it becomes apparent that the ruler's debt (debasing the money supply means that, in essence, the ruler is borrowing money from money holders, i.e. the public) will not be paid back, the fiat becomes permanent... some examples:
20BC - Rome
910AD - China
1500s - Spain
1716 - France
1791 - France (again!)
1862 - USA
1923 - Germany
1932 - Argentina
1934 - 1971 - USA
Last edited by ernie on Tue Mar 25, 2008 6:33 pm; edited 1 time in total |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Tue Mar 25, 2008 6:02 pm Post subject: |
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| ernie wrote: |
| there is no confusion in saying that the socialist monetary system is controlled by elite interests, including elite bankers... classic false dilemma fallacy... |
Elitism...socialism. Still trying to figure out how these two diametrically opposed ideas co-exist. Of course neither group is interested in economic volatility. If that is their goal and their accomplishment, good work to them.
| Quote: |
| part of the difficulty is that it is not clear whether the shift from gold-backed to fiat currency is the cause or the effect of instability... my belief is that the shift from a gold-backed currency to a fiat system is a SIGN of instability, rather than a specific cause or effect of it... |
I'd say effect, but it may just be a difference in semantics.
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| i don't believe that the shift to a gold-standard will eliminate business cycles, but i do think it will reduce their effect by allowing interest rates to be determined naturally by market forces rather than government decree... |
Any empirical data to back that belief? The US and world economies have appeared to become more stable, i.e. less volatile, with the elimination of the gold standard and adoption of central banks. |
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ernie
Joined: 05 Aug 2006
Location: asdfghjk
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| Posted: Tue Mar 25, 2008 6:45 pm Post subject: |
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how are elitism and socialism NOT compatible? germany in the 1930s was run by a group of elites under the banner of 'national socialism'... the USSR? ditto... isn't one of the main critiques of socialism that, in practice, it is really just a facade for elite control?
the idea that interest rates should be determined by market forces is more of a philosophical argument for me... if we believe in capitalism, then shouldn't the very institution that capital depends upon (i.e. MONEY) be run by the market?
don't forget that appearances can be deceiving - often great empires appear strong just before their demise! |
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igotthisguitar
Joined: 08 Apr 2003
Location: South Korea (Permanent Vacation)
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| Posted: Tue Mar 25, 2008 8:20 pm Post subject: |
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| ernie wrote: |
how are elitism and socialism NOT compatible?
germany in the 1930s was run by a group of elites under the banner of 'national socialism'
... the USSR? ditto...
isn't one of the main critiques of socialism that, in practice, it is really just a facade for elite control? |
Good for you Ernie.
Yes, thanks for pointing out the ovbious.
Science & statistics play a key role these days as well ( NEW RELIGION ).
You've heard of the UN haven't you?
Ever read George Orwell's ANIMAL FARM? |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Tue Mar 25, 2008 8:54 pm Post subject: |
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| ernie wrote: |
| how are elitism and socialism NOT compatible? |
Elitism is about putting the wealth into the hands of a few. Socialism is about spreading the wealth to all. These are two polar opposites. That some people use the banner of socialism to promote elitism doesn't really change the true meaning of socialism. If you're going to claim that fiat currency is elitism guised as socialism then just say it's elitism. Don't try to play both ends of the spectrum by calling it elitism and socialism. Then be prepared to back your claims with empirical evidence.
| Quote: |
| the idea that interest rates should be determined by market forces is more of a philosophical argument for me... if we believe in capitalism, then shouldn't the very institution that capital depends upon (i.e. MONEY) be run by the market? |
Philosophical, eh? I'd rather base my decisions on economics. Most interest rates are determined by market forces. But often, the market needs exactly the opposite of what the market is doing.
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| don't forget that appearances can be deceiving - often great empires appear strong just before their demise! |
I'm not sure what that's suppose to mean. |
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