4 ms·

These kind of fluctuations that average out make the money useful on an immediate or long-term timeline, with the cost of medium-term fluctuations (think hold u

These kind of fluctuations that average out make the money useful on an immediate or long-term timeline, with the cost of medium-term fluctuations (think hold under a few months or over 5 years). Fiat as currently found in places like the US makes the money useful in the immediate or medium term timeline (think under 5 years). I think which you prefer depends on your station in life and your spending choices. Personally when fiat hits my bank account I want to shit-can it as soon as possible, eithre for equities or commodities. If I were paid in the kind of unstable but averaging out dollar of the 1800s I would very much prefer that, rather than losing money to middle men converting to some commodity like that (such as a commodities index, silver, whatever) and then converting back whenever I need to spend.

Retric 4y ago
Being able to store value as currency for long periods is a bug not a feature as it does bad things to the economy. Lets’s say you want to store gold in your basement for bad times like a famine. Great you and everyone else has 1+ oz of gold when a famine hits, but society didn’t actually get any more food so everyone having gold is not just pointless but wasteful both to mine the stuff and to keep it protected from thieves. Alternatively, society can try and store value as productive assets like stocks. On a day to day basis it looks similar but rather than building ever larger vaults and digging ever deeper it’s a quest to create even the smallest income stream. You still hit diminishing returns but it’s stuck with diminishing positive returns. PS: > losing money to middle men converting to some commodity You end up losing even more money when the government is trying to get and store enough gold to keep a gold backed currency, it’s just less obvious. Great Britten sent many ships to Canada during WWII to keep it’s gold safe. They had much much useful things to do with those ships and men.
- kragen 4y ago
  This is a specious (ha!) argument because the total amount of effort required to safeguard precious metals is so small, because the metals themselves are so small. Gold currently costs US$55.92 per gram. Gross world product is US$80 trillion per year over 7.9 billion people; this works out to US$10.1k per person per year, or US$770k per person per 76-year lifetime. The lifetime earnings of an average person are thus 14 kg of gold, less than a liter. It does not require a significant fraction of your lifetime to dig enough of a vault to protect a liter of gold from thieves, nor to mine it. The impact on overall economic productivity is probably similar to that of spelling "through" as "through" rather than "thru". You can easily wear a year's wages as jewelry, or a lifetime's wages with more difficulty, which has historically often been useful when you're fleeing famine-stricken areas. Stocks have usually been less useful; protecting a stock portfolio from disaster requires active investment management and is generally infeasible during wars and famines. It is true that collectively we need to store food, not gold, to prepare for famines. It is a mistake to leap from this fact to the conclusion that everyday people should not be allowed to save money. You might or might not be aware that until roughly the transition to fiat currency in 01971 saving money was a canonical example of responsible adult behavior in the US, much like doing your tax returns, separating your recycling, or investing in an index fund today. I've presented a better argument for why being able to store value as currency is harmful in https://news.ycombinator.com/item?id=32258546 https://news.ycombinator.com/item?id=32258546. I'm not completely convinced by it but it's at least not completely specious.
  - Retric 4y ago
    First you can most of the benefits of gold as a currency by just buying gold and then selling it in 40 years. At a personal level a gold backed currency doesn’t change much. Anyway, if gold was actually the words medium of exchange it’s value would be vastly higher. A reasonable estimate is the value of the worlds gold would equal the value of the words current money. As it’s a nice round number the US’s 20 Trillion M1 money supply and ~20% share of the world GDP suggests something like 100 Trillion for a reasonable estimate for the words supply of gold in that hypothetical situation. The actual supply of gold is around 400,000,000 lb. So in that hypothetical world 1 lb of gold would in theory be worth ~100,000,000,000,000 / 400,000,000 = 250,000$/lb. Let’s again simplify to ~10x as much. But wait if it’s worth 10x as much two things happen first it’s used less often in electronics etc which directly hurts the economy, but next it’s vastly more profitable to mine and thus the world spends more effort mining stuff that just sit’s in a vault. Except, governments can’t safely issue currency without being able to back it up with gold so they need to buy up most of this mined gold and then securely transport, store, inspect it etc. As to keeping it in your own vault, you can secure it all you want that just makes home invasion vastly more profitable. As long as you have access to your gold at home, so does anyone with a gun to your head.
    - kragen 4y ago
      I suppose that, if you're right that a hypothetical return to the gold standard would greatly increase the value of gold, that would greatly diminish the amount of gold you need to safeguard. There's nothing in the use of commodity money rather than fiat money that prevents fractional-reserve banking, though you seem to be suggesting that there is, since you're doing the computation based on M1 (though I think you may be using the number for M2). The St. Louis Fed estimates the velocity of M1 and M2 at 1.122, which I guess is transactions per year: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V so I think you're probably right that gold would be about 5 or 10 times as expensive without fractional-reserve banking. So instead of 700 grams of gold your lifetime earnings would be 70 grams. If 5% instead of 0.5% of the cost of electronics was gold, I don't think you'd be able to tell the difference. Maybe that boosts the economic impact of this return to the gold standard to the same as spelling both "through" as "thru" and "thorough" as "thoro". Your implied prohibition on fractional-reserve banking would, by contrast, have an enormous economic impact.
- notch656a 4y ago
  I was going to write a rebuttal, but instead I focus on an amusing byproduct of your points and points above: 1) low inflation good because long-period storage bad 2) Government mishandling of fiat policies also bad 3) 3rd party custody is expensive The solution: radioactive commodity money of high enough density for self-custody. Maybe one with a half-life of like 20 years. Tritium is a close candidate. Keep your life's wealth in tritium in one pocket and your gat in the other.

Retric 4y ago

Being able to store value as currency for long periods is a bug not a feature as it does bad things to the economy. Lets’s say you want to store gold in your basement for bad times like a famine. Great you and everyone else has 1+ oz of gold when a famine hits, but society didn’t actually get any more food so everyone having gold is not just pointless but wasteful both to mine the stuff and to keep it protected from thieves. Alternatively, society can try and store value as productive assets like stocks. On a day to day basis it looks similar but rather than building ever larger vaults and digging ever deeper it’s a quest to create even the smallest income stream. You still hit diminishing returns but it’s stuck with diminishing positive returns. PS: > losing money to middle men converting to some commodity You end up losing even more money when the government is trying to get and store enough gold to keep a gold backed currency, it’s just less obvious. Great Britten sent many ships to Canada during WWII to keep it’s gold safe. They had much much useful things to do with those ships and men.

kragen 4y ago
This is a specious (ha!) argument because the total amount of effort required to safeguard precious metals is so small, because the metals themselves are so small. Gold currently costs US$55.92 per gram. Gross world product is US$80 trillion per year over 7.9 billion people; this works out to US$10.1k per person per year, or US$770k per person per 76-year lifetime. The lifetime earnings of an average person are thus 14 kg of gold, less than a liter. It does not require a significant fraction of your lifetime to dig enough of a vault to protect a liter of gold from thieves, nor to mine it. The impact on overall economic productivity is probably similar to that of spelling "through" as "through" rather than "thru". You can easily wear a year's wages as jewelry, or a lifetime's wages with more difficulty, which has historically often been useful when you're fleeing famine-stricken areas. Stocks have usually been less useful; protecting a stock portfolio from disaster requires active investment management and is generally infeasible during wars and famines. It is true that collectively we need to store food, not gold, to prepare for famines. It is a mistake to leap from this fact to the conclusion that everyday people should not be allowed to save money. You might or might not be aware that until roughly the transition to fiat currency in 01971 saving money was a canonical example of responsible adult behavior in the US, much like doing your tax returns, separating your recycling, or investing in an index fund today. I've presented a better argument for why being able to store value as currency is harmful in https://news.ycombinator.com/item?id=32258546 https://news.ycombinator.com/item?id=32258546. I'm not completely convinced by it but it's at least not completely specious.
- Retric 4y ago
  First you can most of the benefits of gold as a currency by just buying gold and then selling it in 40 years. At a personal level a gold backed currency doesn’t change much. Anyway, if gold was actually the words medium of exchange it’s value would be vastly higher. A reasonable estimate is the value of the worlds gold would equal the value of the words current money. As it’s a nice round number the US’s 20 Trillion M1 money supply and ~20% share of the world GDP suggests something like 100 Trillion for a reasonable estimate for the words supply of gold in that hypothetical situation. The actual supply of gold is around 400,000,000 lb. So in that hypothetical world 1 lb of gold would in theory be worth ~100,000,000,000,000 / 400,000,000 = 250,000$/lb. Let’s again simplify to ~10x as much. But wait if it’s worth 10x as much two things happen first it’s used less often in electronics etc which directly hurts the economy, but next it’s vastly more profitable to mine and thus the world spends more effort mining stuff that just sit’s in a vault. Except, governments can’t safely issue currency without being able to back it up with gold so they need to buy up most of this mined gold and then securely transport, store, inspect it etc. As to keeping it in your own vault, you can secure it all you want that just makes home invasion vastly more profitable. As long as you have access to your gold at home, so does anyone with a gun to your head.
  - kragen 4y ago
    I suppose that, if you're right that a hypothetical return to the gold standard would greatly increase the value of gold, that would greatly diminish the amount of gold you need to safeguard. There's nothing in the use of commodity money rather than fiat money that prevents fractional-reserve banking, though you seem to be suggesting that there is, since you're doing the computation based on M1 (though I think you may be using the number for M2). The St. Louis Fed estimates the velocity of M1 and M2 at 1.122, which I guess is transactions per year: https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V so I think you're probably right that gold would be about 5 or 10 times as expensive without fractional-reserve banking. So instead of 700 grams of gold your lifetime earnings would be 70 grams. If 5% instead of 0.5% of the cost of electronics was gold, I don't think you'd be able to tell the difference. Maybe that boosts the economic impact of this return to the gold standard to the same as spelling both "through" as "thru" and "thorough" as "thoro". Your implied prohibition on fractional-reserve banking would, by contrast, have an enormous economic impact.
notch656a 4y ago
I was going to write a rebuttal, but instead I focus on an amusing byproduct of your points and points above: 1) low inflation good because long-period storage bad 2) Government mishandling of fiat policies also bad 3) 3rd party custody is expensive The solution: radioactive commodity money of high enough density for self-custody. Maybe one with a half-life of like 20 years. Tritium is a close candidate. Keep your life's wealth in tritium in one pocket and your gat in the other.