H. M. Socialist Unmasked!
For those of you who haven't been following the comments the past two days, here are a few links that should explain…
A surge in requests for me to debrief H. M. Socialist
Two comments left by H. M. Socialist himself
H. M. Socialist's Twitter feed
(BTW, I wasn't able to connect HMS to Poopyjim in the stats because he just moved!)
Sincerely,
FOFOA
400 comments:
«Oldest ‹Older 201 – 400 of 400Raymond,
Good catch. Remember an excise tax is considered an indirect tax. Tax paid to the G, but it's usually the buyer that ends up actually paying the tax. The seller throws it on over top of the base price, I believe.
So, for anyone now holding, when it comes to selling, or deploying our savings post FG, any sort of excise tax will be paid for by the "new" gold savers.
Hey, what do you all make of the Bundy Banks latest at the top of ZH? Anything?
Wine time! I'll make sure not to post after;)
Hello Phat Expat,
"@poopylover (how many freaking handles do you have??? and why does FOFOA allow this???)"
Poopyjim changed his name to Poopylover for an ounce of silver. So it appears that silver is still a powerful barter item. ;)
FWIW, my current policy is zero tolerance for real trolls, and that includes anyone who posts a comment that is simply mean spirited. I've already deleted a couple of these since the interviews started. Reasoned arguments are fine, knuckle-dragging ad hominem drool is not.
For anyone who doesn't like the interviews, me, or the people I am interviewing, I invite you to go away and stop watching. But if you have so little self-control that you repeatedly subject yourself to something you don't enjoy and then feel compelled to reveal your pathetic existence to me by attacking people rather than arguments, your participation in the discourse here will be forever banished.
My apologies to anyone who doesn't understand free speech and private property.
Administrative guidelines for this policy are simple and clear-cut. I am the judge, jury and executioner.
Phat, this comment is not entirely directed at you. In fact, part of it is directed specifically at someone else. I just used you as a convenient tool for making an overdue announcement. Don't worry, you are not banished. ;)
Sincerely,
FOFOA
Duggo, Totara,
The most impressive coin I have, and I think it is probably the heftiest is the 100 soles from Peru, a 90% pure gold, weightning almost 47 grams (42.12 grams of pure gold). But not as beautiful and balanced as the 50 pesos, my favorite. If you are really careful you will see that my picture is from 1943, the only year where the 37.5 grams legend is present on both right and left sides! unique and gorgeous!
Cheers.
I suggest you replace the word "Chinese" with "worldwide shrimp investor/savers".
Of course. But many people in the investment community imbue the inscrutable Chinese with a mystic investment ability that defies Western understanding. In reality, the Chinese are the ultimate herd investors. Even the government, for all its ability to avoid the madness and delusions of crowds thanks to a lack of democracy, still ends up being a trend follower.
There will be no tax on the sale of gold after transition so your form of gold is mostly irrelevant to it's future price.
I have been thinking about taxes on gold lately. If, when the time comes when you want to sell you gold for very cheap assets, why not monetize your gold by using it as collateral instead of selling it?
I am wondering if, when Nixon closed the Gold Window in 1971, it came as a complete surprise to the average US citizen, or whether the possibility was being widely discussed for weeks previously in the main-stream-media? For the average well-informed US-resident investor at the time – was this a bolt from the blue, or something that would and should have been foreseen for anyone paying attention?
(In 1971, I was living in South Africa, had just graduated as an Engineer, and had just started my career (with Westinghouse). I have no recollection that anyone either at work or in my personal circle at the time was aware of this event , discussed it, and/or thought it was a big deal. (Strange because we made most of the Gold at that time). I have no recollection of seeing anything in the press either – but then again I was very young at the time and must admit that my focus was more on amateur gynaecology rather than economics).
Fast forward to today – whilst most here believe that a Bank Holiday is definitely on the cards, is the general consensus that it will take us all completely by surprise when it does eventually occur?
Interesting commentary on Russia here:
http://blogs.rediff.com/mkbhadrakumar/2012/10/25/russia-to-be-an-efficient-balancer-in-asia/
I'm going to summarize some of the key points up front and provide some background on why I think Russia watchers should take notice of what is being said in this post by M K Bhadrakumar (a former high ranking Indian diplomat).
1. Russia will not join the EU or NATO.
2. Her alignment is with Eurasia not Asia.
...Russia’s heart and soul is still with the West, while the East becomes a mere occasional affair, a highly selective engagement..
3. There will be no Sino-Russian military tie up but Russia will take advantage of its bi-lateral relationship with China to pursue its interests in the region.
4. Russia will press ahead with the formation of a Eurasian Union with the Customs Union as the first step. The next step is going to be a "Common Economic Space which forms the backbone of the Eurasian Union".
5. This union will apparently be modelled on the Eurozone. At some point (perhaps distant) Russia sees this becoming a political union or involving a common currency.
6. Russia sees itself having a “balancing role” in the Asia-Pacific region. “Russia doesn’t want to see a single power dominating Asia.”
7. Russia's economic success is viewed as a key element of attracting the partners it is seeking to cultivate and the policy emphasis is on economic progress as opposed to military objectives.
(Incidentally Russia's Rosneft is about to overtake Exxon-Mobil to become the largest private oil production company in the world. Apparently BP will ultimately hold a stake in Rosneft of just under 20 per cent.)
The following extract describes the position and background of the speaker Bhadrakumar is quoting (my emphasis).
...today in Moscow the Chatham House rules were mercifully lifted for a scintillating 2-hour conversation we held — a 50-member group of “Russia watchers” drawn from Europe and the United States, plus China, Japan, India and Iran (including three former prime ministers and one defence minister and a top communist party official) — today with Alexey Pushkov, chairman of the Committee on Foreign Affairs of Russia’s State Duma (Parliament).
Pushkov is known to be close to President Vladimir Putin and is an authoritative voice on Russian foreign policy. He is a many-splendoured personality — professor, strategic analyst, journalist and today a politician. In the Russian system, his current position gives him a prominent role in the foreign policy establishment.
fonoah,
...most here believe that a Bank Holiday is definitely on the cards..
If you are speculating on the possibility of a controlled devaluation IMO they would have to trap the cash somehow. In this scenario I would expect them to use withdrawal limits to do so. From what I have been reading most US banks appear to be heading in this direction anyway.
Capital controls would prevent the US dollars everywhere else from attempting to return to America. The USG can also refuse to cash out bondholders with maturing paper and roll over the debt.
The US dollars in all three of these "locations" are sitting ducks for a lightning fast devaluation. How likely is it that the USG would go down this path? Not very likely IMHO but I guess it's possible.
On the other hand after a spontaneous HI epsisode has devalued the currency I can only think of two ways to stabilize the US dollar at its new lower value. Either a targeted peg to gold or a hard peg to the Euro.
In regard to the former I would add that they don't need to announce the ratio to the general public in order to put a gold peg in place. All Treasury would need to do is to inform the key players in the markets and/or the BIS that they will commit to the target ratio (or range) in gold they specify.
So I guess this puts me in the camp that anticipates Freegold first and then RPG after the HI.
One for the China watchers (my emphasis).
With Fed’s QE-Infinity and ECB’s OMT, we suggested that there is a chance that things might get somewhat better toward the 4th quarter (finally), so long as money is flowing back (whether QE and OMT will boost inflow sustainably is another matter). If our read on the recent strength of Chinese Yuan is right, money flow might have indeed turned into inflow after QE-Infinity, which is good for liquidity condition, as confirmed by the fact that despite PBOC being in net withdrawal for the first time in weeks, interbank rates remain low. Not to mention the now-very-noticeable pick-up in investment in some infrastructure, such as railways.
http://www.alsosprachanalyst.com/economy/chinas-economy-in-q3-the-good-the-bad-and-the-absurd.html
This extract from Chuck Butler's letter appears to reinforce the earlier post about China I linked at October 27, 2012 10:06 PM.
The Chinese renminbi/ yuan reached a 19-year high last night (VS the dollar), and basically reached the end of the "allowed trading range" for the first time! So, apparently other traders and investors are seeing what I've pointed out, and that is a recovering Chinese economy.
Stronger manufacturing and Trade Surplus data has really lifted the black cloud that hung over the Chinese economy. So. more and more traders and investors are seeing what I saw, finally!
There are a couple of things going on China and with its currency that is traded offshore now in Hong Kong. the renminbi/ yuan in Hong Kong is even stronger than the price for the currency on the mainland. So, the flow into renminbi/ yuan is back! And apparently, the Chinese Gov't isn't getting all itchy about it.
http://www.kitco.com/ind/Butler/20121025.html
Hey fonoah,
I wasn't even a glimmer in my daddy's eye in 1971, so I can't speak from first hand experience. But I do remember reading articles by Ron Paul and Lew Rockwell where they mentioned they were surprised when Nixon closed the gold window. So, if people who were aware of Austrian economics and gold were surprised, I'd say most everyone else who paid attention to these things at that time were surprised as well. I assume most thought the fixed $POG would be raised just as was done by the paraplegic progressive FDR in 1933.
As far as the average American goes, I doubt many even noticed or cared as long as their dollars still bought "stuff". And given what I know about the average American, it's probably safe to say they were more upset that Bonanza had been interrupted than their dollars weren't backed by gold anymore.
Funny you ask this about the public's perception of gold. I was just reading on the National Proletariat Radio website about Germany's gold:
It's 10 P.M. In Frankfurt. Do You Know Where Your Gold Is?
This quote caught my attention:
"In reality, it does not matter one bit whether the Federal Reserve Bank of New York actually has the German central bank's gold or whether the gold is pure. As long as the Fed says it is there, it is as good as there for all practical purposes to which it might be put. It can be sold, leased out, used as collateral, employed to extinguish liabilities and counted as bank capital just the same whether it exists or not."
Under the current $IMFS this is true. But what I'm curious about is the future. Will there be so much mistrust in the world that all the gold is actually audited when it's time for The Big Reset? Will there be a public outcry to find out where the gold is or if it's real? Who's got who's gold? Or will the same mindset repeat itself? Will the public be content taking the word of the authorities that the gold is there as long as their currency still buys "stuff"? And since gold's value IS subjective, does it even matter? ;)
RJP
One final link for the China watchers. According to this report the use of the Renminbi in trade is growing strongly.
http://www.chinadaily.com.cn/china/2012-10/24/content_15840495.htm
According to the latest report by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, renminbi-denominated trade accounted for 10 percent of China's total foreign trade in July. The figure was zero just two years ago.
Forming the new renminbi bloc is the result of China's rise as the main trading partner in the region. China's share in East Asian countries' manufacturing trade has risen from 2 percent in 1991 to about 22 percent this year, according to the PIIE report.
And now seven out of 10 economies in the region — including South Korea, Indonesia, Malaysia, Singapore and Thailand — track the renminbi more closely than they do the US dollar.... said the report, posted on the [Peterson] institute's website.
The Royal Bank of Scotland predicted in a report on Monday that renminbi will become a fully convertible currency in 2015.
In some ways this is the most interesting piece of news:
In fact, trade is also propelling the rise of the renminbi outside East Asia. The currencies of India, Chile, Israel, South Africa and Turkey all now follow the renminbi closely, in some cases, more so than the dollar.
@Poopylover @FOFOA
Great interview, you seem like really nice guys. Your a great catch for any girls out there with plenty of gold, or at the very an least an interested in what you think is important.
@Costata I think Russia was invited to APEC at it's formation (kind of odd), perhaps the idea of Russia balancing Asia goes way back.
Do you think many of the small countries wanting to join the euro, like e.g. Slovenia will instead end up in this possible new Eurasian currency block?
@RJP thanks for the kind words the other week and the AC/DC link, very appropriate esp Bon Scott . And congrats on your twitter news. Your interview was also great.
Today I checked out Peter Schiff's YouTube channel. Long time ago I was more frequent on his channel. I even participated on some money-bomb if I remember correctly.
One thing caught my eye: number of subscribers per 28. October 2012:
The Schiff Report: 61.750
FOFOAtv: 201
Oh boy, oh boy, FOFOA, there’s some catch up to do. :-)
Costata,
Thanks for the interesting fact about the jewellery.
Also much agreed on that that epoch was a very developmental period for banking.
One big thing of that time was surely the experimenting with adding larger amounts of paper notes to the currency in circulation. Which also turned out not to have such magic properties :-)
@FOFOA: +1 for knuckle-dragging ad hominem drool is not OK
When giants of economic thought duel, the small dog in the street is puzzled. In such cases, his only guidance is the use basic robust logic and hard facts. One of my reality checks is Switzerland. Swiss people are definitely a very educated nation and among (or the) most financially educated nation. As well, they are an aged democracy, they were fighting for their freedom and rights before America’s were discovered. They are probably the only country in the world with some sort of latin name, Confoederatio Helvetica, were the CH F acronym came. And they did not get softer on public issues either, they find their CB governor’s wife was doing some currency trading and they dismissed him, although he was a very competent person and did a great job.
An the burst of the crisis, the CHF jumped incredibly. This was for me counter-intuitive, as all the banking countries were in some sort of pain. Ireland and Iceland were crucified, in UK there was public concern about the lack of manufacturing and oversized “services” sector (read finance) while Netherlands, another banker nation, was shielded by euro. In this glooming landscape how on earth the CHF was the star currency ?
And the other item: the Swiss CB was mandated to keep the CHF somehow at par with other currencies. Instead of being ecstatic about their increased purchase power, about the French wine, german cars, Italian shoes and all the other goodies the money can buy, THEY WERE CONCERNED.
I met informally, at a kid’s party, a banking guy. I asked my clever questions. Stripping out all buzz words, the answer was: CHF is seen as backed by gold. Big boys trust gold, that’s why they want the CHF, it looked like a accessible way to get gold backed paper. And the clock makers were concerned about their currency being stronger as it did twist their economy. All the skiing holidays would become pig expensive, and whatever they made, the watches, the fondue, the medicals, the ammo, everything would become suddenly much more expensive for rest of world. This would led to fast cuts in jobs and to poverty, as the guys need to import gas, petrol and other must have products, while the others could not buy much from them. So yes, the savings would be benefitted, but all the “future savings” would be blown away due over-strong currency. Instead of becoming something for the ordinary swiss to buy bread and eggs, their currency would become some sort of global bond. A too strong CHF would mean that swiss people would have less and less of their own currency while the foreigners would have more and more of their currency.
Based on this empirical observations, the dog I am was led to the following conclusions:
- Gold is highly valued by big boys, but are getting it in silent mode. The pressure on CHF is still there. And if gold is good for them , must be good for us. What is good for Optimus Prime is typically good for Mikey Mouse, too;
- Beware the hard currency. What makes swiss cheese stinks, probably get cedar cheese stinky, too. If you put extra power from gold backing on USD, in couple of years, we may see a country of beggars and bankers ….
Bundesbank: Gold reserves stored securely
(thanks for the correction concerning taxes Raymond, I was trapped in a myopic view)
To /Sleeping/,
Yes, tax policies are going to vary in different countries, but the gold must flow, I guess policy makers will realise this soon enough.
And as you say, willing buyers might also pay the premium to include taxes. The seller has every incentive to find the best price, which wouldn't be hard with such a liquid asset.
For amusement value, and because one cannot seperate economics from politics, I would like to ask opinions.
Which candidate in the upcoming US elections would be worse for the US, and thus bring about a $ apocalypse faster.
I am uncertain, each seems to have their 'merits' if their words are to be believed.
I'm just wondering who I should root for. Socialist king Oblahblah, or let's fire Bernanke and stop QE (music stopping chair finding time) Rumblez. ;)
Thoughts?
TF
MF,
That's an easy one to answer: it won't make a shred of difference. No matter what the candidates say, they will each behave exactly in the same way once in office. And if Bernanke is removed, his replacement will also behave in exactly the same way.
Michael H
So you do not see even marginal differences in TTC ( time till collapse) between them? Pity. xD
TF
I voted on non-economic social issues. But yeah, its doesn't matter.
Romney got RPG running his foreign policy.
World Bank President Robert Zoellick reaffirmed his proposal to use gold as a "reference point" to reform the current international monetary system on Wednesday in Paris.
"What I suggested is that gold serves as a key reference point to allow people to assess the relations between different currencies," Zoellick told the press here at the end of his meeting with French President Nicolas Sarkozy in the Elysee Palace.
"It's an approach that we can take, others also estimate that we can establish a benchmark against prices of principal commodities," the World Bank president said in response to a journalist's question.
"I didn't propose a gold standard, which is an important distinction because it would directly link currency to gold," said Zoellick, denying reports that he had called for a return to the " gold standard" to modify the present monetary system, which he called "Bretton Woods II."
"The system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values," Zoellick wrote in an article published in Monday's Financial Times.
World Bank reaffirms gold as "reference point" to monetary system reform
That data out of China doesn't look good over the intermediate term. It's more likely post QE3 hot money flows lifting the RMB, and that will lead to higher inflation and bad investments, such as the mentioned infrastructure.
China's exports are more yuan sensitive than the CPI, which is 30% food. If the renminbi goes up 5-10%, there are going to be factories shutting down or moving to Vietnam/Bangladesh/Cambodia, but it's not going to dent food prices much. Hot money flowing into infrastructure digs the economy in more and delays rebalancing. When the eventual food inflation wave hits, the populace gets worried about inflation and buys real estate.
The positive factor is the leadership handover; there are supposed to be major economic reforms (redirect investment from infrastructure to the private economy) on the way and Reagan-esque tax cuts.
Title: Federal Net Outlays
Series ID: FYONET
1971-06-30 210172
1972-06-30 230681
1973-06-30 245707
1974-06-30 269359
1975-06-30 332332
1976-06-30 371792
1977-09-30 409218
1978-09-30 458746
1979-09-30 504028
1980-09-30 590941
1981-09-30 678241
1982-09-30 745743
1983-09-30 808364
1984-09-30 851805
1985-09-30 946344
1986-09-30 990382
1987-09-30 1004017
1988-09-30 1064416
1989-09-30 1143744
1990-09-30 1252993
1991-09-30 1324226
1992-09-30 1381529
1993-09-30 1409386
1994-09-30 1461753
1995-09-30 1515742
1996-09-30 1560484
1997-09-30 1601116
1998-09-30 1652458
1999-09-30 1701842
2000-09-30 1788950
2001-09-30 1862846
2002-09-30 2010894
2003-09-30 2159899
2004-09-30 2292841
2005-09-30 2471957
2006-09-30 2655050
2007-09-30 2728686
2008-09-30 2982544
2009-09-30 3517677
2010-09-30 3456213
2011-09-30 3603061
2012-09-30 3538446
Cliff's notes:
Yeah whomever is elected will spend spend spend.
Fool
I agree with Michael H. I see Romney's promise to boost military spending as proof that there is a certain amount os money the USG MUST spend to keep all the balls in the air. Obama would spend differently but I'll wager they both have plans to spend the same amount.
I voted Romney though I gave money to Paul. Romney at least used the word liberty once in the debates. Obama would have to run as a Communist if he was in Italy. We can't call people's ideas that here in the USA because of the cold war, it is equivalent to calling them a traitor...but he is a redistributionist.
Didn't mean to get political but it is election season and the blood runs high.
Michael dV
So then Oblahblah is the better choice as a smaller military is better for the RoW? ;)
Feeding the medicaid and social security monster is a better way to collapse than spending that money on the military gorilla? :P
TF
Some naughty person sent a Screwtape File to BrotherJohn about Silver being a "pump and dump" and he is beside himself trying to explain why everyone is wrong except himself.
I wonder who that naughty person was?
I agree that the ideological attacks on who is a parasite and who isn't in the current system don't serve anyone. They are the product of a very shallow analysis. Here's a good article that was linked by Jesse at Cafe Americaine that shows that a few moments thought about who has a "real" job and who doesn't reveals how utterly facile this kind worldview is. http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelson-takes-on-nyt-editorial-board-government-does-not-create-jobs
Hi JR;
Does the fact that you've voted already mean you're an expat?
If so, what are your top location choices for prospective expatriates,
(based on whatever criteria you prefer)? Just curious.
Foll
I am not at all happy with the choices presented me this election. I accept all criticism that comes my way for my vote but I always vote and almost always choose the lesser evil.
I contribute at the Federal level through the Club for Growth. This is a libertarian leaning organization that supports pro-growth candidates (almost always Republicans) and frequently goes after liberal Republicans in conservative districts.
It is easy to complain as it is usually the slime that makes it to the top. No one who gets elected has ever spoken any useful truth or they would get the treatment Ron Paul got....completely ignored!
sorry that should be Fool (with all due respect)
Michael dV
Haha!
I understand. At this stage I was simply looking for a positive spin to the whole disaster that is the available choices.
Better to laugh than cry, I think. :)
TF
Woland
Most States have early voting here in the US.
@ampmfix
Nice coin. I only have the 1947 ones. I must say the Mexican 50 Pesos has something about it that other coins lack. The Buffalo being pure Gold seems too delicate as do most pure Gold coins. The Krugerrand is boring without face value and I'm not a great fan of the Queen's profile although I do have Sovereigns. The UK CGT exemption for me is not of great concern.
I think a critical issue that one could use to contrast the two candidates is how their administration would try to handle HI with regard to US population/unrest/social breakdown.
I won't reveal my opinion, because I don't want to go all political on you fine folks.
But I sure do have an opinion.
I have considered a number of strategies over the years when it comes to voting for POTUS. The only time I remember being proud of my vote was for Ronald Reagan, and that was only because it was my first time voting and I was young and stupid. This time I am simply voting for the guy who is likely to take the least from pay check in the form of taxes.
I think this time the answer is Romney. All other issues, including the hot button social issues, the two will be indistinguishable when campaign promises inevitably fade. I think Obama will tax more and spend more, Romney will tax less and spend more. Both will be looking to fight any war they can. Both will seek to further infringe upon liberties long taken for granted by complacent Americans.
If I had to guess who is most likely to accelerate the demise of the $IMFS, I would say Obama if he is successful in raising taxes as dramatically as he says he will if given a mandate.
Hi duggo,
Yes, i also like it a lot but can't exactly pinpoint why, maybe the dimensions vs weight. They just seem perfect. You are right that buffalos are very nice but all 24k gold is too delicate, you can almost scratch it with a nail (if you drop it just 10 inches on the table you are working on, it makes a permanent dent...). One word of advice though, according to a dealer, the 50 pesos were the most counterfeited in the past. Ah!, the 20 peso (Aztec calendar, 15grams of pure gold) is also amazingly beautiful.
Here are some of my favorites:
http://www.icollector.com/Mexico-City-Mexico-20-pesos-Aztec-calendar-1918_i9879709
Franz Joseph 100 corona, another biggie: http://www.tulving.com/bullion/austrian_100_corona.htm
Guitar strings DP? The British/UK humour always leaves me confused and in awe of the grunge. Honestly, I thought cracky was a figment of your imagination until FOFOA pointed out otherwise. Seems that I lack in worldliness?
=8o)
Great debriefs FOFOA, Jeff and Jim.
Jim I agree, single is way less complicated, and very satisfying for those that make that conscience choice. The best part is the lack of accountability, which leads to an almost conflict-free life if you allow it.
byiam
let rip, you won't offend many around here and I am interested...I really don't know if there would be a difference as it will be mostly a bureaucratic response I think.
After all the Patriot Act was said to be just waiting for a good cause to spring on the American people. My bet is the same folks are the ones in charge of 'helping us' when the SHTF.
MF
US elections are a sideshow and a joke. Presidential elections today, congressional elections in 2 years. Each election involves at least a year of campaigning followed by another six months of "how great or aweful" life will now be, depending on where one sits.
IMO it makes absolutely no difference who is elected as they are simple the public persona that does the bidding of the banster-puppetmaster (think government Sachs), not to mention the rampant fraud within the electoral process.
It amounts to a gigantic ongoing distraction.
Please consider this as only a humble opinion from one that observes from close proximity ;)
Wendy,
+1 for that comment on the POTUS election.
It amounts to a gigantic ongoing distraction.
LOL! And on that note some more distraction:
http://news.yahoo.com/blogs/signal/week-three-nfl-predicts-lopsided-win-romney-173031156--election.html
I've always been impressed by the American skills regarding the (mis)use of sports statistics...
All right, I'll stop now to allow for a quick in-game commercial break :D
/Burning, a humble observer from across the pond
Michael dV,
Weeellllll... I tend to be rather libertarian, and attempts to regulate morality from either left or right don't sit well with me. So hot button social issues don't persuade me much.
I think the collapse is likely during the next four years. If the whole USD system goes teets up, there will probably be a strong state of emergency, and our freedoms could be severely curtailed as the government tries to keep control. This could be a temporary situation, or more permanent.
I'm hoping that when the dust clears from the transition, we will get the chance to continue on as free people. At least not less free than we are today (long subject).
I was uncomfortable with the Patriot act, but I'm terrified by what's happening in our country today. The most frightening part is how we are being fed virtually unchallenged misinformation in ever increasing intensity about almost everything. People are so filled with propaganda these days that it is difficult to discuss most topics with them.
When push comes to shove, most will just follow the herd. A dependent population is a pliable population. Over the past four years, we have seen our population become far more dependent.
I'm voting for the guy who I think believes in our fundamental freedoms, rather than the guy who believes that government knows best.
With Romney, I think we have a chance of staying free. With Obama, I see some form of dictatorship emerging as distinctly possible.
Are they both slick politicians? Yes, I think so. Do they have the same core beliefs about freedom? Not by a long shot.
*cleansing breath*
Oh my goodness Burning,
the outcome of simmering race, religion, politics AND football together, should prove to be entertaingly explosive bullshit
We watch together the Shit Hit the Fan :D
bYiamB
well that wasn't so controversial I expected flames and thunderous theme music underlying.
I too ID as small l libertarian. I am registered R but my mentor has gone 'I' a few years ago and I will too after this election unless I see movement in the correct direction. I could never vote D because I do not think they have any real principles. If they do I do not understand them. At least Rs state they are limited by the Constitution. We have idiots like Pete Stark (D, CA) who sees no limits to the wonderfullness of government.
So I see the Ds as drifting aimlessly guided by the latest fad to help them get votes. I see the Rs as having the right playbook but they lie about how they will perform.
At least with the Club for Growth of the 36 or so Congress critters they have supported only 2 have gone bad. (I believe it was Twain who stated a good politician is one who once bought stays bought.)
Who knows, if freegold makes me wealthy maybe I'll just buy a politician like everyone else and forget about making the world a better place for all. I need to learn how that whole rent seeking thing works.
snip
"One wonders if Putin thinks that a bankrupt US is something that can be hastened by forcing the US to not cut its gigantic military budget (currently larger than the next 17 largest military budgets of countries that include both Russia and China combined)."
From JSmineset.com today, under the title "The 12th Amendment and the Ending of the Cold War"
I mean yesterday the 27th
Beer Holiday,
You're welcome. I like to think of myself as Bob Hope around here. I don't have that many skills so I just come around to entertain and provide moral support for the troops. I figured you were having a spirit-induced meltdown that night. No worries. I suppose most everyone's done things they wouldn't ordinarily do while under the influence. Maybe you should get one of those interlock-breathalyzers for your computer ;)
I'm not sure what you're congratulating me for (twitter news). I hope you haven't fallen victim to taking one of my tweets seriously :)
MF,
I wouldn't kick a hog in the ass for a whole truckload of Romneys or Obamas. I only vote in local elections. At least I might run into one of those morons at the grocery store and can give them a piece of my mind.
Whether one of the two Prez candidates would expedite HI in the US more than the other is anyone's guess. Most of the rumors I've seen lately tend to speculate that Bernanke doesn't want another term as Chairman anyway. Poor guy. Do you blame him? Taking that job would be like being able to see the future and applying for a job as the captain of the Titanic.
FWIW, here's the three (suckers) frontrunners for the Fed job in a Romney Administration:
http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/28/the-three-frontrunners-for-fed-chairman-in-a-romney-administration/
To hell with elections.
RJP
I would like to appoint Cosmo Kramer as a new FED chairman:
Kramer gets a job – TCB
He would be great for TCB. :-)
@ampmfix
I can see I have a lot to learn about Gold coins.
Still I have my trusty electronic digital callipers and my electronic scale for the possible counterfeit.
It's a fascinating subject. The Gold is the main thing but why not also have a thing of beauty.
90% of Dutch Gold Reserve Is Held Abroad
I see the story linked to a few times here concerning the Bundesbank's statement on Germany's gold hasn't received much in the way of comments yet. NO mention of the Euro by the Germans, why? Seems maybe we'll be hearing a bit more about this in the coming days.
My question is this; Does gold stored "outside of a zone" count the same as gold stored "inside of a zone" under FG? Also, would there be any need to audit and confirm who has what, where, etc? Has this been covered here? If this is acceptable, I often wonder if all of the players can be trusted... LIBOR, possession being nine-tenths of the law, etc.
With a smaller amount of(revalued)gold required for settling trade imbalances in a FG future, why wouldn't these countries be shipping %90 of that shit back to home base?
Sleepingvillage
"Does gold stored "outside of a zone" count the same as gold stored "inside of a zone" under FG?"
If it is in your legal possession and not stolen, yes.
"why wouldn't these countries be shipping %90 of that shit back to home base?"
Because central bankers do not want to create a panic.
But yes they should be doing so very quietly.
TF
@ costata, re: your comment (October 25, 2012 1:05 AM)
You are either not seeing it or carefully avoiding acknowledging it, so allow me to bring it to your attention:
when FOFOA says:
”Maybe ”money = credit” is nothing new. Maybe "money = reserves" is the flawed (and relatively new) premise.”
the inclusion of both instances of “maybe” is FOFOA exercising tact for your benefit.
Money = credit is not only not new, it is all there ever was. Everyone traversing the Gold Trail needs to come to grips with this; it is the revelation that allows one freedom from the shackles of the HMS mindset.
You can’t leave out the “money = credit” aspect and thus “avoid opening a different can of worms”: everything to do with money is a subset of this can.
Money = Credit is in bold on the label. No worms in there, just enlightenment. This is the divide between the Physical Gold Advocate and the Hard Money Socialist. Money is just credibility made fungible. Gold is its store.
In a more recent comment (October 26, 2012 2:27 AM) you said: ”I'm going to review that July discussion at the first opportunity.”
I trust you have had opportunity? It’s been almost three months now since I more directly made the same point to you as FOFOA has above (see my comment of August 4, 2012 5:00 AM) and to which you also gave the impression that it had then given you something to think about (”When I don't respond to you immediately it is because you make me think.“(August 4, 2012 5:56 AM)), but you have not yet responded to that yet either.
I wouldn’t care, except that I notice you then keep bringing it up like it’s an unresolved issue. Let's resolve it.
The pure money concept is the key to gold. You are blocking the trail for those others who are taking your points seriously and subsequently left with the same contradictions as you.
I respectfully await your response.
RJP
I do not know much about any of the 3 candidates for a Romney Fed chair but Hubbard came off pretty badly in the movie Inside Job narrated by Matt Damon. He seemed both naive and insincere at the same time.
RJP
I was explaining idioms, slang and metaphorical speech to my 12 yos son earlier in the week. I do not think I could begin to explain how kicking a hog in the ass would bring about the appearance of a politician
MdV,
LOL!
I grew up on a farm, so many of my expressions include animals. I guess the best way to explain this to your son would be that hogs aren't very fast and they're quite large, so it doesn't take much effort to kick one. In comparison, I wouldn't go to much effort to vote for some scumbag politician either.
But I think you're on to something. Perhaps it isn't best to mention a beast that spends its day wallowing in its own excrement in the same sentence as Presidential candidates. Why sully the reputation of the poor hog? ;)
@byaimBYoung wrote I tend to be rather libertarian, and attempts to regulate morality from either left or right don't sit well with me.
I understand what you're saying, and as a former libertarian (and before that, former liberal), at one time I would have agreed.
But I realized that even libertarians are in favor of "legislating morality": they believe that property rights should be defended, that force and fraud should be punished. That is just another version of morality.
When you think about it, all laws are legislating morality of some sort.
So the question isn't whether morality will be legislated; the question is which morality will be legislated.
And having a certain number of years under my belt now, I've come to realize that there are a lot of really dumb people in the world - and that's no fault of their own - and that these dumb people are not capable of making fine moral distinctions and elegant arguments about them. What they need are firm social norms that tell them in very simple terms what is right and what is wrong. And those simple people are poorly-served by the libertine norms that have evolved in the West since the 1960s. The elimination of social sanctions for things that used to be considered unacceptable leads rather quickly to a degeneration to the lowest common denominator. Illegitimacy rates around 80% for some sectors of the population, for example.
So "don't legislate morality" doesn't seem right to me anymore. We do need to legislate morality. We just need to be careful to choose the right morality to legislate.
Thanks, Fool:)
I figured as much, but it's nice to hear it from someone such as yourself.
"doing so very quietly" answers the other questions rather nicely as well.
I prefer noisy.
Gliding Over Fear, The Opposite Of Beyond Is Here
@FOFOA
"Don't worry, you are not banished. ;)"
Test... Whew... Okay, so far so good... :)
"So it appears that silver is still a powerful barter item."
Meh...
Having offloaded a substantial amount bought in the 4-9 range, I really don't care what happens to silver from here. ;)
And, since I derive a substantial income in RMB, I'm liking this currency effect. And being an expat, well, not paying taxes on the first $95.1K (plus other bennies) is even sweeter. No, I'm rather liking the view from here.
MnMark,
'So "don't legislate morality" doesn't seem right to me anymore. We do need to legislate morality. We just need to be careful to choose the right morality to legislate.'
I don't disagree. It's a hell of a slippery slope, though. We right thinking people, of course, are correct in our assessment of right and wrong, but what about those who erroneously think they know best?
Yes, that was slightly sarcastic. This is the human reality, as inelegant as it may be.
True, there are a number among us who need guidance to stay out of the weeds. But there are many who believe they are equipped to guide those individuals, and not all of them are truly equipped to do so.
So who judges? It's a gordian knot, IMO.
I prefer to come back toward the surface, to what is impacting us as individuals, and our children (I have several).
I can't claim to know what the correct behavior is with regard to social issues. I recuse myself, in other words.
But in my own life, and toward my children, I stress the importance of not causing pain in others when possible. That goes a long way, I think.
None of us has a lock on what true "correct" behavior is.
All that said, I bet we agree way more than disagree.
Cheers
Phat
may I ask where in China you call home? I've seen the Shenzhen/HK area and inland up to ZhuZhou.
@Michael dV
I have two apartments; in the Guangdong area. Both in major cities. I travel all over China but don't speak a single word (well, just the important stuff; beer, bathroom, hotel). Beyond that, I rely on my partners for their kind assistance.
Phat
Guangdong is quite the city! I took the fast train up to Zhuzhou and was impressed! It was on time to the minute, the speed of 305 kph was astounding and the ride was smooth. For about 50 bucks it got me about 400 miles in 3 hours. I pictured myself sleeping on some chicken filled car but as far as public transport is concerned the godless commies have us beat by a mile.
I was also impressed with the ease of doing business. Met a guy who sells motorcycle parts. He said everything he needed was right there. Marketing, manufacturing, banking and ideas. He was Canadian and lived on an American income in China. I was ready to quit medicine and try my hand at business.
Blondie,
Firstly let me acknowledge that I agree with this statement 100 per cent:
[Money = credit} is the revelation that allows one freedom from the shackles of the HMS mindset
And the argument it counters is the hard money/commodity money crowd's claim that gold, when used as a currency, doesn't function like other tokens used as currencies. They claim that gold is somehow special for various reasons when it is not. Currency = Currency. The credit perspective challenges the foundations of their beliefs about hard money systems.
At present (and for the forseeable future) I'm not inclined to rejoin the debate with the hard money crowd. In my opinion that debate has been settled and the hard money crowd have lost the debate comprehensively.
If a definition isn't universal but only functional it does not mean it is not valuable. Likewise if it is contextual it does not mean it lacks value. That said, if a definition is reducible then the reduction may be a better definition.
I noticed that you offered yet another definition of money in your comment to me at October 28, 2012 3:59 PM above:
Money is just credibility made fungible.
FWIW I think your definition would work very well in a debate about the duty of care of the government/currency issuer to the citizens in their currency zone.
In a more recent comment (October 26, 2012 2:27 AM) you said: ”I'm going to review that July discussion at the first opportunity.”
I trust you have had opportunity?
No, not yet. BTW the reason I want to review it is to try to come to grips with Q&B's thinking on this issue. I want to better understand what makes a couple of very smart, knowledgeable guys think that 100 per cent reserving is a practical solution and what problems they think it will solve. Because in my opinion it's a non-starter once you examine it from more angles.
It’s been almost three months now since I more directly made the same point to you as FOFOA has above (see my comment of August 4, 2012 5:00 AM)
Which post thread was that and which page of the thread? I'll revisit your comment and get back to you.
You are blocking the trail for those others who are taking your points seriously...
As to this allegation that I'm "blocking the trail for others" that's a tough call. Who are you referring to? Newby's who are looking to justify their hard money convictions? Others who can't be shifted in their convictions? Participants who have been here a long time? How do you arrive at this conclusion?
..and subsequently left with the same contradictions as you
In relation to these "contradictions" as you call them I wonder what you would include on this list. Thus far, for every anomaly I have found I have also eventually found an explanation or resolved it in some fashion.
@Michael dV
You must be thinking of Guangzhou (fka Canton). Guangdong is the province in which GZ, as it is better known by expats, resides. Yes, train travel is comfortable and easy to use. I tend to fly since the cost and time can't be beat (though some airlines, HK Express, are consistently late, and I do mean late). They are no more commies than the US is a representative democracy/republic.
Good for the Canadian guy; must be doing export biz. The restriction on bikes here makes owning anything 'substantial' pretty tough. I believe anything over 250cc is difficult to register. And, they don't allow bikes on the highways (and in some areas downtown is restricted) so I wouldn't bother. That is too bad since I have a couple I wouldn't mind bringing here, but it's not worth the hassle.
China is about connections; don't quit your day job just yet. ;)
Q&B are subject to the same contradictions. They are mistaking symptoms for causes and then searching for a remedy. With all due respect, it’s a waste of time to even read, let alone tax oneself making sense of it. With better premises I’ve no doubt they’d hit it out of the park. FOFOA remarked to me once (we were discussing this very same issue too) something along the lines of, “that’s great, so long as you don’t mind being wrong”. The real measure is is one able to ditch restrictive baggage long enough to entertain different premises, and if so then not pick it back up again if the new premises are superior? We watched Rick Ackerman succeed with the first and fail with the second, but that was a crapload of baggage. I hold him in very high regard for getting as far as he did. And didn't his peers shriek when their confirmation bias was threatened! Q&B are miles ahead of their peers in being where they are now, and it takes balls, but they're actually in the hardest place right now, where you intuitively know you are right but can't quite empirically demonstrate it. I think most FOFOA readers are in a similar place; they get it, but not the pure money concept. Ironically, that’s the only bit one really needs. The rest would come of its own accord if one had that. I’ll spare you any more of the ramble.
I know it’s a tough call; I didn’t make it lightly. It got your attention. I appreciate your calm and collected response. If it’s a baseless call then that will become apparent to everyone. You know I know how to concede. What do we have to lose apart from the misconceptions of one of us? Isn’t that a win-win?
Our original exchange began here and carried on down the thread, ending with my question to you: ”If savers save in anything but currency, what is there to game?“, a question which I am still waiting for you to answer.
My point is that you seem to see the banking industry as being flawed and in need of reform. It’s not. Banking operates as it does as a result of the collective saving in the medium of exchange, period. Change that (and we call that change Freegold), and everything you don't like about banking is gone. Poof.
The real problem lies in both our individual and collective inabilities to grasp the pure money concept: we don’t know what money really is. Sure, some of us think we do, but almost all of them are wrong too. What's worse is we don't even think it's possible that we could all be wrong, so it's not even on the agenda. It is not possible to conceive of gold’s function without the pure money concept. When I say”Money is just credibility made fungible.“ I am referring to that concept, so it’s no surprise to me that you see an immediate application for it. Everything to do with money is an application of it.
I’ll wait for you to refresh your memory and post your thoughts.
Phat
you are correct on all accounts...I was thinking of the city...I guess the city is so big that the province it is in just seemed, well, non existent.
and yes he is in the export biz
and another friend in Zhuzhou does have an illegal 600 size bike. He says if the cops catch you they first take the keys. This has led to a company making fake key and key holes that are mounted on the bike. When the cop grabs the key you use that as you opportunity for escape.
@costata @blondie
"You are blocking the trail"
As a newcomer I feel I should tread carefully now and not put my oar into the proceedings of which I know little. However the above statement refers to people like me who are reading through the previous FOFOA posts. So it invites me to make an observation.
In my many years in management I came to the conclusion that if participants at a meeting had to explain a concept by lengthy discussion then it wasn't an explanation.
Just a thought. See I do read the comments.
Blondie
is the 'pure money concept' you discuss the idea that it is the collection of trades remembered? The idea of value that springs from the transactions of the past? This as opposed to its stated functions?
FOFOA: The pure concept of money is our shared use of some thing as a reference point for expressing the relative value of all other things. Money is the referencing of the thing, not the thing itself. As FOA said, money is "a value stored in your head!" Money is not something you save. "Money in its purest form is a mental association of values in trade; a concept in memory not a real item… the value is in your association abilities. This is the money concept, my friends."
Interesting debate about "money = credit". But I'm not quite sure what you're saying.
Money is no objective entity which can be argued to have or not have some specific qualities. It's just a word. It means whatever we say it means, and people use it in lots of different ways. It is, I would argue, much less clearly defined than the word credit. So in a sense, when you say that money = credit, you are giving us your definition of the word; you are basically saying that "credit = credit". But that's probably not what you're getting at, so what meaning are you ascribing to the word money in this context?
Instead of letting you answer the question, I'm going to think out loud for a bit. Stop me if I'm way off base, please! :)
The most common definition of money is probably that it is something with the three properties means of exchange, unit of account and store of value. Let's apply this to "money = credit":
Means of exchange = credit
Yep, that works. When you pay someone in "money", you're just switching ownership of a promise to provide some real value (i.e. work. or the product of previous work) for this token at a later date.
Unit of account = credit
Yes, why not. When I say that I owe you fifty bucks, it really means that I owe you X hours of work, and the $50 are a token universally accepted as a measure of the amount of work involved.
Store of value = store of credit
This is where it gets interesting. If we, being on this site, immediately think "gold" when we hear the phrase "store of value", then we're really saying that gold too is just a token, a universally accepted receipt for the promise of future labour. It doesn't have any intrinsic value. The only difference between gold and a dollar bill is that we can, by immemorial custom and because of gold's particular qualities (scarcity etc), expect the former to retain its value longer than the latter. The only difference between currency and gold is time.
Am I getting anywhere with this line of reasoning?
@Michael dV
"When the cop grabs the key you use that as you opportunity for escape."
That is one of the funniest things I have observed here. I have seen plenty of people dodging/riding away from the cops when they were doing license checks at various cross streets (motor bikes; no license required for e-bikes). Traffic cops aren't militarized like in the US (in fact, they don't carry guns). Now, try that in the US. There would be a police chase, shots fired, children run over, with live coverage by the MSM. Just makes you wonder...
Of course, it isn't all peaches and cream here either, but I sure don't have to worry about overzealous policing.
@Börjesson
Jomenvisst!
@Blondie,
My point is that you seem to see the banking industry as being flawed and in need of reform. It’s not. Banking operates as it does as a result of the collective saving in the medium of exchange, period. Change that (and we call that change Freegold), and everything you don't like about banking is gone. Poof.
I can pinpoint where I achieved a real, lasting and comprehensive understanding of Freegold. That moment in time is marked by my change in attitude to banking and central bankers like Bernanke. The hate and disgust I harbored was nothing more than the burden of my own and personal Hard Money Socialist baggage.
You are the equivalent of council elder on this blog and your last post really speaks to why. The truth should not be complicated and should not require exhaustive treatises to articulate it and make it digestible to the "unenlightened." I find that the comments section can easily lose focus when focus shifts from the "clean" and fundamental concepts to peripheral issues more related to the exercising of the ego.
Your quote above is the natural conclusion one automatically comes to when the nature of money is both discovered and then finally accepted.
So for those who are new here and are building up some muscle tone on the trail: you would do well to focus on the simple concept Blondie is referring to. It is exactly what you seek.
Well done Blondie.
Thank you matrixsentry. I thought upon your other comment you may have developed a feel for why I liked this word. To me it relays so much more than credit. It makes it personal, and money is personal, very personal.
However, let's see where it takes us. I may be strung up yet.
@Börjesson,
That third point goes somewhere alright. My preferred term is 'credibility' rather than credit, because I feel it takes us closer to the truth. It has a broader and more familiar meaning, and it is this feeling that money originally emerged in response to. Money is instinctive in this respect. It is not hard to grasp; on the contrary, it is very much part of us.
FOA: ”Our reasons for following these old lifestyles is, for us of course, to gain a better perception of how humans understood and used their wealth, back then. What is coming to light, for gold advocates, is an ongoing evaluation of how we, as a modern people, have lost so much of our connection and understanding to what wealth is, how much it's worth and how to use it. This is, of course, in contrast to the ways wealth, including gold was seen and valued then.”
I'll go no further without costata's return.
"money=credit" ≠ "credit=credit"
Money is a measurement of value, a unit of account.
If we trade goods-for-goods, we use "money" to measure how much of each others goods is a fair swap.
If only one person supplies goods, or there is an agreed imbalance, the "debtor" passes money tokens to the "creditor".
The "debtor" must at some point provide someone, somewhere in the system, something in order to recover sufficient tokens to clear his debt.
The "creditor" can exchange his money tokens with any other trader that accepts these same tokens, to get whatever he wants.
A serial creditor finds themself draining an ever-growing pile of tokens from the system today. To keep the system liquid, more tokens have to be QE'd in.
In a Freegold world, the "creditor" will periodically recycle his excess money tokens back into the system, for gold. QE no longer necessary.
Gold: when you just don't want anything else for the time being.
Hello Blondie;
I ask this just out of curiosity. A few months ago, you said
you were writing something, which you might (or might not)
post if it worked out that you liked it. You then said that it
appeared similar to some thoughts by David Graeber, author
of "Debt: The First 500 Years". Having read the book when it
came out, can you comment on whether the outcome of that
exercise was fruitful, and what, if anything, you now think of
Graeber? Thanks.
OK, I'll ask the obvious follow-up question. But I'm more talking to myself than anyone else here, trying to reason things through:
If gold too is essentially just stored credit (or credibility), just like dollars, then what's the merit of saying that we need to separate the store of value from the means of exchange? Both of these "money" tokens are at the same time both SoV and UoA. They're just at different points on the same sliding scale (measured by time) between the hypothetical and non-existing end points: Pure Store of Value and Pure Means of Exchange. Similarly, dollars and pesos are at different points on the same scale. You might as well use the dollar as your MoA and the peso as your SoV, and achieve the same thing as using gold. (Freepeso? ;)
I guess the difference is that the Governor of the Central Bank of Mexico can debase the peso to his heart's content, and it may at times even be in his country's interests that he does so. Gold on the other hand, unlike the peso and also unlike e.g. the SDR of the IMF, can't be debased more than marginally by anyone's conscious decision. Or at least, it won't once the paper gold market is broken. So what Freegold really is isn't just a separation of Means of Exchange from Store of Value. It's a separation between an inflatable, controllable MoE and an "untouchable" SoV that no one can mess with. And at present, as long as the gold paper market is alive and well, no such "untouchable" SoV exists, and a sound economic system thus isn't possible.
How am I doing?
Börjesson,
(1 of 2)
It is all there in your comment, everything that is needed for a comprehensive understanding. You have no trouble whatsoever acknowledging the unit of exchange and unit of account function as merely the credit concept. You rightly see things are different when you speak of the store of value function. But, what is different?
You could argue that gold also represents a credit or a marker that we use to tally and store value. What are we tallying? We are tallying our surplus real work and productivity, generated in the material plane through our labor. This labor cannot be created by anybody else, it is after all the result of our tangible interaction with the super-organism. It is real and you can "lay your hands on it." Your labor cannot be counterfeited and therefore it is reasonable to store it in something that cannot be counterfeited, is tangible, and can be attained.
Now, what are the credits you refer to that function as UoA and UoE? Are they real things that cannot be duplicated by anyone else? Or are they simply fungible symbols that are supposed to correlate one to one with someones else's productivity? We are led to believe it is a one to one correlation and since the majority of the world is sufficiently convinced this is true, the result is our present system of money we all know here as the $IMFS.
There is nothing even close to parity between the the monetary realm of credits and the realm of the real, goods and services that can be delivered by super-organism. The supply of credits have been greatly expanded to point of absurdity. So absurd that they cannot possibly function when called upon in mass. The solution to that problem of course is to stockpile credits instead of forcing performance.
Why would we choose to store our real productivity in the monetary realm that is so disconnected from reality, where the unit of measure has to be infinitely flexible in order to compensate for the exponential growth of credits that can potentially seek usage in a very finite material plane?
(cont.)
(2 of 2)
So words can be complicating. The concepts that must be articulated using words are what we seek. One can use the word credit in the sense that you seek to bring future productivity into the present. The result is an asset (cash) that is also accompanied by a liability (principal plus interest).
One could also speak of credit in the sense that you receive a monetary payment for goods or services rendered. You have been given a credit or a token that can be later exchanged for goods or services that you seek.
Are these two usages of the word credit the same? In one case the credit comes to you along with a liability, and in the other instance the credit is someone else's liability and comes to you purely as an asset. When we say gold is just a credit, when you possess it does it come to you with a liability that you must repay? Is it someone else's liability that must perform in order for you to exchange it to complete a trade in the realm of the real?
The answer to that last question is yes if you possess any form of gold other than physical in your possession. All forms of gold other than physical gold exist in the monetary realm. Units of this monetary gold far exceed those of the real and physical gold, just as monetary credits far exceed the world's ability to actually deliver real goods and services to complete a value (barter) trade.
So to the extent that one participates in the paper gold arena, yes this person is using gold as credit in the sense that the credit is only an asset as long as a counter-party performs (counter-party's liability) and can deliver. As long as the solution to the problem of paper gold is the same as the solution to the problem with our money, stockpiling to avoid forced performance, the gold credit can perform in some fashion.
The person stockpiling physical gold is currently doing no better than the paper gold stockpile(r) because gold credits and physical gold are effectively considered to be the same by the super-organism. However, the stacker of physical gold is not stockpiling credits (others' liabilities) if his intent is to hold the gold until the super-organism discovers that physical gold is quite different than the corresponding amount of gold credits, both in function and in value.
If a stacker does not fully understand why he is stacking and trades his physical early, or is forced out of the gold into the realm of monetary credits by necessity, he is effectively using his physical gold as credit by converting it from physical ounces to ounces of gold credit.
Consider this dead horse whipped.
I for one have taken quite a liking to Blondie's notion of gold as a store of credibility.
Those without credibility seek to attain it. Those with credibility endeavor to retain it for a time of need when it can be utilized. Credibility must be earned and is not given.
A stack of gold is a testament to someone's credible ability to produce. It is a testament to one's credible ability to manage credit. As it turns out, the banker is impressed by both and the size of the stack.
A gold stack is a testament to an ant's credible interaction with the rest of the Ant Farm.
Blondie has credibility with this ant.
Thanks Blondie!
Jeff,
There ya go in one quote:
FOFOA: The pure concept of money is our shared use of some thing as a reference point for expressing the relative value of all other things. Money is the referencing of the thing, not the thing itself. As FOA said, money is "a value stored in your head!" Money is not something you save. "Money in its purest form is a mental association of values in trade; a concept in memory not a real item… the value is in your association abilities. This is the money concept, my friends."
October 29, 2012 2:47 AM
Let's try a reductionist approach to Money = Credit and see if we conflict with FOFOA's assertion above with the definition that Money = Contract.
Blondie,
Thanks for the link I'll try to revisit that discussion tomorrow.
Cheers
Hi Woland,
Some say the smart money does not wait in line. After all, who could still be undecided after all these damn commercials.
Battleground state-tv-commerical-drowning + political sideshow = BIG HEADACHE!
Currencies today are managed such that their UoA function is the one of paramount significance.
This is so that one can reasonably expect to exchange your received MoE tokens for a fairly stable amount of goods & services.
But not if all, or even just a significant percentage, of those holding these MoE tokens decides to trade them in for real goods & services at the same time. Savers drive everything.
As matrixsentry so clearly put it: There is nothing even close to parity between the monetary realm of credits and the realm of the real, goods and services that can be delivered by super-organism.
Your MoE tokens will continue to be a good SoV - unless and until they are not.
Gold (or any other real good) in your possession, however, is an already-completed trade. The real value of your trades cannot be adjusted ex post facto.
FOA: The real issue is our misunderstanding and misuse of the term "sound money". That thought has been bantered around for hundreds of years. Truly it does not exist except in the minds of men.
Money, the term, the idea, perhaps the ideal,,,,,,, is something we dreamed up to apply to one of our chosen units of tradable wealth. Usually gold. We could take almost every item in the world and use it in this same "money fashion". Still, this form of trading real for real is just exchanging wealth. It isn't exchanging money as we understand money.
Gold is no different than anything else you possess as your wealth, it just so happened to be the most perfect type of tradable wealth in the world. So it evolved to be used the most and eventually labeled in the same function of what we consider to be "sound money".
Now, consider that all wealth is represented in and of itself. You cannot reproduce wealth through substitution, like giving someone five pieces of copper for one piece of gold and then have them think they now have five pieces of gold! This is the process we try to perform within the realm of man's money ideals. We have always debased trading wealth by duplicating it into other forms and calling all of it, collectively, "our money".
This duplicating, this replicating, this debasement is the result of taking the concept of a credit / contract function (paying in the future) and combining it with the concept of completing a trade at the moment. Think about that for a moment?
As an example, I'll give you a paper contract to pay you later for some oranges and you give me the basket of oranges. Better said, I just gave you modern man's actual concept of money.
Or I trade you a basket of apples "or gold" for those same oranges and the deal is finished, done! We have been taught to think that this is also the concept of money trade.
The first uses what our currency system has evolved into, what is really money in our mind. Where the second uses no credit form at all and is more comparable to trading real wealth as the ancients traded using gold.
Contemporary thought has always blurred these two notions; saying that these two methods of trading are one in the same and both forms use the same idea of what we think money is...
This is the road ahead. A fiat no different from the dollar in function, yet a universe away in management. A wealth asset that also stands beside this money, yet has no modern label or official connection as money. In this way modern society can circle the earth, to once again begin where we started. Having learned that the concepts of wealth-money and man's money were never the same.
Hi Matrix;
It's always interesting to hear your thoughts. Sometimes they
kindle my own which, for better or worse, you are about to hear.
I was going to write something a while back about the idea of a
counterparty , as it relates to gold, currency, or any "thing" which
humans believe to have value.
I start with the things with (0) counterparties. (Note: I exclude
from this system Blondie's famous dictum, in response to my
joke about Lake Taupo's famous history, "Mother nature is
everybody's counterparty.") Priceless!
So, what, apart from that exception, has no (0) counerparties?
Oxygen. Water. These are valued by ALL humans completely
without regard to the desires or beliefs of any of their fellow
creatures. Edward Bernays and Walter Lippman could spend
their whole lives trying to convince us otherwise, without the
slightest chance of success. They are, under normal circum-
stances, both priceless and worthless. You can add, in a
gradually decreasing priority list of zero C, food, warmth,
shelter, etc. (and yes, I left out sex, just to keep minds focused)
Next up on my list are the things which have one (1) C. Land
(good title thereto) Gold. Physical objects in your undisputed
possession. In each of these cases, the counterparty is the
thoughts in another mind (as in gold) or in the minds of the
greater collective, whether you wish to use "society" or the
"superorganism" as the relevant term. The problem which I
find interesting is that, unlike category 1, these thoughts
are subject to both evolution and manipulation. And it is the
science of manipulation of social thought and mood which,
particularly since the period of the 2 great wars, has reached
such an apogee of perfection. Personally, I feel that we are
today witnessing the epic struggle between the natural human
resolution of age old problems, and organized groups unwilling
to relinquish power, using all the propaganda tools in their kit,
markets and "pseudo markets' included, to prevent that resolu-
tion from occurring. The gold vs paper struggle is the arena
where the perceptual battle for the mind of the saver/investor
is occurring.
So where does that leave currency? Simple. It has two (2)
counterparties - the "thoughts in another mind" with whom
we exchange value by using it, which we discover by that very
act of exchange, and the thoughts in the mind of the "printer"
which can never be known directly by us, because we have no
direct interaction with "him". It has twice as many risk factors,
one of which is unknowable. FWIW.
Last weekend I went to see the opera "Madama Butterfly" by Puccini. I had to chuckle when Goro introduces the rich prince Yamadori to Butterfly as "Ville, servi, oro, ad Omara un palazzo principesco." (Houses, servants, gold, at Omara a truly regal palace). Also I thought it interesting that in one translation from Italian to English, they used the word "treasures" instead of "gold".
Sorry for the interruption. Please carry on with the "money=credit, credit=credit, gold≠silver..."
Hi JR;
Dang! You burst my happy image of you on some beach with
an "umbrella drink" in hand in some exotic clime. Oh well.
Since it's storm time today, perhaps you might like my slight
revision of the voting system (or not). Under the Woland
system, a candidate must still receive over 50 % of votes cast
in order to win, but a voter can vote either "for" or "against"
a candidate. Thus, in a state of 100 people, if 55 people vote
for Bob Forehead, while 35 people vote for Bill Hairhelmet,
but 7 vote against Forehead - Hooray! Time to go thru a
whole re-nomination process. More money to spend, Koch
brothers! More ad revenue for you, Rupert! More headaches
for JR. (boo hoo) Cheers!
Jeff,
This is the key phrase IMHO (my emphasis):
A fiat no different from the dollar in function, yet a universe away in management.
Good day to you all from the stormy East Coast of the U.S.A. Below are four quotes, the first addresses a different predicament of the human condition than the last three. All the "observations" strike me as relevant to the present items under debate. And, in a general sense, the quotes seem to touch on some of the very nettlesome difficulties that any blog faces whose ultimate purpose is the presentation and explication of abstract concepts applied to constantly evolving and always complex human affairs.
"James Clerk Maxwell, was a brilliant 19th century scientist whose most prominent achievement was formulating classical electromagnetic theory. This theory unites all previously unrelated observations, experiments, and equations of electricity, magnetism, and optics into a consistent theory.[3] One of his key guidelines for preventing apparent discrepancies, or arguments, was the need for all parties in a discussion to agree on the definitions of all relevant terms. It is the violation of that principle that leads to controversy in every area of our lives, including political rhetoric, the weather, and moves in the stock market."
-Charles Miller (edited)
“As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.”
– Albert Einstein
“To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear …"
– Friedrich Nietzsche
“Very few beings really seek knowledge in this world. Mortal or immortal, few really ask. On the contrary, they try to wring from the unknown the answers they have already shaped in their own minds – justifications, confirmations, forms of consolation without which they can't go on. To really ask is to open the door to the whirlwind. The answer may annihilate the question and the questioner.”
– Anne Rice, The Vampire Lestat
The Vampire Lestat, one of my very favorite literary characters!
This is what Money is (this just occurred to me)
Money is defined as that substance which is the ultimate extinguisher of any debt. As a consequence the
substance(s) used as money must have perceived value in and of itself. Menger described the iterative
procedure by which a substance was promoted to money by the people themselves in ‘The Origin of Money
(1892.)’
See, isn't that much more intuitive and easy to understand? This den of thieves intends to corrupt our soles.
And if this rocks your world too much, leave the ad humus attacks out. I am immune.
Hello FHC:
I believe the correct spelling is "ad hummus"
Please see YIAYIA on FASHION @ You Tube
for verification. No need to thank me.
What is the difference, if people store their credits in currency or gold?
Currency is actively managed to ensure it is a stable UoA for trade.
While savers in aggregate are willing to hold the said currency, more and more MoE must enter the system to offset that SoV hoarding, in order to achieve a stable UoA.
Gold as a UoA is on the other hand unmanageable in the absence of a credible paper market.
It is up to the savers to collectively determine gold's price. And the credibility of paper.
Blondie
Naming Money credit, or credibility is one of the greatest moral svindles of man.
Money is debt, and indebtedness. Credibility as applied to money is trust in debt, trust in repayment of debt, trust in the powers of debt and indebtedness.
Credit and Credibility only masks the danger and true nature of debt and indebtedness: debts needs to be settled.
The words credit and credibility make you feel good and whole. Debt and indebtedness quite the opposite.
Respectfully
Gunnar
@Woland, I thought it was "as homunculus"?
@Gunnar
It´s not a swindle. Credit/debt can be both good and bad. Two sides of a coin etc.
FHC wrote:
"This den of thieves intends to corrupt our soles."
I thought that was Nike's job, or perhaps Reebok.
Have you read this? Is this guy right?
http://www.24hgold.com/english/news-gold-silver-triffin-s-dilemma.aspx?article=4105111670G10020&redirect=false&contributor=Nathan+Lewis
Blondie said:
I think most FOFOA readers are in a similar place; they get it, but not the pure money concept. Ironically, that’s the only bit one really needs. The rest would come of its own accord if one had that.
I like this provocatively refreshing assertion.
Can we do anything to expand on this subject? Can we turn the view of money (and thereby Freegold) around, such that this pure money concept is the first thing we explain noobs?
I think you're on to something Blondie, but if you at the same time think most of us here has taken the long path around the lake of understanding, maybe it is time we collectively tried to map out the short route (with your guidance)!
IIRC, you also took the long road first Blondie, and then by fine-thinking discovered this short path. Later you deleted one of your blogs containing mainly the long path.
If this short route to enlightenment exists, that let all trail-followers shake the HMS baggage quicker, let's make it so clear that the majority of FOFOA readers knows it by heart.
To the benefit of the noobs and us all...
/Burning
Thanks for that, matrixsentry! Very helpful. However, I don't entirely agree!
For starters, I don't agree with the distinction between your two types of credit, borrowed money and earned money. In both cases, you get the same dollar bill, and can use it however you choose. In the first case, if you borrowed the dollar, then you also get a liability, a debt owed to someone else. But that, in my view, is a completely separate entity. It doesn't in any way affect the nature or function of the dollar bill in your hand. Your new debt is added to the huge fungible pool of dollar-denominated debt, and no one cares that it's the dollar bill in your hand, as opposed to the one over there in Mr Jones's pocket, that corresponds to this particular piece of debt. All anyone cares about is that once the time comes, you will be able to repay the debt (which will undoubtedly be with a different dollar bill than this one).
Secondly, I don't really agree that there is a difference between a gold coin in your hand and a wad of cash in your hand. They both represent a store of value at this moment in time, and they're both really credit (or credibility). Come to think of it, I actually find myself disagreeing with the tenet: "He who holds the gold has already been paid." That's not so. You don't really want the gold. It has no use, "you can't eat your gold". What you really want is a loaf of bread, a pair of new pants and some gas for your car. Both the cash and the gold require a counterparty who is willing to swap bread, pants and gas for your useless tokens of credibility. Both the cash and the gold thus have a counterparty risk.
This reasoning led me to the notion of gold having one counterparty risk, but cash (or paper gold) having two. But I see that Woland has already covered that bit, so I'll content myself with saying that I agree!
Maybe that's how that hourglass made from the inverted Exter's pyramid works? The higher up you get, the higher the number of counterparty risks. At the point, there's gold which only has one, and then below that, there are real physical items that have none. Gold would thus belong in the monetary plane (the plane of counterparty risk), but at the point where that plane touches the real world.
Maybe I need to elaborate on physical stuff having no counterparty risk. By that I mean that these are things you can use as they are. However, if you e.g. have some steel but don't actually have any use for it, then you obviously need to trade the steel for something else, and then a counterparty risk magically appears. But I think that's sort of beside the point, so let's ignore it for now.
When I starting writing this comment, I think I was going somewhere with it, but now it eludes me. So I guess I'll just stop right here! :)
Gunnar,
I think you're missing it. Börjesson said:
Store of value = store of credit
This is where it gets interesting. If we, being on this site, immediately think "gold" when we hear the phrase "store of value", then we're really saying that gold too is just a token, a universally accepted receipt for the promise of future labour. It doesn't have any intrinsic value. The only difference between gold and a dollar bill is that we can, by immemorial custom and because of gold's particular qualities (scarcity etc), expect the former to retain its value longer than the latter. The only difference between currency and gold is time.
Blondie's replied:
That third point goes somewhere alright. My preferred term is 'credibility' rather than credit, because I feel it takes us closer to the truth. It has a broader and more familiar meaning, and it is this feeling that money originally emerged in response to. Money is instinctive in this respect. It is not hard to grasp; on the contrary, it is very much part of us.
The third point being the quote from Börjesson. Therefore it follows that Blondie is saying he prefers store of value = store of credibility. He is saying nothing regarding naming credit credibility or the credibility of money. He is speaking to a store of value function that is not served well by money as it is currently known and used.
A store of value works because it is credible. Freegold will be the ultimate form of credibility. We have lived in a time where very little credibility was required of our designated store of value. That minimum benchmark for credibility is getting higher and higher. It ends where only the most credible will will be seen as a viable store of value. Gold will be the universally accepted measure of that credibility in the form of the only trusted reserve. It can't be faked.
Credibility will flow from paper and the $IMFS into Freegold. The measure of your Freegold will be the measure of you as a producer and as a player who is worthy of credit. The scam you speak of is one that is self-induced when the super-organism chooses someone's liability as a store of credibility. The mathematics of exponential growth dictates a limit and end to this credibility. As long as one chooses to save in someone's liabilities, they are simply doing their part to perpetuate the scam.
Gold is the future reference point the super-organism is going to use. The credibility inflation that has created the $IMFS will flow into the new chosen store of value. Wealth held in symbolic money will lack credibility and therefore will attempt to flee. Credibility of physical gold will rapidly inflate (big bang) and will plateau as the best store of value (credibility). The problem with money will be solved. We will no longer ask it to be credible over time periods other than required to facilitate needed trade transactions.
Blondie can speak for himself, but this is how I see it.
matrixsentry
I don't really feel like getting involved in this topic. Just a minor point.
"The measure of your Freegold will be the measure of you as a producer and as a player who is worthy of credit. '
Being worthy of credit has always depended on character...not necessarily prior savings, though that may be indicative of good character.
JP Morgan famously remarked that credit was not given, it was something that somebody came into the bank with and then exercised.
TF
Off topic : Any regulars here play Go?
ampmfix
Nathan Lewis shows that the graph of Balance of Payment, during 1967 was positive for US. But I think Triffin as predicting the future and if you expand the graph to 2012, you will see the big negative dive right after US Treasury standard replaced Gold standard.
ampmfix
No.
What Biju said.
Talk about cherry picking data. >.>
TF
Thanks Biju and MF.
Börjesson said...
For starters, I don't agree with the distinction between your two types of credit, borrowed money and earned money. In both cases, you get the same dollar bill, and can use it however you choose. In the first case, if you borrowed the dollar, then you also get a liability, a debt owed to someone else.
Oh yes they are quite different from a credibility standpoint. Consider the case of the banker who must consider the requests for credit from two seemingly equal entities, one who holds central bank liabilities as an asset without any liabilities of his own, the other who holds the same amount of CB liabilities that he borrowed from someone else. Who is more credible in the eyes of the banker? Who is more credit-able?
Yes, as those dollars flow about they are fungible. The credibility of the ant is not fungible. Your balance sheet speaks to your credibility.
Secondly, I don't really agree that there is a difference between a gold coin in your hand and a wad of cash in your hand. They both represent a store of value at this moment in time, and they're both really credit (or credibility).
No argument here. But that is merely the case today as we continue along the dying timeline of the $IMFS. As far as I am concerned I speak to gold in its capacity as Freegold and not in its current capacity as some else's liability as well as an asset. It becomes tedious for me to speak of both so my assumption is the reader will know that I speak of gold's highest purpose. So would you say there is a difference between a wad of cash in your hand and handful of gold coins when Freegold is upon us?
As far as counter-party risk goes, credibility and risk are inversely correlated. Phys. gold has little counter-party risk today in that you will find little difficulty in finding a bidder that measures value similar to you (liquid market). Unless you value your gold like I do, and in this case selling your gold would not be an option in the first place. That counter-party risk of acceptance is shrinking as the timeline of the $IMFS continues to its terminus. When Freegold is upon us, will you see counter-party risk in gold such that you will doubt that others will properly value your gold or will be reluctant to accept it in trade? What will these counter-parties trust and find more credible at this point?
The credibility of gold goes to the highest possible level at a state of Freegold. Counter-party risk becomes as close to zero as possible, nothing else can come close, at Freegold. A holder of gold has completed his trade when we have Freegold, no counter-party risk.
Motley Fool,
Being worthy of credit has always depended on character...not necessarily prior savings, though that may be indicative of good character.
Well that is certainly the case. However, where would you start in your assessment of an individual when deciding what risk you will assign to him regarding the likelihood of repayment of principal plus the interest? I would argue that a quality balance sheet that shows heavy in assets, assets that happen to be the most credible, is a fine measure of character. It shows initiative, productivity, and sound managerial skills.
Börjesson,
I would say you are doing very well.
To add my view to your comment on October 29, 2012 3:19 AM:
I find it easier to think about the pure concept of money based on how it functioned in earlier times, then extend the concept forward to today.
I posted a while back of what I heard at an exhibit at a late-eighteenth-century farmhouse museum. The economic exchanges in the town went something like this:
Each townsperson had a notebook with a page for each other resident. Exchanges were recorded in the notebook by counterparty and value (USD? though I'm not sure what the officieal currency was at the time).
Once in a while, people would get together to square accounts, figure out who owed who how much, and how to extinguish the debt ("I've always fancied that scythe" or "you can help me with my harvest for 8 days this fall"). Longstanding and trustworthy residents could go years between squarings, while less trustworthy or newer folk would find themselves having to square accounts monthly.
In the context of your comment, then:
Medium of Exchange: Goods and services flowed in one direction; what went in the other? Remembered values / favors.
Unit of Account: In this case, still the USD. Those evil townspeople, how dare they adulterate the pure gold-based monetary system with their WORTHLESS credit promises!
Store of Value: In this case, one could store value as excess favors owed by your neighbors, up to the point where the favors could be realistically paid back. Likely these favors included both formal debts recorded 'on the books' and informal debts based on social obligations.
An example of the latter could be if, say, your barn burned down and all the townspeople got together to help you rebuild it. Perhaps you hadn't saved up enough 'dollars' in your neighbors' ledger books to enable you to fully compensate for their time spent helping you, but if you were a contributing member of society they would have probably helped you out in exchange for you 'owing them one' -- informally.
Two further thoughts on the pure concept of money as a SoV:
1. I have read it expressed as “I store meat in the belly of my brother.”
http://www.realitysandwich.com/sacred_economics_chapter_12
2. I also read about a tribal culture in the Pacific Islands where the 'Big Man' (which could actually be of either gender) was not the person who had the most stuff, but the one who gave away the most stuff. Such a person would have everyone's gratitude and would never want for hospitality or for help in an emergency.
Hey Woland,
I never read Graeber, or even watched the interview videos that have been linked. Just don't have time. The quote I posted was from (as I recall) a review of his book, and I suspected debt, just like gold, was completely misunderstood (it is by definition if gold is, because they're symbiotically connected) and he sounded like he had a new perspective.
I don't think it's about either debt or gold per se in the final analysis. They are both (counter-balancing) instruments with which to manage relative credibility. They function in tandem, reaching into the past and the future to "fungify" the present.
It's truly hard to believe we have been able to work around such a monumental error for such a long time. The result is the present structure of society, which is actually testament to the creativity and resilience of humankind in the face of a ridiculous situation: it really could be so much worse.
If money is the cause, society is the effect.
Bjorn
Confusing debt and credit makes fraudulent coin flipping thrive.
matrixsentry
The credibility flow from credit money to freegold is most welcome. It will leave your medium of exchange as debt money, as it should be.
Duggo
I found Tustain very convincing on a podcast he did with Chris Martenson – he refused to get drawn into GATA-style conspiracy hysteria, and was very precise, cogent and, to me, plausible.
Absolutely fascinating.
I'm bold over by the intellectual effort that is put into the complex nuances of debt, money, value and Gold. I'm sure someone will claim victory in these cerebral Olympics much to the chagrin of his/her oponents
Has any body come up with the answer to:-
"How many angels can dance on the head of a pin?"
So far the articles that I've read by FOA and FOFOA have convinced me that I need Gold.
That's it. Game. Set. Match.
Sorry I'm just a simple boy.
42
@ Barry Michaelmore
Sorry Barry. No prize. 42 is the wrong answer but it is the right answer to "The Ultimate Question of Life, the Universe, and Everything". Hitchhiker's guide To The Universe.
Keep counting.
OK... 43 then? 44?
45?
SPIEGEL: President Draghi, do you have a savings account?
Draghi: Yes.
SPIEGEL: Do you know how much interest you are getting?
Draghi: Around 1.75%, that’s the current rate on savings in Italy.
I hope Mr. Draghi has more than just a savings account.
http://www.ecb.int/press/key/date/2012/html/sp121029.en.html
Hi Blondie,
I started re-reading that earlier discussion and making some notes with the aim of responding to you. Your concept of what banking is about is so far from my own that I doubt we can have a useful discussion about the topic. In regard to Q&B I'm looking for something more substantial than a dismissal about some unspecified "contradictions".
In regard to the money = credit issue I think the other discussants upthread made some interesting observations. None of the arguments you have advanced persuades me that this money = credit perspective does not limit the ability to communicate the matters we discuss here to a wider audience.
I think money = credit is a useful argument and a perspective that needs to be explored but it has limited usefulness. I don't see it as paramount.
Cheers
costata,
Your most recent comments illustrate exactly what I mean by you blocking the trail.
Reframe the situation (”Let's try a reductionist approach to Money = Credit and see if we conflict with FOFOA's assertion above with the definition that Money = Contract.“), make a qualified promise to return (”I'll try to revisit that discussion tomorrow.“), cherry pick a quote from some one else (Jeff) quoting some one else (FOA) and place your own emphasis, all of which implies that you have a case. But you never make it.
You make all sorts of claims about the banking system, about the need for full reserves, the apparent paradox of interest and the money supply blah blah blah. You seem to hold the banking industry (“banksters”) responsible for today’s mess. That’s fine, but when challenged to describe your perspective by anyone not intimidated by you, you regularly do what you have done above.
I’m asking you to state this case rather than just alluding to it.
In the meantime, there are other more relevant and fruitful avenues to explore, but your baggage won’t fit, and it's in everyone's way.
Blondie,
Your comment was posted while I was posting mine. I'll try to satisfy your demands but you need to specify them.
Let's break it down into some smaller units and see if we can get somewhere. I don't have unlimited time to devote to this. What do you want to discuss with me (if anything) in order of importance?
Motley Fool, Matrixsentry
Matrixsentry said in reply to The Fool:
Motley Fool,
Being worthy of credit has always depended on character...not necessarily prior savings, though that may be indicative of good character.
Well that is certainly the case. However, where would you start in your assessment of an individual when deciding what risk you will assign to him regarding the likelihood of repayment of principal plus the interest? I would argue that a quality balance sheet that shows heavy in assets, assets that happen to be the most credible, is a fine measure of character. It shows initiative, productivity, and sound managerial skills.
I think that you are both right. I am not a banker but my understanding of bank loan underwriting is that one needs to focus on the 3Cs: character, capacity and collateral. Of these the most important by far is character. In a sane banking world (think back to the 1900 to 1950s) this would be how your loan application would be evaluated. Unfortunately not so today. In our current world of too-big-to-fail banks, a banker will simply approve any loan that he can offload the bank's balance sheet onto the sovereign's. After all, we need to feed the exponential debt monster or the whole system will collapse.
Blondie,
You seem to hold the banking industry (“banksters”) responsible for today’s mess.
I know I am not costata, but if I may. I don't think anyone here thinks it's the banksters who are ultimately responsible.
The ultimate responsibility is with the savers, both with the individual ones who buy debt assets for their own retirement, and with the surplus countries who have kept accumulating debt assets as reserves for decades, primarily dollar denominated, and primarily done so by Japan, China, oil countries. The fact that the banksters thrive in this environment, is a side-effect of this behaviour. The one that has shown up so far and is most widely understood. The root cause, accumulation of so-called 'reserves' (held in the form of debt), is still lurking in the background and will strike during the next round of the financial crisis.
Nevertheless, once all this is over, there will be some technical changes to the banking system. Call them a consequence of the new paradigm if you wish. But I am with costata when he says that the CBs will probably control the credit volume created by the commercial banks (I hope I am right that this is what he said). Why? Not because the bankers were the cause of the financial crisis, but rather because freegold will make inflation of the effective money supply immediately visible, and the CBs will want to took good and preside over a stable currency (relative to gold). So they will tightly control the credit volume created by their commercial banks, and they will probably structly regulate consumer credit, etc.
Victor
I’m asking you to state your case rather than just alluding to it.
costata said:
"Blondie,
If there is a way to game the system then it threatens the "brake and spur" function of gold. It's the "how" I'm trying to flesh out of that valuation process by gold and the "how" of the trade balancing function. And then trying to express this in a solid, defensible way."
It's been three months since you said that, and we're all still waiting. You are continually implying that Freegold needs to be accompanied by banking reforms which you don't quantify to presumably protect against flaws you also don't quantify.
I'm asking you to "express this in a solid, defensible way".
There's little less global gold supply today than there was yesterday.
Victor said:
”I am with costata when he says that the CBs will probably control the credit volume created by the commercial banks (I hope I am right that this is what he said). Why? Not because the bankers were the cause of the financial crisis, but rather because freegold will make inflation of the effective money supply immediately visible, and the CBs will want to took good and preside over a stable currency (relative to gold). So they will tightly control the credit volume created by their commercial banks, and they will probably structly regulate consumer credit, etc.“
Really?
Firstly, banking’s moral hazard is gone when paper gold is gone, isn’t it? So commercial banks then have all the incentive they could possibly need to self-regulate. It’s called risk and reward, and both are now real. TBTF is history.
Secondly, the CBs can legitimately and impartially control their effective money supply by simply buying and selling free market gold. It's called arbitrage.
Thirdly, by restricting commercial bank’s credit creation rather than buying and selling gold they are placing an arbitrary restriction on potential economic growth. It's called bureaucratic central planning.
You are telling me that CBs would “look better” by arbitrarily restricting real, positive economic growth in their currency zone than by participating in the gold market themselves and letting market participants make their risk/reward decisions themselves?
When you say “look better”, you really mean “appear more credible”, don’t you?
FHC
corrupted soles
http://www.google.com/search?q=worn+soles&hl=en&client=safari&rls=en&prmd=imvns&source=lnms&tbm=isch&sa=X&ei=8imPUPW0O8fc2AXg_YCACg&ved=0CAoQ_AUoAQ&biw=1360&bih=658
@VtC
"I don't think anyone here thinks it's the banksters who are ultimately responsible."
Maybe not ultimately but they sure as hell have a significant role in this debacle. The FIRE industry has gamed the system at our expense; it is appropriate that the house burn down around them.
I will likely hear the tired and worn excuses of "they had no choice" and "in order to survive..." After all, we don't need no steenking accountability. I imagine that, throughout history, all those at the business end of the gun had similar excuses. And FG will resolve all this? I'm not yet fully convinced.
That should have read, there's a little less gold supply...
FOA (11/5/01; 18:31:01MT - usagold.com msg#130):
"Gold has always been the most political metal our world has ever known; political because it offers so much power to those that hold it in their hand. Many of the downtrodden look at government policies and say:
--"they dictate our wealth and put us in debt so as to control us"!--
Conversely; A simple person can control his controllers by staying out of debt and owning a wealth no government can dictate the value of: Gold Bullion!
GOLD:
-- value it with official contracts and currencies and your wealth is their power ,,,,,,,,,, keep it as your savings of ages,,, and your wealth becomes their master!"
Inspired by a ZH comment I did a trend search for 'freegold'...lets just say we have the area all to ourselves now:
http://www.google.com/trends/explore#q=freegold&cmpt=q
MdV,
Here, try this one. The googlything got a bit confused with a mining company in BC;)
I appreciate the ongoing discourse re: credit=money=credibility=other really cerebral stuff.
For the pedestrian crowd, let me offer a question:
There is much discussion here about dollar implosion and revaluation of gold. What I haven't seen discussed in any depth (and I may have just missed it because I tend to do that), is what we might expect the economic fallout of the USD HI to be on the global stage. Is there any modelling that can guess at what that would be like? Any posts that deal with this that I have overlooked?
By understanding how much pain a USD HI would cause to key nations, we can (I think) estimate how stridently these nations would work to prevent the HI event. This could advise us on timing, I would conclude.
Thoughts?
Opinions/jeers/contrasts/factoids/musings cheerfully encouraged.
Blondie,
You don't want much do you? Just the following plus a description of the issues in the banking system completed within the last three months:
If there is a way to game the system then it threatens the "brake and spur" function of gold. It's the "how" I'm trying to flesh out of that valuation process by gold and the "how" of the trade balancing function. And then trying to express this in a solid, defensible way."
Okay flip the same request to Q&B or, say, the entire economics "profession" and listen to the deafening silence.
I don't know if you follow all of the comments but I have made several comments on these topics in past threads. I'm trying to tie it together in a way that is "solid and defensible". And I freely admit I have explored some blind alleys including the conventional "100 per cent reserve" schemes.
I'll try to express a key part of what I have developed thus far in a reply to Victor's above (which I think got very close to the heart of the matter of ECB "control" of the banks).
BTW I thought the outcomes/impacts you predict in your comment at October 29, 2012 5:02 PM are ludicrous. And that's being generous.
Blondie,
the commercial banks cannot prevent freegold nor can they stop it once it's there.
But they do have an influence on consumer prices. In order to see this, you need to understand what causes consumer price inflation. You can indeed model the general price level using an old fashioned exchange equation: MV=PQ.
But not in the fashion Milton Freedman thought. It works only once you 'disaggregate' the various components of base and credit money. You basically need to distinguish for which purpose the credit was created.
For consumer price inflation, M is the monetary base that circulates in the goods and services market (as opposed to real estate, financial assets etc.) plus all credit created for the purpose of consumption (e.g. all consumer loans, the usual consumption part of all loans to government etc.). Q is GDP. Then it is a good approximation to assume that V is constant, and you can estimate the price level P.
Another such equation describes the real estate market. Here M is basically the total sum of all mortgages on the books of the banking system, Q the inventory, V assumed constant, and you can estimate the level of house prices P.
There are therefore a number of processes that lead to consumer price inflation. Some obvious ones include:
1. CB creates base money by buying any sort of assets (gold if you wish) so that the seller of the assets tends to consume it.
2. This includes CB buying government debt and giving new base money to government for spending.
3. Commercial bank creates consumer loan (credit card, car loan, whatever).
What's important is that either base money or credit money is created and given to a consumer. (No surprise, really).
The insight that eventually defends costata is the following. Assume that the CB is well behaved, but we need to take a look at the commercial banks. You might think that the regulator sets a reserve ratio, and not many customers depot huge amounts of MoE in their current accounts, and so the banks cannot lend much.
But that's not what happens empirically. It is true that credit creation follows the reserves, but rather the reserves follow the credit creation. I.e. the commercial banks effectively make the decision to expand credit. Then they find a way of attracting reserves (for example by offering higher rates on savings accounts [rate] or by bidding for CB liquidity [usually]).
So although you might think that under freegold, customer deposits are scarce and this would restrict bank lending, the answer is, no, it won't.
This would be one of the major fallacies in the accepted wisdom about banking. The following two are empirically refuted:
1) Presence of reserves allows the commercial banks to create more credit. Truth is that reserves follow lending.
2) Low interest rates stimulate the economy and precedes economic growth. Truth is that low interest rates follow recessions.
...
The message here is that the present mechanics of the banking system and of the way the CBs set interest rates and provide liquidity to the commercial banks does not provide any mechanism by which they could prevent the commercial banks from excessive consumer lending.
It can happen again. The reason is that it has a lot to do with how the MoE is managed in the banking system and little with the store of value that is used.
The difference between freegold and the present system is that you would get visible consumer price inflation very early on (you cannot hide this any longer by asking foreign surplus countries to hold your currency).
So I am saying that the CBs would be vain and would not want this inflation, and so they would find a way of running their commercial banks differently. I think they would at least need to target money supply (according to my definition above) rather than interest rates.
For example, during the first few decades after WW2, both Germany and Japan had detailed regulations about the credit volume the banks could create and what they could create credit for. Both had low inflation and fantastic growth. I don't think this was all 'thanks' to reconstruction, but that the management of their banking system played a big role.
Another change the CBs might want to implement is that they won't accept government debt (at least not without a substantial) haircut in their repo operations. This is another way government debt can still end up on the total balance sheet of the banking system (and cause consumer price inflation).
In particular if the ECB wants to prevent the governments from creating inflation (either now or post transition), they need to find a way of controlling the amount of government debt that is used as a collateral in bank refinancing. Yes, they have LTRO'd quite a bit in order to counter deflation, but they need a new control here. I think this is what costata (and probably others) calls "breaking the link between the banks and the governments".
Secondly, the CBs can legitimately and impartially control their effective money supply by simply buying and selling free market gold.
No, they can only control the amount of base money this way, but not the amount of credit money. Yes, they can counter one sort of inflation (say, the commercial banks lend money for purchasing TVs and TVs get really expensive for a while) by selling gold and cancelling the base money they receive (and reducing M somewhere else). But this would first only distort the prices of different goods and services relative to each other and later on lead to a lack of reserves and some blow up somewhere else in the banking system - somewhere else would be the weakest link that suffers most from drained reserves.
Yes, it would provide inflation. But they would still have to clean up the mess. Some similarities with the old gold standard.
Victor
Again: By selling gold and cancelling the money you take in, you effectively take reserves away from the one who has the least ability of attracting reserves, but not from the one who created credit excessively in the first place.
This is too coarse to manage the MoE for a similar reason for which just setting an interest rate is too coarse.
Btw, George Soros gave lectures at the Central European University in 2009 in which he said precisely this. Well, he always mixes it with his philosophy, and then people dismiss him as a smart-arse fat cat. - I think he completely understands it. (i.e. how to run the MoE under freegold)
Victor
VtC,
A small change and we are on the same page:
Nevertheless, once all this is over, there will be some technical changes to the banking system. Call them a consequence of the new paradigm if you wish. But I am with costata when he says that the CBs will probably control the credit volume created by the commercial banks (I hope I am right that this is what he said).
I think I understand where the ECB is going with this. It's not the volume they need to control it's the quality. And the solution, in principal, is dead simple. Make sure the loans are repaid. In other words maintain the quality of the loan book across the whole banking system.
IMO hence the move to have the ECB take over regulatory control of every bank in the European system from the politicians and place the state regulatory bureaucracies under ECB supervision. This is a crucial step forward in relation to currency management as well.
From the reading and research I have been doing recently the key to currency management is base money. Under-supply the demand and you get deflation. Over-supply the currency and you get inflation. Mises and some of the classical economists were dead right about this. (Customer deposits are an issue but I'll come back to that.)
As I said in a recent comment banks create both persistent and temporary money. The net interest margin of the banks generates a persistent addition to the money supply but it is negligible in the context of the ECB's two per cent target. The principal component of bank loans are a temporary addition to the overall money supply. As they are paid down "money" is destroyed.
Recall an earlier thread where we discussed the fact that defaulted loans leave some deposits in the banking system unbacked by a performing loan. The deposit still exists and there is no way for the central bank to drain this phantom liquidity once the banking system gets out of control as it has in the USA.
So to make it as plain as possible. The banks will have to restrict themselves to lending to people, companies etc who can and will pay them back. Pretty radical idea, no? If they screw up they will be bankrupted or merged not bailed out. Losses will be recognized and this will help the ECB to manage the currency supply.
Note also the critical difference in the plan to guarrantee deposits across the system between the EU plans and other schemes. My understanding is that any payouts will be from a fund that the banks and/or governments will contribute toward.
In the EMU these governments aren't currency issuers and the banks will have to contribute from their own funds. They can't lend this money into existence or have a government print it.
In other words it will be paid out of the existing money stock not with increased flow of new money under the balanced budget regime Christian Noyer described in his recent speech.
I got off an a tangent while trying to figure out how the ECB would excercise control over the bank credit money component of the system. Several of the scenarios I explored/developed were a sledgehammer to crack a walnut.
Like I said above the ECB solution is dead simple and elegant. Uncle costata is seriously hearting Draghi and his team. In future I think he will be considered to be right up there with Wim Duisenberg in the ECB's HOF.
I hope the above is easy for everyone to understand. Happy to provide further detail to anyone who wants it.
Cheers
In the first message it needs to read
It is not true that credit creation follows the reserves,
(typo meets logic...)
The other reason why Blondie's idea won't work is this:
1. Strong commercial bank lends irresponsible to consumers.
2. Consumer prices go up.
3. CB counters this by selling gold and cancelling base money.
4. Inflation goes down (albeit in a different area).
5. Someone other than the irresponsible lender runs out of reserves first.
Problem: Consumer prices are still higher (because no. 1. is still in operation), effective money supply is still elevated, and CB has less gold than before.
You want to give up gold only if this has a positive effect, but not for nothing. In fact, in extremis, the CB would have to abandon this strategy and would have to let the consumer price inflation happen.
costata,
I agree that the ECB proposal is a step in the right direction. Draghi rulez. But eventually they will target credit volume at least as far as consumer loans are concerned and close-to-consumer loans such as government debt.
Victor
Hi All,
I have been writing some articles for my friends here in India to simplify (I hope not dumbed down) the concepts for them. As a stepping stone to FOFOA :-). Also they have friends and family whom they want to help understand the concepts.
Please have a look at the articles. They are not long, at least not by FOFOA standards :-). And give some comments over at the blog. Thanks.
http://talkfreegold.blogspot.in/
@Victorthecleaner
100% with you. Banking sistem need severe redesign.
Hard example: Greece is a state that run bankrupt several times. Economy was not performant, tax level high and political unrest.Before acceding to euro, the drachma was among the weakest currencies in non ex-communist Europe (drachma, italian lira and the turkish lira were the stars of inflation). How on earth such a country would get AAA rating and allowed to borrow up to 100% of GDP? When asked about the drop in rating, the credit rating simply said: we changed the paradigm!
It is assumed that senior finance persons can harmonize political and financial agenda, rather that ignoring the financial consequences due to political drag.
For the advocates of high morality, why you do not examine the guilt of the knowledgeable lender that deliberately created bad debt ? Remember, the knowledgeable lender was the agent/the trustee of saver …
http://commonsenseforecaster.blogspot.ro/2008/02/new-paradigm-role-of-rating-agencies.html
@Victorthecleaner
100% with you. Greece is a state that run bankrupt several times. Before acceding to euro, the drachma was among the weakest currencies in non ex-communist Europe (drachma, italian lira and the turkish lira were the stars of inflation). How on earth such a country would get AAA rating and allowed to borrow up to 100% of GDP? When asked about the drop in rating, the credit rating simply said: we changed the paradigm!
The real senior finance poeple should align the financial agenda and the political agenda, not to ignore the finanical side for politicial efects.
For the advocates of high morality, why you do not examine the guilt of the knowledgeable lender that deliberately created bad debt ? Remember, the knowledgeable lender was the agent/the trustee of saver …
Naughty Slumdog,
I hope you understood me: I was saying what I think will happen. Not want I want to happen.
Everyone,
Woland would say that James Turk is hyperventilating on KWN. But this time he discovered the graffiti "Big Trader Was Here!":
Click here for most recent hyperventilation
Old article by Turk
He shows some import/export statistics that in 1997, more than 2000 tonnes were relocated from the UK to Switzerland.
I actually wonder who got it: SA, BIS or BT?
Victor
Hi VtC,
Your comments went up while I was writing mine in case youget the impression I'm talking past you. I read comments before composing this one and as you can see we are broadly in agreement.
If you step through the impact of a little currency deflation on a bank's business I think it will quickly become clear to you that the ECB can inhibit the banks from over-inflating the money supply if it chooses to do so.
And the pending regulatory changes in the EU will be complementary to the banking system regulatory control that the ECB will be able to excercise.
However, as you point out the banking system will still have the inherent capability of inflating an asset boom if the regulator and, more importantly, the government doesn't push back against them (hard).
So I'll be looking for changes in law emerging if the EU is determined to prevent asset booms (such as RE in Spain and elsewhere).
Personally I think a "middle way" strategy will emerge. A steady rate of loan expansion if the economy can absorb it. Some potential for a speculative bounce but not the wild, out of control crap we've seen in recent decades.
Blondie,
Sorry for the remark about your earlier comment. One of the key things to keep in mind is FOFOA's early insight about the "printer" of currency. He/she can only control supply not demand. But the central bank does have some levers to influence demand.
Unlike governments who issue currency the ECB cannot issue bonds in liquidity management operations. It's ultimate weapon is gold but as Another observed gold is for war. IMO it will be tightly conserved.
I'm trying to complete a scenario for the ECB's management of the customer deposit element of this system. My gut feeling is that it won't be a copy of the system that Denmark uses to control the exchange rate of its currency (interest rates exclusively). Too clumsy and hamfisted.
I can't estimate when this will be completed but I think it's close. It could be as early as three months.
VtC,
...But eventually they will target credit volume at least as far as consumer loans are concerned and close-to-consumer loans such as government debt.
If they go down this path as well or because they prefer it then we should expect big changes in regard to risk weighting and reserve ratios. I don't see the kinds of changes that would facilitate this approach coming out of Basel (at present).
byiamBYoung,
Re: your comment at October 29, 2012 7:45 PM
..what we might expect the economic fallout of the USD HI to be on the global stage. Is there any modelling that can guess at what that would be like? Any posts that deal with this that I have overlooked?
That's a tough one. Most of us have had to try to figure out the implications for our local economies through our own research. FWIW I think a lot depends on how effective the ROW is in disengaging from the US dollar in our international trade. If imports into the USA shut down completely today it would shave high single digits off global GDP for as long as the HI lasted.
Currency swaps may prove to be part of the solution. Also if you accept her data factor in the change in the mix of FX reserves by developing countries that Lan Pham reported recently.
Each currency zone might return to trading on fundamentals after the initial shock rather than being, say, a mirror reverse of the USA (experience deflation). The countries with the largest trade surpluses with the USA will be hurt badly. Obviously China and Japan will be top of that list.
This is merely a hunch but I think there will be some confusion about the Euro initially unless enough time elapses before the HI. I suspect the EU's problems will need to be seen as being in the "rear view mirror" in order for the Euro to be accepted en masse as the alternative trade currency given all of the bad publicity of recent years.
Last and of the utmost importance will be gold - public reserves, private holdings and local gold production. I would be hoping that the FX market traders would recalibrate from the US dollar to gold very quickly. Rumours of the LBMA's death may prove to be greatly exaggerated (and the ROW may have cause to be grateful for that).
Anyway that's my 0.02
sleeping
do I see fofoa forming a 'head and shoulders pattern?
what does your TA say about his future?
Ryan
that was some interview with Draghi. I'd love to hear Bernacke pinned down like that. Imagine Ben saying something like: "Draghi: A lot of governments have yet to realise that they lost their national sovereignty a long time ago. "
Wow!
I wonder how THAT will be digested by the Europeans when it sinks in?
I did a days work for a friend the other day, as mates do. No payment was discussed. But of course he feels as though he must repay me. So he takes a look at my boat engine and offers me some eggs. This is the world of barter. The feeling that he owes me is called credit/debt. Somewhere along the line for a reason I don't know, someone has to put an 'exactness' on that feeling and they stamped it on a coin. money = credit.
Michael dV,
Draghi: A lot of governments have yet to realise that they lost their national sovereignty a long time ago.
He could have said "It is the fault of the stupid German savers to lend their money to the consumers in the south", but he didn't. You just don't insult your host in this way. Although you should!
The Turks, Sprotts, Embrys and Kings (Eric, not Mervyn) of this world should all love the ECB for their hard money stance. Noyer says, roughly, "Dear Asians, you can forget about the debt [of the US] as a reserve, but we offer you stable central bank money instead." Smaghi says an inflation tax won't work. Draghi tells the journalists in his first press conference that the ECB is not the lender of the last resort, and now that sound bite from the interview.
Victor
@ anand srivastava
Nice site. Well done!
VtC, costata,
You seem to be singing from the same songbook, so I’ll address this to you both, if you don’t mind.
VtC:”the commercial banks cannot prevent freegold nor can they stop it once it's there.“
Agree 100%; I’ve never indicated I think otherwise. In fact, I fail to see any other entity being able to do so either.
We agree on some things at least.
Change is coming, and that change is functioning gold.
Gold begins to function when the paper gold market breaks, and this may be either a cause or an effect of a USD HI. This HI is not really pertinent except as it may alter future risk perceptions, as we are interested in the functioning of the banking industry (specific currency/s unimportant), post change. What is important is that gold is now functioning free from encumbrance. There is no credit denominated in gold, and a widespread appreciation of why there should not be.
At the risk of upsetting some people, we could refer to these two paradigms as BG (Before Gold) and AG (After Gold)?
CBs, as currency suppliers and managers, will be interested foremost in the stability of their respective currencies in order to satisfy the needs of their currency users.
Can we agree on this?
Victor,
I am left to wonder whether some sort of spur and brake force would work in your scenario anyway. Just thinking out loud by putting in some more points:
1. Strong commercial bank lends irresponsible to consumers.
1a. Wouldn't this normally mean that interest rates would go down? Thereby making it more attractive for savers to own gold than deposits in this bank?
2. Consumer prices go up.
2a. Gold prices would also go up, no?
3. CB counters this by selling gold and cancelling base money.
3a. Why does the CB need to sell gold? To counter-act the rising gold price? The market forces acting on bank deposit accounts would perhaps make deposits flow to a more responsible bank with higher rates on deposits or into gold.
4. Inflation goes down (albeit in a different area).
4a. Inflation would rise for a time if CB didn't intervene, but would be reeled in once the irresponsible lender ran out of reserves.
5. Someone other than the irresponsible lender runs out of reserves first.
5a. Maybe the market forces described above would make sure that it indeed was the irresponsible lender that ran out of reserves first?
I don't know, just trying to see the problem from the other side...
/Burning
There were a whole host of comments earlier today from a variety of people which interested me, many of which were responses to some degree or other to my own previous comments.
Börjesson,
”If gold too is essentially just stored credit (or credibility), just like dollars, then what's the merit of saying that we need to separate the store of value from the means of exchange?”
Because, in order to interact equitably, we need to be able to differentiate between that which has already been created and that which is not yet created; past and future. They qualitatively differ. Paper gold, or credit denominated in gold if you prefer, disables the instruments (gold and debt) we use to make this differentiation.
Michael dV,
I think my “pure money concept” differs a little from, but is complimentary to, those quoted by Jeff.
matrixsentry,
”A stack of gold is a testament to someone's credible ability to produce.“
What about the credibility this producer then earns by making their useful excess available to others, in return for useless gold?
This ties directly into:
Woland,
Gold does indeed have a counter-party, a really big one called society. Take away society, and what function has gold? Buying gold is really a vote of confidence in society as a whole, in people and their future prospects. There is a lot more beneath the surface here.
Jeff,
I would like very much to share my thoughts on FOA’s comment you have posted at October 29, 2012 7:00 AM, but this would open too large a door for today. My “pure money concept” is an extension of FOA’s descriptions here. I would like to add this though:
FOA: ”Our reasons for following these old lifestyles is, for us of course, to gain a better perception of how humans understood and used their wealth, back then. What is coming to light, for gold advocates, is an ongoing evaluation of how we, as a modern people, have lost so much of our connection and understanding to what wealth is, how much it's worth and how to use it. This is, of course, in contrast to the ways wealth, including gold was seen and valued then.”
I find it very interesting, the way that FOA refers to this developing contemporary understanding of ancient perspectives on money. For one thing, he freely admits it is developing still. For another, he considers it important. He refers a lot to “us” and “we” throughout this leg of the trail: it does not seem unreasonable to assume there is a collective studying and continuing to develop this understanding even today. Obviously this collective is at the monetary coalface. Central Banks, the BIS. If they thought they fully understood everything about money themselves, they wouldn’t need to be developing their perspective, would they? Why would we assume they are done by now? Sure, they’ve got some pretty firm ideas, lots of experience and no doubt some impressive resources to call upon, but it is clear that only comparatively recently the limits of their knowledge were exposed. At a minimum somewhere in the mid 20thC the intellectual core of the global banking system is aware it doesn’t 100% understand how its own fundamental essence operates. Existential crisis for the modern monetary system is a possibility. Gold has been mishandled and subsequently misunderstood for thousands of years. The knowledge really needed, the actual origin of money and the original function of gold lies back prior to this. FOA never claimed his description was complete or perfect.
Just another angle I haven’t seen discussed. Obviously I'm suggesting this perspective may be incomplete and wish to advance some refinements:
Michael H,
Your example is much like my “pure money concept”, just wind it back further to purify. Have you seen 2001? The society in the first scene, they had money too. That’s getting pretty pure, eh? I remember you talking about gift economies quite a way back. This discussion belongs with Jeff’s FOA one that is too big for me today.
Blondie,
CBs, as currency suppliers and managers, will be interested foremost in the stability of their respective currencies in order to satisfy the needs of their currency users.
Broadly agree. And I'm not being churlish with the qualification "broadly". It depends on the currency manager/supplier's mandate and if they are one in the same.
Thanks duggo.
costata,
I agree, it is better when qualified as you have.
costata et al
Perhaps I will add my two pieces of eight. ^^
It is true that base money is almost irrelevant in terms of credit creation, in that it in itself is not a limiting factor. Credit money is also the money of the people ( read Debtors), while gold is the money of the producers ( read Savers).
The function of the central bank under freegold would be management of the unit of account function against a basket of goods.
The unit of account function is affected by the amount of currency in circulation and MV = PQ. Again, base money is almost irrelevant as it comprises such a small volume of the whole amount of fungible units.
So what would happen AG ( h/t Blondie) if banks created too much credit? This is the relevant question.
Well, if the amount of fungible units expands, then each subsequent unit is less valuable if measured against gold. If central banks do not intervene, then this creates an automatic incentive to save more and borrow less,as the price of gold rises. Rates paid on deposits would need to be higher to keep deposits, lest they be swapped for gold, ( something that actually matters AG) and this automatically means that interest rates on loans must climb as well. A double whammy in terms of incentive to stop borrowing.
Central bank intervention is only pertinent in regards to surpluses or deficits in production of real goods flowing across the monetary zone.
TF
So what would happen AG ( h/t Blondie) if banks created too much credit? This is the relevant question.
Yes. With savers going for gold, whose money are the banks risking?
Adam Smith says bank regulation need not apply.
DP that is a very important point.
Currently 99% save in the banks. So with 10% reserves there is a huge amount of money available for the banks.
After Gold could be that only 20% save in the banks. This means that even if there is 0% reserve banking, 80% of the money will be moved to gold, and the effective Reserve Ratio will be 80%. Which is way too high for banks to waste their money on stupid schemes.
I do think AG there will not be need for Central Banks to do much, but it could happen that people again get seduced with the stability and ease of the MoE in the future. Then CBs will need this power. Though not for a couple of decades.
@ Blondie,
Because, in order to interact equitably, we need to be able to differentiate between that which has already been created and that which is not yet created; past and future. They qualitatively differ. Paper gold, or credit denominated in gold if you prefer, disables the instruments (gold and debt) we use to make this differentiation.
I want to thank you for the clarity and perspicacity of your posts. I always gain in understanding from them.
I should have said 80% of the money would move to gold, stocks, land, and other SoV items. The crucial point is that banks are only free to use 20% of the money, as if there was a 80% Reserve Ratio applied by the CB.
FOFOA: But debt itself is not the cause of our problems today. Today we have a situation where the vast majority of excess production value (excess capital) is enabling massive amounts of global malinvestment through new debt creation. That has peaked and is now contracting. But the problem is not the debt itself. The problem is the enabling effect of excess capital not having a viable alternative that floats against the currency. The problem is the lack of the adjustment mechanism of Freegold. There is no viable counterbalance against uncontrolled debt growth today. So we are only left with credit collapse and hyperinflation of the monetary base to clear the malinvestment from the system.
It is easy to blame this on debt as a principle, but unless you don't mind being wrong, there are some deeper explanations out there. Debt under Freegold will not reach such destructive levels. "Easy money" thinkers may or may not get their debt-free money, but if they do they will suddenly realize the flaw in their reasoning. Oops! That it can only have expandable value (needed for the welfare state) if producers are willing to hold it while it expands. Without that, socialist welfare expansion will simply dilute the value of the currency and be as limp as a eunuch.
FOFOA: It is important to understand that few persons or governments hold US dollars! Look at any investment portfolio and what you will find are "assets denominated in US$". This sounds simple, but it is not. You have heard the phrase, "money is moving into real estate, land, oil, stocks or bonds". It is a bad meaning, as it does not what it says.
All modern digital currencies do not go into an investment, they move THROUGH it. The US unit is only an exchange medium to acquire assets valued in dollars. US government bonds are the usual holding. No CB holds any currency! They hold the bonds of that currency. The major problem today, is that digital currencies have erased the currency denominations of all government/nation debt holdings! Even though a debt is marked as DM, USA, YEN, they are in "real time" / "marked to the market" and cross valued in all currencies! No currency asset, held by CBs today are valued in the light of a single issuing country, rather "all currencies are locked together". To lose one large national currency, is to lose the entire structure as we know it!
There is an alternative. Gold! It is the only medium that currencies do not "move through". It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say "gold moves thru paper currencies". Gold can be used to revalue any asset, and not be destroyed in the process! --ANOTHER 1998
MF:
Well, if the amount of fungible units expands, then each subsequent unit is less valuable if measured against gold. If central banks do not intervene, then this creates an automatic incentive to save more and borrow less,as the price of gold rises. Rates paid on deposits would need to be higher to keep deposits, lest they be swapped for gold, (something that actually matters AG) and this automatically means that interest rates on loans must climb as well. A double whammy in terms of incentive to stop borrowing.
As the ANOTHER quote from DP shows, deposits that are swapped for gold will simply become someone else's deposits.
Also, I do not think it immediatly follows that gold will go up in currency price as credit expands. Rather, it would be possible for credit to expand in one asset class only, leading to price levitation of that asset and not affecting either gold or consumer prices. Think residential real estate. But eventually, when the levitation fails, there will be problems. Perhaps it would be better to head off these problems before they start, rather than cleaning them up after the fact.
Blondie,
Thirdly, by restricting commercial bank’s credit creation rather than buying and selling gold they are placing an arbitrary restriction on potential economic growth. It's called bureaucratic central planning.
Do you think that restriciting credit expansion to the ammount required for 2% consumer price inflation would be an 'arbitrary restriction on potential economic growth'?
I see it differently, in that setting the 2% inflation limit would allow whatever amount of credit creation as the economy requires (and 2% more for a margin of safety).
Blondie,
Secondly, the CBs can legitimately and impartially control their effective money supply by simply buying and selling free market gold. It's called arbitrage.
Can you describe how you see this process working? Do you see it differently from what victor says:
Yes, they can counter one sort of inflation ... by selling gold and cancelling the base money they receive ...
deposits that are swapped for gold will simply become someone else's deposits
Unless it was CB gold that entered the market looking for currency to drain from the system.
(Yes, as Victor indicated.)
It is the only medium that currencies do not "move through".
Conversely, if a CB decides its currency is getting too strong, they can push new base currency into circulation by bidding with it for private sector gold.
One could term this targetted devaluation.
MF:So what would happen AG ( h/t Blondie) if banks created too much credit? This is the relevant question.
DP: Yes. With savers going for gold, whose money are the banks risking?
Great comments. This really gave me something. It put me firmly on track compared to my more tentative comment above...
What's at risk if the MoE is expanded, but almost nobody uses it to save in? Well, first of all even fewer will save in the MoE if its quantity keeps expanding. It will also lead to price-inflation in goods, services and wages.
I get the feeling that people will feel pretty relaxed about it AG. Peoples savings are all right. The only annoying thing is that the rubber band we use to measure wages and prices stretches at a greater velocity than when the inflation is lower.
It is annoying while it lasts, and maybe ECB and others will install complex bank regulation to counter that, but is it important to life AG or is it an important part of Freegold?
I don't think so...
I slightly edited FOFOA's comment about debt-free money to show that it also rings true for credit money expansion:
[new credit money] can only have expandable value (needed for the welfare state) if producers are willing to hold it while it expands. Without that, socialist welfare expansion will simply dilute the value of the currency and be as limp as a eunuch.
It seems that AG adventures into irresponsible lending would be fairly short lived, as it would quickly be recognised that the outcome would not be the bubble-blowing that we are used to (BG). It would just lead to inflation and higher gold prices.
[new credit money] can only have expandable value (needed for the welfare state) if producers are willing to hold it while it expands. Without that, socialist welfare expansion will simply dilute the value of the currency and be as limp as a eunuch.
"if you hated the old system, you won't like the new one either"
Well said, Wendy!
If the rubber band we use to measure wages and prices stretches at a greater velocity than when the inflation is lower, then I'm pretty sure people will be quickly out on the streets demanding somebody should do something!
Seems Hungary has found another way to kick the can?
How long before we see this catch on... In the US of A too before the bell rings?
Michael H
At present credit expanded finds shelter in the savings of people.
Those loans created out of thin air creates a asset and liability, and concurrent income stream.
As these units of exchange are all fungible, that means greater purchasing power spent into the present.
Bubbles are simply temporal distortions created by levitation of an asset due to over valuation. This is created by wrong price signals, such as interest rates, and mistaken impressions of future income.
Gold as separate measure unit would point out such mistakes before they become endemic.
I am not saying that mis-pricing would not occur, it is obvious that human judgment is fallible. Yet given good metrics for measure, it is not so far divorced from reality as we see at present.
I think you need to make a stronger case that we will see such extended and ludicrous bubbles AG.
I don't see it being the case.
TF
Please help with a simple concept I should already know...if I take cash and deposit it into a bank account, have I exchanged base money for credit money?
thanks
Hi Michael dV-
if I take cash and deposit it into a bank account, have I exchanged base money for credit money?
Yep. You just created a bank liability equal to the cash (base money) you deposited. That's credit money.
Michael dV and Aaron,
Yep. You just created a bank liability equal to the cash (base money) you deposited. That's credit money.
Yes, now instead of holding 'base' money you are holding 'credit'; as Aaron said you now hold a bank liability.
I just want to add that the base money you exchanged was not destroyed, but rather now belongs to the bank. They can keep it as reserves, or deposit it into their account at the fed, until someone else comes into the branch and asks to withdraw a deposit.
Motley Fool,
I think you need to make a stronger case that we will see such extended and ludicrous bubbles AG.
One place we could look is in economies where the local currency is used for exchange, but savings are in a foreign currency like USD. Would the presence or absence of asset bubbles in such an economy tell us anything about how bubbles would behave AG?
Also, bubbles do not need to be 'extended and ludicrous' to cause broad economic harm.
Aaron,
Did you get my latest e-mail on the draft presentation to your economist colleagues?
Cheers
Costata-
Yes and thank you. I agree with you that we should recognize a solid foundation of surplus-seeking individuals as a vital component of a healthy economy. In fact, lucky for us surplus-seeking in my view is a natural state for humans -- that is -- we each seek a surplus to better own own situation (and in extremis -- increase our credibility ;-).
Getting to the "who" part of the question from a Marxian perspective on where that surplus originates (bourgeoisie or proletariat) or the methods by which the producer accumulates his/her surplus is probably a bit much for Mary.
But the idea of individuals as surplus-seeking entities. I like where your thoughts are going.
Would you like to refine any of these ideas for those reading along?
--Aaron
costata,
I agree that what has been announced so far in terms of banking supervision, sounds like your scenario. Whether controlling the credit volume will follow, we have to see.
Another thought I had is this. With a 2% inflation target, you can actually abuse your money supply quite a bit. For example, monetize about 2-3% of GDP in additional government debt every year.
If you think about it, 2% inflation is a large number. Of course, it is not large in relation to our post-1944 or post-1971 experience, but for a MoE under proper management, it is large. (It is just that virtually nobody can remember the good old times before the exorbitant privilege).
Perhaps it will be a piece of cake to control consumer price inflation, simply because (although what I said might be technically correct) the numbers are so small that you don't have to care? Blondie?
Blondie,
CBs, as currency suppliers and managers, will be interested foremost in the stability of their respective currencies in order to satisfy the needs of their currency users.
Can we agree on this?
Sure. I'd like to be specific and say the CBs are interested in the MoE relative to consumer prices. If they achieve this, they won't be able to have the MoE exactly stable in terms of gold, and vice versa.
(The real value of gold needs to be able to fluctuate for it to function. If the CB tries to have their currency stable w.r.t gold, they are trying a soft-peg gold standard and will fail as everyone did who has ever tried it because they would have to sterilize gold's natural function). The idea that gold would be stable relative to goods and services is a fallacy from the HMS (Hard Money School). Does this all make sense?
MF,
Well, if the amount of fungible units expands, then each subsequent unit is less valuable if measured against gold. If central banks do not intervene, then this creates an automatic incentive to save more and borrow less,as the price of gold rises.
I am not sure this is universally true. The best model that is able to describe inflation of consumer or asset prices as a consequence of actions in the banking system, is Werner's theory of disaggregate credit. The point is that it does matter for which purpose people take out their loans (with mortgages this is obvious in the statistics, otherwise you need to guess).
So if people borrow money from the banks in order to buy consumer goods (and the respective M increases), you get consumer price inflation. You would get an increasing gold price from this effect only if people borrow MoE in order to buy gold. (In addition to this, you also have the effect that your preference of holding gold relative to holding MoE denominated investments depends on peoples' view on future real interest rates - Barsky-Summers again).
Victor
VtC,
"The real value of gold needs to be able to fluctuate for it to function."
Absolutely.
Which makes it useless as a UoA.
Neither is it acting as a stable SoV. Value in ≠ value out. I think it is doing something else, which I will come back to when it's in context, but I would like to say that the price of gold AG is everything we currently wish GDP was today (and it isn't).
DP,
Yes. With savers going for gold, whose money are the banks risking?
If someone borrows MoE from a bank, this is (electronic) credit money, and this MoE always appears somewhere on the liabilities side of the banking system. All loans here are deposits somewhere else. So that money would still be at risk (besides the bankers' own money and that of their shareholders and non-depositor creditors).
What FOA says in the quoted passage is that any expansion of MoE money supply for consumer loans (which includes a good part of loans to government), would immediately lead to inflation. Agreed. The question is whether your CB would let it happen AG or whether they would try to make their MoE as stable as they can.
Michael H,
Also, I do not think it immediatly follows that gold will go up in currency price as credit expands. Rather, it would be possible for credit to expand in one asset class only, leading to price levitation of that asset and not affecting either gold or consumer prices. Think residential real estate. But eventually, when the levitation fails, there will be problems. Perhaps it would be better to head off these problems before they start, rather than cleaning them up after the fact.
This is exactly my point (and costata's?)
I see it differently, in that setting the 2% inflation limit would allow whatever amount of credit creation as the economy requires (and 2% more for a margin of safety).
Agree 100%. Loans to businesses tend to increase not only money supply, but also GDP which compensates the inflationary effect. Only loans beyond that, to consumers, directly lead to rising consumer prices.
One place we could look is in economies where the local currency is used for exchange, but savings are in a foreign currency like USD. Would the presence or absence of asset bubbles in such an economy tell us anything about how bubbles would behave AG?
Exactly!
DP,
did you lock JR into your basement with a printout of all FOFOA posts, and are you know forcing him to work for you?
Victor
So, JR usually responds within milliseconds, can process large volumes of data easily, does not want to appear on camera, and hangs at the first sign of a recursive definition (credit=credit). Hmm...
costata, VtC,
Just to be clear: I greatly respect both your views; the obvious depth of your knowledge of economics and banking; the time, dedication and perseverance required to achieve this (and likewise for all the others here doing similar). I also acknowledge the difficult task you are both engaged in in attempting to bridge the gap between today’s systems and the concepts revealed by the Gold Trail. I see for example Victor criticised by those of a more conservative perspective for lacking credible sources and stretching the realms of probability too far on the one hand, and then criticised by the likes of myself for being too conservative on the other, on the same day. I imagine costata to be in a not dissimilar position. It’s a big ask, trying to reconcile these juxtaposed perspectives. It’s not my intent to simply make it more difficult for anyone.
An aggravating difficulty in building this bridge is that each position resides in a different paradigm (BG/AG), one of which is in the future, so it requires an incredible amount of effort when trying to distinguish which current conditions/assumptions/models/situations/relationships will apply in the future. This diagram may help illustrate my point here. You guys have far more technical knowledge of the current paradigm than I. On the other hand, I have never experienced any great difficulty in conceptually assembling my perspective in the future paradigm and seeing a consistent and increasingly hi-res picture there (relaying it to others, well that’s a bit different, but this has much more to do with their preconceptions (baggage) than my descriptions, in other words elements of the current paradigm whether real or perceptual which simply don’t fit through the focal point).
The focal point, the transition where gold credit expires and gold begins to function freely, appears to be common ground.
If we imagine the diagram stretching back through time to the beginning of the current paradigm, it would diminish into another focal point. If we were, for arguments sake, to say that this was the point at which the human money concept began, then it is critically important to understand the forces at work at this point too and the original nature of this concept. These are the fundamentals from which all else is derived, after all.
Anyway, I maintain that you guys are attempting to bring some things through the focal point that just doesn’t make the transition (relatively recent stuff too), and this is distorting the view.
Our chances of reaching agreement don’t look too bad, providing none of us take things personally. So far, so good. I wonder though, if we do reach that point, if your bridge doesn’t somehow work well for you but require a quantum leap for today’s more “mainstream” economic viewpoint.
Michael H,
I am not ignoring your point, I'm just currently out of time.
Blondie,
Which makes it [gold] useless as a UoA.
Neither is it acting as a stable SoV. Value in ≠ value out.
Very nice. I agree. Some here have written that the price of gold AG will be stable. Well, it will be way more stable than between 1971 and today - this is because all the political effects of dollar support and all the paper gold games will be over. But its real value will not be constant. And this is not just some technical side effect, it is actually the main point!
Victor
@Victorthecleaner
I hope you understood me: I was saying what I think will happen. Not want I want to happen.
I never understood that you want bad things to happen, as probably all of us here. What I want to make clear is that I do not believe that there are silver bullets for the current crisis, and by adopting HM or FG things will get back to normal by themselves. HM will not work, FG I am still struggling with the concept, but still I do not believe there is a universal painkiller …
I keep urging serious people to disband moral considerations when talking finance economics. There are no real villains and real victims. It is not so simple, like predatory banking or pig borrower. It is like believing that a good football player is consequently and necessarily a good human being. There are separate things.
Officially, we have new villains: China, PIIGS, borrowers, banksters. This is very dangerous, read history. And we have this dangerous game at high level … have a sample:
http://www.project-syndicate.org/commentary/america-s-bipartisan-mistakes-about-china-by-stephen-s--roach
Remarks of @Börjesson were very insightfull. Bank deposit is not some form of storing the value, but a transaction, a form of financial trading, with rewards (the interest) with attached taxation and with related risks (bank or currency failure). The fact that the risks related to financial transactions are presented to us as being zero, this does not mean that this is correct. Such risks have been very well managed on a long time frame, but this can not last forever ….
Blondie, VtC, Michael H, Aaron et al,
These comments aren't in strict order with the comments above that I'm replying to here.
Aaron,
I think we should develop the proof a little more and get some feedback from the economists. Torture test it a little first if you get my drift.
Blondie,
I can happily concede we might ultimately conclude that some of the ideas and projections we are exploring could prove to be wrong. IIMO if we can prove beyond all doubt that X=false that has value (equal?) to proving X=true.
I totally agree with VtC. You are dead right on the UoA issue. Just as hopeless as trying to use gold as an MoE. How's this for a thought? Gold fails as MoE because it is too effective as an SoV. The SoV properties outcompete the Moe and UoA properties.
Michael H,
Your last few comments rang true with me (as they very often do). One of the issues I have been delving into is asset bubbles in a pre/post transition regime.
VtC,
Regarding your comment at October 30, 2012 8:25 PM. I agree 2 per cent is a big, big number when you think of prices across a whole economy. It's so big that I think the present reference point they are using may be likened to MTM. It's Freegold-RPG ready but not fully actuated.
Measured against a floating gold price this 2 per cent target would look quite different. It could be operated as a zero inflation target over a cycle/period. The RPG may be prices of goods etc right now because that is all they have to work with.
Returning to BIS/ECB regulatory strategy for a moment. I view capital adequacy + risk weighting as an attempt at creating a quality assurance regime for the lending books of banks. This approach is complimented by the ECB's ability to apply variable haircuts to pledged collateral.
On the other hand I view adjusting reserve ratio requirements as a form of credit rationing. A much blunter instrument. I agree with the sentiments expressed by Blondie (and many others) about the supply of credit. Enough (no more/no less) is the only correct answer to the question: How much credit should be provided? What kind? and For what purpose? are quite different issues.
I don't think any of this matters to a currency issuer/manager provided the creation of credit doesn't impact on their ability to do their job.
IMO this exchange with DP and Michael H at October 30, 2012 8:50 PM contains some really good stuff fellas e.g.
Also, I do not think it immediatly follows that gold will go up in currency price as credit expands. Rather, it would be possible for credit to expand in one asset class only, leading to price levitation of that asset and not affecting either gold or consumer prices....
VtC - "This is exactly my point (and costata's?)"
It's one of the key things I'm trying to get a handle on. Will asset bubbles still be possible under the Euro Freegold-RPG regime? And I'm still thinking that the answer is - Yes - but I can't offer a solid, defensible set of arguments one way or the other at present.
One final point which I think may be quite important. Consumer lending not only expands consumption it shifts it forward in time e.g. a 3 year loan for the purchase of durable consumer goods shifts a +3 years ahead cash purchase to the present.
I noticed in Australia that the 1-year-interest-free loans offered here a few years back gradually metamorphosed into 5-years-interest-free. I think this tends to build into the market a likely future slump in demand and leads to malinvestment which is exposed when sales drop precipitously in the future.
So this probably argues for VtC's position that some types of credit may be restricted or banned outright at some point.
@MichaelH @costata,
It is the only medium that currencies do not "move thru".
If people will cycle the proceeds from selling their bubble asset, into more of that asset to flip again and again, then yes the one asset class could I guess still bubble in price without any other class rising alongside.
I don't know if that will be likely or not. I would never have thought it would happen for something as absurd as tulip bulbs, for example. But it did. I don't suppose there is much in Freegold, or anything else including bank regulation, which can prevent the madness of crowds.
Short of that kind of collective mania for a certain asset class, it seems to me the additional currency will likely flow through the asset purchased, into many and varied asset classes. Raising all those boats too. (AKA general price inflation.)
Michael H
“One place we could look is in economies where the local currency is used for exchange, but savings are in a foreign currency like USD. Would the presence or absence of asset bubbles in such an economy tell us anything about how bubbles would behave AG?”
That would be a place to look yes. It would not be perfect, but we could make some broad observations and conclusions at least.
The required circumstances would be, store of value and medium of exchange separate. Locals income in the medium of exchange. The bubble would need to be locally fueled. No restrictions on exchange between medium of exchange and store of value. Non-hyperinflating medium of exchange, though this last condition can be dropped if need be.
I presume you refer to Jamaica. I am not aware of any such bubbles there, are you, or is anyone else for that matter?
“Also, bubbles do not need to be 'extended and ludicrous' to cause broad economic harm.”
I think perhaps here you are indicating a preference as opposed to seeing what is. You are implying a number of things. First, that you would prefer markets that are always in equilibrium. Second, that any disturbances from this equilibrium has serious effects. And third, that we should exercise force on markets to prevent any disequilibrium.
The first and third are impossible I think, the second is highly questionable. If we were to include in discussion the size of the disequilibrium then I would agree that large disturbances would have more negative impact than smaller disturbances.
Remember that if we do not allow people mistakes, we also prevent success. I see the economy as a constantly flowing sea of change. I do not see that we can prevent the tides.
TF
VtC
You seem to be making the same objection as Michael H with this :
“I am not sure this is universally true.”
Allow me to clarify my thoughts.
I am sure you will agree that we have to take into account temporal dynamics here. On a long enough timeline any disequilibrium in a specific market will be resolved.
There is also correlation between the length of a disequilibrium and the size of it.
Ideally we want disequilibriums to be as short as possible, and to diverge from real value as little as possible.
There are two approaches to economics – the one where we centrally plan and try and force certain behaviors on market actors, and the one where we allow the individual actors to determine the results of the whole economy.
The latter is clearly preferable in my view, but is only possible if we have clear and reliable metrics to reference our judgments individually. I think gold priced freely will provide this required metric.
This then will make sure that individual actors don't succumb too much or too long to the madness of crowds.
I welcome your response.
TF
that kind of collective mania for a certain asset class
I caught you a delicious bass
@Victor,
did you lock JR into your basement with a printout of all FOFOA posts, and are you know forcing him to work for you?
He used to be in the basement, happy with the printouts. But then he only bin an done an got hissel hitched!
Thanks for the laugh Delusional Investing :-)
Maybe he really is a bot?
If so, I would put the JR program in a while(1) loop such that he starts up again whenever he seg-faults or reaches max. recursion depth :D
Yes Gold as Money is the right system!
HM Socialist says it doesn't work, but what doesn't really work is the fraud of FRACTIONAL RESERVE BANKING lending more gold then there is.
There wouldn't be a problem if, when you deposit your gold at the bank, you had 2 choice:
1) storage facility (it's not used to make loans, and can be taken back at any time) - or
2) lent to the bank at a fix interest rate for a fix amount of time, which the bank uses to make commercial loans.
The practice of fractional reserve banking is the fraud. Get to the foundation of things.
Now, the most frequent objection to that:
There won't be enough gold to match the growth of the economy.
Again wrong, the *free* market will adjust the price of gold, if "not enough", its price will rise. Savers will have it the easiest way to save, no need to speculate: just pile up.
The current system is the reason people don't save and people end up poor. There is no incentive unless you are a good speculator, or sharp investors, and they don't teach this nor the foundation of money in public school.
Knowing how to invest in real estate to take advantage of this devaluing debt and to invest in gold and silver in commodity cycles are key.
10000 to 1 gold to silver ratio!?
You are hilarious
At what point will you admit you are wrong?
When the gold silver ratio is at 30 to 1, or at 20 to 1 or only when it is 15 to 1?
If you say 10,000 to 1, what is your idea of the gold/cooper ratio and gold oil ratio then?
Billions to 1 (currently 9000 to 1 for copper)...
And for 10,000 to 1, what's your price in $ for gold? $10,000/oz? So you think nobody will be buying silver to protect themselves from inflation? (PS: 9 to 1 is the current rate out from mining; and there is 3 times more gold then silver above ground for investors to buy).
Finally! Someone with a clue!
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