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It's interesting to me that everyone seems to think all world currencies are not dying. The problem is the "currency" the worlds been sold into. Case in point
by X86BSD 10y ago
It's interesting to me that everyone seems to think all world currencies are not dying.
The problem is the "currency" the worlds been sold into.
Case in point... it takes us all about an average of $2.00 dollars for a gallon of gas. On average right now. Probably more on the coasts.
If I take one of my Morgan silver dollars, and melt it for the silver content I can get as of today roughly 8 gallons and a little more for that one silver dollar.
2 paper, fiat, federal reserve notes for 1 gallon OR 1 Morgan silver dollar for 8+ gallons.
The problem is the currency is worthless. And is inflated away each year to lose more and more value.
So IMO the problem is the currency. It's worthless and bankers are able to devalue it at will.
- R_haterade 10y agoThis is such a wildly unpopular notion, and yet I've never heard a reasonably articulated counterargument. It's like people who understand supply and demand short-circuit when they think that the same laws don't apply to money too.
- X86BSD 10y agoUsually people don't understand the dangers of private banks owning a fiat paper currency they can print at will. Until I pull out a silver quarter or silver dollar and prove to them how much the private federal reserve has devalued their money. Then it's like, "Oh. Wow. You're right."
- Laforet 10y agoA Morgan dollar is worth $15 for its material and possibly more for its collectible value, what is the problem here? Every dollar invested in 1900 would still have yielded a better return than $15, i.e. burying silver in the ground. The real issue with a currency based on precious metal is that the reverse grows at such a rate much slower (<1% annually for gold IIRC) than economic growth. In a deflationary market, rational actors would simply remove money from circulation because it will just increase in value on its own, whilst the economy collapses.
- colanderman 10y ago…except people don't keep fiat currency underneath mattresses. They invest it, and better their economy for doing so. So your old coin isn't competing against some ratty old dollar bill, it's competing against the real value of my index fund shares. Which, by the way, are winning: http://ritholtz.com/wp-content/uploads/2013/04/fda.jpg http://ritholtz.com/wp-content/uploads/2013/04/fda.jpg
- icantdrive55 10y agoKeep an eye on your Index fund (real value) when the free money stops. Sorry guys, I think we are in for some rough times ahead. There's got to be a price to pay? The people, I see getting loans, are practically gambling with the money. But what do I know? I'm a nobody. I did read that jobs report the other day. What jumped out was the amount of people who just stopped looking for work.
- chillwaves 10y agoJust wait until he pulls that silver dollar out of his pocket. Then you will see.
- tehwebguy 10y ago"It's just like bitcoin in practice, except you have to use fire and steel to break it into smaller increments!"
- R_haterade 10y agoInterestingly, a good pair of tinsnips is enough. It was a serious problem until Isaac Newton (of all people) came along. Apologies that I can't find a better source right now: http://www.lsned.com/newton-invented-ridges-coins/ http://www.lsned.com/newton-invented-ridges-coins/
- Spooky23 10y agoPeople don't understand the risk of commodity investments until I show them a coin collectors red book from 1986, when that same Morgan dollar was worth $3-4. Gold and silver is high because asians with money in places like China and India don't trust their governments. Period. Reliance on gold and the resulting starvation of capital caused a lot of economic and social devastation 100-130 years ago.
- jblow 10y agoI think such people just aren't paying attention. Everyone who understands American economic policy knows that the currency is being slowly devalued on purpose. This is not a conspiracy theory, it is common knowledge. The inflation target is always greater than 0. This is in part because of the perceived risks of deflation -- better to be on one side of the line than the other -- but also, generally, the point is to encourage people to spend or invest rather than passively save, because spending and investment grow the economy. To a libertarian this is one of the most oppressive things about the way the government works currently ... it forces everyone to work more than they would ideally have to, in a sense. (But I say "in a sense" because if the economy were at a much less active level as "normal" maybe everyone would have lower quality of life. I don't know.) If you ever wondered why Ron Paul dislikes the Fed so much, well, it's because of reasons like this.
- amluto 10y ago> To a libertarian this is one of the most oppressive things about the way the government works currently ... it forces everyone to work more than they would ideally have to, in a sense. This part I don't get. It is generally straightforward to invest one's fiat currency in a very secure (and privately run in a nicely capitalist way!) instrument that has positive real interest rate.
- logicchains 10y agoThe worst thing for me is that inflation is an implicit wealth tax, because governments don't account for inflation when charging capital gains tax. So if inflation is 3%, you have $10000 which increases in value to $10300, then you pay capital gains tax on that $300, reducing the real value of your holdings.
- jdavis703 10y agoWhy are you investing in things with a 0℅ return then? If you're part of society you're ideally using labor and resources from other specialists such as farmers and miners who need some reason to move dirt around to make your life better. If you have money then you put that to work helping those people be more efficient, and maybe spawn other kinds of specialists like web developers. If however you'd rather not be a part of this society, then you're free to opt out. But then you don't get the benefits of "being on the team" and now either your standard of living goes down (I.e. homelessness) or you have to work super hard (I.e. living off grid in some remote area).
- maxerickson 10y agoThe demand for money is greater than the supply of precious metals so we don't use precious metals as our only money.
- abakker 10y agoThere's limited evidence that demand for currency is really related to the underlying material it is printed on. In fact, that has been a staple of our economy since we adopted fiat currency. It is not perfect to have fiat currency, but currency value is more about aggregate demand for goods and the functional circulation of the existing money. (See velocity theory of money). Remember also that the laws of supply and demand are not necessarily rational, and they effect the value of gold just as much as the value of paper money. (Gold is not inherently valuable)
- MarkMc 10y agoDoes this wildly unpopular notion have any predictive power? For example, can you make a prediction about US inflation over the next 50 years?
- X86BSD 10y agoReally? If you're going to downvote it I at least expect you to point out the flaw in my comment. It's a little hard to argue it's not factually accurate so I'd like to hear why you downvoted it.
- danharaj 10y agoThis is not a refutation, but the rubric under which your idea would be scrutinized by mainstream economics: https://en.wikipedia.org/wiki/Neutrality_of_money https://en.wikipedia.org/wiki/Neutrality_of_money I'm not going to engage you because I don't even believe in mainstream economics. Shrug.
- umanwizard 10y agoWhat makes you think slow, steady inflation matters so much? You can typically keep your savings growing faster than inflation with relatively safe investments.
- DominikR 10y agoGovernment wouldn't inflate money supply if it didn't matter much.
- tptacek 10y agoIn countries with strong central banks, the economy is mostly inflating and deflating itself. The central bank attempts to guide it towards a target. The observation that central banks find a low level inflation valuable stems from the fact that the target isn't zero. One reason the target isn't zero is price stickiness. For instance: people react irrationally to drops in their wages, but, obviously, the price of an hour of labor can't be steady: it moves up and down just like anything else that can be bought or sold.
- DominikR 10y agoOh so the central banks come into being from nothing, their existence and their powers have nothing to do with the government itself. It's just a group of independent people who decided: We'd like to print some money. And Hyperinflation has nothing to do with government failure. Only delusional people or people with an agenda would argue against there being any connection between inflation and the government.
- idlewords 10y agoI think irrationally is a poorly-chosen word there. More like, people don't behave as you would expect if wages were a purely economic transaction.
- tptacek 10y agoSure! More broadly: humans are extremely loss-averse, and will go through contortions to avoid having things taken from them, and so some of what we do is just to work around that glitch in our thinking. I don't want to over-sell "rationalism". But loss aversion is extremely powerful.
- gameshot911 10y agoWhat am I, the average Joe, going to do with a few ounces of silver though? A few scraps of paper or a handful of metal, both seem pretty equally useless. Food, medicine, clothes, transportation... Now those are far more inherently useful to a human. Not great mediums for a standard of exchange, however.
- DominikR 10y agoIt'd make the difference between life and death for many Venezuelans right now.
- fra 10y agoThere is solid evidence that slow, steady inflation is beneficial to the economy. Besides the emotional appeal of "they're stealing my money!", the onus is on you to prove otherwise.
- WalterBright 10y agoThe US grew from subsistance farming to superpower before the fiat money system, and had zero net inflation.
- deleted 10y ago[deleted]
- unclenoriega 10y agoIs there evidence that this is because there was not a fiat money system? One could argue that the economy would have grown faster with fiat money and a small amount of inflation to further incentivize investment.
- WalterBright 10y agoWhat it is is evidence that a fiat money system (and its associated inflation) is not necessary for excellent long term economic growth.
- Spooky23 10y agoAt the cost of very high volitity, which was increasingly more challenging as industry grew larger and more national in scope. The current system moderated the boom bust cycle.
- logicchains 10y ago>The current system moderated the boom bust cycle. Citation? From what I've read the great depression was a worse bust than anything that occurred during the 19th century, numerically speaking.
- maxerickson 10y agoYou can get a large loan denominated in US dollars at a low interest rate. You can exchange the value provided by the loan for things like cars and houses. Those things contradict It's worthless and bankers are able to devalue it at will.
- deleted 10y ago[deleted]
- tptacek 10y agoA decent starting point is any of the threads on /r/badeconomics about the gold standard: https://www.reddit.com/r/badeconomics/comments/4y6zgn/gold_standard_more_like_the_lold_standard_amirite/ https://www.reddit.com/r/badeconomics/comments/4y6zgn/gold_s...
- kryptiskt 10y agoThe use of a currency is as a medium of exchange, not necessarily as a store of value long-term. Yeah, you would want it reasonable stable in the short-term, but if holding cash is a bad investment, that doesn't mean that anything is wrong. It just means that hoarding cash is not a useful way to save. Which isn't a bad thing for the economy. It is better for it if a person of means lends the money to the government or the private sector, or buys equities or other investments.
- duncan_bayne 10y agoDon't know why this is being downvoted - fiat currency is one of the root causes of problems like these.
- Spooky23 10y agoThe Morgan dollar isn't unique in this regard. If gas stations were willing to barter commodities for gas, you could also provide a pound of shelled walnuts or perhaps 8 oz of fine aged Parmesan cheese. Why was a Morgan dollar worth a dollar? A: Because congress said so. Just as with paper currency, if the market value is higher, people will hoard it (like Eastern Bloc nations did with dollars back in the Cold War) and if it goes lower, people will discount it.
- drtz 10y agoIs something that can be manipulated by foreign governments and private interests and fluctuates heavily based on industrial demand really a better alternative? Since you mentioned silver specifically, it's worth noting that the entire world's supply of silver was nearly cornered by the Hunt brothers in the 1970's. Wonder what that would have done to inflation.