6 ms·

No inflation? Asset prices are a lot higher than they were.

nl 7y ago
That's not what inflation means. And if the OP is trying to protect (?) against rising asset prices, then they should invest in the assets that are appreciating not in silver which isn't really correlated with asset prices.
- BubRoss 7y ago
  If you look at the money supply graphs, there is a tremendous amount of money that has been making its way through the world in the last decade. You can probably redefine inflation until you get something that hasn't increased in the last decade but you have to at least say what that is. https://fred.stlouisfed.org/series/MBCURRCIR https://fred.stlouisfed.org/series/MBCURRCIR (Also saying something 'is going up' is a prediction of the future. You only know that something went up in the past tense).
  - nl 7y ago
    Money supply isn't inflation. I'm using the standard economics definition of inflation: changes in value of a standardised bucket of goods and services.
    - nybble41 7y ago
      The "standard" definition preferred by political economists (for the obvious reasons) is useless for making accurate predictions. The economic effects of inflation are all due to the changes in the money supply; the changes in prices are an side effect of this and many other factors, not a cause.
      - AnimalMuppet 7y ago
        You can't just look at the money supply. Let's say that we hold the money supply perfectly constant. Then one dollar becomes worth, not a fixed amount, but a fixed fraction of the economy (assuming velocity remains constant). For example, let's say that there are 1000 dollars in circulation, and the velocity is 2 - on average, each dollar changes hands twice in a year. So the GDP is $2000. Ten years pass. We learn to be more efficient. The economy produces 20% more than it did ten years ago. But the GDP is still $2000, because that's how much money there is. That seems unreasonable to me. If I saved a dollar, why does that dollar give me a claim, not just to what the dollar would have bought when I saved it, but also a claim on a part of all the growth since I saved it?
        nybble41 7y ago
        > The economy produces 20% more than it did ten years ago. But the GDP is still $2000, because that's how much money there is. More or less, yes. The improved efficiency is reflected in the fact that prices are now 20% lower, so the same GDP buys more goods. I'm not saying that prices shouldn't be considered. Prices are an important economic metric—which is exactly why it's a bad idea to conflate natural price signals with the noise caused by artificial changes in the money supply. > If I saved a dollar, why does that dollar give me a claim, not just to what the dollar would have bought when I saved it, but also a claim on a part of all the growth since I saved it? Because the improved efficiency and growth are in part due to the fact you chose to save that dollar, meaning that during that time there were $1 worth of extra goods and services available for other people to invest or consume. You created a surplus and essentially loaned it to everyone else by choosing to consume $1 less than you produced. The drop in prices is the interest on that loan. Of course, it could go the other way too. If people choose to consume capital rather than invest in the future then the economy could shrink, resulting in rising prices. The general rate of return represented by deflation or inflation (in the absence of interference with the money supply) represents the baseline level of return a venture needs to offer in order to be worth investing in, not just for the individual—who would be looking for the best rate of return in any case—but for the economy as a whole. If you can't find anything better to invest in than the real-valued return you would get from stuffing your money in a mattress and waiting, we're all better off if you do just that and avoid taking resources away from actually beneficial investments. An inflationary economy incentivises people to invest more, but if the inflation is artificial then the result is a lot of malinvestment from people simply looking for a safe haven for their money, even if it's still losing real value over time.
      - nl 7y ago
        The standard definition of inflation is a standard for a good reason: it's what effects consumers! It's been that definition all through the 1970s when inflation was a real problem, so your implications it is that for political reasons is incorrect. You can keep trying to argue for a different definition, but the OP was clearly trying to hedge against consumer price inflation - otherwise he'd hedge for investment asset inflation by investing in the assets subject to that increases, not a metal like silver which isn't correlated with those increases.
        nybble41 7y ago
        > The standard definition of inflation is a standard for a good reason: it's what effects consumers! No, what affects consumers is how consumer prices have changed relative to wages. The CPI doesn't tell you that, or really anything else of value. Hypothetically, let's say the CPI indicates that prices are double what they were ten years ago. Is the median consumer better or worse off? Who knows! Maybe wages are the same as they were ten years ago, and everything takes twice as much work to acquire. Maybe wages have tripled in that time and goods seem cheap. Without a fixed money supply, all it really tells you is that someone set a CPI target that resulted in doubling the prices over ten years. In other words, a tautology. Which is a shame, really, since the fluctuations in general price levels would otherwise tell us useful things about how much investment is needed and what the minimum return should be for a venture to be considered worthwhile.
        nl 7y ago
        Inflation (as measured by the CPI) measures price changes. Wage indexes measure wage changes. You want to measure both separately so you can do exactly the kinds of comparisons you want to do above ("Hypothetically, let's say the CPI indicates that prices are double what they were ten years ago. Is the median consumer better or worse off? Who knows! Maybe wages are the same as they were ten years ago, and everything takes twice as much work to acquire. Maybe wages have tripled in that time and goods seem cheap.") Money supply is measured separately since it affects lots of other things too (eg, the relationship between interest rates and money supply). You have to measure all these things separately because that lets you tease apart the relationships. Again, if the OP is talking about increases in money supply (which I agree can lead to increases in the speculative assets) then you need to explain how buying silver would protect against those increases (since the silver price is uncorrelated with those speculative increases).
BallyBrain 7y ago
In reply to nl. Actual inflation is the expansion of the money supply and there has been a vast expansion in it since 2008. Where that extra money supply ends up going, is where the inflation is.
- nl 7y ago
  "Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. It is the constant rise in the general level of prices where a unit of currency buys less than it did in prior periods" https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp If you think he's using some alternative definition then you'll need to explain how silver protects against it.

nl 7y ago

That's not what inflation means. And if the OP is trying to protect (?) against rising asset prices, then they should invest in the assets that are appreciating not in silver which isn't really correlated with asset prices.

BubRoss 7y ago
If you look at the money supply graphs, there is a tremendous amount of money that has been making its way through the world in the last decade. You can probably redefine inflation until you get something that hasn't increased in the last decade but you have to at least say what that is. https://fred.stlouisfed.org/series/MBCURRCIR https://fred.stlouisfed.org/series/MBCURRCIR (Also saying something 'is going up' is a prediction of the future. You only know that something went up in the past tense).
- nl 7y ago
  Money supply isn't inflation. I'm using the standard economics definition of inflation: changes in value of a standardised bucket of goods and services.
  - nybble41 7y ago
    The "standard" definition preferred by political economists (for the obvious reasons) is useless for making accurate predictions. The economic effects of inflation are all due to the changes in the money supply; the changes in prices are an side effect of this and many other factors, not a cause.
    - AnimalMuppet 7y ago
      You can't just look at the money supply. Let's say that we hold the money supply perfectly constant. Then one dollar becomes worth, not a fixed amount, but a fixed fraction of the economy (assuming velocity remains constant). For example, let's say that there are 1000 dollars in circulation, and the velocity is 2 - on average, each dollar changes hands twice in a year. So the GDP is $2000. Ten years pass. We learn to be more efficient. The economy produces 20% more than it did ten years ago. But the GDP is still $2000, because that's how much money there is. That seems unreasonable to me. If I saved a dollar, why does that dollar give me a claim, not just to what the dollar would have bought when I saved it, but also a claim on a part of all the growth since I saved it?
      - nybble41 7y ago
        > The economy produces 20% more than it did ten years ago. But the GDP is still $2000, because that's how much money there is. More or less, yes. The improved efficiency is reflected in the fact that prices are now 20% lower, so the same GDP buys more goods. I'm not saying that prices shouldn't be considered. Prices are an important economic metric—which is exactly why it's a bad idea to conflate natural price signals with the noise caused by artificial changes in the money supply. > If I saved a dollar, why does that dollar give me a claim, not just to what the dollar would have bought when I saved it, but also a claim on a part of all the growth since I saved it? Because the improved efficiency and growth are in part due to the fact you chose to save that dollar, meaning that during that time there were $1 worth of extra goods and services available for other people to invest or consume. You created a surplus and essentially loaned it to everyone else by choosing to consume $1 less than you produced. The drop in prices is the interest on that loan. Of course, it could go the other way too. If people choose to consume capital rather than invest in the future then the economy could shrink, resulting in rising prices. The general rate of return represented by deflation or inflation (in the absence of interference with the money supply) represents the baseline level of return a venture needs to offer in order to be worth investing in, not just for the individual—who would be looking for the best rate of return in any case—but for the economy as a whole. If you can't find anything better to invest in than the real-valued return you would get from stuffing your money in a mattress and waiting, we're all better off if you do just that and avoid taking resources away from actually beneficial investments. An inflationary economy incentivises people to invest more, but if the inflation is artificial then the result is a lot of malinvestment from people simply looking for a safe haven for their money, even if it's still losing real value over time.
    - nl 7y ago
      The standard definition of inflation is a standard for a good reason: it's what effects consumers! It's been that definition all through the 1970s when inflation was a real problem, so your implications it is that for political reasons is incorrect. You can keep trying to argue for a different definition, but the OP was clearly trying to hedge against consumer price inflation - otherwise he'd hedge for investment asset inflation by investing in the assets subject to that increases, not a metal like silver which isn't correlated with those increases.
      - nybble41 7y ago
        > The standard definition of inflation is a standard for a good reason: it's what effects consumers! No, what affects consumers is how consumer prices have changed relative to wages. The CPI doesn't tell you that, or really anything else of value. Hypothetically, let's say the CPI indicates that prices are double what they were ten years ago. Is the median consumer better or worse off? Who knows! Maybe wages are the same as they were ten years ago, and everything takes twice as much work to acquire. Maybe wages have tripled in that time and goods seem cheap. Without a fixed money supply, all it really tells you is that someone set a CPI target that resulted in doubling the prices over ten years. In other words, a tautology. Which is a shame, really, since the fluctuations in general price levels would otherwise tell us useful things about how much investment is needed and what the minimum return should be for a venture to be considered worthwhile.
        nl 7y ago
        Inflation (as measured by the CPI) measures price changes. Wage indexes measure wage changes. You want to measure both separately so you can do exactly the kinds of comparisons you want to do above ("Hypothetically, let's say the CPI indicates that prices are double what they were ten years ago. Is the median consumer better or worse off? Who knows! Maybe wages are the same as they were ten years ago, and everything takes twice as much work to acquire. Maybe wages have tripled in that time and goods seem cheap.") Money supply is measured separately since it affects lots of other things too (eg, the relationship between interest rates and money supply). You have to measure all these things separately because that lets you tease apart the relationships. Again, if the OP is talking about increases in money supply (which I agree can lead to increases in the speculative assets) then you need to explain how buying silver would protect against those increases (since the silver price is uncorrelated with those speculative increases).

BallyBrain 7y ago

In reply to nl. Actual inflation is the expansion of the money supply and there has been a vast expansion in it since 2008. Where that extra money supply ends up going, is where the inflation is.

nl 7y ago
"Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. It is the constant rise in the general level of prices where a unit of currency buys less than it did in prior periods" https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp If you think he's using some alternative definition then you'll need to explain how silver protects against it.