Market Shennanigans and Thoughts

I'm not suggesting we return to a literal version of carrying and transferring gold between participants; So I don't understand how "fiat helps increase productivity by allowing the efficient transfer of wealth between entities."? I don't see how payment systems would be altered without fiat?

 

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I know that's not what you meant. You're calling for a return to a gold backed standard where the dollar (or whatever currency we're discussing) is backed by a fixed unit in gold.

In the United States (as of July reporting):
M0 is just north of $3.77T
M1 is currently about $3.24T.
M2 is currently about $12.89T.
Bank balance sheets approximate reporting at $15.99T.

If we return to a gold standard, the price of gold would be fixed based upon the M2 value. The US gov't in all holdings has approximately $291B of gold on hand. In order to have a true reserve backing our currency, we'd need to acknowledge or accomplish one (or a combination) of two things:

1) The price of gold in the United States would be 44.3 times the price of gold anywhere else in the world.
2) The US would need to purchase $12.7T of gold on the open market. (At current market values, there are about $10T of gold in vaults and unmined in the planet. This includes the $291B of gold the US already has on hand.)
1+2) The combination of these two scenarios would likely result in the global price of gold being around $27k per ounce (non-troy).

These measures wouldn't account for MB in the calculation.

Now, if we chose to operate on M0, instead, that helps (a little), but still causes a very odd sense of inflation, as the price of gold would rise as the US acquired more gold.

Anyway, while we settled out that issue, the US currency would essentially only be acceptable for debts within the US. Why? Without the backing of the government, foreign banks would be effectively buying ounces of gold (at a US premium). Rather than doing that, they'd be better served buying gold on the open market or using a different reserve currency.

Once the US lost reserve currency status, we'd have to pay off all foreign debts at a premium, since they'd demand to be paid in non-US notes. That's actually the least of our problems.

Imagine, now, if you will, that the US announces tomorrow that every $1500 US would be backed by 1 troy ounce of gold. There would be an immediate run on Reserve banks from anyone with a ton of cash demanding their gold. Why? Because it doesn't take much to realize that the action of a gold standard will result in 1800-3000% inflation overnight. We'd have the purest version of hyper-inflation possible, since the US would be announcing to the world "We need to buy gold... and we need to buy it at any price." Since gold takes up little space (all the gold in the world would approximate to a five story apartment complex -- a 20m per side cube), people would have an incentive to hoard. Eventually, physical gold would hold a premium over dollar equivalent, as people would be afraid of the hyper-inflation. The impact of all of this would be companies being unable to order parts manufactured outside the US, and all contracts being drafted in ounces of gold equivalent. There'd be zero incentive to innovate, as the cost of failure would be catastrophic, and the wealth of rewards would be almost negligible.

 

Hyperinflation, a return to a gold standard, skyrocketing gold prices -- all nice theoretical discussions, but none of them are happening anytime soon.

 

I agree it is theoretical only.

I was just curious about how fiat increases productivity? I understand the redemption cost issues (I think?) but IMO, believe those pale in comparison to the "market shenaninigans", productivity cost issues of unbacked fiat.

I don't know but these discussions get me closer to knowing, I hope!

 

Okay, that's where the conversation ends for me. When people can unashamedly admit to supporting economic Darwinism without being shunned as rotten human beings, I'm done, finished. I've devoted my entire life to ENDING ECONOMIC DARWINISM! It's what I do. It's, for me, a fundamentally unacceptable position to take, analogous to admitting to being a practicing neo-Nazi. I guess my mission is accomplished though. I seem to have revealed what I sought to reveal about people who favor hard money Austrianism - they're nasty miserable human beings lacking a single shred of empathy.

We already know what Darwinism looks like for humans. It looks like Mogadishu, Somalia, and in slightly less severe form, Ciudad Juarez, Mexico, when compared with El Paso. Darwinism? No thank you, I'll take a pass on that.

And no, at the extreme, NOT participating in remediation of suffering is NOT your right. It's called a democratic republic for a reason.

 

I'm sticking with "they haven't thought through the implications of their beliefs", and I won't hold them in contempt for that, because I don't think any of us can ever really think through all the implications of everything we believe.

But it escapes me how someone can look at the states you mentioned, or even read Dickens or Sinclair, and just shrug it off as "meh, that's how capitalism is supposed to sort things out."

 

"Most of economics can be summarized in four words: "People respond to incentives." The rest is commentary."- Steven E. Landsburg

Great quote above and I think it tells the story of why some folks can seem cruel and uncompassionate in regards to the fate of the less fortunate.

If you look at the current structure of government incentives towards poverty, I think you will find a disconcerting pattern. One that doesn't seem to work at solving the problems but rather continuing them. Why create economic incentives that reward the less fortunate only on conditions of reproduction and single parent homes? Why not incentives that reward non-reproduction and openly encourages whole families? If someone is having trouble providing for themselves, why create incentives that burden them further and encourage more problems?

One incentive works towards solving the problem and one grows it but various groups can and do benefit or suffer from every problem the government addresses. If the problem is solved, the benefits (incentives) disappear for many powerful interests. So consider the money being given by lobbyist's and the incentives coming from the government. They appear to be geared toward growing (or at least maintaining) the problems, not solving them. Who benefits?

If you look closely enough, you can find these patterns in nearly every government effort and all of them are funded by our unbacked fiat currency. So we all pay endlessly via taxes, inflation, etc. as many of us are pushed towards poverty ourselves.

Therein lies the reason some folks can seem downright mean and selfish. When you understand the truth, you'll desire a real solution too and real solutions can seem cruel when measured by the unaware.

 

Leopards are so cool; they should be called Ludwigs.

 

In the real world, where 1/3rd or more of global government bonds have 0% or negative yields, focusing on money supply (without looking at velocity) is suicidal to an accurate look at economic implications.

 

All socio-economic "reform" programs are economic Darwinism, as you put it. This includes those programs that specifically help the under-privileged and "minority" groups. How? Well, quite simply, they have the "cute" factor going for them. Much like biological/evolutionary Darwinists will point out that cute/friendly puppies will survive by garnering sympathy from humans, programs which target single moms and economically challenged minorities are simply another version of Economic Darwinism. Remember, for every instance of genocide, there was a party in power that was trying to improve the lives/opportunities for some special interest group of their choosing.

In a life/economy driven by consumption of limited resources, you can't always have winners. Until energy/food/water (two of three means all three are free) is free, there will always be losers somewhere.

 

I agree that regardless of the system, there will always be winners and losers, and I think we're all winners if somebody follows thru with their threat and stays away...

 

That's a VERY astute observation. The velocity of money (MV2) is at the lowest point it has ever been in the history of its measurement. It is why we can have a large and growing money supply without inflation.

 

Darned glitchy airport WiFi. Sorry about the duplicate posts.

 

And this gentleman reveals yet another thing about coin people - dissent from the "Wild West" coin people orthodoxy is not well tolerated. No dissenters need collect, I guess.

 

Did you get home OK?

 

So much for the conversation ending for somebody...

 

Yes, thank you. I'm in Philly now, where people lost their Wild West wannabe fantasies over two centuries ago. Return to Amish country in the morning. You know, Amish people, who eschew worldly possessions and avoid flashy displays, and don't even ALLOW insurance at all, because they're all jointly OBLIGATED TO BE responsible to help their neighbor with any need that should arise. I help too, even though I'm not Amish myself. I've been part of two barn raisings over my lifetime. Why? Because it's the neighborly thing to do. So is paying my fair share in taxes.

My son and I had a wonderful evening in the French Quarter Wednesday with Santinidollar and Kirkuleez. Both fine gentlemen of the highest order.

You want to talk about "socialism" on steroids, with a real market for nearly everything? Check out the Amish. The lack of greed works, people. It's not EVERYBODY'S bag o' tricks, but they sure are wonderful people to live around and do business with. They live their commercial lives by auction for almost everything, including real estate.