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Jati
Joined: 13 Dec 2008
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 Posted: Wed Feb 04, 2009 11:38 pm Post subject: |
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| mises wrote: |
Yes. The expansion of the money supply should mirror the expansion in GDP as this behaves as a means of stimulating aggregate demand, without a significant inflation risk.
However, if you expand beyond GDP (as we have done... many factors beyond GDP) then investments become inefficient and markets distorted.
In the past decade, government essentially lost control over the monetary system because of limitless leverage/gearing in the financial system. For example, Bank of America in June listed their leverage rate at 33% (+/- 1%, can't remember) but research by Naill Ferguson of Harvard puts their leverage (with so-called 'off balance sheet assets') at 132. Citi is at 88/1 gearing/leverage. This is obscene.
This is why we've had this disgusting asset bubble.
Our financial system is based on debt and backed by nothing. It is a confidence game, and gold serves to add to the confidence. With confidence essentially zero right now, I wouldn't write off a future gold standard. |
Yes, your explanation makes sense: the fact that the USA has grown its money supply at a rate beyond the GDP growth rate has lead to the asset bubble.
Sigh...unfortunately I am also a victim of this asset bubble in that I own some shares of a bank that leveraged up on junk.
I watched some of Paul Volcker's testimony on the telly last night, in his address to some congressional committee. Of course, he said that the US should have raised interest rates several years back rather than lowering interest rates. This is somewhat of a rebuke of his successor's policy (Greenspan).
Higher interest rates (the real solution, I suppose) leads to lower economic growth and, thus, higher unemployment. And that is really the crux of the issue: politicians cannot stomach running for re-election in districts in which many of their constituents are out of work.
And still the US$ is the reserve currency, i.e., the currency of choice around the world, and I don't see any other currency on the horizon that will replace it. And gold is still problematic for several reasons. I mean, it has a specific gravity of 19.3: who wants to carry a pocket of it around all day?
And......
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Feb 05, 2009 6:22 am Post subject: |
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I have no ideological love for a gold standard. I merely want a stable monetary system that doesn't blow up the economy. And I loath the transfer of capital from savers to money changers (from me to the bankster bastards that ruined the global economy).
High interest rates aren't necessarily bad for growth. The growth in a high interest, high savings economy would likely be a tad slower but it would likely also be more consistent and stable. High interest makes saving more profitable which increases the capital stock of a country (the domestic source for investment). We can invest borrowed money or we can invest saved money (ok, we can invest some borrowed and some saved, but I'm speaking in generalizations). |
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Dude Ranch
Joined: 04 Nov 2008
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| Posted: Thu Feb 05, 2009 8:32 am Post subject: |
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| I really wish Mr. Obama would read this thread |
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Jati
Joined: 13 Dec 2008
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| Posted: Thu Feb 05, 2009 7:41 pm Post subject: |
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| mises wrote: |
I have no ideological love for a gold standard. I merely want a stable monetary system that doesn't blow up the economy. And I loath the transfer of capital from savers to money changers (from me to the bankster bastards that ruined the global economy).
High interest rates aren't necessarily bad for growth. The growth in a high interest, high savings economy would likely be a tad slower but it would likely also be more consistent and stable. High interest makes saving more profitable which increases the capital stock of a country (the domestic source for investment). We can invest borrowed money or we can invest saved money (ok, we can invest some borrowed and some saved, but I'm speaking in generalizations). |
My sentiments exactly.
With a negative (or near negative) savings rate, the USA is basically borrowing money from other countries for capital investment. This is scary. If the US$ wasn't the reserve currency at this time, then it would have already gone down in value significantly. But it has held up so far.
For example, after the Malaysian ringgit was loosened from it's 3.82 peg to the US$, it strengthened all the way to 3.15 last spring, but has since given back ground to around 3.62 now. This is one reason I am fairly confident that the US$ will hold up for a while longer at least. The long-term trend against the Euro switched last summer and now the Euro is weakening.
I have hope that Mr. Obama will make a difference in the attitude of Americans RE saving. Enough of these "financial engineers" who produced not much more than a MESS. |
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OneWayTraffic
Joined: 14 Mar 2005
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| Posted: Sat Feb 07, 2009 9:14 am Post subject: |
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| mole wrote: |
| OneWayTraffic wrote: |
Except gold doesn't have any basic value and the price is certainly open to fluctuation. What would happen, for example, should we discover a mountain of the stuff in an asteroid somewhere? This is what happened when Columbus discovered America.
Gold's value is in it's rarity and the faith that it can be exchanged for someting of use. Should we see upheavals of a degree to make money worthless then I'm not sure gold will help much. In that case you'd be better off investing in a farm and guns and bullets. |
You may be confusing two related, but not equal terms; money and fiat currency.
Let us turn in our hymnals to the Intrinsic Value of Gold and Silver. |
Umm from a page called the Silver Stock report, and filled with ads letting me know the dangers of free markets and offering to sell me special silver coins. Sounds like an unbiased source. And the bible quotes isn't going to do much to convince an atheist.
Intrinsic value to me is the value of something divorced from social or cultural values. Gold has a pretty much universal cultural value, and had we enough of it would probably be a pretty good base for a currency. But it has no intrinsic value beyond it's ultility as the best dental filling material available and it's suitability for electronic contact points in circuit boards. Silver has also a value beyond it's strict industrial use.
Iron, oil, steel, land, guns, and so on all have intrinsic value. People from all cultures can see what can be done with them. But gold, just like fiat currency is valuble if and only if people believe it is. |
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OneWayTraffic
Joined: 14 Mar 2005
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| Posted: Sat Feb 07, 2009 9:16 am Post subject: |
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| Dude Ranch wrote: |
| I really wish Mr. Obama would read this thread |
I'm pretty sure that if the best source of economic advice is coming from an ESL forum, we're all frakked.
He's getting his advice direct from the source. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sat Feb 07, 2009 12:30 pm Post subject: |
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| OneWayTraffic wrote: |
| Dude Ranch wrote: |
| I really wish Mr. Obama would read this thread |
I'm pretty sure that if the best source of economic advice is coming from an ESL forum, we're all frakked.
He's getting his advice direct from the source. |
Yeah, he is getting his advice from Lawrence Summers:
http://online.wsj.com/article/SB123396756857259093.html?mod=googlenews_wsj
| Quote: |
| WASHINGTON -- An hour after the release of Friday's grim jobs report, Lawrence Summers was in the Oval Office giving President Barack Obama his daily economic briefing. The chief White House economic adviser told his boss with econometric precision that there was a roughly 80% chance -- "in the low 80s" -- that the $800 billion stimulus bill being revised in the Senate would create as many jobs as Mr. Obama's original proposal. |
Who is this guy?
| Quote: |
| During the California energy crisis of 2000, then-Treasury Secretary Summers teamed with Alan Greenspan and Enron executive Kenneth Lay to lecture California Governor Gray Davis on the causes of the crisis, explaining that the problem was excessive government regulation.[4] Under the advice of Kenneth Lay, Summers urged Davis to relax California's environmental standards in order to reassure the markets. [5] It was later conclusively revealed that Enron traders were the cause of the California electricity crisis.[citation needed] |
http://en.wikipedia.org/wiki/Lawrence_Summers
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In 1998, an obscure federal agency, the Commodity Futures Trading Commission, raised the prospect of regulating the burgeoning market in complex financial instruments, which then had a notional value of $28.7 trillion. Today the notional value is $531.2 trillion, according to the International Swaps and Derivatives Association.
The nation�s leading financial officials � Levitt, Federal Reserve Chairman Alan Greenspan, Secretary of the Treasury Robert Rubin, and his deputy Lawrence Summers � pummeled the proposal, saying it was dangerous to even discuss the idea. Led by Rubin, Levitt and Greenspan, the Clinton White House instead proposed a modest set of reforms. Months later, Clinton Administration officials walked away from their own recommendations, concluding the market could be best managed by the financial industry. |
http://www.propublica.org/feature/former-clinton-official-says-democrats-obama-advisers-share-blame-for-marke
Summers is seriously to blame for this economic shit-storm America is in. Not solely to blame, but he should be hung. And he's got Obama's ear.
Scarily enough, Obama probably would do better to read this this thread. |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Sat Feb 07, 2009 2:55 pm Post subject: |
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| OneWayTraffic wrote: |
Umm from a page called the Silver Stock report, and filled with ads letting me know the dangers of free markets and offering to sell me special silver coins. Sounds like an unbiased source. And the bible quotes isn't going to do much to convince an atheist.
Intrinsic value to me is the value of something divorced from social or cultural values. Gold has a pretty much universal cultural value, and had we enough of it would probably be a pretty good base for a currency. But it has no intrinsic value beyond it's ultility as the best dental filling material available and it's suitability for electronic contact points in circuit boards. Silver has also a value beyond it's strict industrial use.
Iron, oil, steel, land, guns, and so on all have intrinsic value. People from all cultures can see what can be done with them. But gold, just like fiat currency is valuble if and only if people believe it is. |
Are you arguing against me or helping to make my point clearer?
The italicized immediately above is my point. It is a leap of faith of sorts to believe in either.
Which FEELS more realistic? A hunk of gold you can toss around, use as a door stop, or as you say, make loads of dental fillings?
Or a piece of paper or digital cyber byte representing an irredeemable IOU?
I subscribe to Hommel's newsletter, even read his "private" forums, though I'm not at all vocal there like here. 
Here's some Classic Hommel and check the date. He has had a self-proclaimed following of 80,000 subscribers.
But I get rumors that has fallen by half since the later portions of the past year.
There's plenty of anti-Hommel opinion also. Just a sample there, google if interested.
WTF are you talking about when you say Jason warns you of the dangers of free market??
He's the most adamant free marketeer there is, save for maybe Dr. Ron Paul.
I agree. All along, the thing that turns me off most about JH is the religious babble. And I've said so in his forums.
I'm nobody's religious fundamentalist by far. IF I have to claim a religion, I'm going to say Buddhism.
That's based solely on interactions with Koreans IN Korea, and the fact it's so ingrained in the culture.
I said I was preaching. Maybe I was preaching Hommelism, I don't really know.
You just seem to want debate even when there's no opposition.
Odd. |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Tue Feb 24, 2009 1:48 pm Post subject: |
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| "Mr. Ash notes that Stephen Harmston, erstwhile economist at Bannock Consulting, wrote that �across 2,500 years, gold has retained its purchasing power, relative to bread at least� which is seemingly proved when one considers that �It is said that an ounce of gold bought 350 loaves of bread in the time of Nebuchadnezzar, king of Babylon, who died in 562 BC� which is roughly what it buys today, a stretch of 2,500 years, while the dollar, on the other hand, has lost 97% of its buying power since 1913, less than 100 years ago, when the detestable Federal Reserve was given its diabolical unholy control of the nation�s banks and money by a corrupt Congress and allowed by a corrupt Supreme Court." |
http://www.dailyreckoning.com/gold-in-the-art-of-bread-consumption/ |
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Beeyee
Joined: 29 May 2007
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| Posted: Tue Feb 24, 2009 3:55 pm Post subject: |
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| Dude Ranch wrote: |
| I really wish Mr. Obama would read this thread |
He has no control over the monetary system of the USA. That right was signed over to the private bankers in 1913. |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Wed Feb 25, 2009 2:10 am Post subject: |
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I digress. Perhaps there is hope for your beloved dollar.
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| How long can the US government protect the dollar's value by leasing its gold to bullion dealers who sell it, thereby holding down the gold price? Given the incompetence in Washington and on Wall Street, our best hope is that the rest of the world is even less competent and even in deeper trouble. In this event, the US dollar might survive as the least valueless of the world's fiat currencies. |
http://www.gata.org/node/7197 |
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cobright
Joined: 10 Oct 2008
Location: Rochester Hills, MI
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| Posted: Sun Mar 01, 2009 11:23 am Post subject: |
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A nations currency becomes worthless when the government loses the faith of its moneyholders that it is capable of returning something of value for it.
The death knell of a nations monetary system is the withdrawal of foreign investment.
As for the nature of currency, you need to consider the term "intrinsic value" carefully. Gold was valuable, intrinsically, when the demand for it (generally jewelry and religious artifacts) consumed enough of the supply to make it rare. Presently the demand for gold to actually use is unfathomably small compared to the supply. The "intrinsic value" of gold is about the same now as that of a baseball card. |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Sun Mar 01, 2009 12:02 pm Post subject: |
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| cobright wrote: |
A nations currency becomes worthless when the government loses the faith of its moneyholders that it is capable of returning something of value for it.
The death knell of a nations monetary system is the withdrawal of foreign investment.
As for the nature of currency, you need to consider the term "intrinsic value" carefully. Gold was valuable, intrinsically, when the demand for it (generally jewelry and religious artifacts) consumed enough of the supply to make it rare. Presently the demand for gold to actually use is unfathomably small compared to the supply. The "intrinsic value" of gold is about the same now as that of a baseball card. |
The baseball card analogy makes no sense.
It is not fungible. You cannot cut it in half and sell the two parts for half the whole value each.
Gold's primary use IS money. Silver is more fun because it does have industrial use AND is money.
Do you have faith that your beloved dollar will continue to be accepted in exchange for useful things?
Most of us are or have awakened to the reality.
The R3VOLUTION is brewing.
Death knell? How long would you expect China to keep funding America's failing institutions and policies? |
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cobright
Joined: 10 Oct 2008
Location: Rochester Hills, MI
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| Posted: Sun Mar 01, 2009 12:24 pm Post subject: |
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To quote myself:
| Quote: |
| The "intrinsic value" of gold is about the same now as that of a baseball card. |
I was referring to the "intrinsic value" of each product. If you tear a baseball card in half it has the same intrinsic value as before, kindling. Same thing as gold. The only reason my Honus Wagner rookie is worth anything is because people believe it to be rare and valuable. Same as gold, the difference is, honus really is rare and gold is absurdly plentiful compared to it's usefulness.
In an economic collapse, how many potatoes will your $1000 ounce of gold get you? First you would have to find someone who actually needs gold to survive as much as you need potatoes. You think the $$ drops in value fast, throw the stability of a government out the window and gold will drop in value just as quick. |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Sun Mar 01, 2009 12:34 pm Post subject: |
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Ok, but can we use bread instead of potatoes, since I already addressed that issue above?
I'm not claiming that gold is utilitarian commodity. Someone did bring up that it's useful in dental applications, though.
It's the original most basic medium of exchange and store of value.
Let a government fail. Gold does not depend on said government to dictate its value. As in worthless fiat currency. |
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