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You have a lot of learning to do my friend. Inflation steals purchasing power away from people who contributed their labor to the market in exchange for the mo

You have a lot of learning to do my friend. Inflation steals purchasing power away from people who contributed their labor to the market in exchange for the money they received. The cash hoarding that inflation is supposed to solve continues because people want to hold on to their money in risky times. Smart people are moving away from cash assets and into precious metals and real estate. These are tangible things, unlike fiat currency that keeps losing value over time. The US dollar in particular has lost more than 90% of its value since abandoning the gold standard in the early 70s.

Mikeb85 13y ago
Really? Is this a joke or one of those terrible 'end-of-the-world' advertisements you hear on Bloomberg radio? Precious metals and real estate haven't done very well compared to equities in the last year or two... Yes, inflation reduces purchasing power if you assume that wages don't track inflation, but historically they do.
- emperorhadrian 13y ago
  > Yes, inflation reduces purchasing power if you assume that wages don't track inflation, but historically they do. This is not only factually false, but if it were true it would invalidate the argument being made by the economists quoted in the NYTimes article. I strongly recommend that you read The Creature from Jekyll Island or other materials on the history of the Fed and its role in US monetary policy.
  - Mikeb85 13y ago
    Come on, you only need to have been alive for the last 10 years to see wages go up. Minimum wage where I live is 80% higher today than 10 years ago. Average wages are much higher too, though by a lesser percentage. Here's an inflation adjusted chart of American wages, you'll see that wage increases have actually outpaced inflation slightly... http://en.wikipedia.org/wiki/File:Median_US_household_income.png http://en.wikipedia.org/wiki/File:Median_US_household_income... Edit - some more charts for you: http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php http://www.advisorperspectives.com/dshort/updates/Household-... Sorry, numbers don't lie.
    - lake99 13y ago
      > Minimum wage where I live is 80% higher today than 10 years ago. Average wages are much higher too, though by a lesser percentage. The way they adjusted for inflation is suspect. [1] This [2] is how the wages look if you measure in amounts of gold. Of course, gold is not the end-all of monetary policy. But it's way more stable than the USD. [1] http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/ http://business.time.com/2013/03/12/if-theres-no-inflation-w... [2] http://pricedingold.com/us-wages/ http://pricedingold.com/us-wages/
- jayfuerstenberg 13y ago
  Every fiat currency in history has failed. http://www.caseyresearch.com/editorial.php?page=articles/thousand-pictures-worth-one-word&ppref=ZHB207ED0711A http://www.caseyresearch.com/editorial.php?page=articles/tho... What makes the US$ so special? And each time, people go back to something tangible to call money. That's usually gold or silver. Not that they're as easy to use as money or anything. That's why gold backed currencies tend to make sense (even though they too are not perfect). People working at minimum wage would laugh at your "wages historically track inflation" argument.
  - Mikeb85 13y ago
    http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php http://www.advisorperspectives.com/dshort/updates/Household-... Numbers don't lie. Fiat currencies have failed because empires and nations have failed. A fiat currency always depends on a guarantor - someone who guarantees its value, usually through projection of military and economic power. So of course currencies will rise and fall with nations. But the idea of currency has always persisted, from ancient times.
- jayfuerstenberg 13y ago
  I would invite you to look at gold prices over the last 20 years. I only wish I could go back in time and tell my 20 year old self to buy lots of it back when it was in the $300/toz range. Right now it's sitting pretty at $1351/toz.
  - Mikeb85 13y ago
    And oil prices have gone up just as much. Once upon a time oil was a dollar a barrel... Come on, inflation increases the value of all commodities, gold, silver, oil, corn, wheat, etc... It's not like gold is special.
    - jayfuerstenberg 13y ago
      Gold is special. It's easier to carry than a barrel of oil, and stays fresher longer than a bunch of corn or wheat. That's why gold tends to get used as money over and over in history. But you're right about one thing... inflation increases the value of real assets. Or to put it better, the value of real things doesn't change (a loaf of bread is a loaf of bread) but the value of the dollar weakens in regards to it with inflation. Bringing us back to the beginning of the argument that inflation steals the purchasing power of people. If I bought gold 20 years back I would have paid $300 for 1 toz. That same 1 toz of gold today costs me $1351. The gold hasn't changed. The US$'s purchasing power has. [EDIT: I should mention that inflation isn't the sole reason it takes more money to buy gold than 20 years ago. There are of course some other factors.]
      - Mikeb85 13y ago
        > [EDIT: I should mention that inflation isn't the sole reason it takes more money to buy gold than 20 years ago. There are of course some other factors.] Alot of other factors. Like the fact that gold is widely used in electronic circuits, and not just for bling now. This of course will increase demand for it, beyond its use as a 'hard' currency... >Bringing us back to the beginning of the argument that inflation steals the purchasing power of people. It does, but wages have historically followed inflation, as historic data shows, leaving the average person no worse off (unless their only asset is a pile of cash under their mattress...).
eli_gottlieb 13y ago
>The US dollar in particular has lost more than 90% of its value since abandoning the gold standard in the early 70s. The supply and demand for gold have essentially nothing to do with real economic value. Now, admittedly, you've drawn near to an actual critique of our current monetary system, but that would require you to critique capitalism itself, too. Here, let me do that for you: Capitalism optimizes for the production and accumulation of capital. Therefore, the monetary base does actually matter, because money is the most liquid form of capital. Thus, capitalism will optimize society for the production and accumulation of money, however money is defined. Define money as some commodity, like gold, and you'll get people sailing across the world to rig up mining infrastructure and haul back a rock of zero ultimate worth, simply because that's the optimization criterion of the economy they live in. Admittedly, all that hauling and sailing does actually require getting something done, so you do see real economic development under such a system, but the same thing can be enforced with fiat currency via exchange-rate controls and the rest of the Bretton-Woods package (which was, in fact, deliberately concocted to make trade count more than finance!). Whereas, in contrast, if you set the definition of money as being debt, your capitalist economy will become a debt-maximizing machine. Which is what we see now, since the early '70s when the capital controls, exchange-rate controls, trade regime, and gold standard of Bretton-Woods were all abandoned. There.

Mikeb85 13y ago

Really? Is this a joke or one of those terrible 'end-of-the-world' advertisements you hear on Bloomberg radio? Precious metals and real estate haven't done very well compared to equities in the last year or two... Yes, inflation reduces purchasing power if you assume that wages don't track inflation, but historically they do.

emperorhadrian 13y ago
> Yes, inflation reduces purchasing power if you assume that wages don't track inflation, but historically they do. This is not only factually false, but if it were true it would invalidate the argument being made by the economists quoted in the NYTimes article. I strongly recommend that you read The Creature from Jekyll Island or other materials on the history of the Fed and its role in US monetary policy.
- Mikeb85 13y ago
  Come on, you only need to have been alive for the last 10 years to see wages go up. Minimum wage where I live is 80% higher today than 10 years ago. Average wages are much higher too, though by a lesser percentage. Here's an inflation adjusted chart of American wages, you'll see that wage increases have actually outpaced inflation slightly... http://en.wikipedia.org/wiki/File:Median_US_household_income.png http://en.wikipedia.org/wiki/File:Median_US_household_income... Edit - some more charts for you: http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php http://www.advisorperspectives.com/dshort/updates/Household-... Sorry, numbers don't lie.
  - lake99 13y ago
    > Minimum wage where I live is 80% higher today than 10 years ago. Average wages are much higher too, though by a lesser percentage. The way they adjusted for inflation is suspect. [1] This [2] is how the wages look if you measure in amounts of gold. Of course, gold is not the end-all of monetary policy. But it's way more stable than the USD. [1] http://business.time.com/2013/03/12/if-theres-no-inflation-why-are-prices-up-so-much/ http://business.time.com/2013/03/12/if-theres-no-inflation-w... [2] http://pricedingold.com/us-wages/ http://pricedingold.com/us-wages/
jayfuerstenberg 13y ago
Every fiat currency in history has failed. http://www.caseyresearch.com/editorial.php?page=articles/thousand-pictures-worth-one-word&ppref=ZHB207ED0711A http://www.caseyresearch.com/editorial.php?page=articles/tho... What makes the US$ so special? And each time, people go back to something tangible to call money. That's usually gold or silver. Not that they're as easy to use as money or anything. That's why gold backed currencies tend to make sense (even though they too are not perfect). People working at minimum wage would laugh at your "wages historically track inflation" argument.
- Mikeb85 13y ago
  http://www.advisorperspectives.com/dshort/updates/Household-Income-Distribution.php http://www.advisorperspectives.com/dshort/updates/Household-... Numbers don't lie. Fiat currencies have failed because empires and nations have failed. A fiat currency always depends on a guarantor - someone who guarantees its value, usually through projection of military and economic power. So of course currencies will rise and fall with nations. But the idea of currency has always persisted, from ancient times.
jayfuerstenberg 13y ago
I would invite you to look at gold prices over the last 20 years. I only wish I could go back in time and tell my 20 year old self to buy lots of it back when it was in the $300/toz range. Right now it's sitting pretty at $1351/toz.
- Mikeb85 13y ago
  And oil prices have gone up just as much. Once upon a time oil was a dollar a barrel... Come on, inflation increases the value of all commodities, gold, silver, oil, corn, wheat, etc... It's not like gold is special.
  - jayfuerstenberg 13y ago
    Gold is special. It's easier to carry than a barrel of oil, and stays fresher longer than a bunch of corn or wheat. That's why gold tends to get used as money over and over in history. But you're right about one thing... inflation increases the value of real assets. Or to put it better, the value of real things doesn't change (a loaf of bread is a loaf of bread) but the value of the dollar weakens in regards to it with inflation. Bringing us back to the beginning of the argument that inflation steals the purchasing power of people. If I bought gold 20 years back I would have paid $300 for 1 toz. That same 1 toz of gold today costs me $1351. The gold hasn't changed. The US$'s purchasing power has. [EDIT: I should mention that inflation isn't the sole reason it takes more money to buy gold than 20 years ago. There are of course some other factors.]
    - Mikeb85 13y ago
      > [EDIT: I should mention that inflation isn't the sole reason it takes more money to buy gold than 20 years ago. There are of course some other factors.] Alot of other factors. Like the fact that gold is widely used in electronic circuits, and not just for bling now. This of course will increase demand for it, beyond its use as a 'hard' currency... >Bringing us back to the beginning of the argument that inflation steals the purchasing power of people. It does, but wages have historically followed inflation, as historic data shows, leaving the average person no worse off (unless their only asset is a pile of cash under their mattress...).

eli_gottlieb 13y ago

>The US dollar in particular has lost more than 90% of its value since abandoning the gold standard in the early 70s. The supply and demand for gold have essentially nothing to do with real economic value. Now, admittedly, you've drawn near to an actual critique of our current monetary system, but that would require you to critique capitalism itself, too. Here, let me do that for you: Capitalism optimizes for the production and accumulation of capital. Therefore, the monetary base does actually matter, because money is the most liquid form of capital. Thus, capitalism will optimize society for the production and accumulation of money, however money is defined. Define money as some commodity, like gold, and you'll get people sailing across the world to rig up mining infrastructure and haul back a rock of zero ultimate worth, simply because that's the optimization criterion of the economy they live in. Admittedly, all that hauling and sailing does actually require getting something done, so you do see real economic development under such a system, but the same thing can be enforced with fiat currency via exchange-rate controls and the rest of the Bretton-Woods package (which was, in fact, deliberately concocted to make trade count more than finance!). Whereas, in contrast, if you set the definition of money as being debt, your capitalist economy will become a debt-maximizing machine. Which is what we see now, since the early '70s when the capital controls, exchange-rate controls, trade regime, and gold standard of Bretton-Woods were all abandoned. There.