3 ms·

So true. The reason the head of Coca-Cola, a successful major corporation would do something as apparently outrageous as to agree to sell syrup at a price guara

by SiVal 14y ago

So true. The reason the head of Coca-Cola, a successful major corporation would do something as apparently outrageous as to agree to sell syrup at a price guaranteed forever was that the history of the US currency from its creation to 1899, when he made this contract, was one of a rock-solid dollar. According to the Federal Reserve itself (http://www.minneapolisfed.org/community_education/teacher/calc/hist1800.cfm? http://www.minneapolisfed.org/community_education/teacher/ca...), prices for goods fell over the decades as the dollar stayed solid and the industrial revolution increased productivity every year. It was clear to any intelligent person that, while prices for specific things fluctuated with supply and demand, a constant, reliable dollar combined with increasing productivity (due to technological improvements) made overall prices something that would go down over the long run forever. Why not agree to sell at today's prices forever? Then the Federal Reserve was created in 1913 to allow the Federal Government to play a more active role in the economy and all that "solid as the US dollar" stuff became a quaint historical relic. According to the Fed itself (link above), prices that had gradually come down from $50 (for a basket of goods sized to show the index value as dollars) in 1800 to $29 when the Fed was created, suddenly turned around and shot up to ABOVE $700 today (est. Nov. 2012 value). In other words, since the Federal Government decided to take a more active role in "managing" the dollar instead of merely guaranteeing it, they have managed to destroy more than 95% of its value. It wasn't the CEO of Coke who was incompetent at managing finances; it was that he couldn't imagine a day when the US Federal Government would become so utterly incompetent at managing finances.

pkulak 14y ago
Your premise that inflation ("DESTROYING THE VALUE OF THE DOLLAR!") is always bad is hardly accepted enough to just throw out there and assume that everyone will agree with you. How many libertarians are there in this country? Not a majority.
anigbrowl 14y ago
Something you gold fetishists might like to keep in mind is that for the first century of the US (and arguably quite a bit longer), the country was benefitting from massive amounts of virtually free capital, if you discount the fairly minor cost of driving Native American tribes off the land. When the US government needed to raise money in earlier times, it just sold off vast tracts of land for cheap. Obviously, this strategy couldn't go on forever, and by the time the west coast was properly settled the country needed to switch to a more conventional form of public financing, ie a central bank. Seriously, if you have an entire continent at your disposal, running an economy is easy. Likewise, after WW2 most of the the rest of the developed world was in a shambles, and the US was the only industrial economy that hadn't been bombed heavily. Unsurprisingly, a long period of great economic growth followed, in time with the Bretton Woods system but not necessarily because of it. I'm very interested in monetary theory, but a lot of gold fans seem to attribute stability or growth to the use of gold rather than extremely favorable economic conditions. If you back and read the the Wealth of Nations, there's a very worthwhile (if long-winded) explanation by Smith of how hard currency can act as a limit upon economic growth, as well as being corruptible in its own right.
- jpatokal 14y ago
  Seriously, if you have an entire continent at your disposal, running an economy is easy. Which is why Australia has such a remarkably stable economy, right? Oh, wait... http://www.abc.net.au/news/linkableblob/3873450/thumbnail/jericho070312chart2-thumbnail.jpg http://www.abc.net.au/news/linkableblob/3873450/thumbnail/je... See http://www.abc.net.au/unleashed/3872646.html http://www.abc.net.au/unleashed/3872646.html for context, and in particular the bit about "mad boom and bust cycles".
  - panacea 14y ago
    The vast majority of the Australasian landmass is desert.
  - dredmorbius 14y ago
    Australia has a tiny population relative to its landmass. While it's rich in extractive resources (mining, minerals) from which much of its present wealth derives, it lacks both water and fertile land for agricultural production. This itself is interesting: because Australia is an island continent, with few or no internal volcanoes or rift zones, the land is, literally, ancient, with many nutrients vital for ag production missing (one estimate I saw was that seeding land with an infinitesimal amount of iron would greatly increase production). Much productivity is due to windblown dust from the Indian subcontinent and south-east Asia. Even where irrigation is possible, evaporation causes accumulation of salts which degrade ag values. The first settlements in Sydney very nearly starved due to difficulties in producing sufficient food.
- ekianjo 14y ago
  I do not even how you can call paper dollar a currency. You cannot use something as a currency if: - it can be manufactured easily - it can change value from one day to another - it is not dense in physical space (i.e. you do not need to carry buckets of it to buy something). The paper money clearly does not respect ANY of these principles nowadays. The FED can print (and does) as much as they want to buy back toxic assets (remember the Krugman clown advising after the Net bubble in 2001 that we should create a housing bubble to stimulate the economy ? That really worked well for everyone, did it not?). The US Dollar is constantly losing value versus Gold since its parity was dropped for good in the 70s, and now you have such a galoping inflation than looking at movies 30 years ago make you feel old: then the bad guys were asking for "a million dollars" as something highly valuable/desirable, while nowadays if you do not cross the billion mark it is not considered as much anymore (Austin Powers made this very good point in a clever way). Why do you think China is buying all the Gold it can currently to replace its stinky dollars?
snowwrestler 14y ago
It's meaningless to say that the value of a dollar has been destroyed, because a dollar does not have a value. It is merely a unit for denominating, measuring, and comparing value. Only actual assets have value, like gold, or real estate, or companies. That the size of the unit has changed over time does not mean than any value has been destroyed. It's like saying that the creation of the centimeter destroyed the length of the inch.

by SiVal 14y ago

pkulak 14y ago

Your premise that inflation ("DESTROYING THE VALUE OF THE DOLLAR!") is always bad is hardly accepted enough to just throw out there and assume that everyone will agree with you. How many libertarians are there in this country? Not a majority.

anigbrowl 14y ago

Something you gold fetishists might like to keep in mind is that for the first century of the US (and arguably quite a bit longer), the country was benefitting from massive amounts of virtually free capital, if you discount the fairly minor cost of driving Native American tribes off the land. When the US government needed to raise money in earlier times, it just sold off vast tracts of land for cheap. Obviously, this strategy couldn't go on forever, and by the time the west coast was properly settled the country needed to switch to a more conventional form of public financing, ie a central bank. Seriously, if you have an entire continent at your disposal, running an economy is easy. Likewise, after WW2 most of the the rest of the developed world was in a shambles, and the US was the only industrial economy that hadn't been bombed heavily. Unsurprisingly, a long period of great economic growth followed, in time with the Bretton Woods system but not necessarily because of it. I'm very interested in monetary theory, but a lot of gold fans seem to attribute stability or growth to the use of gold rather than extremely favorable economic conditions. If you back and read the the Wealth of Nations, there's a very worthwhile (if long-winded) explanation by Smith of how hard currency can act as a limit upon economic growth, as well as being corruptible in its own right.

jpatokal 14y ago
Seriously, if you have an entire continent at your disposal, running an economy is easy. Which is why Australia has such a remarkably stable economy, right? Oh, wait... http://www.abc.net.au/news/linkableblob/3873450/thumbnail/jericho070312chart2-thumbnail.jpg http://www.abc.net.au/news/linkableblob/3873450/thumbnail/je... See http://www.abc.net.au/unleashed/3872646.html http://www.abc.net.au/unleashed/3872646.html for context, and in particular the bit about "mad boom and bust cycles".
- panacea 14y ago
  The vast majority of the Australasian landmass is desert.
- dredmorbius 14y ago
  Australia has a tiny population relative to its landmass. While it's rich in extractive resources (mining, minerals) from which much of its present wealth derives, it lacks both water and fertile land for agricultural production. This itself is interesting: because Australia is an island continent, with few or no internal volcanoes or rift zones, the land is, literally, ancient, with many nutrients vital for ag production missing (one estimate I saw was that seeding land with an infinitesimal amount of iron would greatly increase production). Much productivity is due to windblown dust from the Indian subcontinent and south-east Asia. Even where irrigation is possible, evaporation causes accumulation of salts which degrade ag values. The first settlements in Sydney very nearly starved due to difficulties in producing sufficient food.
ekianjo 14y ago
I do not even how you can call paper dollar a currency. You cannot use something as a currency if: - it can be manufactured easily - it can change value from one day to another - it is not dense in physical space (i.e. you do not need to carry buckets of it to buy something). The paper money clearly does not respect ANY of these principles nowadays. The FED can print (and does) as much as they want to buy back toxic assets (remember the Krugman clown advising after the Net bubble in 2001 that we should create a housing bubble to stimulate the economy ? That really worked well for everyone, did it not?). The US Dollar is constantly losing value versus Gold since its parity was dropped for good in the 70s, and now you have such a galoping inflation than looking at movies 30 years ago make you feel old: then the bad guys were asking for "a million dollars" as something highly valuable/desirable, while nowadays if you do not cross the billion mark it is not considered as much anymore (Austin Powers made this very good point in a clever way). Why do you think China is buying all the Gold it can currently to replace its stinky dollars?

snowwrestler 14y ago

It's meaningless to say that the value of a dollar has been destroyed, because a dollar does not have a value. It is merely a unit for denominating, measuring, and comparing value. Only actual assets have value, like gold, or real estate, or companies. That the size of the unit has changed over time does not mean than any value has been destroyed. It's like saying that the creation of the centimeter destroyed the length of the inch.