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cobright
Joined: 10 Oct 2008
Location: Rochester Hills, MI
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 Posted: Sun Mar 01, 2009 12:44 pm Post subject: |
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| Gold does require demand like anything else to be valuable. Incidentally, grain was the first currency. A miller would take 3% of the grain given in exchange for milling the farmers crop. |
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Cheonmunka
Joined: 04 Jun 2004
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| Posted: Sun Mar 01, 2009 12:58 pm Post subject: |
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As for me, if it gets to a point where money becomes worthless I'd rather have some soil of my own on which to mini-farm and produce food rather than have a few gold ingots weighing down my pant pockets.
Hence why I bought a house with land on it. Damned thing's nearly paid for itself, too. (People don't pay you to hold your gold for you but they'll pay to rent your land.
And when you go back and produce food on it, you'll get paid in gold, you'll have somewhere to store it, and still own the soil to produce more.
I think you guys are barking up the wrong investment path. Land is the only thing worth having. |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Sun Mar 01, 2009 1:03 pm Post subject: |
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Grain isn't a store of value. It rots.
Land doesn't rot. It can be divided. Certainly a priority of mine to get me a nice spread that's mini farm and ranchable.
I'll just have a small hoard of PM buried there.  |
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cobright
Joined: 10 Oct 2008
Location: Rochester Hills, MI
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| Posted: Sun Mar 01, 2009 1:36 pm Post subject: |
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Land is a great investment. Long term anyway. And even if the market completely tanks you still have land that you can live or grow on.
These days people want to know where to put their money to keep it safe. Honestly I think realestate isn't a bad choice if you can buy it up outright. If you have to borrow to aquire it then you're gonna get hit.
contrary to precious metals, land is at a real low in market prices.
It's a good transition for this thread. What is the nature of money? It is anything someone will settle a bill for. |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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| Posted: Sun Mar 01, 2009 6:13 pm Post subject: |
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| Jati wrote: |
Basically, unless the digging of gold keeps pace with the growth of the world economy, there will be inflation in the price of goods and services whether or not those are priced in terms of gold, silver or fiat money (paper currency).
For example, year after year the number of people entering the work force increases. In order to pay those additional salaries, along with the increases in salaries of other workers, the amount of currency (again: gold, silver or fiat) needs to increase. If it doesn't, what happens? More salaries (demand for wages goes up), same amount of currency (supply stays the same, we call this inelastic supply). Thus, price INFLATION. |
Your logic is a bit flawed here. If we increase the workers, but the money supply doesn't change, that would lead to DEFLATION of prices, as you are spreading the same amount of dollars around a larger pool of labor. What you would have is APPRECIATION in the value of the currency, because one unit of currency would have to represent more and more value.
Example - If we have 1 million dollars and one million workers, and they all work equally, we pay them all 1 dollar. That 1 dollar is enough to pay for everything the need, i.e. food, clothing, shelter, etc.
Now, lets assume that next year we have 2 million workers, but the money supply is still the 1 million dollars. Now we only pay the workers 50 cents, but they are still producing and consuming the same amount. Now, because they only have half the money, the can only buy have the things, the economy falls into recession and then deflation of prices sets in (because we cannot change the money supply, so the ONLY way to return to equilibrium in this situation is to deflate prices or murder half of our labor force) and we return to equilibrium where 50 cents now equals one dollar last year. |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Sun Mar 01, 2009 6:44 pm Post subject: |
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| nathanrutledge wrote: |
Now, lets assume that next year we have 2 million workers, but the money supply is still the 1 million dollars. Now we only pay the workers 50 cents, but they are still producing and consuming the same amount. Now, because they only have half the money, the can only buy have the things, the economy falls into recession and then deflation of prices sets in (because we cannot change the money supply, so the ONLY way to return to equilibrium in this situation is to deflate prices or murder half of our labor force) and we return to equilibrium where 50 cents now equals one dollar last year. |
Why would 2 million people produce and consume the same as 1 million people? |
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sjrm
Joined: 27 Jul 2005
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| Posted: Sun Mar 01, 2009 9:14 pm Post subject: |
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| nathanrutledge wrote: |
| Jati wrote: |
Basically, unless the digging of gold keeps pace with the growth of the world economy, there will be inflation in the price of goods and services whether or not those are priced in terms of gold, silver or fiat money (paper currency).
For example, year after year the number of people entering the work force increases. In order to pay those additional salaries, along with the increases in salaries of other workers, the amount of currency (again: gold, silver or fiat) needs to increase. If it doesn't, what happens? More salaries (demand for wages goes up), same amount of currency (supply stays the same, we call this inelastic supply). Thus, price INFLATION. |
Your logic is a bit flawed here. If we increase the workers, but the money supply doesn't change, that would lead to DEFLATION of prices, as you are spreading the same amount of dollars around a larger pool of labor. What you would have is APPRECIATION in the value of the currency, because one unit of currency would have to represent more and more value.
Example - If we have 1 million dollars and one million workers, and they all work equally, we pay them all 1 dollar. That 1 dollar is enough to pay for everything the need, i.e. food, clothing, shelter, etc.
Now, lets assume that next year we have 2 million workers, but the money supply is still the 1 million dollars. Now we only pay the workers 50 cents, but they are still producing and consuming the same amount. Now, because they only have half the money, the can only buy have the things, the economy falls into recession and then deflation of prices sets in (because we cannot change the money supply, so the ONLY way to return to equilibrium in this situation is to deflate prices or murder half of our labor force) and we return to equilibrium where 50 cents now equals one dollar last year. |
Actually, deflation is when stores, etc. drop prices in order to get people to buy, but people keep hold of their money, hoping and/or expecting prices to drop even more, so some stores do so. Then, this causes an even worse situation because not only are stores not making as much money, factories are not producing as many products because stores aren't buying as much from them because consumers aren't buying as much from them. That's where even more layoffs come, and even less money to be spent, which furthers a recession, into possibly a depression. This is deflation, and why it is a real problem. |
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cobright
Joined: 10 Oct 2008
Location: Rochester Hills, MI
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| Posted: Sun Mar 01, 2009 9:24 pm Post subject: |
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Generally speaking, the physical amount of currency (even commodity backed) doesn't affect monetary inflation. Because such a small portion is needed for labor and intranational trade. I think that proposing a situation where the workforce doubles in pretty much academic.
The main hinderence of a pegged (yes I'm borrowing economic terms from another genre) dollar is that it stifles growth horribly. Taking us off the gold standard allowed for gigantic leaps in GDP. The financial system was allowed to grow the economy on pace with actual productivity and the monetary system could grow or shrink the money supply as needed in relation to free-market pressure.
There have been some dips along the way but compare the quality of life we have access to now to that of our grandparents.
Addendum:
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| This is deflation, and why it is a real problem. |
That is not what deflation is. |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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| Posted: Sun Mar 01, 2009 10:04 pm Post subject: |
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mises - I mean that each person is producing the same amount, and consuming the same amount, their net production is the same, not the gross. also, I apologize for my half-assed spelling and half/have. :::shudders:::
sjrm - your analysis is partially accurate. A decrease in prices leads to a decrease in supply leads to a decrease in labor hired leads to a decrease in demand and the cycle SHOULD end at that as a new equilibrium has been achieved.
Also, deflation is not controlled by suppliers. It is a function of money supply and production output.
Look at the current situation. The money supply has been decimated, so we're spreading fewer dollars around the same pool of people, thus the value of the dollar has gone up. V�ila! Deflation of prices. (There is a large underlying explanation for this, but if people are interested, google it)
cobright - I disagree that leaving the gold standard let the GDP climb. We'd had periods of solid growth on the gold standard before 1971-2. I would say the real change came with the end of massive government spending on Vietnam, as well as increased international trade/more markets opened. Again, compare to today and our economy The amount of money we are spending in Iraq and Afghanistan is astounding and we have negative growth and recession (granted, their are other factors, but I would argue that Iraq and Afghanistan are no small potatoes in this equation). |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Sun Mar 01, 2009 10:49 pm Post subject: |
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| nathanrutledge wrote: |
I apologize for my half-assed spelling and half/have. :::shudders:::
[b]Look at the current situation. The money supply has been decimated, so we're spreading fewer dollars around the same pool of people, thus the value of the dollar has gone up. V�ila! Deflation of prices. (There is a large underlying explanation for this, but if people are interested, google it)
[/b]
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About the spelling thing.. either fix it and maintain it, or if you choose to continue it, at least be consistent.
Where are you getting this assertion? M1?M2?M3? I'm not disputing your theoretical economics, but is that really where we are at the moment? |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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| Posted: Sun Mar 01, 2009 11:26 pm Post subject: |
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| mole wrote: |
| nathanrutledge wrote: |
I apologize for my half-assed spelling and half/have. :::shudders:::
[b]Look at the current situation. The money supply has been decimated, so we're spreading fewer dollars around the same pool of people, thus the value of the dollar has gone up. V�ila! Deflation of prices. (There is a large underlying explanation for this, but if people are interested, google it)
[/b]
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About the spelling thing.. either fix it and maintain it, or if you choose to continue it, at least be consistent.
Where are you getting this assertion? M1?M2?M3? I'm not disputing your theoretical economics, but is that really where we are at the moment? |
As all of us in Korea are well aware, the value of the dollar has skyrocketed. This is largely due to the collapse of the banking sector.
Example. If I put my 100 dollars in the bank, they hold onto the required ratio (lets say 10%) and then take the other 90% and loan it out to you. You take your loan and deposit it into the bank, again with the bank holding their 10% and loaning out the other 81 dollars, so on and so forth down the line.
This is how 1 dollar in the monetary base is multiplied many times over. But now, the credit markets have frozen, and as such my 100 dollars stays as just that, 100 dollars, instead of becoming a multiple of itself. |
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cobright
Joined: 10 Oct 2008
Location: Rochester Hills, MI
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| Posted: Mon Mar 02, 2009 9:49 am Post subject: |
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| Nathan: Would the kind of gains in global trade be possible with a gold-pegged dollar? Allowing global demand for dollars set its price is what made FDI in the US possible on this scale. As for gold-dollar growth, consider that the DOW never topped 1000 Until about 1980 and now we panic when it dips below 7k |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Tue Mar 03, 2009 6:03 pm Post subject: |
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Doesn't sound like the money supply is "decimated" to me. Worthless, maybe.
| Quote: |
| 03/02/09 Tampa Bay, Florida Actual cash, in the form of bills and coins which some know as �currency in circulation� � and others know as, �Please, daddy! I need twenty dollars!� like money just appears by magic in my magic wallet or something, and all I have to do is get it out of my pocket and start handing out twenty-dollar bills to anybody who asks me for one � was (unlike me who was down in cash last week), up another $4 billion last week, taking the 12-month total of new physical currency up another $77 billion, bringing the grand total (�ka-ching!�) to $894 billion, which is not a lot when you consider all the tens of trillions of dollar�s worth of stuff out there all based on this little bit of �real� money! Hahaha! |
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OneWayTraffic
Joined: 14 Mar 2005
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| Posted: Tue Mar 03, 2009 8:11 pm Post subject: |
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| mole wrote: |
Doesn't sound like the money supply is "decimated" to me. Worthless, maybe.
| Quote: |
| 03/02/09 Tampa Bay, Florida Actual cash, in the form of bills and coins which some know as �currency in circulation� � and others know as, �Please, daddy! I need twenty dollars!� like money just appears by magic in my magic wallet or something, and all I have to do is get it out of my pocket and start handing out twenty-dollar bills to anybody who asks me for one � was (unlike me who was down in cash last week), up another $4 billion last week, taking the 12-month total of new physical currency up another $77 billion, bringing the grand total (�ka-ching!�) to $894 billion, which is not a lot when you consider all the tens of trillions of dollar�s worth of stuff out there all based on this little bit of �real� money! Hahaha! |
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As long as enough people believe that they can exchange it for goods and services money won't be worthless. Incidentally the same can be said for gold. The real question is: Is the belief for gold stronger than the belief for money?
All currencies follow the path of inflation into worthlessness. The trick is to replace them with other currencies before this happens, and to control the rate of supply so inflation doesn't exceed 2-3% long term. So long as inflation is controlled, and there are opportunities to invest money at at least the rate of inflation, after costs and taxes, then it's not a major issue.
Land is a great hedge vs almost anything. Just make sure it's real land, not an apartment. |
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mole
Joined: 06 Feb 2003
Location: Act III
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| Posted: Tue Mar 03, 2009 9:01 pm Post subject: |
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Great comparison. Real land vs. an apartment.
Yet you accept paper and digital cyberbytes over real money.
"Are our current economic woes a result of mere �chance�
or the direct result of the U.S. Government�s adoption
of an unconstitutional debt-based, fiat currency and
a privately-owned central banking cartel called the
�Federal Reserve� that conjures our money infinitely
from thin air, then lends it back to us, plus interest due?" |
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