The Gaming Den

tzor wrote:Gold Is A Total Joke.

A reader sends in this chart of various markets and assets over the past year.

UP at the top you have the wild stuff like corn and silver and cotton.

Below you have the boring stuff. Equities. The euro, and yes... gold, acting like a total snoozer.

Corn I can see. Silver I can see. Cotton?

Excuse me, while I start singing "Old Man River."

The story of cotton in the last year is somewhat complex. Some of it has to do with increases in demand as the developing world (and whatever category we put China in) return to full employment. A lot of it is gross speculation as warehouses full of cotton sit idle at the behest of speculators in cotton futures.

The Cotton Story.

-Username17

DSMatticus wrote:Whoa. I never said gold should be used to represent the entirety of an economy

Let me remind you what you said:

This is exactly my point...with economies so large nobody can get enough gold to represent their economy's transactions with it

So, this line you said from your high school class about there not being enough gold for a country's economy...what was that about, then?

(the actual idea of expending something of actual value, labor and resources, to acquire something so it can be thrown in a vault to represent other things of actual value, is patently ridiculous).

Man, it's like dealing with my weaker students, that forget on Wednesday everything discussed on Monday.

Recall: I've already shown speculators can perform valuable services and add to the growth of the economy. People do what you just said all the time, have been always, will do so always.

Again, nearly every country in the world puts gold in vaults...been doing so for a long, long, time, I promise you.

Can bad speculators cause harm? Sure, just like everything and everyone else. People die from drowing, too...doesn't mean water is fundamentally a bad thing and should be outlawed.

Also, 100% failure rate of paper currencies - lol. Allow me to rephrase what you've actually said - "of all the paper currencies that are no longer around, 100% of them have failed." Which is like saying, "there's no dead person that's survived dying." Unfortunately for your assessment, there are paper currencies that are still around, and so the failure rate is not 100% (because they infact currently exist).

Ah, you missed the part where I said all current paper currencies are in perpetual decline. No problem, I can see repetition will be necessary. Even the incredibly powerful dollar has has lost over 95% of its value since it became pretty much a slip of paper.

(Yes, I realize there can be short periods of deflation, but the bulk of the lifespan of paper currencies has been constant inflation of some sort...they only look good when compared to another constantly falling currency.)

Is it possible they will fail in the future? Yes.

Good. So now you need to answer: why shouldn't people be allowed to protect themselves from this eventuality?

I mean, you don't have a problem with life insurance, right?

Whether it's sharp and dramatic (bad) or slow and gradual (not so bad).

Either way, why can't people be allowed to protect themselves?

"what are they going to be replaced by?" Undoubtably, that's going to be another paper currency.

And you really don't see anything funny about this.

"Yes, this crack will kill me, but I'll switch over to heroin soon." Think about it.

This isn't even a net 'loss' in the paper currency column.

Oh wow. Tell that to China, France, Germany, the USSR, early USA, Zimbabwe, most of South America....too many to list, really.

Again, the world seems to disagree with you. Paper currency collapses are bad things, and people should be allowed to protect themselves. I know, you're just reciting here so saying stuff like this isn't really your fault, but think about it.

This is just a switch from one currency to another, and the gradual collapse of an entire economy

So you do have the tools to realize that paper currencies might be bad. I don't understand how you can hate speculators so much but love paper currencies, when you say things like this.

But paper currency is as much a valid representation of an economy as gold, because there's nothing to either except a gentleman's agreement to say, "yeah, this is more valuable than it actually is. Roll with it."

Oh wow, again. It's pretty simple to print up more bills, with endless numbers of zeroes on them. Gold works a bit differently, honest....even if that was how a transaction works.

Have you bought things in a store? You don't give them money and say "this is worth more than it actually his"...you give them money that you implicitly agree is worth whatever it is you're purchasing.

The advantage with paper is that it's much cheaper and easier to acquire than gold.

So's air. So's tree bark. So's grass. So are pebbles. Of course, it's generally pretty idiotic to use those, too. I'd suggest another book discussing how gold is not, in fact, the same thing as a slip of paper but for being difficult to acquire and some arbitrary value, but I get the feeling you're still working on the first.

So if you're going to apply arbitrary value to something, paper's going to cost you less.

Well, less for the guy that has the printing press. For the guy that accepts paper, he needs to get rid of it, fast.

For some reason, gold's arbitrary value sticks better than paper's arbitrary value, because A) more people subscribe to its arbitrary value, and B) it has a longer history.

Doublewow. Can I encourage you to read a bit on gold? It turns out there quite a few other reasons gold tends to keep its purchasing power more than paper. I know mentioning too much can lead to confusion, so I'll just stick to the bit about the printing press.

There's really no reason that can't change other than inertia in the market - gold has as much reason to tank as paper, it just doesn't because it's gold.

You really need to think before you type. If gold has as much reason to tank as paper, how come paper does it over and over and over and over and over again, but gold doesn't? It is because it is? Is that really the level of logic you're using here?

(As a hint: towards the end of currency collapses, paper money gets printed faster and faster with ever bigger numbers printed on it)

And if you're expecting a currency to tank, sure you can buy out of that dollar and into gold. And this will in fact weaken the dollar further, possibly causing the very collapse you predicted if you have a large share of the dollar, or enough people join you that you share a large portion of the dollar.

Ah, the patriotism argument, another fine high school claim. Blame the guy who tries to dodge the bullets, not the guy pulling the trigger?

You really feel that someone trying to protect himself and his family is *evil* for not sacrificing himself and his family to help out the folks with the printing presses?

If you're pointing out that speculation can be good for the individuals that do it right, obviously - I'm pointing out that it's flat out bad for the economy.

Again, keep in mind, already proven that that's not the case (insofar as even 1 survivor is better than everyone being dead, clarifying because I don't use 'prove' often). Feel free to go back a few pages and study until it sticks.

Granted, you poo-poohed that example because you don't think starvation is posible nowadays, so I'll back to the generators.

Those generators were used to power fans (keeping folks dying from the heat), and to power refrigerators. The contents of those refrigerators were *saved*...the economy is improved with people being alive, and having food. Honest.

So, please, stop reciting, open your mind, and think about it.

A mass shift from paper -> gold in the expectation of the paper currency's collapse will literally cause the predicted collapse, and make it much faster and much worse than it would have been otherwise.

Again, blaming people for trying to protect themselves is silly, but there's even an bigger problem with your thinking:

If gold is as meaningless as you say, and paper currencies are not even connected to gold, HOW CAN YOU POSSIBLY state that shifting from paper to gold will cause a collapse?

Do you honestly believe what's been going on in Zimbabwe (or in the past with any other failed paper currency) has much to do with the price of gold?

Think about it, try to see the error here.

Are you implying that, "since the food market already has fluctuations within some parameters X, it isn't a problem that speculation can cause fluctuations outside some parameters X?"

So you're saying some fluctuation is ok, but past that is bad. You're willing to risk wiping out the entire economy just to avoid the possibility of a level of fluctuation that makes you uncomfortable. Fair enough, but let's think this through.

The only way you could possibly achieve your utopia is with price controls, forcing prices in a certain range, and prohibition past that point.

Do you realize price controls and prohibition have been complete disasters every time they've been used? Let me know if you'd like this discussed further.

You really just implied that all market fluctuations are the same,

I said there is randomness involved in all market fluctuations, and I stand by it. Randomness is a bit of a weasel word, I admit, but compared to what you said, it's fairly accurate.

Recall, you said

100% predictable and deterministic

While such a claim is casually easy to shred (and have already done so), any time you want to demonstrate by giving a precise formula (multivariable is fine), I'd be MOST pleased to see it.

So, let's stop here and give you time to provide a deterministic formula for, say, the price of oranges. Make sure this formula is accurate for the next six months. For convenience, please represent this formula within 10^(-6) by a polynomial, using any published approximation method.

I'm already counting the money I'll make using it.

If enough people try to prepare for the end of civilization, civilization ends.

Orion wrote:If enough people try to prepare for the end of civilization, civilization ends.

That's a great platitude. Evidence?

Orion wrote:If enough people try to prepare for the end of civilization, civilization ends.

But then a new one will begin.

Well, PoliteNewb...
1) Society tends to produce resources at their expected rate of consumption.
2) Preparing for the end of civilization involves collecting a quantity of resources far greater than you would consume in the same interval of time you're buying them.
3) If this is sudden enough and a large enough portion of the population does it, you will see market depletion on vital commodities.

Imagine if everyone in your town decided to go buy a month's worth of food this very day from the local store. It's more complex than that, but imagine everyone frantically fighting over the stuff on the shelf is the idea. Then go nation-wide with that.

Doom, our discussion is getting bloated in that with every post we start arguing about another 2-3 additional things.

@Gold

You're misquoting me. Accidentally or on purpose. The fact that I said there isn't enough gold to represent modern economies doesn't mean I implied there should be. I'm quite fine with paper currency, because it's the most economically feasible model.

Also, the collection and storing of gold is no longer the foundation of economies. That is the exact description of a transition from precious metal -> paper currency economy. And that's what I said, and that's true, so I don't know what you're arguing with me. The fact that people still are throwing gold in vaults is not the foundation of our economy.

@Declining value of paper currency.

I want to know by what metrics you're stating that the dollar post-dereserving is 95% of what it was before. P.S., inflation does not weaken a currency. Inflation, by definition, weakens an individual unit of currency, but this is usually accompanied by a proportional increase in the amount of currency in circulation (not always). If there's a trillion dollars, and you print another trillion dollars, the only thing you've done is shaft people with money in their wallet. Your overall currency is not weaker, because while every dollar is worth half as much, there are twice as many dollars as there were before. (In reality, some prices will stick, others won't, and doing this all at once will totally screw things up. But gradual inflation is completely harmless, except eventually one-dollar bills will serve the role of quarters. But at the same time, people will have more five-dollar bills. This is a non-issue.)

@Replacing paper currency with other paper currencies is bad.

When my oranges go bad, I have to buy new oranges. Are you implying I should stop buying oranges?

Actually, you're perpetrating a logical fallacy - you're associating the fall of a paper currency with it being paper currency. But there's no clear causal link here. Especially if the paper currency falls because it was beaten by another paper currency. That's not a sign that 'paper currency' was bad. That's a sign that one paper currency was better than another, and therefore a completely useless analysis.

P.S., showing that paper-based economies occasionally collapse, as your examples do, also does not establish that they collapse because they're paper-based. If that were the case, if I were to point out any gold-based economy that collapsed, it would suggest it collapsed because it was based on gold. And that's obviously false.

@Using air and tree bark and pebbles in place of paper.

It's awful hard to write a number on air, or prevent people from counterfeiting it. If it's tree bark or grass, you can grow your own money. And it would be awful hard to put little security markings on pebbles. And they're heavy and unwieldy.

Seriously, those are just bad counterexamples.

@End of currency collapses, rampant printing presses

You are committing another logical fallacy. You are pointing out that two things happen, and implying a relation that you have not shown. Here's a question: do these economies fail because they're printing the money, or do they print the money because they're failing?

Until you can prove which (psst, it's the latter), that statement is meaningless. Economies, in an attempt to save themself from approaching collapse, end up raising inflation rates like raising the rate on the treadmill - it gets them nowhere, but they couldn't think of anything else to do. But make no mistake, they were already failing. They didn't raise the inflation rate then start failing. They realized they couldn't pay for anything and printed money to pay for it, and that's a non-solution they were too stupid to realize was bad.

People should really stop this fucking idiocy of crop speculation.

For those who think Cotton is an investment...

Read the Rolling Stones article I linked. And then read it again. Then hit your head really hard then read it again.

Crop futures were never meant to be traded around like stocks to be part of a 401K. The reason they were created was to ensure that farmers weren't screwed over by sudden shifts in demand and are forced to burn their own crops to keep the prices high. Agricultural overproduction is a serious problem in many developed economies, as having too much wheat/corn/cotton can send prices spiralling to the floor which paradoxically makes farmers make less money than if they had been less productive.

But then the industry was deregulated so that it became another fucking game of musical chairs by some other name.

Stop believing the sleezeball market manipulators.

DSMatticus wrote:Well, PoliteNewb...
1) Society tends to produce resources at their expected rate of consumption.
2) Preparing for the end of civilization involves collecting a quantity of resources far greater than you would consume in the same interval of time you're buying them.
3) If this is sudden enough and a large enough portion of the population does it, you will see market depletion on vital commodities.

Imagine if everyone in your town decided to go buy a month's worth of food this very day from the local store. It's more complex than that, but imagine everyone frantically fighting over the stuff on the shelf is the idea. Then go nation-wide with that.

You are making a (very large) leap here, which equates preparing for the end of civilization (as you defined in #2) with sudden, crazed hoarding, rather than a methodical practice done over time (which is how most people tend to define "preparation"). Going to the supermarket and buying a ton of shit all at once and fighting over it is the opposite of preparation...it is the knee-jerk reaction of the unprepared. When people talk about "preparing for the end of civilization", they are generally referring to survivalists...who slowly stockpile excess goods, usually in a way that the market can keep up with.

If everybody decided to buy an extra $50 in storable foodstuffs (or ammunition, or maxi pads, or whatever) every week because they were scared of an eventual holocaust, it would not cause the downfall of civilization.

So what you're positing is really more like, "If enough people panic and act like a bunch of jackasses, civilization ends". Which, y'know, is kind of self-evident.

PoliteNewb, it doesn't have to be sudden crazed hoarding - any increase in demand increases price. My example was... hyperbolic, certainly. I didn't mean to imply the problem would be people fighting over food in the last moments before their projected apocalypse. I mean to imply the problem is that increased demand will cause an increase in price, and this increase in price can cause economic instability and civil unrest (nobody wants their food budget to increase substantially). And that's just one portion of the market - if people predict the currency is going to be useless, everyone will attempt to get rid of this currency in favor of material possessions, at the same time. And that will tank the value of the currency, without a doubt.

The more certain people are they're facing an economic collapse, the more they will try to get rid of the dollar. The more they try to get rid of the dollar, the less valuable it will become. The less valuable it becomes, the more people will be certain they're facing an economic collapse. Repeat. That sort of prediction really can be self-fulfilling, if enough people make it at the same time.

DSMatticus wrote:PoliteNewb, it doesn't have to be sudden crazed hoarding - any increase in demand increases price. My example was... hyperbolic, certainly. I didn't mean to imply the problem would be people fighting over food in the last moments before their projected apocalypse. I mean to imply the problem is that increased demand will cause an increase in price, and this increase in price can cause economic instability and civil unrest (nobody wants their food budget to increase substantially).

Are you seriously saying that increased demand is bad for the economy? If it increases the price, doesn't that encourage additional production, which produces more overall capital (and, incidentally, increases supply which stabilizes price)?

Of course no one wants their food budget to increase substantially...but corn farmers want higher corn prices, and dairy farmers want higher milk prices.

And that's just one portion of the market - if people predict the currency is going to be useless, everyone will attempt to get rid of this currency in favor of material possessions, at the same time. And that will tank the value of the currency, without a doubt.

The more certain people are they're facing an economic collapse, the more they will try to get rid of the dollar. The more they try to get rid of the dollar, the less valuable it will become. The less valuable it becomes, the more people will be certain they're facing an economic collapse. Repeat. That sort of prediction really can be self-fulfilling, if enough people make it at the same time.

This is entirely true, but is also entirely separate from what is being discussed above. It's pretty much definitional that if people stop having faith in fiat money, the economy built on fiat money will collapse (and the society built on that economy will go with it).

How is this any kind of defense of fiat money as an economic system? It sounds like telling everyone to believe in the tooth fairy, because if enough people stop believing the tooth fairy dies.

PoliteNewb, you're actually discussing something different now.

Orion: [if enough people prepare for an economy to end, it'll end]
PoliteNewb:[just because it sounds fancy doesn't mean I buy it]
Me: [vague explanation]
(Forgive my paraphrasing, I did my best not to portray anyone in a negative light.)

The bit about defending fiat currency is completely off topic. We aren't arguing over whether fiat currency is good or bad, here. It's not a debate I mind having, I'm just pointing out that is not actually what I'm talking about.

But back on topic...

No. Increased demand isn't always bad for an economy. Sudden fluctuations in demand can be bad. P.S., the money those people are spending on food to stockpile is coming out of other areas of their budget, where demand will be suppressed. Certainly, this situation is a farmer's dream, but it's bad for anybody who's not a farmer (and it's bad for the people stockpiling, unless they turn out to be right and the economy collapses).

But the food case isn't convincing, the currency case is what's worth focusing on. And it is not separate from what's being discussed - we're talking about people predicting an economic collapse of their nation. When people predict an economic collapse of their nation, whether it's a gold-backed currency or a fiat currency, they don't want that currency anymore. They want to exchange it for things that are in no way dependent on the condition of their nation. And this will collapse a non-fiat economy, too. Because when your government goes broke, even if their dollar is backed by something, they can't actually afford to give you the something that's backing it. And there's no reason to trust that it would in that scenario.

PoliteNewb wrote:It's pretty much definitional that if people stop having faith in fiat money, the economy built on fiat money will collapse (and the society built on that economy will go with it).

This can be generalized - "it's pretty much definitional that if people stop having faith in the issuing government, any economy built on representational currency (i.e., currencies who value is not a literal part of the dollar) will collapse." Unless the dollar you're holding is made out of gold, or you can walk up to your government and say, "hey, the gold this represents. I sort of need it, the world's falling apart," and expect them to say, "of course, sir, your gold is this way..." it won't survive the sort of thing we're talking about.

Gold-backed or fiat, people will throw that currency away for things of material value, and in the process of throwing it away they will destroy its value and the economy based on it.

DSMatticus wrote: Doom, our discussion is getting bloated in that with every post we start arguing about another 2-3 additional things.

Well, trying to help you overcome what you learned in school. It's tough to undo years of "rightthink" in a few days, lots of misinformation to correct.

.... because it's the most economically feasible model.

Oh, wow.

I want to know by what metrics you're stating that the dollar post-dereserving is 95%

Purchasing power. Even using BLS numbers, you get this result (well, higher, but I'm being conservative).

inflation does not weaken a currency. Inflation, by definition, weakens an individual unit of currency,

Dude, seriously, just how thin do you intend to split hairs?

"Inflation" can mean many things, we've mostly been talking about price inflation, with respect to speculators. Are you now wishing to talk about devaluation and how it causes inflation? These concepts are not the same.

the only thing you've done is shaft people with money in their wallet.

Yup...keep in mind, this is what is going on right now.

You never did answer: why do you feel it's bad for people to not want this done to them, and/or to take action to prevent it happening?

Your overall currency is not weaker, because while every dollar is worth half as much, there are twice as many dollars as there were before.

Now you're just trolling, right? Talk about spa-spa-spa-splitting hairs.

You do realize that the 'twice as many dollars' doesn't mean much to the guy on the street, since it's the guys with the printing press that get all the new money. The currency of the guy on the street? To him, yeah, it's weaker.

But gradual inflation is completely harmless,

Oh wow. Forcing people to become speculators, preventing people from saving, annihilation of inheritances, obliteration of savings in paper over time, destruction of life's work through tax rates only on 'the rich'...these are harmless things?

If it's not bad, would you be so kind as to cover what I lose due to inflation every year from my accounts and investments? We'll just use BLS numbers for that...I'm sure it won't take long until you change your mind, assuming you'll even put your money where your mouth is for a little while. Put up or shut up.

I'm putting you in this situation because I've encountered bright folks like you before. Thing is, your intelligence makes you very vulnerable to indoctrination. Are you so sure it's 'harmless' that you're willing to pay that 'small' amount?

Fun anecdote: I was explaining Newton's Laws, and mentioned how when you run into a wall, it strikes back against you with a force equal to you running into it. One student insisted with certainty that "no, that wall doesn't hit back." He was very resistant to my explanation of how it worked, until finally, I challenged him to run into the wall and see what happened. The look in his eye flickered at least a bit before deciding to concede the point.

So, am I getting a check?

It's win/win for me, I promise you. Think it through, and decide.

But at the same time, people will have more five-dollar bills.

I remember hearing that one in school too; alas, it's only half the story. "People" get those five-dollar bills only AFTER the folks with the printing presses aready have spent them...by the time the serfs get that money, it's already been devalued.

Of course, the old folks living off savings, the unemployed, the underemployed, the pensioners on fixed incomes, anyone with a piggy bank, anyone with a change dish, anyone with a checking account, they're screwed over.

This sort of inflation is a very bad thing for many people...note how many people it hurts.

I guess in school nowadays, they teach that newly printed money is evenly distributed out to the population or something? Trust me, it doesn't work that way, not even close.

@Replacing paper currency with other paper currencies is bad.

When my oranges go bad, I have to buy new oranges. Are you implying I should stop buying oranges?

No, but if the oranges make you very sick and cost you everything you have every time just to recover from them...maybe continuing to eat oranges isn't a good idea.

I mean, you acknowledge that paper currencies destroy economies...but say that's ok, because when they collapse they get replaced with new paper currencies.

Think about it.

Actually, you're perpetrating a logical fallacy - you're associating the fall of a paper currency with it being paper currency.

Well, every time I toss a ball up in the air, it falls back down eventually. I just figure that that's what will happen the next time I toss a ball up in the air.

I acknowledge, theoretically, that it's possible in a mathematical sense that the ball will never come back down...but realistically, I think otherwise.

But there's no clear causal link here.

What goes up, must come down. Perhaps my tossing the ball up has nothing to do with it. I guess.

Especially if the paper currency falls because it was beaten by another paper currency.

Uh...when did this ever happen?

That's not a sign that 'paper currency' was bad. That's a sign that one paper currency was better than another, and therefore a completely useless analysis.

Uh, yep...when did this happen, exactly?

Can you give me one situation where one paper currency literally BEAT another paper currency into worthlessness?

If that were the case, if I were to point out any gold-based economy that collapsed,

Other than the Spanish Empire after the conquest of South America, can you point out a case where the value (whatever that word means) of gold dropping to zero caused an economic collapse?

it would suggest it collapsed because it was based on gold. And that's obviously false.

Example. Please. I want to toss the Spanish Empire because the collapse there matches is similar to what you see in paper currencies when they collapse--a massive influx of gold caused inflation, comparable to a massive influx of paper with ever increasing numbers on it.

Thing is, printing presses still exist...woefully technologically primitive societies with great quantities of gold, on the other hand, probably aren't around any more.

Example. Please.

If it's tree bark or grass, you can grow your own money.

And this is less ethical than using a printing press because...?

Don't forget that example.

Seriously, those are just bad counterexamples.

Yes, too much like paper. Keep in mind, those examples matched what you said was great about paper.

Don't forget, that example.

You are committing another logical fallacy. You are pointing out that two things happen, and implying a relation that you have not shown. Here's a question: do these economies fail because they're printing the money, or do they print the money because they're failing?

This is a more complicated question. Once we've mastered basic concepts, will move on to that, ok? "Supply and Demand" requires more than you've learned so far.

But I do want to see a case where gold got considered completely worthless (like what one sees in a paper currency collapse), causing an economic collapse.

Until you can prove which (psst, it's the latter),

It's a deep concept...but do they really teach it that way in school nowadays?

Do they teach a case in school where gold was valued at zero, causing an economic collapse?

Economies, in an attempt to save themself from approaching collapse, end up raising inflation rates like raising the rate on the treadmill - it gets them nowhere, but they couldn't think of anything else to do.

Where do you *get* this stuff? How can an economy raise inflation rates? Is the economy a sentient being? Do the presses run themseles? Do people in some grand telepathic conspiracy all just decide to raise the rate of inflation one day?

Oh, and when did gold drop to zero, causing an economic collapse?

But make no mistake, they were already failing. They didn't raise the inflation rate then start failing. They realized they couldn't pay for anything and printed money to pay for it, and that's a non-solution they were too stupid to realize was bad.

By 'they', do you mean the rulers, perhaps? I'm only guessing, but that is the only force that controls the printing presses. In this case, you're actually dangerously close to understanding what inevitably goes wrong with paper currencies, but I'm not sure.

I take it you'll be reneging on that demonstration of 100% predictability in a market...I do hope I won't be similarly disappointed with this example you claim would support your case; this disappointment will be ameliorated dramatically if you decide to put your money where your mouth is regarding how 'harmless' mild inflation is.

Jesus christ, every post is longer than the last, and half of it is attempts to look down at me with as much substance as a stern message from a bowl of alphabet soup.

@On the matter of inflation and printing money.

You accurately point out that printing money and handing it to rich people will imbalance the economy.

Unfortunately, you fail to recognize that this is not a de facto truth of either paper currencies or inflation (it's trivially easy, when adding currency to the economy, to just distribute it through social programs to lower and middle classes, like scholarships. The fact that we don't do this perhaps means we're a-holes, but it doesn't mean fiat economies favor the rich). Also, the fact that we do this is literally the least of the reasons our economy currently favors the rich.

Gradual inflation rates mitigate this effect towards zero.

@95% purchasing power

Even if this statistic is true (unlikely), it literally doesn't matter. This number fails to measure anything meaningful. The market comparisons between then and now do not reflect us being 5% as wealthy as our grandparents, even if the dollar were 95% less valuable. We have more money and things are cheaper relative to that dollar. Seriously - this statistic is at best worthless, and at worse worthless and wrong.

@Acknowledge that paper currencies destroy economies.

No, I acknowledge that all economies die, including ones that happen to use paper currency. Would you like to point out an economy which has lasted forever and you expect to continue to do so indefinitely?

Do you seriously think paper currency-driven economies have a monopoly on falling apart?

@Tossing balls

Again, this colorful example applies just as well to any economy as paper economies. "If you build an economy, it should fall down eventually."

@Paper beating paper

Anytime a paper currency has failed, and then been replaced by a different paper currency.

@Spanish empire, gold, blah blah blah.

Your cause and effect are backwards. Why does a paper-driven economy flood itself with paper? Most are usually in their death-throes when they do it. Seriously. These economies don't decide, 'hey, let's print a BUNCH of money!' and then flop over dead.

What actually happens is adding money to the economy can temporarily stimulate growth (time delay between when the currency devalues), and they go overboard in an attempt to save their economy, and just destroy it another way.

I.e., they use inflation to save their economy, and destroy it instead. The message is that those economies were screwed either way (or they were just stupid, and were playing chicken and lost).

@Ethical

Wait. What. Ethical? Okay, you do realize that gold's value really is just a gentleman's agreement? Yes, it's hard to dig out of the ground, but the value of gold is only partially reflected by that. The value of gold is much, MUCH higher than the sum of its production costs and use desirability. I know, you know this, there's no reason to even pretend to be unreasonable about this.

Gold has more intrinsic value than paper, but neither gold nor paper's FINAL value is based on its intrinsic value. There is a sociological effect here, where people get together and say, "let's use this as currency," and their value goes up.

Yet you're implying it's "unethical" to use paper because... why? It's intrinsic value is less than the intrinsic value of gold? You can only add sociologically arbitrary value to things which have a certain threshold of intrinsic value?

@Asking for examples...

I don't think you understood what I was saying. That was a 'give me.'

You gave a list countries whose economies had collapsed, and were paper-driven.

I told you that pointing out that just because a country's economy collapsed, and it happens to be paper-driven, does not mean it is because of the paper. It's an unsubstantiated leap.

I took that same unsubstantiated leap - any economy that has failed and happened to be gold-backed, must also have failed because it was gold-backed.

This is a ridiculous claim on its face - it is meant to be. Because it is an exact parallel of your claim, with two words changed, and I've provided exactly as much support for my claim as you have your's.

@Rest

There's more, but we should probably focus on narrowing this conversation rather than expanding it.

Ironically, the most damning argument that inflation is bad is not in the substance of your arguments, but in our posts' constantly growing length.

Edit: Actually, one more...
Since you seem to be hammering at it so hard, the paying you thing (which reflects more of your complete misunderstanding of my position more than being an even approachably reasonable point).

I'm not saying inflation doesn't happen. If that's what you're drawing from this, you're being dense. Inflation happens, and rampant speculation destabilizes an economy. These two claims are not exclusive. At all.

Inflation is meaningless, because nobody should care - if the inflation rate were 0%, and people took money and shoved it in their mattress, that would be fucking terrible. Truly, god awful terrible. As a matter of fact, that doesn't even seem mathematically possible - to keep the inflation rate at zero, with people removing dollar bills from the economy, you'd have to print and distribute more. And that would lower the value of the people with dollars in their mattress.

Seriously. Shoving money in a mattress doesn't work, because your money is an abstract representation of something valuable (the sum exchange of goods and services within that economy). Preventing that money from flowing is, somewhere, somehow, reducing that sum exchange of goods and services and the economy gets weaker.

If inflation discourages this, inflation is making the economy stronger. If inflation just encourages people to move towards speculating, it repeats the same problem.

Self-interest != collective interest. I don't care if you have money in the bank that gets less valuable every year with inflation - invest, so someone can use that money and our economy will be stronger.

The problem is that our current economic infrastructure can't encourage this - there is no mechanism in place for taking care of you or letting you safely accumulate wealth without removing it from circulation. And that's a failing of the system, but it's not a failing of inflation.

DSMatticus wrote:
You accurately point out that printing money and handing it to rich people will imbalance the economy.

This is what happens.

Even if this statistic is true (unlikely),

Um, it's true. It matters. It demonstrates what 'harmless' inflation does.

The market comparisons between then and now do not reflect us being 5% as wealthy as our grandparents,

Never said this, never implied this.

No, I acknowledge that all economies die, including ones that happen to use paper currency. Would you like to point out an economy which has lasted forever and you expect to continue to do so indefinitely?

Finally, a decent attempt at a counter argument. Thing is, all countries eventually make the mistake of devaluing their currency. The Byzantine Empire was solid for 1,000 years, then they started devaluing their currency, and the collapse soon followed. The British and Roman Empires had several centuries before they too, screwed up. The US Empire had a little over a century.

Yes, I realize, it's possible the two are unrelated, but the fact still remains: currency devaluation (for whatever reason) precedes collapses.

Paper currency, due to its incredible ease of devaluation, causes those collapses to happen much faster than otherwise.

Do you seriously think paper currency-driven economies have a monopoly on falling apart?

No, it's just much faster, and the common man is much more hard pressed to protect himself.

Anytime a paper currency has failed, and then been replaced by a different paper currency.

No, not the same thing at all. In the interest of brevity, I'll skip the confusion of ideas here.

These economies don't decide, 'hey, let's print a BUNCH of money!' and then flop over dead.

What actually happens is adding money to the economy can temporarily stimulate growth (time delay between when the currency devalues), and they go overboard in an attempt to save their economy, and just destroy it another way.

Sort of correct. You keep acting like the printing presses are sentient.

What really happens in the modern world (in very brief, because we're skipping a few chapters ahead), is the ease of printing, combined with the "promise everything to everyone" approach of elections, causes deficit spending...which is covered by printing. This leads to debts...covered by printing. This leads to more debts...more printing. Eventually it goes more and more, faster and faster.

Keep in mind, this has happened every time in the recent past, and is happening now.

Gold has more intrinsic value than paper,

Whoa...you can't say gold is only a gentleman's agreement, and then say it has intrinsic value. Think about it...every post, filled with contradictions like this.

I'll help you out here: gold doesn't have intrinsic value.

Yet you're implying it's "unethical" to use paper because... why? It's intrinsic value is less than the intrinsic value of gold? You can only add sociologically arbitrary value to things which have a certain threshold of intrinsic value?

Well off the deep end here, I'm afraid. You said tree bark was bad because anybody could create money (unlike paper, I guess). Intrinsic value has nothing to do with it.

, and it happens to be paper-driven, does not mean it is because of the paper. It's an unsubstantiated leap.

Yes, that was a bad leap on your part, but forgiveable. Paper accelerates the collapse. Nothing is forever, but that still doesn't mean you should build a house out of paper mache.

I took that same unsubstantiated leap - any economy that has failed and happened to be gold-backed, must also have failed because it was gold-backed.

Except, of course, there is no such example beyond the one very odd case.

This is a ridiculous claim on its face - it is meant to be. Because it is an exact parallel of your claim, with two words changed, and I've provided exactly as much support for my claim as you have your's.

Well, you've provided no such example, just said that if there was, you'd have provided support.

Hey, magical unicorns exist. I won't be providing an example, since, apparently, that's not important for showing existence. Think, please.

Ironically, the most damning argument that inflation is bad is not in the substance of your arguments, but in our posts' constantly growing length.

Well, you're panicking as the stuff you thought was true was shown to not be, and spewing out other things you were told as a child, hoping something is true. Don't worry, it's a common reaction, I've seen it before, and we can undo the damage done to you. I'll try not to respond so fully to all of the contradictions and platitudes and flat out wrongness, that should help.

I'm not saying inflation doesn't happen.

You said it's harmless.

Inflation is meaningless, because nobody should care -

Meaningless also? Great. So pay me the difference, just for the last 20 years, and I'll shush.

Or do you lack the courage of your convictions?

You'd be hysterical as an oncologist. A man and his son visit you.

You: "You've got cancerous tumors in your lungs. They're harmless."

Man: "But won't they grow and eventually kill me?"

You: "Meaningless. Besides, it'll all be ok, your son will get them too."

Truly, god awful terrible. As a matter of fact, that doesn't even seem mathematically possible - to keep the inflation rate at zero,

And yet, for a few hundred years, it was the case in North America...for a thousand years in the Byzantine Empire...for a ridiculous long time in ancient Egypt. The 'constant inflation' thing has really only happened with the advent of paper currencies. That's the thing, you've grown up with it, so you can't see any other way.

For what it's worth, the folks with the printing presses have definitely gotten better at slowing the collapses (in the past, most paper currencies only lasted years, instead of decades).

Seriously. Shoving money in a mattress doesn't work, because your money is an abstract representation of something valuable (the sum exchange of goods and services within that economy). Preventing that money from flowing is, somewhere, somehow, reducing that sum exchange of goods and services and the economy gets weaker.

Ah, the hatred of the miser. Start another thread and I'll help you with this.

Self-interest != collective interest. I don't care if you have money in the bank that gets less valuable every year with inflation - invest, so someone can use that money and our economy will be stronger.

So people should not be allowed to save? Ever? You might want to tell your parents they were idiots by saving anything for you.

Think.

no mechanism in place for taking care of you or letting you
safely accumulate wealth without removing it from circulation.

Again, wow. Actually, when you put money in a bank, you're saving, and the bank still manages to put the money into circulation.

I definitely don't see a check coming. You lack the courage of your convictions, sir, and I am pleased. There's hope.

The problem with printing money and handing out to people being bad for the economy.. is that.. BANKS DO IT ALL THE TIME.

Banks create ficticious money all the freaking time, they've been doing it for a long time. Because they only needed to have 10% hard currency to cover their loans, they've been lending out money THAT DID NOT HAVE for a long time. What's worse, they lend money they do not have out to the Government, and charge them interest, and then turn around and borrow money from the fed for 0%. It's ludicrously stupid.

Usually they can only borrow money from the fed overnight (not even a full day). The program which allowed them to borrow it for a full day and roll over the loan multiple times (up to 46 days) was temporary ... and wasn't really stupid, it was a gift ... from the people at the Fed, to their future employers.

Actually, MFA, he's talking about bank reserve lending as well as the short term borrowing.

Two other cans of worms entirely. Personally, I'm still conflicted about how evil reserves are. I've read some long essays on it, but still not convinced one way or the other.

Doom wrote:This is what happens.

What is once is not always, nor forever shall be, nor is the only concievable way. Seriously, if you're trying to tell me, "the U.S. has problems with its paper currency implementation," that is a massive no shit. The fact that you can do paper currency, and fuck it up, does not imply the reverse is true - that paper currency will invariably fuck you up.

These are completely separate claims. You are totally hardcore proving one (because it's true), and then pretending it means the other is true.

Doom wrote:Um, it's true. It matters. It demonstrates what 'harmless' inflation does.

Except you haven't established that this is a bad thing, unless you've kept large sums of dollar bills under your mattress for fifty years. And really it isn't clear that an economy should allow or encourage people to put money in a mattress, because that is painful to the economy as a whole.

So yes, if inflation did that, that can still be totally completely 'harmless' if people are living at or better than the standard of living 50 years ago with the money they actually have. If the individual, discrete units of that currency have changed value, it doesn't matter, and it's not a bad thing.

As I said, this is a fairly useless number.

Doom wrote:Yes, I realize, it's possible the two are unrelated, but the fact still remains: currency devaluation (for whatever reason) precedes collapses.

And stoppage of breath precedes death of brain. Is it logical to assume that everyone who holds their breath for a few seconds is dying?

Again, establishing that one happens before the other does not establish that one is causing the other. In this case, it seems much more likely to be the case of a separate cause (the actual economic problems of the nation) that causes both - the devaluation of currency via overprinting and the collapse. Or, in rare cases, pure idiocy, where someone has the 'brilliant' idea that "we can just print more money! It's a foolproof scheme" and they overprint and destroy the economy.

But also: this problem literally does not happen with small inflation rates. This only happens when a currency's value spikes or plummet (overprinting, over-removal). And measuring the power of an individual unit of currency (the dollar) is absolutely, completely meaningless. A much better measure of wealth is (amount of dollars in circulation * value of individual unit). If this number goes up, your economy gets better. If this number goes down, your economy gets worse. Sudden changes in the amount of dollars will fuck everything up, but gradual ones (or slightly less gradual ones equally distributed among levels of society) fuck nothing up.

@Deficit spending

Deficit spending isn't covered by printing money. It's auctioned off as IOU's to other countries. (That's a gross over-simplification, but it's basically true.)

@Gentleman's agreement vs intrinsic value

When I say intrinsic value, I am referring to things like "can be used in temperature-sensitive electronics, and is difficult to mine." Paper has intrinsic value like "requires you to pulpify it, can be used to write things on, and wipe your ass." These are intrinsic values/properties. Intrinsic may be a strange word, but it's the word I'd like to use here. It's a semantical thing.

I am distinguishing this value, this intrinsic value based on acquirability and use, from the value of the gentleman's agreement, where we increase that value by coming together and deciding to use it as currency.

I asked you what reason that gentleman's agreement should be on gold as opposed to paper. The only difference between the two is gold has a higher intrinsic value (where intrinsic is defined as above; its use in electronics, and its difficulty to acquire) than paper.

Doom wrote:Well off the deep end here, I'm afraid. You said tree bark was bad because anybody could create money (unlike paper, I guess). Intrinsic value has nothing to do with it.

Paper has security systems in place. Counterfeit bills are an incredibly small portion of the economy, and what's more, counterfeit bills that can't be caught literally become a part of the economy. When the reserve tracks how much money is floating around, counterfeit bills that aren't getting caught count against that, and when they adjust the amount in circulation they will account for that. (I'm not saying the reserve does its job well, it's run by the people in the financial sector. Who stand to profit off of running it poorly. So yes, the reserve occasionally does stupid shit. This is a lack of accountability/regulation/management, not a fault of the idea of a reserve.)

A gentleman's agreement on tree bark is impossible, because I can go tear that off a tree. Any individual can generate wealth individually from thin air. The printing presses generate wealth at a level of society, not the individual. This is important, because it makes the 'gentleman's agreement' completely enforcable by controlling the amount of money out there. If any individual can get wealth (tree bark) by doing nothing (finding a tree), as opposed to get wealth in exchange for providing a valuable service/producing a valuable good/being a worthwhile investment, you have a problem. (As a matter of fact, it's the same problem as printing money and handing it to Bob the Billionaire, except literally everyone from Bob the Billionaire to John the Homeless is doing it.)

It's a bad example because tree bark is stupidly, obviously uncontrollable at a macroeconomic level. Having tree bark doesn't represent having wealth - it would represent having torn bark off a tree. And unless your society thinks, "fuck trees," that is literally not valuable to them, so your tree bark has no value. Having paper represents having accomplished some task soceity deemed worthwhile to compensate you for with some value of goods and services equal to the amount of paper you have (spend wisely). Since you can't go to a tree and get printed money out of it, nobody can break that expectation, so that expectation holds.

Doom wrote:Well, you've provided no such example, just said that if there was, you'd have provided support.

Wait, are you suggesting countries with precious metal backed economies don't collapse? You are aware that the vast majority of today's nations have only been around for a fraction of society's overall lifetime? Where do you think they went? Not to mention, many countries have had massive economic downturns during periods of being gold-backed, but survived as a whole (Great Depression).

Doom wrote:

DSMatticus wrote: Inflation is meaningless, because nobody should care -

Meaningless also? Great. So pay me the difference, just for the last 20 years, and I'll shush.

Yes, the things I say will look like something completely different when you quote half of them. What a clever trick you have going on there.

So I'll repeat what I said, again. Inflation rate devalues held currency at a gradual rate, and this is completely 100% okay because it encourages people who are holding onto currency to invest it into the economy where it will grow that very same economy. It really is better for an economy when you spend, spend, spend. Is it risky for individuals and difficult to retire? Yes. Which is why we need social mechanisms for protecting against those risks and ensuring people retire. Holding onto paper isn't one of them. Low-risk, easily-accessible, insured investment schemes with inflation-adjusted returns. Unfortunately, our markets are dominated by the big moneyholders, who can literally wipe out your entire livelihood and say, "whoops, my bad. Better luck next time." Which is a separate, real, and significant problem.

But if your complaint is, "but inflation is hurting me," I absolutely do not care because we can make a stronger economy overall where you can buy more and better things by taking the money you have stored and spending it.

Doom wrote:So people should not be allowed to save? Ever? You might want to tell your parents they were idiots by saving anything for you.

People need ways to save that allow the economy to use their money at the sametime. I.e., stable investment.

Doom wrote:Paper accelerates the collapse.

Yes, when your economy is printing money to stall an economic collapse it can accelerate a collapse. Unfortunately, there is absolutely nothing that establishes the printing of money started the collapse in the first place.

So yes, if you have a collapsing economy, and you print a bunch of money, you will collapse that economy faster. The fact remains that you had a collapsing economy in the first place, which suggests there is an underlying factor that is causing your economic problems. The paper money didn't ruin you, the fact that your economy blew ruined you. And any economy can suck, gold-backed or fiat. See Great Depression - that was a period of our history when we were gold-backed.

But you are noticing something, it's just NOT what you think you're noticing. Fiat economies can play chicken with collapse - in bad situations, they can print money to stimulate economic growth and mitigate the effects of minor downturns. But there's a real limit to how much you can do this before you hyperinflate and ruin everything, and that limit is hard to predict.

This is why you see fiat economies pump out tons of money as they die - they're doing it to stall a slow, painful death. When they get it right, the economy recovers and nobody remembers. When they get it wrong, the economy collapses even harder and everybody remembers.

Do you want to know what people do when they're drowning? They swim. Sometimes they swim so hard they exhaust themself, and they drown faster than if they'd just bobbed along the surface. Just because you can exhaust yourself swimming and die faster doesn't mean you shouldn't swim - you just have to be smart, and pace yourself. It's the same with the fiat money system - you can save yourself printing money, but when you fuck it up things get worse, not better. And of course, sometimes you're just flat-out screwed. You aren't going to swim your way out of a hurricane, or print your way out of the Soviet Union's economic shittiness, or anything like that.

But the fact remains that's WHY you see hyperinflation death throes, and that's why we don't care about inflation - there are times when printing money literally stops economic downturns by getting resources flowing again. Nobody remembers these times, because they aren't big deals. Everything stays the same. We remember when that inflation goes supernova and ruins an economy, because that's a big deal.

DSMatticus wrote: What is once is not always, nor forever shall be, nor is the only concievable way.

True enough, but you're forgetting, empirical observations still have value.

Suppose you're standing in a line, and a guy comes in with a gun.

He points it at the head of the first person, says "This is harmless", then shoots that person in the head.

He goes through the same process, over and over again, pausing only to reload his gun, then comes to you, points the gun at your head, and says "This is harmless."

You won't be a little worried, not one bit? After all, there's no guarantee that the outcome will be the same. We've already been through this; nobody's claiming a crystal ball, sometimes you just have to use common sense, is all, which is why I keep asking, in vain, for you to think about it.

Except you haven't established that this is a bad thing,

Actually, I have. Go back and reread, please.

unless you've kept large sums of dollar bills under your mattress for fifty years.

Hey look, another example, albeit a goofy one. It's yours though. Why should a person who does this be punished?

Does he own his money, or not? If he does, why should society punish him for using it as he pleases.

Or do you honestly think you don't (or shouldn't) own your money?

Think about it. You've been trained to think that the misery and pain inflicted, the 'sacrifices' the the people on the bottom are forced to make, are justified for a strong economy, and you've never been told that those sacrifices primarily go to help the folks on top (I do grant that sometimes the serfs get some scraps).

Think: why is it ok to sacrifice Joe Sixpack (unwillingly) to help Obama (who already has so much he doesn't need help)? Every single person with so much as a checking account, so much as pocket change, is a victim of this system.

And really it isn't clear that an economy should allow or encourage people to put money in a mattress, because that is painful to the economy as a whole.

Now, here's something you've never proven, although I've shown the opposite of what you said is correct when it comes to speculation.

How, exactly, is it 'painful to the economy' when you can just print up more money anyway? Think it through.

So yes, if inflation did that, that can still be totally completely 'harmless' if people are living at or better than the standard of living 50 years ago with the money they actually have.

Non sequitor. The US killed off a great many Plains indians in the 19th century, the US even practiced slavery. Just because people might possibly be living better now than in the 19th century doesn't change that these were bad things to do.

If the individual, discrete units of that currency have changed value, it doesn't matter, and it's not a bad thing.

Go back and reread, already established that it is.

And stoppage of breath precedes death of brain. Is it logical to assume that everyone who holds their breath for a few seconds is dying?

Heh, getting desperate? If it's for a few seconds, probably not (since you've given an end time in a brief period, that's what we'll use). On the other hand, ff they manage to do it forever, then, yes, they're probably dying.

Thanks for showing yourself wrong. Again.

where someone has the 'brilliant' idea that "we can just print more money! It's a foolproof scheme" and they overprint and destroy the economy.

Now, if this happens every single time in the past, then there's a cause for a concern.

Again, let that guy point the gun at your head and say "It's harmless". Are you SURE you're not going to be a little bit concerned? Are you SURE you're not going to think this is a situation that should be avoided?

But also: this problem literally does not happen with small inflation rates.

Ok, we've already established small inflation is still bad...anytime you want to write me a check for that "small" "harmless" "meaningless" inflation from the last 20 years (is this even your whole life?), I'll reconsider that you really believe it's no big deal.

Otherwise, you're wrong, and you know you're wrong, and just don't want to admit it.

. A much better measure of wealth is (amount of dollars in circulation * value of individual unit).

What's the exact way you calculate 'value of an individual unit'?

Deficit spending isn't covered by printing money. It's auctioned off as IOU's to other countries. (That's a gross over-simplification, but it's basically true.)

Oh wow, again. But skipping this until the basics are mastered.

When I say intrinsic value, I am referring to things like "can be used in temperature-sensitive electronics, and is difficult to mine." Paper has intrinsic value like "requires you to pulpify it, can be used to write things on, and wipe your ass." These are intrinsic values/properties. Intrinsic may be a strange word, but it's the word I'd like to use here. It's a semantical thing.

Wow, that's some hair-splitting there.

Fine, you want to define intrinsic to mean whatever you want it to mean. Okeedoke, let's just move on (keep in mind, in finance, the word doesn't mean what you're saying, above).

I asked you what reason that gentleman's agreement should be on gold as opposed to paper. The only difference between the two is gold has a higher intrinsic value (where intrinsic is defined as above; its use in electronics, and its difficulty to acquire) than paper.

You really need to read more, this is just such an 'oh wow' moment. By your personal definition of 'intrinsic', paper has more of an 'intrinsic' value because it can be used for more things.

I'll remind you again: you can't run a printing press and create an infinite amount of gold. You can do so with paper.

One clown with a printing press can utterly destroy your savings, your investments, obliterate your economy, in minutes. And you're arguing this is a desirable situation to be in.

A gentleman's agreement on tree bark is impossible, because I can go tear that off a tree. Any individual can generate wealth individually from thin air.

So, you really do believe wealth is defined by slips of paper? The rulers that run the printing presses really are generating (your word) wealth (your word) when they print money, creating even more wealth when they print money with bigger numbers on them?

Just for the heck of it, let's assume you're right, that wealth can be generated in this fashion.

Why do you want to restrict this awesome power to just our rulers? Do you honestly consider our leaders to be great, honest, people who never do anything for personal gain and can be trusted in all ways?

It's a bad example because tree bark is stupidly, obviously uncontrollable at a macroeconomic level. Having tree bark doesn't represent having wealth - it would represent having torn bark off a tree.

Agreed, in your viewpoint, it's just as bad as paper, which only represents the running of a press for a second or two.

. Having paper represents having accomplished some task soceity deemed worthwhile to compensate you

The task for the rulers by which 'society' infinitely rewards them: running a printing press.

. Since you can't go to a tree and get printed money out of it, nobody can break that expectation, so that expectation holds.

But you can print it off a press, so that expectation, in fact, doesn't hold.

Wait, are you suggesting countries with precious metal backed economies don't collapse?

We're talking about economies now, not countries in general.

What was the example, again? You know, where people lose faith in gold and it drops to a value of zero...still waiting.

I'll again explain. Gold backing isn't by any means guaranteed not to fail, it just has a much stronger track record than paper. If the Earth gets pummeled by thousands of tons of solid gold asteroids, yeah, we'll be screwed.

But doesn't that strike you as just a *teeny* bit less likely than someone using a printing press?

Not to mention, many countries have had massive economic downturns during periods of being gold-backed, but survived as a whole (Great Depression).

Another classic flawed argument from school. Note: the Fed was created in 1913, and that's when the presses started (also why inflation measurements typically start from this year, because inflation was truly negligible before then). Once those presses started, we were only nominally on a gold standard at that point...the massive printing led to the roaring 20's, as the 'free wealth' poured into the stock market, magnified even further by margin trading.

Thing is, this was before the internet, and people didn't realize all the funny "money" that was being created.

The Great Depression was years after the presses started, beginning around 1929. A few years into the Depression, people began to realize what had been done to them and started unloading their paper for gold, causing problems for banks caught in the same trap. The bankers complained to the government, which eventually led to making it illegal to own gold in 1933.

Past that point, we were only theoretically on a gold standard (and the average US citizen totally was not). So, yeah, you were told wrong about this, too.

By your theory, no longer being on the gold standard in 1933, and being strictly on paper, we should have been able to print up insane amounts of wealth in no time, ending the Depression by late afternoon on April 6, 1933 at the latest. Do you believe this is what happened?

Again, clearing up misconcepts regarding 1913-1950 is a bit much to address here. Probably best to stick with today, you likely have a better handle on current events.

So I'll repeat what I said, again. Inflation rate devalues held currency at a gradual rate, and this is completely 100% okay

Great! When will I be getting that check? You just don't seem to understand nearly *everyone* is screwed by this.

Without that check, I know you don't really believe it. I mean, it'll be a tiny check, right? Itsy-bitsy inflation is meaningless, after all.

It really is better for an economy when you spend, spend, spend. Is it risky for individuals and difficult to retire? Yes.

And why is it bad to give people a choice besides spending like a buffoon or taking the risks you just identified? I keep asking and asking this.

Again: why don't you want people to have a fair shake?

Which is why we need social mechanisms for protecting against those risks and ensuring people retire.

So the rulers with the printing presses already have incredible power that is abused regularly, and you feel we should respond by giving them...more power via social programs? Think about it.

Unfortunately, our markets are dominated by the big moneyholders, who can literally wipe out your entire livelihood and say, "whoops, my bad. Better luck next time." Which is a separate, real, and significant problem.

And the reason you don't want people to have the option of protecting themselves from this problem you identify is....?

Wouldn't be better if people weren't subjected to this in the first place?

But if your complaint is, "but inflation is hurting me," I absolutely do not care because we can make a stronger economy overall where you can buy more and better things by taking the money you have stored and spending it.

Again, you forget. We've already established paper currencies destroy economies, you said as much yourself. Most people are not better off being destroyed.

People need ways to save that allow the economy to use their money at the sametime. I.e., stable investment.

Agreed, so why do you keep defending a system that makes such things impossible?

Yes, when your economy is printing money to stall an economic collapse it can accelerate a collapse. Unfortunately, there is absolutely nothing that establishes the printing of money started the collapse in the first place.

Once again, the gun is pointed at your head. He's squeezing the trigger.

Are you SURE that it's quite unreasonable to guess at what's going to happen next?

See Great Depression - that was a period of our history when we were gold-backed.

Not quite. Having printing presses and gold at the same led to problems (also, see "Gresham's Law").

But there's a real limit to how much you can do this before you hyperinflate and ruin everything, and that limit is hard to predict.

Indeed, so we should all forced to gamble with such destruction, knowing that the best we can manage is to be destroyed (relatively) slowly by it.

Why do you want this, again?

Incredible economic growth is quite possible without the ridiculous risks of paper currency. The only people that want paper currency are the folks with the printing presses...they're also the ones that hired the teachers that trained you to think like this.

But, try overcome what was done to you and see another side.

This is why you see fiat economies pump out tons of money as they die - they're doing it to stall a slow, painful death. When they get it right, the economy recovers and nobody remembers.

When did they get it right? Oh yeah, nobody remembers. Another 'proof by lack of evidence'?

When they get it wrong, the economy collapses even harder and everybody remembers.

Fair enough. How many times would you need to see someone shot in the head before you would conjecture a causal relationship might exist? Why are you so willing to risk your life when the danger is very apparent and very great?

Do you want to know what people do when they're drowning? They swim. Sometimes they swim so hard they exhaust themself, and they drown faster than if they'd just bobbed along the surface. Just because you can exhaust yourself swimming and die faster doesn't mean you shouldn't swim

And if everybody who jumped in that lake yesterday has drowned and is dead, and everyone who jumped in that lake today is obviously drowning, maybe it's a lake not worth swimming in.

But you go right ahead and jump, I guess. But, before you go, can you explain why nobody should have the option of not jumping in?

we don't care about inflation

Oh wow, again. (Hint: there are numerous sites that calculate inflation in many forms, and even a government agency that does this very thing you claim we don't care about)

Bottom line, I don't think you're really forgetting things we've shown together these last few pages. What's happening now is you're just getting so much new information that it's causing you to shut down. I've seen this before too, and invariably, after a few months or a year, the seeds of knowledge planted now manage to take root in the crap you've been told as a kid.

So let's just step back a bit, and perhaps come back to this later when you've time to get some perspective instead of instinctive responses.

fixed quote tags. I think. --Z (sorry about that, had some actual work to do for a bit, didn't edit carefully)

With full reserve banking you need ~10% deflation for ~10% economic growth. Assuming the same percentage of gold sitting in the bank and the remaining gold going around at the same velocity. Which explains nicely why before fiat money even in times of nearly continuous increases in productivity there was never continuous economic growth ... persistent 10% deflation and human psychology don't go together, people stop spending money.

Ironically the gold standard without government guarantees for fractional reserves (and thus a lot of people choosing full reserve banking instead) could work now even though it worked so poorly in the past ... it's not compatible with fast economic growth, which we won't have again any way in the first world. Although fat fucking chance you could convince developing countries to go along with it ...

Well said. Arguments like those are exactly why I have such a hard time condemning fractional reserve banking.

In a fair market, banks that took extreme risks (eg, going way below their fraction) would eventually get wiped out. I don't like that much, but personally find it preferable to our 'too big to fail' philosophy, where I'm literally forced to bail out banks with my money...only possible because of the printing press.

And then a few years later watching the executives of these "almost failed" banks get a yearly bonus more than I'm likely to make in my lifetime? I like that much, much, less.

@Gun, largely irrelevant. Note: gold economies have failed. There are countries that used a gold standard, and are now no longer around. There are countries which have used gold and suffered economic downturns. You are implying here, without justification, that paper economies have a monopoly on being shot in the head, and therefore we should see a pattern. The actual pattern you should see is that weak economies are bad, and weak economies can use fiat money or gold.

You still need to connect these two exclusively.

Actually, I have. Go back and reread, please.

You established that this is a bad thing for a specific subset of individuals. Totally. Unfortunately, those actions are bad for the economy as a whole. (And this is obvious - spending money incites demand, which creates opportunities for people to create that demand and get paid for it. Spending breaks recessions, and strengthens upturns.)

Doom wrote:Hey look, another example, albeit a goofy one. It's yours though. Why should a person who does this be punished?

The economy should punish/discourage things that hurt it, and support/encourage things that help it. Isn't that obvious? We want the strongest economy possible, because then we're all in the best shape.

It's best if you think of money as a representation of the flow of wealth in a nation - in exchange for providing a service/producing a good/whatever, you are getting a promise that you can take the this slip of paper and cash it in for something you want.

You shouldn't expect to be able to wait a year, go to the local gas station, and say, "gas was worth this much a year ago. This money is a year old. I want to buy gas at the old rate." This is just a market-wide broadening of that obvious effect. And if your economy provides stable, inflation-adjusted ways of investing, you have other options.

Inflation is bad if you expect to be able to save currency directly. But I really see no reason you should be expected to be able to save currency, and it's certainly not clear that it's the best way for the economy to approach the issue.

Doom wrote: How, exactly, is it 'painful to the economy' when you can just print up more money anyway? Think it through.

Because all printed money will subsequently lower the value of all existing money, such that you have no net wealth gain? Printing money is only useful to 'kick-start' an economy that is locked up.

And yes, it really is painful. The reason you aren't seeing this is it's the difference between, "strengthening the economy," and "staying where we were." When you go out and spend money, you strength an economy. Saving money just leaves you where we were. People save during bad times, and that actually makes them worse because less people can have jobs, because people want less things.

@Non-sequitur

No. You implied that the devaluation of an individual unit of the dollar was bad. All you've actually shown that it was bad only to people who want to save stacks of paper, and I've universally responded, "people shouldn't want to do that anyway. If they spend that money, they will employ people, and that's just plain better." The things we should actually care about (not being able to save stacks of paper), like living off the money you actually get during the course of your life, is more possible now than it was then.

@Breath

There's a much better example below on the topic of swimming that establishes the same thing. In the interests of brevity, we'll disregard the semantics of parsing this argument (yes, if you stop breathing/hyperinflate indefinitely, you're dead/economy will collapse) - the point of that is that there is a disconnect between holding your breath occasionally and dying, and there's a disconnect between moderate inflation and the death of society.

@Guns again, and the past

Every single dead economy is dead. Fiat economies ALWAYS, ALWAYS hyper-inflate because inflation can kick-start and save a stalled economy. If you see a dead fiat economy, it invariably suffered hyper-inflation at the end because hyper-inflation was an attempt to save it. Again, let's condense this into the discussion at the bottom, with the 'swimming' example.

Doom wrote:Ok, we've already established small inflation is still bad...anytime you want to write me a check for that "small" "harmless" "meaningless" inflation from the last 20 years (is this even your whole life?), I'll reconsider that you really believe it's no big deal.

Please stop misrepresenting my position. Seriously. Are you stupid, or are you just determined to not get this because you can't get over how awesome you think you are for asking me pay up on a claim I never made?

Your apparent interpretation of my claim: "Inflation is meaningless huh? He says it's meaningless? Well it must be because it's of trivial scale, then. If it's of trivial scale, he won't mind paying it himself. Haha! I'll ask him to put his money where his mouth is."

My actual claim about inflation: "Inflation is meaningless, and we don't care that it hurts people who save currency because we don't want people to save currency in the first place. It's better for the economy as a whole if they spend that money, because it will then incite a demand increase that will employ people/make other people wealthier." The fact that we don't have as many low-risk, insured investments is the real problem here. Not the fact that currency is devaluing.

Note, that claim doesn't involve saying inflation is trivial. I'm just flat-out saying that I don't care paper loses value overtime to more paper - spend it, and you'll be happy and so will everyone else. If you want to save, do so in a way that promotes economic growth by investing appropriately.

Doom wrote:I'll remind you again: you can't run a printing press and create an infinite amount of gold. You can do so with paper.

One clown with a printing press can utterly destroy your savings, your investments, obliterate your economy, in minutes. And you're arguing this is a desirable situation to be in.

Intrinsic values are not a matter of "list X is bigger than list Y, so list X is more intrinsically valuable." Gold's intrinsic value is higher because its acquirability is lower and its uses are more expensive. But seriously, it doesn't matter what word we use here. We can call it a "foo value." Replace with whatever - as long as the concept it represents is well-defined (and the concept is well-defined, because paper and gold both have these uses and relative difficulties to acquire).

Telling me, "I don't like the word you used for that," is fine. But I gave you a definition to go with the word, so the language works out just fine. We know the concept being referred to.

As for the actual claim you make in the quote (money is easier to print than gold), that's totally correct, and it's a double-edged sword.

When you want to make new money in a paper economy, you snap your fingers. You don't have to spend much money, because paper is cheap. This is a bonus. It also makes overprinting money very easy, because again, paper is cheap. This is bad (but it usually only happens when an economy is in shit shape anyway).

When you want to make new money in a gold economy, you have to buy gold. And that shit is expensive, especially when you use it as currency. You have to spend a lot of money. This is a down. It also makes overprinting money hard. This is a plus.

The bonus of being able to generate currency quickly is good, because you can inject an economy with it to prevent that economy from stalling.

Doom wrote:So, you really do believe wealth is defined by slips of paper? The rulers that run the printing presses really are generating (your word) wealth (your word) when they print money, creating even more wealth when they print money with bigger numbers on them?

No, they're generating things that have wealth, and that wealth is not appearing out of thin air, it is coming as a fraction of the wealth of all dollar bills currently in existence. Which is why your wallet gets lighter, even though it hasn't changed. If that's gradual enough, you don't even notice your wallet getting lighter, unless you hold onto the same bill for 10 years.

Doom wrote:Agreed, in your viewpoint, it's just as bad as paper, which only represents the running of a press for a second or two.

One is at the level of an individual. One is at the individual of a society. Do you see the difference? If we used tree bark, instead of going to work, I could go into my backyard and tear something off a tree, then go buy food. If we use paper as printed by a mandated authority, I still have to do something to get that paper.

P.S., your talk about 'bad' mandated authorities is completely valid, but it's a separate issue - if you're telling me our representative democracy currently blows, that's totally true. We have no accountability in government or finance, ridiculously long terms for the senate, and a public body with short memory spans that is incredibly bipartisan to the point of extremity, and sensationalist, ratings-driven new organizations. We are so completely fucked up it isn't even funny anymore. But that's a completely separate issue from printing presses. And our printing presses have not gone off the deep-end. It is true that they could, but they haven't. Any society ruled by bad people is in for deep shit.

Example you're asking for: Great Depression. P.S., my example didn't require losing faith, at all. You said, "there are some paper currencies that have failed," and you implied it was due to the paper. I just have to provide an example of a failing gold economy, and with all the same justification you offered, we can assume it's the gold. And the Great Depression was a pretty massive failure.

The idea here was symmetry - expecting me to show you HOW gold destroyed the economy is the same as me expecting you to show me HOW paper destroyed the economy.

@Great Depression

Except not? The reserve at that point was required to back 40% with gold. And people took advantage of this, converting their note to gold and tanking our economy. You seem to have that right.

Doom wrote:By your theory, no longer being on the gold standard in 1933, and being strictly on paper, we should have been able to print up insane amounts of wealth in no time, ending the Depression by late afternoon on April 6, 1933 at the latest. Do you believe this is what happened?

That's not what I said, so much so that you are flat-out lying. I'll return you to this formula, which is roughly true except for sticking prices. (amount of dollars in circulation * value of individual unit). I.e., if I have one dollar out of a hundred, I own 1%. if I have one dollar out of two hundred, I own .5%. I own half of what I used to.

The mechanism by which printing money saves an economy has NOTHING to do with generating wealth, it has to do with stimulating spending. By printing money and letting people spend it, you can get wealth flowing again and shift things from 'saving' to 'spending,' which will totally save your ass. You created no wealth, you just moved it around. And moving it around is totally enough to stop some problems.

Doom wrote:And why is it bad to give people a choice besides spending like a buffoon or taking the risks you just identified? I keep asking and asking this.

I want to have the strongest economy possible? And we can mitigate those risks by stopping bankers from pissing away our investments and taking it as bonuses.

@Social programs
I kind of figured you'd hate social programs. You realize that most of the modern world has these social programs, and the countries with more of them tend to have better quality of life indices? You're welcome to not trust Uncle Sam all you like, and you're probably right - our government specifically is full of a bunch of douchebags right now who think deregulating the financial sector and cutting a few pennies off the budget will totally fix everything, so there's some merit to saying they're all stupid assholes.

But again, that reflects poorly on our election and news system. Not the idea of social programs. The fact that we're stupid enough to elect assholes and never hold them accountable... Social programs completely work, and they seriously help and alleviate the inherently shitty parts of an economy and society. Fixing things is not bad. Letting crooks pretend to fix things and walk away with your money is bad.

Doom wrote:Again, you forget. We've already established paper currencies destroy economies, you said as much yourself. Most people are not better off being destroyed.

No, we've established economies die, even the ones with paper currencies. You're really bad at this cause and effect thing. Did you know icecream sales and shark attacks correlate? They literally both happen at the same time. Selling icecream makes sharks hungry for flesh. Oh wait, there's a common element there? People buy icecream during the summer, when they're spending more time on beaches? Wow, that makes a lot more sense.

Show me the causative agent by which paper currencies single-handedly destroy economies.

Doom wrote:When did they get it right? Oh yeah, nobody remembers. Another 'proof by lack of evidence'?

We fucking do it everytime our economy looks bad. Seriously. It happens all the god damn time. The latest time, it failed to work, and you're noticing it, and going, "holy shit! Inflation ruined our economy!" In actuality, "inflation failed to save the economy."

Doom wrote:And if everybody who jumped in that lake yesterday has drowned and is dead, and everyone who jumped in that lake today is obviously drowning, maybe it's a lake not worth swimming in.

Seriously, do you not get what you're actually saying? That's a null comparison. Economies can't "leave" being economies. You can stop being in water. An economy cannot be anything but an economy. Somewhere, there's a lake of gold economies, and it's a graveyard, because those gold economies never got the chance to say, "I think I'll stop being an economy." Economies are losing propositions in the sense that they never end well (i.e., never get out of the lake). They either swim forever or drown. They are winning propositions in that while that economy is running, you get to play in the water, and it has lots of nice things.

Every 'economy,' gold or paper, has jumped in the lake and stayed there until it either A) changed lakes, or B) drowned.

The point is that A precedes B does not imply A was the cause of B in the same way swimming really hard didn't kill you - drowning did.

If superman fails to save you from the villain, superman didn't murder you. The villain did.

If your economy is failing, and inflation (used in small doses to mitigate economic downturns) fails to save you, inflation didn't collapse your economy.

But all of these things are likely to happen before your respective death (swimming, superman [at least in the superman universe], and inflation). You are seeing correlation and shouting, "aha! Causation!" and it's really just wrong.

@Little summary...
The only thing moderate inflation actually hurts is your ability to save currency for extended periods of time, and we can seriously have a stable economy that discourages saving currency. Does our's do that right now? No - our economy sucks at that. But you can totally do it, and it would be much, much better.

Inflation is not the source of all doom (unless sudden). It is a preventative measure, and the fact that you see it before the death of a paper economy is fucking obvious. But make no mistake - that economy was already screwed well before the hyper-inflation.

Again, you're simply blocking now, and responding with anger instead of thought, filibustering instead of considering. Let's come back to this later when you might have more perspective. The seeds have been planted, and that's enough for now.

When that time comes, I humbly ask that you reread that screed with an unbiased eye. You're really coming across as nuts now...you're willing to hurt, inflict pain on, and destroy human beings just for a (possible, alleged) "strong economy". Destroying people to save them. Yikes.

When the people being hurt are your children, I'm most optimistic you'll have a better perspective on how wonderful this system is.

For those that are curious about the reality of the Great Depression (I won't bother correcting the crap you're claiming): a better perspective

Your condescension aside, I do agree that this is going absolutely nowhere, and it's getting bloated and ridiculous. Forum posts were perhaps a bad medium to have this argument. Let's stop.

But please don't pretend you've said anything to me worth thinking about, or even particularly challenging to my position. If you want to stroke your ego, find another way. This argument would pick back up exactly where it left off, which I think is as good a reason as any to just call it dead - we're going nowhere, slowly.

I think we're just done.

Doom wrote:In a fair market, banks that took extreme risks (eg, going way below their fraction) would eventually get wiped out. I don't like that much, but personally find it preferable to our 'too big to fail' philosophy, where I'm literally forced to bail out banks with my money...only possible because of the printing press.

OK, what your problem here is essentially a moral problem. As in: there is a fundamental problem with your morality where you are a terrible person.

The "bank" doesn't really mean anything. It might be a person on paper, but it is only on paper. In the real world, it doesn't exist at all. The risks and profits and losses are the results of real people in the real world and when the bank is teetering on collapse they already got paid. The bank failing or not actually has precisely fuck all to do with whether the villains of the piece get rewarded or punished. If the bank fails, they'll just have to take their millions of dollars and get a new job or go on a sex tour of Thailand.

The people who actually lose money if the bank fails are the depositors. You know, the every day working fucks who leave a little from each paycheck in the bank in case they are ever out of a job or want to send their kids to private school. So when you say you want the banks to fail, you're literally saying that when investment bankers fuck around and set fire to the economy with too many risky financial games, that you won't be happy until random dock workers have their savings wiped out on top of that.

To put this in D&D perspective: when a demon lord threatens to destroy the city, you want to make sure that no one in the city gets out alive whether or not the demon is actually punished.

---

Yes, you should go after these greasy Wallstreet fuckers and yes the government should be seizing assets right and left for this shit. But none of that has anything to do with whether or not the government defends the innocent depositors. Who I must remind you: are fundamentally innocent in all this.

Letting banks fail is not only not a moral option, it's not even tangentially relevant to the actual problems. And it doesn't even have anything to do with fiat money, since the FDIC was totally functional back with we had metal-backed currency.

-Username17