People and opinions do change (me 3 years ago)

[Rassah]

Created a disqus account, and it pulled my various posts from random blogs from years ago. Stumbled onto this "gem" I posted on a personal finance site, where I was arguing about monetary policy. Man, I'm blushing reading some of this

"Modern" economy is different from 30's and 40's economy due to drastically increased speed and globalization. Gold production could ALMOST keep up with economic expansion in the 30's without causing too much deflation. I don't think that is the case now (considering The Wizard of Oz, it doesn't seem like it was back then, either).
Inflation "forces" the economy to move. Businesses rush to continue to invest, expand, and create ways of turning their value-losing cash into more cash in order to outpace inflation. Customers rush to buy goods and services, or to invest in businesses, to make sure their money does not lose value either. Deflation would mean people would have an incentive to hold on to their cash and watch it grow, rather than spend it. Deflation also runs the risk of self-feeding stagnation: people hold onto their money instead of buying things, economy slows and available cash declines, cash increases in value even more, people have even more incentive to hold onto their cash instead of grow it, and on and on (until we have a cash bubble, like the tulip mania in Netherlands). Both runaway inflation and runaway deflation are bad, but I believe low 2% to 3% inflation is better and safer than 2% to 3% deflation, and has a way lower risk for making things go really bad.
Also, why specifically "gold" for a standard? Why not silver, platinum, or tulips? I don't believe gold can increase in quantity rapidly enough to keep up with our economic expansion, so it would lead to severe deflation. Fiat currency allows us to more or less control inflationary and deflationary forces (start or stop the printers, so to speak). We can't control the amount of gold in mines. Also since we are globalized, and can easily buy other types of commodities or currencies, why even a "standard?" If you are worried about USD, you can buy precious metal ETFs, stocks, or even Euros/Yen. As I see it, due to much more globalized economy, extremely fast speed of transactions, and with way fewer barriers, we already have a somewhat free market for currency, one that competes against other forms of currency and valuables. The only barrier left is free immigration: we can't easily escape taxes by moving to another country.
-- Rassah  (3 years ago)

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[Rassah]

And some more embarrassing naivete from same discussion

Regarding the main point, gold; the reason gold standard really bothers me is because I feel it would be way too similar to last year's oil spike: people hoard it, driving the cost of it up artificially. At least oil is renewable; gold is not quite as much. If gold were the currency standard, people hoarding gold would make its value go up. Food would cost less and less gold comparatively. That's deflation. Should the bubble pop, or another type of currency enter the market, the gold, having almost no utility value, would crash, and food would cost more and more gold. Inflation. We would essentially be in a perpetual cycle, driven by people not smart enough to realize what they're doing. Am I incorrect in understanding this? Also, our economy, and our population, has expanded exponentially in the last few decades. With a limited supply of gold, we would have less and less gold per person. Scarcity would again lead to deflation (price of money/gold going up). Even with banks using low reserve rates and re-loaning the money, I can't see something like gold growing fast enough to support this, can you?

[myrkul]

A ray - slim though it might be - of hope for some of this forum's participants, then...

[Lethn]

Happens to all of us, I almost thought about joining the army when I was younger, definitely would have ended up losing it and shooting a superior officer.

[firefop]

I think this post deserves my two favorite Churchill quotes.

“Courage is what it takes to stand up and speak; courage is also what it takes to sit down and listen.”

&

“If you're not a liberal at twenty you have no heart, if you're not a conservative at forty you have no brain.”

[Rassah]

“If you're not a liberal at twenty you have no heart, if you're not a conservative at forty you have no brain.”

That last one really needs to be qualified, and specifically mean fiscal conservative. A lot of older people are social conservatives, and that's always bad. And actually, the word conservative in there isn't even right, either. I know it's a colloquial meaning of conservative, i.e. "thinking about economics from the right political position," but conservative really just means resistance to change, and fear of trying something new, even in the face of conflicting evidence. In that sense, Comunist USSR was extremely conservative, both socially and economically, Democrats are mildly conservative, wishing to preserve the status-quo of the current tax rates and entitlement programs, but being somewhat lenient on social issues, and libertarianism is extremely liberal in all senses.
So, if you don't mind, since I came from the liberal, Democratic, immigrant, same-sex left, I'll continue to have disdain for anything conservative  

[Anon136]

i think you made some good points. Gold really isnt a great money from a technical standpoint. it would likely be deflationary and this would likely lead to hording which would hamper economic growth. Similarly inflationary money also leads different but no less real forms of malinvestment. Ideally we would have a money that was responsibly managed in order to maintain a stable purchasing power. Probably a currency that was issued privately and redeemable for a basket of commodities would be most ideal.

Of course what is great about gold as money is the protection it provides against the damage that would be caused by government meddling (damage that is typically orders of magnitude greater than a little naturally occurring deflation)

[myrkul]

i think you made some good points. Gold really isnt a great money from a technical standpoint. it would likely be deflationary and this would likely lead to hording which would hamper economic growth.

Gold has a historical record of increasing supply roughly equal to population growth. There have been some blips, but roughly speaking, gold has held it's value pretty steady since well before that long-haired hippy started preaching against the moneylenders on the temple steps.

[Rassah]

i think you made some good points. Gold really isnt a great money from a technical standpoint. it would likely be deflationary and this would likely lead to hording which would hamper economic growth.

Gold has a historical record of increasing supply roughly equal to population growth. There have been some blips, but roughly speaking, gold has held it's value pretty steady since well before that long-haired hippy started preaching against the moneylenders on the temple steps.

Is THAT why long-term investment in gold yields something like 3% return?

[myrkul]

i think you made some good points. Gold really isnt a great money from a technical standpoint. it would likely be deflationary and this would likely lead to hording which would hamper economic growth.

Gold has a historical record of increasing supply roughly equal to population growth. There have been some blips, but roughly speaking, gold has held it's value pretty steady since well before that long-haired hippy started preaching against the moneylenders on the temple steps.

Is THAT why long-term investment in gold yields something like 3% return?

Is that inflation adjusted? Often ROI is measured in the currency units that you bought it in, and if you inflate the purchasing power of the dollar away, the same amount of gold is going to buy a lot more dollars.

[niko]

In some ways, only a fool never change their opinion. I may be one: since ~2000, I take the "political compass" test once every 3-4 years. My coordinates have not moved significantly: I'm right there, in the libertarian-left corner, with Nader, Walt Brown, Mandela, the Dalai Lama, Gandhi (even though I'd never endorse most of them).

[Rassah]

i think you made some good points. Gold really isnt a great money from a technical standpoint. it would likely be deflationary and this would likely lead to hording which would hamper economic growth.

Gold has a historical record of increasing supply roughly equal to population growth. There have been some blips, but roughly speaking, gold has held it's value pretty steady since well before that long-haired hippy started preaching against the moneylenders on the temple steps.

Is THAT why long-term investment in gold yields something like 3% return?

Is that inflation adjusted?

Apparently.. yes.
"Since 1900 to 2011 bullion made real returns of only 1.3% a year..."
Real returns - returns adjusted for changes in prices due to inflation or other external effects

[myrkul]

i think you made some good points. Gold really isnt a great money from a technical standpoint. it would likely be deflationary and this would likely lead to hording which would hamper economic growth.

Gold has a historical record of increasing supply roughly equal to population growth. There have been some blips, but roughly speaking, gold has held it's value pretty steady since well before that long-haired hippy started preaching against the moneylenders on the temple steps.

Is THAT why long-term investment in gold yields something like 3% return?

Is that inflation adjusted?

Apparently.. yes.
"Since 1900 to 2011 bullion made real returns of only 1.3% a year..."
Real returns - returns adjusted for changes in prices due to inflation or other external effects

yup... steady. Maybe a little up, maybe a little down, that's what you want in a currency. Just like bitcoin. It will inflate to a set number, hopefully at a rate close to adoption, and then slowly trickle away as people lose wallets. Eventually, we may need a Bitcoin 2.0, but I'll be long dead (or uploaded) by then.

[Topazan]

A ray - slim though it might be - of hope for some of this forum's participants, then... 

Makes me curious what you used to believe. 

From what I understand, money is neutral in the long term.  I personally suspect that short term effects would be limited if we allowed currency competition.  Let people choose what kind of currency they use.

[myrkul]

A ray - slim though it might be - of hope for some of this forum's participants, then... 

Makes me curious what you used to believe. 

A brief summary:
I've wandered all over the political spectrum, from "rebellious" anarchism (the teenaged, unfocused, fuck the system type) to card-carrying democrat (voted for Clinton both times), to Ron Paul Republican, to minarchist libertarian, and finally, to AnCap.

[Rassah]

A ray - slim though it might be - of hope for some of this forum's participants, then... 

Makes me curious what you used to believe. 

A brief summary:
I've wandered all over the political spectrum, from "rebellious" anarchism (the teenaged, unfocused, fuck the system type) to card-carrying democrat (voted for Clinton both times), to Ron Paul Republican, to minarchist libertarian, and finally, to AnCap.

I was under the impression you were not from US

[myrkul]

A ray - slim though it might be - of hope for some of this forum's participants, then... 

Makes me curious what you used to believe. 

A brief summary:
I've wandered all over the political spectrum, from "rebellious" anarchism (the teenaged, unfocused, fuck the system type) to card-carrying democrat (voted for Clinton both times), to Ron Paul Republican, to minarchist libertarian, and finally, to AnCap.

I was under the impression you were not from US

Born and raised. I throw in the occasional over-seas phrase or word to keep people on their toes.

[Anon136]

A ray - slim though it might be - of hope for some of this forum's participants, then... 

Makes me curious what you used to believe. 

A brief summary:
I've wandered all over the political spectrum, from "rebellious" anarchism (the teenaged, unfocused, fuck the system type) to card-carrying democrat (voted for Clinton both times), to Ron Paul Republican, to minarchist libertarian, and finally, to AnCap.

Have you ever heard of someone who used to consider themselves a free market anarchist but has since moved on? I find it interesting and perhaps telling that it is easy to find someone who used to consider themselves a communist or used to consider themselves a republican but i have never yet met someone who used to be a market anarchist.

[myrkul]

A ray - slim though it might be - of hope for some of this forum's participants, then... 

Makes me curious what you used to believe. 

A brief summary:
I've wandered all over the political spectrum, from "rebellious" anarchism (the teenaged, unfocused, fuck the system type) to card-carrying democrat (voted for Clinton both times), to Ron Paul Republican, to minarchist libertarian, and finally, to AnCap.

Have you ever heard of someone who used to consider themselves a free market anarchist but has since moved on? I find it interesting and perhaps telling that it is easy to find someone who used to consider themselves a communist or used to consider themselves a republican but i have never yet met someone who used to be a market anarchist.

I believe there's one person I've met (on here, of course) who claims to have turned away from libertarianism before reaching free market anarchist (recoiled from personal responsibility, I think), but one you go AnCap, you don't go back.

[firefop]

I believe there's one person I've met (on here, of course) who claims to have turned away from libertarianism before reaching free market anarchist (recoiled from personal responsibility, I think), but one you go AnCap, you don't go back.

I'm not opposed to the idea of it... but nobody's been able to sell it to me yet. But I'm not really that far off of it.