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Nobel Winner Dares To Go There: "No Reason To Fear Deflation... Greece May Benefit From Gold Standard"
"Historically, there is no reason to fear deflation," Nobel Laureate Thomas Sargent explains to Germany's Wiwo.de, "we all benefit from lower prices." Crucially, he continues, "countries with declining prices, such as Greece, must improve the competitiveness they have lost in recent years," requiring falling wages and rising productivity (and falling unit labor costs) which will lead to companies cutting prices, "this is not a dangerous deflation, but part of the necessary correction so that these countries are internationally competitive again." That central banks pursue an inflation rate of around 2%, Sargent blasts, is because they consider it their job to "make bad debt good debt," adding that inflation is "a major redistribution machine - reducing the real debt burden for the benefit of creditors and devaluing the assets of the creditors." A return to a gold standard,he concludes, to prevent governments and central banks from limitless money-printing "would not be foolish."
Thomas Sargent (via Wiwo.de) dares to go there (and is likely about to be stripped of his Nobel)...
"The countries with declining prices is troubled countries like Greece. They must make their price competitiveness, they have lost in recent years, again. This requires falling wages and rising productivity. As a result, unit labor costs go back, and the company may cut prices. This is not a dangerous deflation, but part of the necessary correction so that these countries are internationally competitive again, "Sargent said in an interview.
In addition, there are, according Sargent "historically no reason to fear deflation."
On the contrary: "We all benefit when technological progress lowers the prices, such as computers," said Sargent.
That central banks pursue an inflation rate of around two percent, according to Sargent is because they consider it their job to "make bad debt good debt". Of an inflation governments benefited with high debt.
Sargent: "Inflation is a major redistribution machine, which reduces the real debt burden for the benefit of creditors and devalued the assets of the creditors."
To prevent this, according to Sargent, the reintroduction of the gold standard would be possible, "I would not necessarily say that it would be the best solution, but it would not be foolish."
Until the First World War, had the gold standard, to prevent that governments and their central banks print money limitless. During this time the prices would indeed have fluctuated, but had compensated over the years.
and specific to Europe, Thorstein Polleit adds (via Wiwo.de),
"The ECB will continue to push the rate toward zero percent and then buy government bonds," Polleit said. Background of this development are falling consumer prices in the euro-crisis countries and the resulting fear of deflation.
At the same time Polleit warns against the consequences of the low interest rate policy. "You can defer the market-based adjustment of the credit boom of the past few years through lower interest rates and the printing of new money most, but not prevent," said Polleit. In the medium term there is no way to lead a massive correction, coupled with cuts and debt deflation.
Polleit's conclusion seems very apt givne the current melt-up:
"The longer you postpone this process, the more destructive is its effect."
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Do you seriously call this stable??
http://www.macrotrends.net/1380/gold-to-oil-ratio-historical-chart
Compared to almost every ratio in the economic world?
Yes, compute the variance and get back to us.
Edit: Why don't you plot the Gold-to-silver ratio since it started free floating in 1965? And that ratio is comparing two very similar things...
There is a point here. Again though the argument is leading and false. The ratio is computed in what terms? It has been DISTORTED. Lets remove the distortion here, a bit abstract and look at the whole pie.
I see the economic world broken into 2 parts:
1. Currency (Sometimes Money)
2. Tax (Mostly Government) - This includes inflation, direct & indirect, duties, etc etc
I believe that both of these items both 1 and 2 must be stable. Since they are not, and I would venture to say since governments are unstable #1 will always be under pressure. The only way to short short circuit government is to have #1 NOT be counterfeited and survive for long periods of time, longer then our lives. This is why gold is so appealing.
Gold will increase not so much competitiveness but improve QUALITY and LONGEVITY. It will also shackle government by cutting the credit card perhaps more importantly.
Point blank: Currency or Money is one part of the problem. Unless we also give a long hard look at government schemes we are doomed. Government is the other 50% of this argument/problem. That is why this money/currency discussion is so divisive. Anything that reduces government power will be destroyed at all costs. This is why in my opinion ANY competing and interest free currency is a positive step. Interest free currency makes all of us more responsible for ourselves and at the same time allowing us to be responsible by not inflicting never ending costs to transact.
If you are looking for sources of information I can provide them. Subjects of anarchy, gold standards, interest free currency (used today), etc etc... My business currently is numismatics, I am lucky enough to see this stuff in real life and through history.
I am sorry, the ratio of price of two commodities is independent of what ever facilitates said transaction...
Why is my argument false? Sorry, you have written nothing to show otherwise..
The ratio of gold to silver is based on what? Futures contracts? Real life experience? Mining percentages?
I bet it is based on futures contracts. (Which cannot be purchased in said material, they are denominated in what again?)
Therefore the context is in the dollar price moves that effect the ratios. Looking at any one data point is not enough. Other currency and raw material ratios need to be examined.
Really? The ratio of their values is independent of the means you measure their value...
Pretty clumsy obfuscation on your part...
Edit: Why don't you plot the Gold-to-silver ratio since it started free floating in 1965? And that ratio is comparing two very similar things...
Lulz. How are silver and gold 'two very similar things'? Let me give you a helping hand.. the stock:(annual) flow ratio of gold is around 60:1.... why don't you go find out what it is for silver and come back and try to argue gold & silver are similar?
I swear to God, you're as ignorant on this subject as you are on the 'science' of AGW.
I would say two metals that are extracted and have been used for a medium of exchange for thousands of years are similar.. Do you understand what a ratio is?
Indeed, I do know what a ratio is.
Or do you not understand the significance of the annual stock:flow ratio of a 'commodity' (a standard monetary metric) when trying to determine its suitability as money?
Please demonstrate with plausible examples and realistic numbers exactly what you mean in the context of the issue under discussion.
Based on what you just wrote, I don't thinki you even know what is being debated...
As usual Flak, you are incapable of following even the simplest train of thought.
You challenged WSMassiv:
Edit: Why don't you plot the Gold-to-silver ratio since it started free floating in 1965? And that ratio is comparing two very similar things...
ie, that the gold and silver ratios diverged wildly, despite - according to you - them being 'very similar things'.
I then explained why they are not 'very similar things' at all.
I don't think it's me that's failing to understand what's being discussed here, girlfriend.
When it comes to the subject of gold, his trains of thought invariably run off the rails and plunge over the cliff of denial and dishonesty.
By the way she argues, I suspect Flak is female.
Nothing wrong with that, of course...
Now that is truly funny...
Gold and silver are indeed very similar things, haven't you been listening to Akak go on about metallic monetary standards...
well not totally stable it ranges 7 to 32, but those peaks were around massive gvt interventions and even then it is a factor 4. If you take the dollar price in that range for oil, it begins at 2$ barrel and had been 140$ which is a factor of 70.
So yes the oil price in gold is pretty stable.
Thank you....
Dupe
i agree, WSM. As a fundamental principle, money must be sound. It has to mean something reliable or all trade halts. We can argue gold standards or other methods but it must be done.
As the title of the article states, deflation is not to be feared an it is no worse than inflation in reality. Deflation, i.e. increased purchasing power of money should be the natural course of increases in productivity. If human productivity rises annually at 2-3% a stable value currency should increase in buying power at the same rate. This actually makes saving much more valuable and it actually lowers interest rates in a very real and proper way. If I am a banker and I know the purchasing power or value of money will increase at 2-3% per year then I know that the value of a ten year loan has that interest rate built into the note. So, even if I did a no interest loan I know that the money paid at the end of the tenth year is over 20% more valuable. I can then make a very real loan to you at two or three or five percent depending on market conditions.
To the contrary, if i expect actual inflation to bet 2-3% then that works against the loan and raises the rate I need to charge. In year ten the value of the dollars will be about 20% less then when I handed you the cash.
The artificial contro and abusel of money by central banks and governments grinds all of us down economically.
You still have not explained how an international gold stadard can be made to work in practice....
It worked for hundereds of years. WTF are you even trying to say? It is clear that Fiat never ever works. I means what? Seriously WHAT is your point? Fiat is just going to work magically this time?
Before you create more strawmen, not once have I mentioned fiat or claimed it was superior or was going to work....
----
The standard worked for hundreds of years in a time when international trade was squat and before the age of oil...
I am talking about an international gold standard, not a local one...
Will a gold standard work with a closed economic system? Yeah, no doubt, but you are aware that it is the G-20 and not the G-1....
PS There are no few advocates claiming the downfall of the Roman Empire was related to the unsustainable flows of precious metals eastward to China for luxury goods... Same idea, different era and goods...
Flak, you have been repeatedly proven wrong and in error regarding the gold standard, and monetary history more generally, yet you continue to repeat the same errors (mistruths?) over and over.
I know that you will not believe this, but it is an incontrovertable fact that, per capita, the extent of world trade was GREATER pre-World War I than it has ever been since, including today. And that had very little to do with your specious argument that most of it represented "colonial plunder", as the bulk of that trade was between those whom you would define as the "plunderers".
You keep grasping for any rationalization, ANY excuse to avoid facing the reality that hard money, money backed by (or consisting of) gold and silver, is the ONLY system that truly works. The fact that the monetary responsibility represented by gold and silver did not 'die', but was KILLED, by rapacious and warmongering governments is no real indictment of hard money, but merely the greed and sociopathy of those to whom you and your ilk wish to hand over even more of your (our) freedom and wealth.
Show me where I have been proven wrong. Once again, I am discussing the international gold standard that emerged in the 2nd half of the 19th century.
Do I need to post the plot again showing a near tripling of world gold reserves during the period? Here it is (half way down)
http://www.investopedia.com/articles/05/030705.asp
Hey, there was lots of trade, but imperial powers looting their colonies is very different that trade between the powers vis a vis the flow of gold reserves.
Easy with the rhetoric, show me the data that disproves what I said. Show me that the trade between European powers dwarfed the effect of capital flows from their respective colonies..
---
We are not arguing that local closed, basically agrarian economy. can work with a gold standard. I have no issue with that.
Flakmeister, I once again find nothing but highly muddled 'logic', if not outright disingenuous dishonesty, in your comment here.
For one thing, that graph which you posted in the above comment (http://i.investopedia.com/inv/articles/site/CT-GoldStandard.gif) is confusing and grossly misleading. "Gold Reserves" of whom, exactly? It is abundantly clear that it does NOT represent total world gold stocks, as they most certainly did NOT rise in any way corresponding to that graph, nor have they EVER been falling --- although they did indeed rise significantly, both in the aggregrate and in per capita measure, during the later 19th and early 20th centuries, due to discoveries in Alaska, Canada, and South Africa.
If, on the other hand, that graph is intended to, or does in fact, represent the gold reserves of world central banks, then I would say that it is both an enlightening and a damning representation of the concentation of world wealth in the hands of those unaccountable, parasitical organizations.
I would fathom that the gold reserves of the major powers are being plotted:
Here are additional relevant quotes from the excerpt:
Edit: In case it was not clear, the above are from
The biggest problem with the gold standard isn't (as you have implied) that it doesn't expand quickly enough to meet modern requirements; the biggest problem is that if you run it along with central banks and fractional reserve banking you inevitably have inflationary booms and deflationary busts which politicians will feel they need to step in and quelch by devaluing the currency relative to gold. And I don't mean 'deflation' as in the mild price deflation people experienced before 1913; I mean the catastrophic monetery deflation that happens when the credit multiplier collapses and goes into reverse.
The government shouldn't be involved in telling people what money 'is' and what it should 'cost' (ie, interest rates). The gold standard is far better than what we have now, but a better system than either would be competing currencies issued by private institutions... something rather like a gold standard would probably emerge, alongside silver, platinum, real bills, etc, (though neither of the latter two metals make very good money because of their low stock:flow ratio)
You are changing the subject and still have not address the issue I raise...
Reciting the standard polemic ad nauseum does not change the current situation in the world economy, namely the flows of oil dwarfs the stock of gold...
This assertion has been debunked - ad nauseam - elsewhere on this page
Oh, really? Could you quote the passage and author please?
You buy oil just like you do now. Is that a clear enough explanation?
You clearly did not get the memo...
How do you stop the Petrostates amassing all the gold in the space of 15 years?
Ask China. I mean seriously dude. You think there is some imaginary economic input? Learn economics. There is no magic money tree. You conduct trade.
You have a childishly ridiculous, simplistic, rigidly mercantilist view of world trade. Neither logic nor history is evidently your forte.
I could equally ask you, Flak, how do you stop all the food states from amassing all the gold? Or all the iron ore states (or all the nickel states, or all the rare earths states, or all the tin states, or all the cobalt states, or all the coconut states) from amassing all the gold? Or all the gold states from amassing all the oil, for that matter?
To believe that trade in one commodity can overrule the fundamental stability of a millenia-proven monetary standard is the height of ignorance and short-sightedness if not outright disingenuousness.
That is the very point of a gold standard: NOBODY can amass "all" of ANYTHING, short of one nation collectively spending itself into total bankruptcy. As for the Roman Empire, they were much more sunk by their excessive and ever-increasing military spending (more, per capita, in fact, as the Empire was shrinking than when it was expanding) than they were by their spending on luxuries from China, India and Arabia.
Akak,
I though you were better than that. Please show how the balance of trade in food compares with that of oil... By and large, most of the earth is self-sufficient.
That is disingenuous. Tell that to the 160 Million residents of Japan. LOL
Japan is 2.5% of the world population...
Do you understand what "By and large. most of the earth" means??
I'm sure that the Chinese (the world's #1 importer of both food AND oil) will be glad to learn that fact.
Anyway, while the dollar value of petroleum traded in the world is greater than that of food (by about a factor of four to five), both are equally critical resources, which was my main point. And that still leaves unaddressed your specious argument that under a gold standard, the flow of gold will be only one-way: from oil consumers to oil producers. The flow of gold was NEVER that one-sided, as indeed no economic relationship can ever be (for long). That is as equally absurd as trying to claim that within a given economy, ALL the wealth will flow from the non-food-producers to the farmers, and that the farmers will all end up with all the gold --- because we all have to eat, right?
Akak,
how would quantify world gold flows from 1918 to 1965? How did the US end up with 75% of the gold?
It would seem that China is able to export more than it imports at least for now: (but we do agree that China is fucked, do we not?)
http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/leadingtraders.html
BTW on a relative caloric basis, it is Japan:
http://www.fas.usda.gov/country/Japan/Japan.asp
How did the US end up with 75% of the gold? They didn't. They may have ended up with something like 75% of all the gold held by central banks, but this was a combination of selling munitions and materiel during the first and second world wars and Roosevelt seizing US citizens' gold in 1933.
So the Saudis have lots of oil. So they will amass a lot of gold as they sell it... but for them to be 'wealthy', they need to spend that gold. So the gold flows in and out of Saudi.
The more they 'hoard' gold relative to the rest of the world, the more the gold held by the rest of the world goes up in value, increasing the spenders' purchasing power.
Christ! You've been here HOW long? Does this REALLY need to be explained to you?
Please, do not play thick...
http://goldnews.bullionvault.com/US_gold_reserves_01120092
US gold reserves peaked in the 1950's at about 20,000 tonnes....
I thought gold was "wealth", you are telling me that you have to spend it to be wealthy?
Please, do not play thick...
http://goldnews.bullionvault.com/US_gold_reserves_01120092
That is monetary gold. Do you think they're counting wedding rings and gold watches in that total too? When they compared the gold holdings of the US vs, say, India in 1950 and the US had so much more, do you think they were including all the gold held by the hundreds of millions of Indian citizens, who have been hoarding it for milennia? The vaults full of the stuff in the basements of their temples?
I thought gold was "wealth", you are telling me that you have to spend it to be wealthy?
No, you can just sit naked in your mother's basement and eat/wear/watch/talk to your pile of monetary gold. You're wealthy!
Of course you have to spend money to be wealthy, idiot. It doesn't matter how much money you have, if you've never spent any of it to buy anything, you're poor.
Are you actually proposing a jewellry based currency as viable? Or are you just saying that a lot of people hold a good chunk of their lifes savings in jewellry... A very different thing.
Think carefully...
Oh my God, you REALLY cannot follow a train of thought, can you?
You asserted that the US at one time had 75% of the world's gold. I showed it did not.
The whole point about (most) gold jewellery held by the citizens of a place like India is that it is very, VERY easily converted into monetary gold... but wasn't counted in the stocks of monetary gold you were using to establish your profoundly shallow understanding of the subject.
I guess you're just too busy fire-fighting pro-fiat and AGW arguments all over the intertubes to be able to do anything more than read and reply to the most recent comment in a thread... and thus you miss the point your interlocutor is making. Well, girlfriend, it shows.
Your words, "converted to a monetary form of gold", with the attendant loss of the value added by the gold smith...
Why would anyone want to do that with their savings?
\facepalm
Your words, "converted to a monetary form of gold", with the attendant loss of the value added by the gold smith...
Why would anyone want to do that with their savings?
Haha, you've contradicted yourself here and you don't even know it!
Clue: 'attendant loss of value' and 'their savings'.
Keep facepalming, girlfriend, it hides your blushes.
Equivalently, why would I burn Van Goghs to keep myself warm?
Oh, the jewelry may be traded locally, but that does not finance the international purchase of goods....
A good bracelet/chain is at worth ~2 x times it's weight in gold. Why would anyone forgo that value by monetizing it at its scrap value or marginally better... (By monetizing, I mean enter into any transaction using the jewellery as means of settlement)
Seriously....
Hmm let's see now... because whereas firewood costs pennies, a Van Gogh costs millions? That's why you wouldn't burn one?
Why do you think the Indians buy gold jewellery in the first place? Because that IS their savings. And the bid/ask spread there is a lot lower than here, because they all do it, and goldsmiths get paid a few dollars a day.
I might add that 'jewellery' is a rather grandiose term for what is often just gold hammered into a wearable shape.
Seriously...
He knows that he is wrong and you guys are right, he has all but admitted it in a round about way. He has also stated that he wants the status-quo to continue on for the remainder of his days so that he won't have to risk facing any pain when it all falls apart. Nor does he want to be tasked with making meaningful contributions during the rebuilding process.
Just as do the FSA, and gov't employees, he benefits from the status quo and will defend it to the death. Preferably the death of people like you and me.
Dialing up the volume on your personal echo-chamber, i.e feeding your confirmation bias, doesn't count for much here....
You clearly have not reading very closely or the implications are beyond your grasp.... Sorry.
Don't shoot the messenger, dude.
You clearly got a bum transcription of the message then...
When a Country starts running out of Gold then their Oil Consumption declines. Then the Petrolstates have a glut of Oil and they drop the price of Oil.
Furthermore nobody in their right mind likes DEAD MONEY. The Petrolstates will begin to buy products with that Gold from the rest of the World to INCREASE THEIR STANDARD OF LIVING.
They have exported Dollars to purchase Treasuries from the USA because of the TREATY. They have also used Dollars to purchase Goods and Services.
Well that Treaty is coming to a DE FACTO end. The Saudi people have seen an increased Standard of Living over the past 40 Years. In fact it is that which threatens the House of Saud as the Population have been accustomed to growth...true growth. Saudi Arabia circa 1970 was a far more primitive place than it stands today.
Likewise the Petrolstates will spend their Gold into a World Economy where Fiat Currency DOES NOT EXIST.
That is how it works. Remove the Fiat and institute a Gold Standard then it is Gold, and ONLY Gold, which will be used as money. No Paper Gold shall be used. No Paper Promises to deliver Gold will be used.
If that is the case then ONLY Gold shall be used with Physical Delivery as a PREREQUISITE for a purchase.
Now if you want to write about the logistics being problematic and the costs of transport being "exorbinant" then we can address those.
Those are just a COST OF DOING BUSINESS.
When the Fiat Currency Ponzi collapses, and it will, then this will be the outcome anyway. Nobody will trust Paper or Promises anyway. So this will happen whether you like it or not. Trust will be a rare commodity in a Post Fiat Collapse World...a World that is headed your way very soon. So it is an eventuality, the result of today's PREDICAMENT.
That is how you stop the Petrolstates from amassing "all of the Gold in the space of 15 years". You decrease your use of their Oil.
A Gold Standard does not restrict trade. A Gold Standard makes Trade both FAIR AND HONEST.
So the solution you propose is cut your economy in half to reduce oil imports so as to maintain gold... Do you deny the correlation between real economic activity and oil use?
The Great Depression would seem like a boom time...
If one (a nation) does not have the gold, or other resources or manufactured products, to trade for that oil, then their economy MUST be 'cut in half' to pay for what they CAN afford. The printing of fraudulent fiat currency in no way ameliorates that problem, not in the long run.
Really, Flak, are you listening to yourself here? Because your arguments are SO ridiculous and shallow that I would be embarrassed to be you right now.
And is that going to not happen eventually, gold standard or not? What is your big rush? You can't be worried that the current fiat regime can last significantly longer. Are you?
Why would anyone in their right mind want to completely trash the economy, as we both agree will immediately occur, unless they were simply talking their book. The deflationary crush would make the Depression seem like modest recession...
You have evidently passed into stage #2 of the gold-basher --- babbling irrationality.
You are still implicitly trying to argue that, in essence, a regime of fraudulent fiat currency can enable a society to indefinitely live beyond its means, whereas it could not under a hard money regime. I will grant you that such is the case in the short run, but the price to be paid in the end for such fiscal short-term insanity will be even steeper than it would have been immediately under a hard money regime.
Like any statist, you seem to instinctively loath and repudiate fiscal responsibility, which is simply all that hard (honest) money represents.
Gold Basher???
Hardly, I have touted gold as an asset class here for years, admittedly, it has truly sucked as such since ~June of 2011...
Do you have anything but insults to wield?
So, curiously, you believe in owning gold as an "asset class" (and a very revealing choice of words that is), while both being ignorant of, and grossly distorting and misrepresenting (indeed, "bashing"), gold as a monetary asset, and as a foundation of the world's historic monetary system (along with silver).
Do you have anything but dishonesty to wield?
Gold is an asset class and has been since at least 1971 and depending on where you have lived, 1933...
Oh, I think it is very safe to say that your understanding of how monetary systems have actually functioned is really the issue in question. You have the superficial talking points down pat, but there are the details which you miss.
I answered your question on how it will work. That was a direct answer.
If an Oil Consumer slides into recession as a result of overconsumption then the Oil Producer will have to cut the price in order for their economy not to suffer a recession.
It is just part of a Free Market Business Cycle. Booms and Busts.
This argument is rather moot as it will happen anyway...regardless of what I want or what you want.
So..to reduce this to an individual level, if you can't maintain your standard of living on the money you make, it's OK to just start kiting credit cards? The whole world is living beyond it's means, buddy. That absolutely cannot go on forever.
If that is true, then, at present the oil producers must have all the dollars...
But they don't.
Oh shucks, I guess they must be trading them for other things.
Sheesh.
Head, meet nail!
Good job Shovelhead!
I had to break a double facepalm to type one handed, so it was brief. ;)
Don;t break your arm trying to pat yourself on the back...
You did no such thing...
What are the current account flows for the Petro states? Back up your rhetoric with hard data. Here is mine:
Russia is currently running a current accoutn surplus, $50 to 150 billion a year...
Saudi Arabia is running a surplus of $150 billion a year...
Kuiwait is $70 billion a year....
Remind me, isn't 1,000 tonnes of gold is ~40 billion dollars?
Do I need to list more?
Well just imagine what the price of gold and silver might be if there were true price discovery in a non-fiat world. You forgot to list that.
Did you miss the discussion of the Gold-Oil-Ratio?
Or are you playing your own version of the three monkey game (see no evil...)
Both are finite, and production of both has peaked. The remaining quantity of one is rapidly diminishing. Your point?
Oh, by the way, don't you lambast everyone who argues ad hominem and yet you do the same thing? Hmmm....there's a word for that.
So you think there is something magic in the fiat system that influences the oil in gold price?
Given the ratio has been pretty constant before and after Nixon shut the window you have a lot of work to do to show that is indeed the case...
Yeah, I forget how the USA had accumulated all of the world's gold supplies due to its near-monopoly on the whale oil trade in the first half of the 19th century.
Like every typical liberal, Flak, you refuse, or are unable, to see or even imagine second-order and greater-order effects --- you can only see the most simplistic and superficial details and relationships. Your 'analysis' flies in the face of both current and historical reality.
Please, put a leash on your malicious statist dogma already.
You do rely a lot on strawmen and ad homs, don't you...
If anything, I am the one very disappointed in your efforts...
Actually, if there was a single state, you could make a gold standard work, but we don't want to go down that path do we? Do you know why it would work in this case?
https://www.youtube.com/watch?v=CSZ5WbTdaOo
Get back to me on the price of gold when the fake paper market blows up and they cant monkeyhammer prices through the floor.
Who is setting the price of gold anyway? Any ideas?
Well then, there you have it.
Do you understand the difference between real and nominal gains? It would appear not. I don't care how many dollars my gold buys, I do care about how much and oil and food they buy though...
Here, take a look at the gold wheat ratio
http://www.financialsense.com/contributors/ronald-griess/ratio-charts-gold-versus-other-assets
Remind me, isn't 1,000 tonnes of gold is ~40 billion dollars?
Lulz. And what's the price of a '1,000 tonnes' of the paper used to print up currency? Not much. The paper's value (once it's converted to a bunch of dead presidents in green) stems from the fact it is recognised as money.
Thus it is with gold. If it were money again, its value would also be multiples higher...
Really, it would be more valuable? Because Big Jim says so? It sure sounds like you are talking your book...
The gold oil ratio has been basically constant before and after Nixon shut the window... Explain why would that ratio change...
Really, it would be more valuable? Because Big Jim says so?
No, numbskull, for the same reason paper's value becomes multiple times higher when it's printed up as currency. Jesus you are either astonishingly dumb or being wilfully obtuse.
Prove it then....
A real concrete example, not arm waving, if you please...
Erm... you want me to 'prove' that paper's value increases when a government prints it up as currency?!?
You're thinking that government mints pay the same amount for their supplies of paper that they get from the value of the currency they create from it??? Presumably then, the paper they use for $100 bills costs 100x the amount of the paper they use to print up $1 bills???
Hahahahahahahahahahaha!!!
You really are delicious.
Trolololo...
Oooh, what a riposte!
Just can't admit when you're beaten, can you?
The answer here is twofold: one, you assume that oil is the only product being "traded", when many products are traded. Thus, SA may have a lot of oli, but they need labor, food and building materials. Two, and most important, in a stable monetary system, countries are limited in what they can spend, therefore countries would stop buying oil and adjust their economies to retain enough gold, etc to purchase goods. Better stil, countries would be encouraged to develop new systems for energy use and development.
See the above post.
The above post doesn't answer my question. Heck, it doesn't even recognize that oil reserves are in flux, that they are lied about (especially SA), that the US, Israel, China and Europe may change the whole equation with fracking and natural gas deposits.
You seem a little angry today and I'm not trying to attack you. Your questions are valid, but are they comprehensive of the possibilities or are you showing your biases as well? You may be trying to fight too many battles here?
Well considering the abuse that has been hurled my way, I'd say I have been pretty even tempered...
Not sure what oil reserves have to do with it... It could well be that as oil production falls that the gold will buy more oil. I seriously doubt it...
You used a twenty year time frame to transfer all the gold. I would suggest you have used a combination of tempered responses, excellent responses and snarking ones as well, not that I wouldn't get snarky either.
If you return to my first post, I never disagreed regarding a gold standard. I think you are right, but perhaps for a different reason: statism will always corrupts currency systems. Gold is not the problem, it is the authority and control of gold that is the problem.
Now, I have a 2000 pomerol latour to consider...adios amigo
Nice...
Enjoy...
A gold exchange standard sets up the next con (see 1933 & 1971).
Gold as a wealth reserve asset (savings) in a physical only, non-fractional market is preferred.
I'd reply, but I am not sure what you are trying to say...
Yes there's only one problem with deflation: for more information google "Japan's lost decade" .
But the next gold standard is bitcoins anyway, so getbitcoins.
Well we can be sure of it then. How do they print AND go on a gold standard? Free gold, not fixed?
Yes, freegold.
End the Fed. The issuing power of currency should be returned to the Congress, debt free.
I can hear it now:
"Drive by shooting kills Nobel laureate...."
"...dies in small plane crash."
"...dies of cancer."
"...dies of sudden heart failure."
"...dies in canoeing accident."
"...dies after shooting himself in the head...twice."
"...dies in a car crash."
"...dies in flaming single-car crash of late model Mercedes."
'... dies of economic anathema'
On the Gold Standard from the author of Currency Wars:
Bitcoin Heist And Jim Rickards On Taper, Janet Yellen and Gold
In this very interesting episode RT is reporting about the hunger for the FIAT Currencies alternatives and how it is driving the Bitcoin Bubble, but it is not The New Gold or even close to it - as we have written before. New security concerns are reported with the cryptocurremcy and Jim Rickards dissects the Currency War situation in the ECB, BOJ and FED race to the bottom. You will find out why Janet Yellen can not Taper and what is behind the Gold and why Gold Standard is still valuable option even today. http://sufiy.blogspot.co.uk/2013/11/bitcoin-heist-and-jim-rickards-on-ta...
Deflation does not erode your savings, plus items are cheaper, allowing you to save more, ergo - it's a good thing...
Your wages are more likely to go down than your savings are to go up.
And if you have debt... you're screwed
(which is the primary problem for both the FSA majority and the fascist State that confiscates wealth to sustain the FSA)
You guys need to think about 'deflation' a little more.
There is a difference between price deflation and monetary deflation; though the latter will lead to the former, the former can happen without the latter.
Bitcoin standard, anyone?
I am puzzled, when a Nobel Laureate in Economics says something supportive about gold the Nobel Prize is used to lend gravitas to the statement, but when a Nobel Laureare claims something that disagrees with the ZH concensus, the prize and the field of economics is derided and mocked...
Should we pay attention to or ignore Nobel Laureates in Economics? Which is it?
If you don't know there is no such thing as a Nobel prize in economics, you have not been paying attention.
Yes, I am aware of the subtleties involved in "Nobel" prizes...
Maybe you should explain that to Tyler given the title of the article...
Try re-reading the article above, this time for comprehension, and with your sarcasm detector calibrated on "high".
I read it very closely... And???
Edit: Is Wiwo the German equivalent of the Onion? Is that what I am missing?
Just go trolling on some other site, why here?
I have been an active poster here for ~4 years, you have been here for 9 weeks...
Who is really the troll?
I have read your posts for a couple years and thought you were a troll.A good troll.But a troll non the less. Why do you only ask questions for which you have NO interest in the response? Are you a lawyer?
3 years 38 weeks
No, I am not a lawyer, not even close.
If you think I am a troll, you have no idea what a troll really is then...
Or did you think that we should all hold hands in sing kumbaya in personalized echo-chambers?
Flak. You need to read more and talk less. I'm amazed quite frankly at the level of patience ZH'ers have provided you to this point. Lets compare Nobels: Thomas Sargent - Rational Expectations and the Demand for Money, Paul Samuelson - Foundations in Neoclassical economics, Robert Lucas - The Lucas Critique - dismantled the classic Keynesian macro economic model of the Philips curve tradeoff, by which Paul Krugman - Nobel for international trade - continues to flog as "correct" economic theory for current monetary policy (6.5% U, 2% I), when even Friedman recognized that not only is the relationship questionable at best (in theory), it is almost impossible to observe consistently and hardly credible enough to use as policy as the tradeoff ignores changes in behaviour as a result of changes in rules.
The economics discipline has a habit of profoundly advancing its knowledge only to wait 30 years to deny such advances and essentially employ the very incorrect theory that was later disproven by very bright people who moved the profession forward to begin with (Samuelson brought us excellent tools - the marginal revolution - yet the mathematical modeling that ensued left reality largely behind). Paul Krugman (Nobel) takes us backwards - unequivocally - and Sargent/Lucas are an excellent reminder of just how far backwards Krugman et al are prepared to go. ZH'ers do not deride economics - they deride Keynesian economics (big difference), because Keynesian economics does not produce the results that the theory professes will occur. Its that simple. When you understand the difference between the classical economists and the Keynesian economists, this will, I am sure, become clear.
You still did not address my issue with an international gold standard and the problem of oil flows...
But you are apparently well read in economics, for whatever that is worth...
AMERICA THE BEAUTIFUL
http://patrick.net/forum/?p=1233763
Someone needs to tell the author that Greece pledged all their gold for one of the previous bailouts.
http://www.zerohedge.com/news/greece’s-lenders-have-right-seize-national-gold-reserves
Greece lied its' way into the fuck state it finds itself and NO ONE got prosecuted for it, but every Greek paid the price.
Yes once again an individual or group "said" to represent the greek people pledged their nations gold. This is the same as the pension issue. I'd like to take a loan out on my neighbors house, don't worry about anything he's good for it.
gold, waiting, gold, waiting...
Electromagnetic Frequency: Perspective on Stupid
Ok, let’s take a break from the drilling. We are at BigAgREITs, the short is getting shorter with each short squeeze, and sovereigns must buy them directly. The BAR doesn’t care about property or money, which is why derivatives always blow up. Empire is obsessed with control, and impulsively blows itself up.
Empire controls something it trains you to want from birth, you give it what it wants, focus on a contrived constitution assuming preemption over natural rights, joining a herd, and it gives you money, a promise to control your children as well, to spend on its product, capital control, to complete the positive feedback loop. It’s smoke and mirrors, hiding smoke and mirrors.
The Bush administration failed to pump the SS ponzi, and the Obama administration failed to pump the MC ponzi. Who the H gives a F, except gold and its derivatives?
The point of the drilling is to show you how stupid it is to focus on the gravity. The solar planets are like buoys (space conservation) in the harbor. Don’t hit them. Of course the sun, the tip, is hot. With all the talk on the Internet, has the course of empire changed?
Life is an apprenticeship. You want to be the apprentice, to grow life. You can’t make contact so your object must make contact with you to make the bridge, and the fact is that humanity as a herd is just too D stupid to be of any interest, except to itself. Have you taken a look at the clusterF that is the USNavy on the margin?
That is the State of 21st Century Generation, the Boeing/Microsoft implementation model, driven by the Silicon Valley/Chimerica design model, with Nazi stupidity coming out the pipeline. The space program failed because it was an empire gravity problem, charting gravity inside the box. Go to Living Light and pay $20 for a carrot; it’s always Manhattan all over again.
The trick to finding the needle in the haystack is being the magnet. The trick to finding the magnet is to be the needle. The eye of the needle is the choke. Birds of a feather…
Build the instrument to find what you are looking for, not to map itself with relative obscurity. Humanity is like a 12-yr-old with waterwings, afraid to leave the shallow end of the pool.
Spotting kids with effective talent isn’t difficult. They set up on bullies to entertain themselves when they have nothing better to do, as the final timing adjustment, and, for them all gates to prosperity are always open.
The problem/solution is isolation, increasing pressure on decreasing volume, mirroring the law of diminishing returns, individual choice. What the herd sees as a threat, the kid sees as an opportunity. What the herd sees as a weakness, the kid sees as a strength. And vice versa. The mirror is a circle with a dimensional contact set.
The water doesn’t boil uniformly due to source relativity. Don’t make the problem harder than it is. Where the mirror is, between talking and doing, in the sentence, depends upon your perspective. Is that pause by the Chinese Fed a comma, and if so…?
Take a look at the implications of the personal telco project again. What do you suppose those suns are drilling into anyway? What is the difference between right-handed and left-handed torque? Why aren’t most women left-handed?
I see you have already taken advantage of the lowering opium prices .
When I use my left hand it feels like I am going out on myself and it makes me angry and sad at the same time.
A huge problem we have these days is the breakdown of language - this 'Nobel Winner' speaks about inflation as a measure of price level. In fact, price level is just one symptom of inflation. If I produce one widget, the price of the widget will most likely be a lot higher than if I produce a thousand widgets. Economy of scale. So, when the price of something like a calculator goes down, that is *not* deflation.
We use price level of some things to try and measure inflation. Inflation is the expansion of the money supply. Even in a gold standard, inflation occurs if production of gold is high. That's what makes the gold standard work (for the most part), it is unlikely that somebody is going to dig a hole and find a mother lode.
Our language is being destroyed and it makes it really hard to solve these problems when so many people can't tell the difference between changes in the money supply and progress. A quick summary:
1. I spend a lot of money to produce a piece of software
2. I sell a bunch of them and make a decent profit after recovering costs
3. I lower the price and sell a *lot* more copies that are nearly pure profit
4. Government clowns see the price drop and declare 'deflation'
5. Government's banker friends print more money to drive my price back up
6. I raise the price while still seeing some lowering of my purchasing power
7. Government and bankers spend lots of free printed money and smoke cigars
There was inflation and falling prices. Of course, gold went up.
You have not not even broached the topic of how an international gold standard functions is the face of huge imbalances in the worlds econonomic alpha asset....
Unless you are indirectly advocating "One World Government", are you?
I was commenting on the article. Not sure what thread you were reading.
The article to referred to the pre 1914 international gold standard as somekind of panacea... Did it not?
The political filth and their central bankers deliberately conflate different definitions of inflation causing most people to think that inflation only means "price inflation" (ie: rising prices for goods and services). They have little or no idea about the real definition of inflation: "rising money supply", which usually, but not always, leads to price inflation.
And most governments' addiction to inflation is because they have spent the past two generations or more encouraging countless millions to take on ever higher levels of debt to fund a standard of living which - if the truth is known - they cannot afford. But it looks good on paper. A reduction in inflation (disinflation or deflation) would force millions to actually repay their debts and become poverty stricken as they were forced back in to the real world of paying their way and not living off the back of savers/investors/taxpayers.
But reality does not produce votes in ballot boxes.
@Flakmeister
could you help me understand your question, how does the flow of oil affect an international gold standard?
How do you stop the gold from piling up in the hands of the oil exporters? To wit, Russia and Saudi Arabia are responsible for ~35% of global oil exports by themselves... In total, 3,000 tonnes a year would flow to Petrostates, net flows will be slightly less.
Unless you think those guys having all the gold in the space of 10-15 years and acting as the world's gold banker is your idea of a winning plan...
Do you think Nixon et al. did not figure this out???
you are absolutely right that the root cause of our problems is uneven distribution of productive capital. Monetary system is secondary to that
Thank you. It would appear that you get it....
What Flackmeister is saying is that if you have a large quantity of something valuable you should not be allowed to sell it for gold because it wouldn't be "fair" to everyone else.
He doesn't see the contradiction in his own reasoning. that on the one hand he would like to see a reduction in the western worlds reliance on imported oil but on the other hand he cannot countenance oil being fairly priced.
He completely ignores the effect a gold standard would have in reducing consumption of plastic crap (oil) and massively raising the reward for industry developing non oil based solutions to transport, that is another one of his bugbears.
He assumes that rational market participants will willingly hand over their last gold eagle for a few gallons of oil rather than innovating, conserving and finding new ways of getting along.
In short flakmeister sees enough of the picture to to excitedly convince himself that "he gets it". He then proclaims the story finished and closes the book triumphantly, without realising that it is in fact only the first part of a three part trilogy.
I am not saying that at all, however hard you may wish to the contrary...
I think you are tilting at windmills, no, I take that back, tilting at strawmen...
That is incredibly rich, coming from you.
And you still have yet to explain how a hard money standard managed to facilitate world trade for centuries and millennia, yet somehow could not do so today simply because of the petroleum trade.
Hint: you need to consider ALL trade, in ALL goods and services, and not merely the trade in one commodity. By that laughably limited rationale, no nation or region that was not self-sufficient in food, for example, could ever survive or exist.
" ... how a hard money standard managed to facilitate world trade for centuries and millennia ... "
But can you really say that ?
All I have heard about hard money standard, is that they always ended adulterated more or less rapidly . And of course, in all the societies where those standard were in use, general misery seems to have, often, been the norm .
The problem with standards is that they are generally rule based systems, set up by academia, politicians, or worse Banksters.
Thus over time some clever Banksters always find a way to turn them into their own personal advantage .
I personally would like to see a completely free market system of money. Rather than a particular type of "monetary system".
Use whatever you want for money, gold BTC, cattle, Benny bucks, silver, beanie babies.. The Banksters become powerless if there is no leverage pre built into the monetary system.
A natural market hierarchy would emerge, and if you didn't happen to have gold well just trade in something else, no big deal...
Oh and no taxes either!
An pray tell what kind of economy would exist? I am running a business and now you tell I have keep track of multiple currencies whose relative value is constantly changing...
Great... And you dare to claim that excess regulation stifles business...
Do even think about what you write before you write it?
When I next go into a business and see a sign up saying
No AMEX
&
No personal cheques
Accepted
I will think of poor little flakmeister sitting there with calculator and abacus trying to work out what to do with some Russian rubles or republic credits.
Bravo for trying to keep everyone happy, but why not take a hint from this businessman?
http://m.youtube.com/watch?v=skv3wSIL5xI
Umm... this is what you said
This is what I said
Are you even following what is going on?? Or do you not know what currency means? Are you fixing the Gold silver ratio? Are you fixing the ratios of all that you claimed was usable as money?? Make up your mind.
Is your business closed on Sundays?
Perhaps you should just work 7 day weeks instead of commenting here, where your "business savvy" is obviously highly undervalued.
Let me know when you feel like being pwnd again....
Well, to the extent that that was the case (and even then it was FAR from the case, particularly before the last two or three centuries), it was solely due to rising governmental control and deficit spending which led to currency debasement and the dilution of the precious metal content of their coins, such as Roman debasement of the denarius throughout the 2nd and 3rd centuries AD. Yet Byzantium managed to maintain the standards of their gold and silver coins for almost a millenium.
I don't know how you can or would come to that conclusion. Pretty much ALL societies (at least in the Old World --- money was never invented in the New World), prior to the last two or three centuries, functioned strictly with gold and silver-based monies. The fraud of fiat currency would simply not have been accepted at that time (even though the fraud of fractional reserve banking had been creeping into the system for centuries).
"... it was solely due to rising governmental control and deficit spending which led to currency debasement and the dilution of the precious metal content of their coins, such as Roman debasement of the denarius throughout the 2nd and 3rd centuries AD ."
Apparently, according to : Silver & Gold - Hidden Secrets Of Money Ep 2 , starting at about 4:00 , that happened in Athens too . I would be very surprised if that didn't happen relatively often in other places .
http://www.youtube.com/watch?v=EdSq5H7awi8
" I don't know how you can or would come to that conclusion."
I'm not a specialist on that matter, but I read in different places that in those ancient societies there was slavery (even in Athens at the time it was a "democracy" ), and the financial condition of the masses was generaly rather precarious.
" .... prior to the last two or three centuries, functioned strictly with gold and silver-based monies. "
Yes, but the fact is that hard money standards or not, it seems that there always were privileged people, there always were corruption, wars, currency debasement, and yes, the standard of living of the masses seems to have been generally rather low.
What I mean is that, hard money standards alone have never solved the problems we generally like to think they can solve .
That's an interesting analysis of matters.
The only flaw I can see in it is that the development of oil replacement fuels would probably not happen in the clinical market-driven way or timescale that you would like to see because it assumes a perfectly efficient course and sequence of activities.
So the movement of gold from oil buyers to oil producers would probably continue until something happened.
That "something" could be war, with governments of oil buying nations claiming that oil producers were holding the world to ransom or whatever. And one absolutely cannot ignore that this whole process is heavily overlayed by government involvement who have their own agendas and are utterly incompetent to boot.
One look at the global "peak oil" phenomena tells us that the first action governments took was to bury their heads in the sand. The second action was to fabricate a wholly dishonest distraction to wean people off oil via taxation by inventing global warming, quickly renamed to climate change when the original term didn't quite fit what was actually happening on the ground.
What I'm saying is that any natural market based solution to the matter that you set out becomes difficult precisely because of political interference.
You were doing ok until you posited that something that was predicted in 1896 based on experiments in the 1850s and experimental verified based on analyses of mulitple independent data sets was a conspiracy to address the problems with global oil flows...
Sorry, creating conspiracy theories out of thin air don't cut it. I suggest you get back into your bubble/echo chamber and leave the process of heavy thinking to those that can...
Everybody will be better off...
Well Flakmeister, I don't have a clue what you're talking about ...if indeed your comments were actually a response to my comments at all, which I doubt since they relate to something completely different.
{shrug}
Well, yes, that was my point. You don't really have a clue about what you talking about any time Global Warming is mentioned..
Infra-red properties of C02 discovered in the 1850s
Arrhenius predicts AGW based on burning of coal in 1896
1969: Satellite data confirms the Terrestrial green house effect from direct measurement of earths IR spectrum...
Paleo-reconstructions and the meausured temperature record analysis confirm human effect on the global temperature, 80's 90's and on going...
See?
Well you know, repeating pro-AGW mantras like every other pro-AGW enthusiast does including the political elites and their Lefty supporters who invented the proven/unproven term - whilst ignoring that they are packed full of lies and distortions, and that there is as much evidence against the claims as there are for it - does not impress me.
FWIW, I have long accepted that some climate change is going on. In fact it's been going on for about 4.6 billion years, often much more severe than we see today. It may even be the case that the climate change at this time in history is very slightly more severe than (say) over the last few centuries etc. But for the pro-AGW lobby and all the socialist, fluffy Friends of The Earth crowd - who want us to go back to the horse and cart - to deceive people into accepting a direct connection between C/C and mankind (ie AGW) - for the sole purpose of imposing ever more Statism and higher taxes - is shameful and dishonest. It exposes their real agendas.
Have a nice day :-)
You can also take a look at that :
http://www.youtube.com/watch?v=HfpO-WBz_mw&feature=player_embedded
starting at 33:20 (8. The American Revolution) , ending at 39:52 (9. The Bank of North America) , they say one or two interesting things about fiat currency and gold standard .
Or on the monetary question – we need money to circulate commodities, no question about it. But the problem with money is that it can be appropriated by private persons. It becomes a form of personal power and then a fetish desire. People mobilise their lives around searching for this money even when nobody knows that it is. So we’ve got to change the monetary system - either tax away any surpluses people are beginning to get or come up with a monetary system which dissolves and cannot be stored, like air miles. [David Harvey, 2013]
Nixon ran up huge expenses fighting a war and america defaulted. The lesson is that gold would have held America in check back then, but since all the Keynesians and statists simply love paper money the whole world went along with that charade. Did you figure that maybe the situation could have resolved if America stayed productive and didn't destroy its civilian economy, i.e. exported things to oil rich nations.
Show me the data to back your claim.
Here are the budget deficits in terms of GDP at the time
http://www.usgovernmentspending.com/spending_chart_1950_2012USp_15s1li011lcn_G0f
and
http://www.theatlantic.com/business/archive/2012/11/the-long-story-of-us-debt-from-1790-to-2011-in-1-little-chart/265185/
I'm sorry but I don't see how your statements reconcile themselves with the above.
BTW, you won't get any arguement from me on this:
The real question is how you accomplish that...