5 ms·

The whole point of money was to last longer than the expiring and perishable things it was used to pay for. The purchasing power of a dollar in the last centur

The whole point of money was to last longer than the expiring and perishable things it was used to pay for. The purchasing power of a dollar in the last century is about 1/500th of what it was when it was paid for the value someone created back then. If money expires/inflates, people use it to buy something to hedge it, which creates a bubble in that asset. The real estate bubble created by low interest rates is exactly what happens to everything else in an inflationary environment. Hedges include gold and metals, land, art and alternative assets, or like Wiemar [0], people just spend devalued money on gambling and prostitution. If history is any indicator of what happens when you debase a currency, I'd say the best hedges are a second passport and ammo. [0] https://en.wikipedia.org/wiki/Weimar_culture#Berlin's_reputation_for_decadence https://en.wikipedia.org/wiki/Weimar_culture#Berlin's_reputa...

haolez 3y ago
That's a very good way of explaining this. Here in Brazil the previous generations have a golden rule that you must store value in land, not in money. And Brazil has had tons of inflation and weak currencies in the last decades (with all the poverty and stagnation that it brings).
- gumby 3y ago
  Land can expire. IIRC back in the late 60s and 70s Singapore had, and may still have, a law requiring purchased land to be developed within 7 years else the government would auction it off. The same effect is why many economists believe that a bit of inflation is important (this argument is different from the widely held central bank theory that an inflation target of ~2% is better than 0)
  - temporarara 3y ago
    If you buy forest or agricultural land you are pretty safe. The worst thing that can happen in civilized places is that a big entity forcefully buys it away from you for "reasons" and you don't get as much profit as you would like, but nonetheless then you can just buy more land somewhere else. Owning developed land is just a liability in many places since you've got to pay taxes and all kind of annual fees. It's business at that point and not just owning land (your business instincts don't have to be nearly as good when dealing with forest and agricultural land).
  - alittleotbut 3y ago
    Expire !? For example, let's think about a solid basic land reform, and every owner now has to pay 5% of the immobile-value on it, as an annually tax. And after twenty years i don't have paid the debt for an apartment or house, two-times? But, sure so americans try to sell us houses builded from; chipboard, insulating wool, plasterboard and roofing cardboard? i am questioning this... in terms of: "money was to last longer than the expiring and perishable things" and "The real estate bubble created by low interest rates" Cos for me it seem that it ignored grief and "people" for -to be objective something the OP named "interest", i won't sound offending but it seem to be a mistake (both..all three...) regards... edited: sry "alittlebut" i mistaken you for the op p-:
  - haolez 3y ago
    They probably preach that because they never saw land expire in decades, but they've seen money expire a few times.
  - bombcar 3y ago
    A 1% land tax expires the land in 100 years.
    - CapitalistCartr 3y ago
      Because of compound interest, the total tax will equal original land value in about 70 years, assuming simple interest. But the utility of land is worth far more than 1%.
      - thriftwy 3y ago
        What is the utility of a piece of a forest somewhere in Brazil? Assuming you do not deforest it.
        the_third_wave 3y ago
        You do not need to deforest a forest to harvest trees. Assuming an annual growth of X m³ha-¹ you'll be able to harvest X*area by taking only mature trees. If you start out from a clear cut or a forested area grown from a recent clear cut you'll need to stagger the first few harvests (which will produce less wood that projected) to create more diversified age strata but once you have this system going you'll be able to keep on harvesting without breaking the forest cover. The effect of such a management technique is not too different from the way trees naturally age and die, especially not when tree crowns and branches (which used to be of little to no commercial value although this has changed with the increased demand for biomass for heating purposes) are left in the forest to make sure the soil is not depleted.
    - refurb 3y ago
      Most of Singapore land is on a 99-year lease. There is some freehold and 999-year leases left over from the British, but no new land will be created with that type of ownership. When you buy land with a 99-year lease in Singapore, it will be turned over to the government at the expiration of the term, with $0 in compensation. There have been a lucky few who get en bloc development where the land is sold before expiration and a new 99-year is provided - so current residents get bought out at values higher than otherwise. A few 60 year leases expired recently. The government assisted in finding new homes, but it was pretty much "get your belonging and leave". https://www.channelnewsasia.com/singapore/lorong-3-geylang-expiring-leases-owners-permanent-housing-sla-452881 https://www.channelnewsasia.com/singapore/lorong-3-geylang-e...
mo_42 3y ago
> The whole point of money was to last longer than the expiring and perishable things it was used to pay for. The purchasing power of a dollar in the last century is about 1/500th of what it was when it was paid for the value someone created back then. I agree that store of value is an important property of money. Although, I think money wasn't explicitly designed as you suggest. Modern money is a complex cultural phenomenon that evolved over several stages. I think there's so much confusion about money because people refer to different stages. If we wanted to have really stable money, we could fix prices of goods. But I guess this doesn't make much sense in a dynamic economy (how do we compare a basket of goods from 1920 with one in 2020 which includes iPhones). > The real estate bubble created by low interest rates is exactly what happens to everything else in an inflationary environment. I wouldn't be so sure whether there's a real estate bubble. I think our current situation is different from the years before 2008 where people where actually buying houses in expectation to sell them at higher prices one year later. I would rather explain the real estate prices as adaptations of net present values to changes of the interest rate. > Hedges include gold and metals, land, art and alternative assets, or like Wiemar [0], people just spend devalued money on gambling and prostitution. I don't see how a reference to prostitution in Berlin in the 1920ies supports your economic argument. I guess the situation in the Weimar Republic is more complex than simply explaining inflation with printing of money. (As far as I know, monetarism was abandoned by major central banks long ago. The German Bundesbank tried it quite long though, not surprisingly.) Germany lost WWI and had to pay for reparations. So it had to produce goods for which they didn't get foreign currency. Before the inflation really kicked in, the Reichsmark devalued already. Basically, the central bank didn't have any currency reserves to counter this. So everything imported became much more expensive. It probably also didn't help that Germany had to take care of wounded soldiers that weren't fully part of the workforce. In sum, the production capacity was hindered but there was excess demand.
- deleted 3y ago
  [deleted]
- motohagiography 3y ago
  The vice angle is that when inflation increases faster than wage work, people switch from a longer term wage, to selling what they can negotiate spot prices for to keep up with inflation - like the value of a bet in gambling, or client prices in prostitution. Wiemar was the complete destruction of a social fabric under reparations and inflation, and the vice businesses that sprung up as people switched from regular wages to survive caused the social reaction that produced the second world war. Unmitigated inflation reduces people to animals. Inflation destroys stability in the labour market and incentivises piece work to stay afloat. Fixing the price of goods does not create stable money, it just creates huge black markets in foreign and alternative currency. Ask Argentina, Cuba, and the former USSR. If you are interested in the history of money and banking, I highly recommend the book The Ascent of Money by Niall Ferguson as a basis for what most interested people outside of finance understand about how money works.
deleted 3y ago
[deleted]
corethree 3y ago
Right but the problem is money isnt value itself. It only represents value. Thus it's not a realistic representation of value because real value degrades while money does not. Imagine I sell a house for 2 million. Now that house burns down. Basically that money now represents value that doesn't exist anymore. If this was an island economy consisting of 1 burned down house and 2 million dollars the economy essentially now has 2 million dollars in paper bills representing nothing. This is why money is inflated deliberately. To keep the representation from getting too unrealistic. It incentives you to move your value into more realistic representations of value. In short money already does have an expiry date or something equivalent. It's inflation.
- thriftwy 3y ago
  New value is being created all the time. The actual value is not the house; it is your desire to have that house, for which you are going to be ready to trade some money (either to buy or to rent). The total value of a country usually grows with time.
  - corethree 3y ago
    Then print money at the rate at which new value is created. Which is also what occurs in a sense. What isn't realistic is I save money and that money grows it's value with the economy while I sit on my ass, contributing nothing. A little inflation makes the situation more realistic.

haolez 3y ago

That's a very good way of explaining this. Here in Brazil the previous generations have a golden rule that you must store value in land, not in money. And Brazil has had tons of inflation and weak currencies in the last decades (with all the poverty and stagnation that it brings).

gumby 3y ago
Land can expire. IIRC back in the late 60s and 70s Singapore had, and may still have, a law requiring purchased land to be developed within 7 years else the government would auction it off. The same effect is why many economists believe that a bit of inflation is important (this argument is different from the widely held central bank theory that an inflation target of ~2% is better than 0)
- temporarara 3y ago
  If you buy forest or agricultural land you are pretty safe. The worst thing that can happen in civilized places is that a big entity forcefully buys it away from you for "reasons" and you don't get as much profit as you would like, but nonetheless then you can just buy more land somewhere else. Owning developed land is just a liability in many places since you've got to pay taxes and all kind of annual fees. It's business at that point and not just owning land (your business instincts don't have to be nearly as good when dealing with forest and agricultural land).
- alittleotbut 3y ago
  Expire !? For example, let's think about a solid basic land reform, and every owner now has to pay 5% of the immobile-value on it, as an annually tax. And after twenty years i don't have paid the debt for an apartment or house, two-times? But, sure so americans try to sell us houses builded from; chipboard, insulating wool, plasterboard and roofing cardboard? i am questioning this... in terms of: "money was to last longer than the expiring and perishable things" and "The real estate bubble created by low interest rates" Cos for me it seem that it ignored grief and "people" for -to be objective something the OP named "interest", i won't sound offending but it seem to be a mistake (both..all three...) regards... edited: sry "alittlebut" i mistaken you for the op p-:
- haolez 3y ago
  They probably preach that because they never saw land expire in decades, but they've seen money expire a few times.
- bombcar 3y ago
  A 1% land tax expires the land in 100 years.
  - CapitalistCartr 3y ago
    Because of compound interest, the total tax will equal original land value in about 70 years, assuming simple interest. But the utility of land is worth far more than 1%.
    - thriftwy 3y ago
      What is the utility of a piece of a forest somewhere in Brazil? Assuming you do not deforest it.
      - the_third_wave 3y ago
        You do not need to deforest a forest to harvest trees. Assuming an annual growth of X m³ha-¹ you'll be able to harvest X*area by taking only mature trees. If you start out from a clear cut or a forested area grown from a recent clear cut you'll need to stagger the first few harvests (which will produce less wood that projected) to create more diversified age strata but once you have this system going you'll be able to keep on harvesting without breaking the forest cover. The effect of such a management technique is not too different from the way trees naturally age and die, especially not when tree crowns and branches (which used to be of little to no commercial value although this has changed with the increased demand for biomass for heating purposes) are left in the forest to make sure the soil is not depleted.
  - refurb 3y ago
    Most of Singapore land is on a 99-year lease. There is some freehold and 999-year leases left over from the British, but no new land will be created with that type of ownership. When you buy land with a 99-year lease in Singapore, it will be turned over to the government at the expiration of the term, with $0 in compensation. There have been a lucky few who get en bloc development where the land is sold before expiration and a new 99-year is provided - so current residents get bought out at values higher than otherwise. A few 60 year leases expired recently. The government assisted in finding new homes, but it was pretty much "get your belonging and leave". https://www.channelnewsasia.com/singapore/lorong-3-geylang-expiring-leases-owners-permanent-housing-sla-452881 https://www.channelnewsasia.com/singapore/lorong-3-geylang-e...

mo_42 3y ago

> The whole point of money was to last longer than the expiring and perishable things it was used to pay for. The purchasing power of a dollar in the last century is about 1/500th of what it was when it was paid for the value someone created back then. I agree that store of value is an important property of money. Although, I think money wasn't explicitly designed as you suggest. Modern money is a complex cultural phenomenon that evolved over several stages. I think there's so much confusion about money because people refer to different stages. If we wanted to have really stable money, we could fix prices of goods. But I guess this doesn't make much sense in a dynamic economy (how do we compare a basket of goods from 1920 with one in 2020 which includes iPhones). > The real estate bubble created by low interest rates is exactly what happens to everything else in an inflationary environment. I wouldn't be so sure whether there's a real estate bubble. I think our current situation is different from the years before 2008 where people where actually buying houses in expectation to sell them at higher prices one year later. I would rather explain the real estate prices as adaptations of net present values to changes of the interest rate. > Hedges include gold and metals, land, art and alternative assets, or like Wiemar [0], people just spend devalued money on gambling and prostitution. I don't see how a reference to prostitution in Berlin in the 1920ies supports your economic argument. I guess the situation in the Weimar Republic is more complex than simply explaining inflation with printing of money. (As far as I know, monetarism was abandoned by major central banks long ago. The German Bundesbank tried it quite long though, not surprisingly.) Germany lost WWI and had to pay for reparations. So it had to produce goods for which they didn't get foreign currency. Before the inflation really kicked in, the Reichsmark devalued already. Basically, the central bank didn't have any currency reserves to counter this. So everything imported became much more expensive. It probably also didn't help that Germany had to take care of wounded soldiers that weren't fully part of the workforce. In sum, the production capacity was hindered but there was excess demand.

deleted 3y ago
[deleted]
motohagiography 3y ago
The vice angle is that when inflation increases faster than wage work, people switch from a longer term wage, to selling what they can negotiate spot prices for to keep up with inflation - like the value of a bet in gambling, or client prices in prostitution. Wiemar was the complete destruction of a social fabric under reparations and inflation, and the vice businesses that sprung up as people switched from regular wages to survive caused the social reaction that produced the second world war. Unmitigated inflation reduces people to animals. Inflation destroys stability in the labour market and incentivises piece work to stay afloat. Fixing the price of goods does not create stable money, it just creates huge black markets in foreign and alternative currency. Ask Argentina, Cuba, and the former USSR. If you are interested in the history of money and banking, I highly recommend the book The Ascent of Money by Niall Ferguson as a basis for what most interested people outside of finance understand about how money works.

deleted 3y ago

[deleted]

corethree 3y ago

Right but the problem is money isnt value itself. It only represents value. Thus it's not a realistic representation of value because real value degrades while money does not. Imagine I sell a house for 2 million. Now that house burns down. Basically that money now represents value that doesn't exist anymore. If this was an island economy consisting of 1 burned down house and 2 million dollars the economy essentially now has 2 million dollars in paper bills representing nothing. This is why money is inflated deliberately. To keep the representation from getting too unrealistic. It incentives you to move your value into more realistic representations of value. In short money already does have an expiry date or something equivalent. It's inflation.

thriftwy 3y ago
New value is being created all the time. The actual value is not the house; it is your desire to have that house, for which you are going to be ready to trade some money (either to buy or to rent). The total value of a country usually grows with time.
- corethree 3y ago
  Then print money at the rate at which new value is created. Which is also what occurs in a sense. What isn't realistic is I save money and that money grows it's value with the economy while I sit on my ass, contributing nothing. A little inflation makes the situation more realistic.