Various recessions and depressions happened in US history, they were always linked to government propping up bad investments one way or another.
The Federal reserve was not created to 'prevent shocks', it was created to be given to the politicians and bankers as a tool to grow government power and by extension to grow banking profits. The Fed was initially forbidden from buying US Treasury debt (monetizing debt), but in 1917 this prohibition was repealed, that's the beginning of the countdown towards the current disaster.
In 1921 the depression lasted for 1.5 years, that's because Harding cut spending by 70%.
In 1925 the Fed printed dollars to buy bad UK debt to prop up the Pound sterling. By 1929 this blew up as an agricultural equity bubble and caused a recession (the blowing of the bubble and the recession was predicted by Hayek, while Keynes lost money on it, because he was buying into the hype).
Hoover and eventually FDR spent more and more money fighting the consequences of the recession, not allowing it to clear out the debts and reset the prices and the economy, and so they turned the recession into the Great Depression, which only ended in 1947, after WWII ended and the gov't cut spending by 64% and taxes by 32%.
The 1950s were 'fortunate' for USA in the sense that USA had nearly a monopoly on the world's production, as everybody else was rebuilding their infrastructure, but the Space Race and the Cold War spending (and other wars) expanded the government on credit (and this included all other government expansions, like the Medicare in 1965), and by 1970 this caused the beginning of the next recession.
In 1971 Nixon defaulted on the dollar and the stagflation hit (inflation and recession with high unemployment), this was only curbed by Volcker taking interest rates to 21.5% in 1981. Gold rose from 19 dollars an ounce in 1971 to 800 by 1981 and since Volcker succeeded showing that USA is serious about fighting inflation, the return on bonds and other investments became lucrative enough and people got out of gold, which fell to about 200-250USD per ounce, but that's still over 10times its value in 1971.
What Nixon could have done instead of defaulting, was devaluing the dollar, so an ounce of gold would be 100 bucks instead of 19, while cutting government spending (and as a consequence cutting taxes), he should have repealed Medicare, SS, FDIC, Fed, IRS and shut down various other agencies and departments.
But of-course he was Nixon, not Hayek or Mises, so this didn't happen.
As to 'deregulation' - it never happened. There is more regulation every day, the only piece of regulations that everybody is pointing to is 'Glass Steagall', which was part of the FDIC that was supposed to counterbalance the moral hazard of FDIC fake insurance. But that was not the reason for the economic calamity, the reason was the Federal reserve printing more and more money, which was sloshing around and eventually grew the financial industry, made it too big.
Regulations themselves created part of the problem in the subprime mortgage market (which would have never existed if there were no regulations aiming at less than satisfactory lending practices).
Regulations like the Patriot Act and various others have completely killed off small competition in the banking and investment industry, nobody can compete with the 'too big to fail' especially given how much burden regulations force upon the industry. Many of the regulations are passed by various 'private' regulatory bodies, like FINRA, which are really just an extension of the regulatory process and which prevent competition.
In the first Romney vs Obama debate, Romney said that he thinks regulations are good, he said: "we should not allow people to start banks in a garage" (something like that)
A bank in a garage is a good idea, it would be too small and not too big to fail, it would have to evaluate risk accordingly. W
I agree with everything you just said except for one thing.
This:
The mainstream economists are wrong about deflation being a threat.
Some of them are wrong, the most ignorant ones, but there are those who are not wrong. They are deliberately lying to keep the power in the hands of the powerful government elite.
You think that Alan Greenspan did not know what he was doing with his insane printing, also known as the 'Greenspan Put'? Seriously? You think the man who used to be very much in tune with even the Objectivist view point would not know what his policies would lead to?
No. I don't believe that all 'mainstream economists' are ignorant of the reality. They are seduced and corrupted by the power.
You are wrong, inflation is what causes hoarding, not of that fiat, but of fiat hedges. But this is not a momentary result of the government printing money, it takes time and in case of USA it took 58 years for the country to default on its monetary obligations (71-13). What happens once the default occurs is obvious - the savings and productive investment capital starts leaving, going somewhere else. Of-course the same forces that destroy the currency allow the government power to grow uncontrollably (until the economy collapses and the government with it). People see inflation and look for hedges. Inflation is what pushed so many people around the world into the stock markets, where most people should never have gone. Others bought more and more government debt, not realizing that the gov't debt is denominated in the same currencies that are being destroyed (well, government propaganda machine knows what it's doing). Of-course today it's the Fed that monetizes all new long term debt of the Treasury, while private investors are moving out of the gov't debt.
Inflation eventually destroys the economy, it drives savings and investments out, causes prices to rise and hits those on fixed incomes the most, then those with some modest savings. Those who are working have their hourly wage reduced by inflation (that's how the Fed "controls" unemployment), this allows businesses to hire more because wages fall in real price, but eventually, as businesses leave due to the inflation and government that grows based on inflation, there are fewer and fewer businesses and eventually there are no more people who want to or can hire.
The minority with more wealth than others bid up prices of assets, moving their money out of currencies and into various commodities and of-course monetary metals.
- I do not believe it's possible to participate in a rational conversation with you.
Whale oil once was a useful product, today it's of limited use. Continentals have no use at all beyond being a collectible item.
Of-course I never suggested anybody investing in whale oil, it was a strawman argument. Whether one specific commodity may lose its purpose over the time is a question to that commodity and technology.
Whether a fiat currency will lose its value is not a question of 'when', it is only a question of 'if'. All fiat currencies (artificial currencies that were declared by government to have some set value) have gone the way of Dodo bird.
Many have disappeared over the last 100 years, many will disappear in the coming years.
As to your other comments: Alan Greenspan has completely violated his own principles in the nineties, it was known as 'Greenspan Put', you should look it up. He was a money printing machine, completely opposite to the free market principles that he supposedly held before he became one of the power brokers.
State bonds are not risk free, they are very risky and they also blow up and disappear together with the fiat currency of that state and it happened like clock work, every time a fiat currency disappeared due to high (or hyper) inflation, the purchasing power of the bond holders was wiped out.
Inflation hedge allows people to store their purchasing power while governments destroy the purchasing power of the currency, that's why Golden Sachs stores thousands of tons of aluminum and other people store other commodities and precious monetary metals.
Good luck with your trolling, I am not inclined to participate in such obvious cases.
No, it's not 'less valuable', it is no longer used for the purposes of lighting and it is illegal to produce in many cases. It has a substitute, if the substitute was not there, there wouldn't have been more whales on this planet. Actually the crude oil mining industry has saved the whales.
As to 'risk free' - see, this is ridiculous, nothing is 'risk free', but some things are guaranteed to be extremely risky, like fiat currencies in the hands of governments with the printing press being their last refuge, since they have already destroyed the actual productive economy.
What are you talking about, a 'bubble' in commodities? You are confusing inflation in fiat currency and destruction of the economy with a bubble in asset classes that protect against inflation.
It would only be beneficial to our economy if we figured out a way to do transmutation of elements that would make metals abundant and cheap, it's not a negative, it's a positive. Aluminum is used as a store of value, here is a 5 year chart.
Oh, and in case you are wondering why did I mention Goldman Sachs and aluminum in one sentence, well, here it is. How do you like that picture? Do you think holding aluminum is smarter or dumber than holding US dollars or US Treasury bills or bonds?
Well, if nobody participates than actually there is no value in whatever it is you are holding. It's not mine, it is your comment that is nonsensical. What is your point, you think that for example somebody buying gold OR aluminum (Goldman) is doing something stupid, you think they are NOT protecting themselves against inflation?
Well, I sure would rather hold aluminum or any metal than fiat currency. AFAIC metals hold value better than inflating fiat.
Old baseball cards are definitely more valuable than BitCoins if the cards are real. They hold significant historic value, they are artifacts of the past, antiques, they are of limited quantity in a manner that's different than BitCoins. BitCoins can be replicated under a different scheme. Old baseball cards are similar to any old art - they can go up or down in value, but they have intrinsic value, they are true representation of history.
that's irrelevant. Anybody could stamp coins, governments only defined the official weight (content) of the metal in a coin.
In fact you could come to the Mint (when dollar was gold and silver), and they would mint a coin out of your own gold for you, but that's your gold and that's your coin. You couldn't counterfeit the coin, because that's basically a trademark violation, but it was your gold in that coin and it had nothing to do with government.
You could as well mint your own coins, people would accept it for the weight and content value, the nominal value on the coin face (or on any currency face) doesn't matter at all.
Investing is by definition something that produces value, if you are putting your money towards something that loses value, that's not called investment, there is actually a name for it: mal-investment or loss.
As to 'sitting on commodities', there is absolutely time and place to do that. That's when the individual freedoms are stifled so much that there is no way to make a profit, because the system is confiscating and destroying it all explicitly or implicitly (by preventing normal free market, price discovery, with inflation).
Inflation IS the reason why people buy commodities, again, it's called an investment hedge, as in protection against inflation.
Sometimes the best people can do is try and not to lose their purchasing power that they have saved over years and sometimes that means just buying gold or whatever keeps value and cannot be diluted, destroyed by the inflation and just waiting for the problem of government, which creates inflation, to go away.
Sometimes you can't fight the overwhelming storm, and that's what governments do - stir up the huge storm of destruction, the best you can do sometimes is get out of the way.
You can call it 'speculation', but what it is in reality is protection, insurance. The more money is sloshing around in the system, the higher the prices for assets will be bid up, that's normal. That's why inflation is so much worse for the poor than for the wealthy, because the poor live in fixed incomes and inflation wipes out their purchasing power so that their fixed incomes buy less and less and less.
While I would not put my own money into BitCoins, saying that there is a 'deflationary problem' with them misses the larger point - there is no problem with deflation.
BitCoins CAN be split into other, smaller pieces, as their value goes up, that's what the market provides in so many various forms, I am surprised that people are not mentioning it.
From ETFs to other derivative instruments, options, futures. It's possible to use an indivisible atomic BitCoin as a larger reserve and issue Sub-BitCoin instrument, that is not the problem.
Especially it is not a problem in a computerized world (which made BitCoin possible in the first place), because you don't need to trade the whole BitCoins, you can use BitCoin credits, like a Visa or a Debit Card and swap parts of BitCoin.
Of-course the original purpose of BitCoin was to provide a method for atomic transactions, but this does not mean that there cannot be an exchange, that would take 1 BitCoin and give you 1000 Sub-BitCoins or whatever. It's a nonsense artificial problem, it never existed.
What you are observing is an inflation hedge. How do you actually propose for the BitCoin users to use them?
The best way to use savings is to grow it (that's if your day to day expenses are covered). With governments of the world printing all fiat currencies, with gold going higher for a decade and with more and more inflation in sight, the investors are fighting for inflation hedge providing assets.
What do you think the savers should do, buy government bonds?:)
With real rate of inflation being in double digits (11 to 15% easy, but even by CPI it's 8% after it's annualized and compounded) the investors need to have a way to ensure nominal return of 14 to 21% to stay afloat and make around 6% real interest.
If you are not making 6% interest, don't bother with investment, just keep your money in an inflation hedge. 6% interest is necessary to cover at least some of your investment risks. But that's real rate of return, the nominal rate of return has to be above 14% at least to ensure that today by CPI figures, and I believe it has to be over 20% by real numbers. That's a hard thing to do, to get a 20% annualized return in nominal terms today.
Deflationary spiral is a made up problem, it's only a problem from the point of view of largest debtors and mal-invested money. So the real problem is for the government not for people.
People see inflation as the problem, not deflation, and they are right. USA had slight deflation in 19th century up until the beginning of 20th century, when in 1913 the Fed was established and really up until 1917, when the Fed turned into a debt monetizing instrument for the government.
Great Depression was caused by the Federal reserve in the first place, when the Fed monetized bad UK debt, this lead to the recession caused by the Fed inflating the stock market bubble in agriculture mostly. Hoover and FDR turned the recession into the Great Depression with all the bail out and stimulus policies and more money printing to be spent by governments and by the well connected largest institutions - the banks. Great Depression only ended as the WWII ended and the gov't cut spending by 64% and taxes by 32%.
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To answer your question: what should be done is government must be forced to stop with its inflationary policies, the government must be forced to quit setting up fake interest rates, controlling the monetary supply, actually it must be forced to quit telling the people what money is.
Of-course that's part of the problem, the other part is the size of government and thus all the regulations and taxes and everything that goes with it - destruction of individual rights and private property rights.
Today is the time when 'socio-economic' mobility is the lowest in 200 years. Never before were the governments so huge as they are today and never before have they prevented and stopped so many people from trying and improve their circumstances. It is the government that prevents socio-economic mobility, not free market.
In a free market, you are by definition free to attempt and start and run your own business without any government interference (as long as you are not defrauding and hurting people, that's the criminal code and contract law, nothing else is needed, but those things need to be enforce one way or another, though I personally disagree that government is the best way to provide even those functions, free market provides them absent government.)
Says somebody typing on a computer, that is direct product of competition between businesses for customer money.
Basic research is done by private sector absent government crowding out all sorts of credit, money, people and other resources, which governments always crowd out of the private sector into the public sector in search for a better bomb to kill you.
You are saying: not ALL invention comes from private sector. Well, of-course the governments steals so much money, that they can throw nearly unlimited funds at a problem. That's a huge waste of resources. Just like the Langley Aerodrome compared to the Wright brothers airplane. Langley had 50,000 USD thrown at him at the beginning of 20th century. Wright brothers had their own bicycle shop and under 1000 bucks of money over they years. Results are in the studio.
Yes, we can have money stolen from us by government and piles of it can be thrown at problems, like money thrown at Iraq, Afghanistan, Vietnam, Korea, War on Drugs, War on Poverty, etc.etc. It doesn't matter to the government how the money is spent, the only solution to all problem is: steal more money and spend it.
Would the Internet be here without government? OF-COURSE! Of-course it would be, just like all other forms of communications that we invent. Would it be using a protocol similar to what we are using today? Most likely, it's not like the idea of packet switching is so far fetched from the ideas that were already implemented in telephone circuit switching exchanges, the difference being that the telephone circuit had to be on and with data the speed removes the need for completely synchronous data exchange.
Besides, as I said, the people who were crowded out by the government from the private sector into the public sector, most of those people were already working on similar or exactly the same projects. Stealing them for the purposes of running wars more efficiently by governments is not what I would call a 'moral' enterprise. AFAIC the public sector is definitely immoral, it's based on theft and coercion and murder.
The private sector absent the government is based on voluntary exchange and pursuit of profits, which is the most moral way that we have invented as a species to run an economy, specifically because it's based on voluntary exchange among willing participants.
- obviously I see the real solution - get rid of the public school system, all education should be handled as a business, that way everybody will be served properly and voluntarily and as inexpensive as possible and nobody will be forced into anything.
I believe that the world is made of of awful people.
- absent government involvement everybody has to look out for themselves and this means higher level of voluntary cooperations through businesses and trade rather than militarism, laws, imprisonment.
Using government rules and regulations to solve societal problems is exactly like using DRM to try and prevent people from copying data. It fails in every case and for every purpose.
As you said: 'awful people'. Well, the 'awful people' will murder you, steal from you, do all the 'bad' things ('bad' in your current societal context) regardless of the government law and consequences. Free market forces higher level voluntary cooperation, government gives you an impression of security, but it's false security. You have more things to fear from government itself than from individuals.
If you want a more interesting (or at least a more weird) presidential debate, look at this one:
For voters having trouble getting enthusiastic about Obama and/or Romney, the Schiff Show is featuring a panel of overlooked presidential candidates. Participants include: Vermin Supreme, presidential candidate on the Free Pony Party ticket; Jimmy McMillan, presidential candidate on the Rent Is Too Damn High Party ticket; Santa Claus, independent write-in candidate, and Edgar Lawson, write-in Republican presidential candidate.
The USPTO generates the most income for the government, outside of the IRS
- no, that would be the Federal reserve. Of-course we can argue on the definition of 'income', but whatever the Congress gets its hands on is used as if it was 'income', so that's a technicality (and they never failed to raise the so called 'debt ceiling', so they clearly think this can go on forever).
You are right, the Constitution needs to be fixed but you are wrong, there is no such thing as 'right people', not in the long run. In the long run you will not have 'right people' (and I doubt that Americans are capable of figuring out as a society that the right people are those, who would protect the Constitution and not an individual or a business interest, the right people are not getting elected: Ron Paul, Gary Johnson).
You are right at the end, there will be blood. Look at Greece. Imagine Greece but with 315,000,000 population and guns. There will be blood.
The policy of trying to keep prices stable is flawed by design. USA had falling prices over the 19th century as dollar gained value by the factor of 2, by the beginning of 20th century USA became largest creditor because it became largest manufacturer and exporter.
The Fed was instrumented in 1913 (almost 100 years back now), and in the beginning it wasn't allowed to monetize debt! In fact it implemented a stronger gold standard than was used in commercial banks of the time, it had more reserves. By 1917 the Congress changed the policy, allowed the Fed to monetize the Treasury debt (originally SCOTUS only judged Fed to be legal because it wasn't allowed to monetize debt, but that's how all laws start, little by little, slippery slope, camel's nose under the tent, etc.)
By 1917 they changed the rules, allowed the Fed to monetize the debt, but they understood that this is inflation, so they introduced the infamous 'debt ceiling', which was raised every time when Congress hit it, so it's not a ceiling, the real ceiling will be imposed by the lenders (otherwise it's like allowing you to raise your maximum credit on your credit card indefinitely, why would you ever work again?)
As productivity increased over the 19th century, prices fell, no price is "set" to anything, it's always discovered by the market. Prices fall as productivity increases and efficiencies allow more to be produced with less cost, but the business grows and occupies more market as it provides lower and lower prices (compare to the computer and cell phone markets, you'll understand what I mean).
Total amount of gold mined is completely irrelevant of-course. Even if you take a theoretical country that has no gold (0 ounces) for all of its people, not only government, it does not mean that they cannot trade!
They can trade by selling something else for gold, they can trade in other metals as well. The issue is not gold itself, it is the ability not to be constrained by the artificial monstrous creations of the central banks and governments that are fiat currencies.
In fact in a free market you are free to issue your OWN currency, you can base it on anything you like! Why not? You can make a currency out of shares of your company. You can make currency out of some product that you release, it's up to the people whether to accept your currency and take it as payment. Clearly government shouldn't be preventing you from doing it, yet government calls it terrorism.
Government clearly hates competition in money, it wants to be the only issuer.
The free market allows for hoarding of resources, and because gold does not lose value due to spoilage, there is no pressure to sell.
- you do not understand business and you do not understand money.
Of-course there is pressure 'to sell', it's the pressure to invest. That's the reason why USA had deflation in 19th century and the beginning of the 20th century, yet it became the largest manufacturer (and thus exporter and creditor) in the world.
The very reason not to hoard money is PROFIT. If you hold your money underneath your mattress, that is fine, but it does nothing to grow your money.
What you should be worried about is INFLATION, not real money.
Inflation is what makes people 'hoard' real money and not use it, because to make a return that is worth the investment, you have to account for inflation as well, and since inflation is huge (11 to 15% AFAIC, but it's 8% if you just go by the annualized and compounded CPI) so to make, say a 6% real return on your investment (which is always a risky proposition), you have to make easily 15-21% nominal yearly return! That's very hard, that's what makes people 'hoard' their money rather than invest it.
Slashdot Mirror
Seriously, you'd think with his connections...
OTOH how do you know he didn't serve already, remember the VP during W's terms?
The debate starts at minute 40, they have a few technical difficulties in the beginning, but solve them in a couple of minutes.
But a deflationary spiral with exactly the described scenario was exactly the thing that had led Hitler to power in Germany. I'm not joking:
- you are not kidding, you are wrong though.
The reason Hitler came to power was the destruction of bourgeoisie class in Germany, rise of national socialism since about 1915.
Various recessions and depressions happened in US history, they were always linked to government propping up bad investments one way or another.
The Federal reserve was not created to 'prevent shocks', it was created to be given to the politicians and bankers as a tool to grow government power and by extension to grow banking profits. The Fed was initially forbidden from buying US Treasury debt (monetizing debt), but in 1917 this prohibition was repealed, that's the beginning of the countdown towards the current disaster.
In 1921 the depression lasted for 1.5 years, that's because Harding cut spending by 70%.
In 1925 the Fed printed dollars to buy bad UK debt to prop up the Pound sterling. By 1929 this blew up as an agricultural equity bubble and caused a recession (the blowing of the bubble and the recession was predicted by Hayek, while Keynes lost money on it, because he was buying into the hype).
Hoover and eventually FDR spent more and more money fighting the consequences of the recession, not allowing it to clear out the debts and reset the prices and the economy, and so they turned the recession into the Great Depression, which only ended in 1947, after WWII ended and the gov't cut spending by 64% and taxes by 32%.
The 1950s were 'fortunate' for USA in the sense that USA had nearly a monopoly on the world's production, as everybody else was rebuilding their infrastructure, but the Space Race and the Cold War spending (and other wars) expanded the government on credit (and this included all other government expansions, like the Medicare in 1965), and by 1970 this caused the beginning of the next recession.
In 1971 Nixon defaulted on the dollar and the stagflation hit (inflation and recession with high unemployment), this was only curbed by Volcker taking interest rates to 21.5% in 1981. Gold rose from 19 dollars an ounce in 1971 to 800 by 1981 and since Volcker succeeded showing that USA is serious about fighting inflation, the return on bonds and other investments became lucrative enough and people got out of gold, which fell to about 200-250USD per ounce, but that's still over 10times its value in 1971.
What Nixon could have done instead of defaulting, was devaluing the dollar, so an ounce of gold would be 100 bucks instead of 19, while cutting government spending (and as a consequence cutting taxes), he should have repealed Medicare, SS, FDIC, Fed, IRS and shut down various other agencies and departments.
But of-course he was Nixon, not Hayek or Mises, so this didn't happen.
As to 'deregulation' - it never happened. There is more regulation every day, the only piece of regulations that everybody is pointing to is 'Glass Steagall', which was part of the FDIC that was supposed to counterbalance the moral hazard of FDIC fake insurance. But that was not the reason for the economic calamity, the reason was the Federal reserve printing more and more money, which was sloshing around and eventually grew the financial industry, made it too big.
Regulations themselves created part of the problem in the subprime mortgage market (which would have never existed if there were no regulations aiming at less than satisfactory lending practices).
Regulations like the Patriot Act and various others have completely killed off small competition in the banking and investment industry, nobody can compete with the 'too big to fail' especially given how much burden regulations force upon the industry. Many of the regulations are passed by various 'private' regulatory bodies, like FINRA, which are really just an extension of the regulatory process and which prevent competition.
In the first Romney vs Obama debate, Romney said that he thinks regulations are good, he said: "we should not allow people to start banks in a garage" (something like that)
A bank in a garage is a good idea, it would be too small and not too big to fail, it would have to evaluate risk accordingly. W
I agree with everything you just said except for one thing.
This:
The mainstream economists are wrong about deflation being a threat.
Some of them are wrong, the most ignorant ones, but there are those who are not wrong. They are deliberately lying to keep the power in the hands of the powerful government elite.
You think that Alan Greenspan did not know what he was doing with his insane printing, also known as the 'Greenspan Put'? Seriously? You think the man who used to be very much in tune with even the Objectivist view point would not know what his policies would lead to?
No. I don't believe that all 'mainstream economists' are ignorant of the reality. They are seduced and corrupted by the power.
You are wrong, inflation is what causes hoarding, not of that fiat, but of fiat hedges. But this is not a momentary result of the government printing money, it takes time and in case of USA it took 58 years for the country to default on its monetary obligations (71-13). What happens once the default occurs is obvious - the savings and productive investment capital starts leaving, going somewhere else. Of-course the same forces that destroy the currency allow the government power to grow uncontrollably (until the economy collapses and the government with it). People see inflation and look for hedges. Inflation is what pushed so many people around the world into the stock markets, where most people should never have gone. Others bought more and more government debt, not realizing that the gov't debt is denominated in the same currencies that are being destroyed (well, government propaganda machine knows what it's doing). Of-course today it's the Fed that monetizes all new long term debt of the Treasury, while private investors are moving out of the gov't debt.
Inflation is theft, people know it and they are worried about it.
Inflation eventually destroys the economy, it drives savings and investments out, causes prices to rise and hits those on fixed incomes the most, then those with some modest savings. Those who are working have their hourly wage reduced by inflation (that's how the Fed "controls" unemployment), this allows businesses to hire more because wages fall in real price, but eventually, as businesses leave due to the inflation and government that grows based on inflation, there are fewer and fewer businesses and eventually there are no more people who want to or can hire.
The minority with more wealth than others bid up prices of assets, moving their money out of currencies and into various commodities and of-course monetary metals.
You've lost troll
- I do not believe it's possible to participate in a rational conversation with you.
Whale oil once was a useful product, today it's of limited use. Continentals have no use at all beyond being a collectible item.
Of-course I never suggested anybody investing in whale oil, it was a strawman argument. Whether one specific commodity may lose its purpose over the time is a question to that commodity and technology.
Whether a fiat currency will lose its value is not a question of 'when', it is only a question of 'if'. All fiat currencies (artificial currencies that were declared by government to have some set value) have gone the way of Dodo bird.
Many have disappeared over the last 100 years, many will disappear in the coming years.
As to your other comments: Alan Greenspan has completely violated his own principles in the nineties, it was known as 'Greenspan Put', you should look it up. He was a money printing machine, completely opposite to the free market principles that he supposedly held before he became one of the power brokers.
State bonds are not risk free, they are very risky and they also blow up and disappear together with the fiat currency of that state and it happened like clock work, every time a fiat currency disappeared due to high (or hyper) inflation, the purchasing power of the bond holders was wiped out.
Inflation hedge allows people to store their purchasing power while governments destroy the purchasing power of the currency, that's why Golden Sachs stores thousands of tons of aluminum and other people store other commodities and precious monetary metals.
Good luck with your trolling, I am not inclined to participate in such obvious cases.
No, it's not 'less valuable', it is no longer used for the purposes of lighting and it is illegal to produce in many cases. It has a substitute, if the substitute was not there, there wouldn't have been more whales on this planet. Actually the crude oil mining industry has saved the whales.
As to 'risk free' - see, this is ridiculous, nothing is 'risk free', but some things are guaranteed to be extremely risky, like fiat currencies in the hands of governments with the printing press being their last refuge, since they have already destroyed the actual productive economy.
What are you talking about, a 'bubble' in commodities? You are confusing inflation in fiat currency and destruction of the economy with a bubble in asset classes that protect against inflation.
Collectibles? Since there is no free market in whale oil you have to go out of country, but it's bought and sold today, not as a collectible item, it has various uses, especially in cosmetics.
It would only be beneficial to our economy if we figured out a way to do transmutation of elements that would make metals abundant and cheap, it's not a negative, it's a positive. Aluminum is used as a store of value, here is a 5 year chart.
Better than your Continentals.
Oh, and in case you are wondering why did I mention Goldman Sachs and aluminum in one sentence, well, here it is. How do you like that picture? Do you think holding aluminum is smarter or dumber than holding US dollars or US Treasury bills or bonds?
Well, if nobody participates than actually there is no value in whatever it is you are holding. It's not mine, it is your comment that is nonsensical. What is your point, you think that for example somebody buying gold OR aluminum (Goldman) is doing something stupid, you think they are NOT protecting themselves against inflation?
Well, I sure would rather hold aluminum or any metal than fiat currency. AFAIC metals hold value better than inflating fiat.
Old baseball cards are definitely more valuable than BitCoins if the cards are real. They hold significant historic value, they are artifacts of the past, antiques, they are of limited quantity in a manner that's different than BitCoins. BitCoins can be replicated under a different scheme. Old baseball cards are similar to any old art - they can go up or down in value, but they have intrinsic value, they are true representation of history.
that's irrelevant. Anybody could stamp coins, governments only defined the official weight (content) of the metal in a coin.
In fact you could come to the Mint (when dollar was gold and silver), and they would mint a coin out of your own gold for you, but that's your gold and that's your coin. You couldn't counterfeit the coin, because that's basically a trademark violation, but it was your gold in that coin and it had nothing to do with government.
You could as well mint your own coins, people would accept it for the weight and content value, the nominal value on the coin face (or on any currency face) doesn't matter at all.
Investing is by definition something that produces value, if you are putting your money towards something that loses value, that's not called investment, there is actually a name for it: mal-investment or loss.
As to 'sitting on commodities', there is absolutely time and place to do that. That's when the individual freedoms are stifled so much that there is no way to make a profit, because the system is confiscating and destroying it all explicitly or implicitly (by preventing normal free market, price discovery, with inflation).
Inflation IS the reason why people buy commodities, again, it's called an investment hedge, as in protection against inflation.
Sometimes the best people can do is try and not to lose their purchasing power that they have saved over years and sometimes that means just buying gold or whatever keeps value and cannot be diluted, destroyed by the inflation and just waiting for the problem of government, which creates inflation, to go away.
Sometimes you can't fight the overwhelming storm, and that's what governments do - stir up the huge storm of destruction, the best you can do sometimes is get out of the way.
You can call it 'speculation', but what it is in reality is protection, insurance. The more money is sloshing around in the system, the higher the prices for assets will be bid up, that's normal. That's why inflation is so much worse for the poor than for the wealthy, because the poor live in fixed incomes and inflation wipes out their purchasing power so that their fixed incomes buy less and less and less.
While I would not put my own money into BitCoins, saying that there is a 'deflationary problem' with them misses the larger point - there is no problem with deflation.
BitCoins CAN be split into other, smaller pieces, as their value goes up, that's what the market provides in so many various forms, I am surprised that people are not mentioning it.
From ETFs to other derivative instruments, options, futures. It's possible to use an indivisible atomic BitCoin as a larger reserve and issue Sub-BitCoin instrument, that is not the problem.
Especially it is not a problem in a computerized world (which made BitCoin possible in the first place), because you don't need to trade the whole BitCoins, you can use BitCoin credits, like a Visa or a Debit Card and swap parts of BitCoin.
Of-course the original purpose of BitCoin was to provide a method for atomic transactions, but this does not mean that there cannot be an exchange, that would take 1 BitCoin and give you 1000 Sub-BitCoins or whatever. It's a nonsense artificial problem, it never existed.
What you are observing is an inflation hedge. How do you actually propose for the BitCoin users to use them?
The best way to use savings is to grow it (that's if your day to day expenses are covered). With governments of the world printing all fiat currencies, with gold going higher for a decade and with more and more inflation in sight, the investors are fighting for inflation hedge providing assets.
What do you think the savers should do, buy government bonds? :)
With real rate of inflation being in double digits (11 to 15% easy, but even by CPI it's 8% after it's annualized and compounded) the investors need to have a way to ensure nominal return of 14 to 21% to stay afloat and make around 6% real interest.
If you are not making 6% interest, don't bother with investment, just keep your money in an inflation hedge. 6% interest is necessary to cover at least some of your investment risks. But that's real rate of return, the nominal rate of return has to be above 14% at least to ensure that today by CPI figures, and I believe it has to be over 20% by real numbers. That's a hard thing to do, to get a 20% annualized return in nominal terms today.
Deflationary spiral is a made up problem, it's only a problem from the point of view of largest debtors and mal-invested money. So the real problem is for the government not for people.
People see inflation as the problem, not deflation, and they are right. USA had slight deflation in 19th century up until the beginning of 20th century, when in 1913 the Fed was established and really up until 1917, when the Fed turned into a debt monetizing instrument for the government.
Great Depression was caused by the Federal reserve in the first place, when the Fed monetized bad UK debt, this lead to the recession caused by the Fed inflating the stock market bubble in agriculture mostly. Hoover and FDR turned the recession into the Great Depression with all the bail out and stimulus policies and more money printing to be spent by governments and by the well connected largest institutions - the banks. Great Depression only ended as the WWII ended and the gov't cut spending by 64% and taxes by 32%.
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To answer your question: what should be done is government must be forced to stop with its inflationary policies, the government must be forced to quit setting up fake interest rates, controlling the monetary supply, actually it must be forced to quit telling the people what money is.
Of-course that's part of the problem, the other part is the size of government and thus all the regulations and taxes and everything that goes with it - destruction of individual rights and private property rights.
Today is the time when 'socio-economic' mobility is the lowest in 200 years. Never before were the governments so huge as they are today and never before have they prevented and stopped so many people from trying and improve their circumstances. It is the government that prevents socio-economic mobility, not free market.
In a free market, you are by definition free to attempt and start and run your own business without any government interference (as long as you are not defrauding and hurting people, that's the criminal code and contract law, nothing else is needed, but those things need to be enforce one way or another, though I personally disagree that government is the best way to provide even those functions, free market provides them absent government.)
Says somebody typing on a computer, that is direct product of competition between businesses for customer money.
Basic research is done by private sector absent government crowding out all sorts of credit, money, people and other resources, which governments always crowd out of the private sector into the public sector in search for a better bomb to kill you.
Invention of transistor was done privately and without it we still would be stuck with vacuum tubes, which were also invented privately.
The history of telegraph is a history of private inventors, same as the history of telephone. Radio.
History of television is fascinating in yet another aspect, since the inventor of Kinescope had to escape h his new Soviet government while doing it.
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You are saying: not ALL invention comes from private sector. Well, of-course the governments steals so much money, that they can throw nearly unlimited funds at a problem. That's a huge waste of resources. Just like the Langley Aerodrome compared to the Wright brothers airplane. Langley had 50,000 USD thrown at him at the beginning of 20th century. Wright brothers had their own bicycle shop and under 1000 bucks of money over they years. Results are in the studio.
Yes, we can have money stolen from us by government and piles of it can be thrown at problems, like money thrown at Iraq, Afghanistan, Vietnam, Korea, War on Drugs, War on Poverty, etc.etc. It doesn't matter to the government how the money is spent, the only solution to all problem is: steal more money and spend it.
Would the Internet be here without government? OF-COURSE! Of-course it would be, just like all other forms of communications that we invent. Would it be using a protocol similar to what we are using today? Most likely, it's not like the idea of packet switching is so far fetched from the ideas that were already implemented in telephone circuit switching exchanges, the difference being that the telephone circuit had to be on and with data the speed removes the need for completely synchronous data exchange.
Besides, as I said, the people who were crowded out by the government from the private sector into the public sector, most of those people were already working on similar or exactly the same projects. Stealing them for the purposes of running wars more efficiently by governments is not what I would call a 'moral' enterprise. AFAIC the public sector is definitely immoral, it's based on theft and coercion and murder.
The private sector absent the government is based on voluntary exchange and pursuit of profits, which is the most moral way that we have invented as a species to run an economy, specifically because it's based on voluntary exchange among willing participants.
Can you see no other option?
- obviously I see the real solution - get rid of the public school system, all education should be handled as a business, that way everybody will be served properly and voluntarily and as inexpensive as possible and nobody will be forced into anything.
I believe that the world is made of of awful people.
- absent government involvement everybody has to look out for themselves and this means higher level of voluntary cooperations through businesses and trade rather than militarism, laws, imprisonment.
Using government rules and regulations to solve societal problems is exactly like using DRM to try and prevent people from copying data. It fails in every case and for every purpose.
As you said: 'awful people'. Well, the 'awful people' will murder you, steal from you, do all the 'bad' things ('bad' in your current societal context) regardless of the government law and consequences. Free market forces higher level voluntary cooperation, government gives you an impression of security, but it's false security. You have more things to fear from government itself than from individuals.
If you want a more interesting (or at least a more weird) presidential debate, look at this one:
For voters having trouble getting enthusiastic about Obama and/or Romney, the Schiff Show is featuring a panel of overlooked presidential candidates. Participants include: Vermin Supreme, presidential candidate on the Free Pony Party ticket; Jimmy McMillan, presidential candidate on the Rent Is Too Damn High Party ticket; Santa Claus, independent write-in candidate, and Edgar Lawson, write-in Republican presidential candidate.
Here is the debate, it starts at minute 40 (there are a few technical difficulties alone the way, but they solve them).
The USPTO generates the most income for the government, outside of the IRS
- no, that would be the Federal reserve. Of-course we can argue on the definition of 'income', but whatever the Congress gets its hands on is used as if it was 'income', so that's a technicality (and they never failed to raise the so called 'debt ceiling', so they clearly think this can go on forever).
You are right, the Constitution needs to be fixed but you are wrong, there is no such thing as 'right people', not in the long run. In the long run you will not have 'right people' (and I doubt that Americans are capable of figuring out as a society that the right people are those, who would protect the Constitution and not an individual or a business interest, the right people are not getting elected: Ron Paul, Gary Johnson).
You are right at the end, there will be blood. Look at Greece. Imagine Greece but with 315,000,000 population and guns. There will be blood.
First: price stability is bad, not good.
The policy of trying to keep prices stable is flawed by design. USA had falling prices over the 19th century as dollar gained value by the factor of 2, by the beginning of 20th century USA became largest creditor because it became largest manufacturer and exporter.
The Fed was instrumented in 1913 (almost 100 years back now), and in the beginning it wasn't allowed to monetize debt! In fact it implemented a stronger gold standard than was used in commercial banks of the time, it had more reserves. By 1917 the Congress changed the policy, allowed the Fed to monetize the Treasury debt (originally SCOTUS only judged Fed to be legal because it wasn't allowed to monetize debt, but that's how all laws start, little by little, slippery slope, camel's nose under the tent, etc.)
By 1917 they changed the rules, allowed the Fed to monetize the debt, but they understood that this is inflation, so they introduced the infamous 'debt ceiling', which was raised every time when Congress hit it, so it's not a ceiling, the real ceiling will be imposed by the lenders (otherwise it's like allowing you to raise your maximum credit on your credit card indefinitely, why would you ever work again?)
As productivity increased over the 19th century, prices fell, no price is "set" to anything, it's always discovered by the market. Prices fall as productivity increases and efficiencies allow more to be produced with less cost, but the business grows and occupies more market as it provides lower and lower prices (compare to the computer and cell phone markets, you'll understand what I mean).
Total amount of gold mined is completely irrelevant of-course. Even if you take a theoretical country that has no gold (0 ounces) for all of its people, not only government, it does not mean that they cannot trade!
They can trade by selling something else for gold, they can trade in other metals as well. The issue is not gold itself, it is the ability not to be constrained by the artificial monstrous creations of the central banks and governments that are fiat currencies.
In fact in a free market you are free to issue your OWN currency, you can base it on anything you like! Why not? You can make a currency out of shares of your company. You can make currency out of some product that you release, it's up to the people whether to accept your currency and take it as payment. Clearly government shouldn't be preventing you from doing it, yet government calls it terrorism.
Government clearly hates competition in money, it wants to be the only issuer.
The free market allows for hoarding of resources, and because gold does not lose value due to spoilage, there is no pressure to sell.
- you do not understand business and you do not understand money.
Of-course there is pressure 'to sell', it's the pressure to invest. That's the reason why USA had deflation in 19th century and the beginning of the 20th century, yet it became the largest manufacturer (and thus exporter and creditor) in the world.
The very reason not to hoard money is PROFIT. If you hold your money underneath your mattress, that is fine, but it does nothing to grow your money.
What you should be worried about is INFLATION, not real money.
Inflation is what makes people 'hoard' real money and not use it, because to make a return that is worth the investment, you have to account for inflation as well, and since inflation is huge (11 to 15% AFAIC, but it's 8% if you just go by the annualized and compounded CPI) so to make, say a 6% real return on your investment (which is always a risky proposition), you have to make easily 15-21% nominal yearly return! That's very hard, that's what makes people 'hoard' their money rather than invest it.
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