BreakPoint
Random Posts (An alternate to side discussions)
@PaulG. wrote:
Good point. The value of a coin is completely subjective. [...]
Fiat moneyMoney did not and never could begin by some arbitrary social contract, or by some government agency decreeing that everyone has to accept the tickets it issues. Even coercion could not force people and institutions to accept meaningless tickets that they had not heard of or that bore no relation to any other pre-existing money.[2]
@Intaris wrote:
But the value of money (being a non-tradeble item in itself, I mean you can't DO ANYTHING with money except spend it or save it. It has no other use unlike say chickens) must be widely agreed upon. Imagine the problems if a California dollar was worth only half a Texas dollar.
In order for a common trading region (country) to function economically there must be a general consensus on worth. Otherwise you just barter for everything and you accelerate armed conflict with groups trying to forcfully monopolise the local resources.
So even if you say you'd like to trade "value" for "value", define "value".
Imagine if today you could buy a specific house for 1,000,000, a specific car for 50,000 and say a pound of hamburger for 5. You want to retire someday and so you saved 200,000. Your "budget" is based around these numbers saying relatively constant with your income. Now, imagine if all the money in your country is 20 trillion. If you mint a single 1T coin, the amount of total money increased by 5%. As that money starts to get proprogated through the systems, first with the major banks, then loaned out to people, etc. It'll cause more money to be in the system for the same amount of goods possible, thus cause inflation which is going to happen at 5%. The value of the house you want goes up 50,000, the car you want goes up 2,500. Your food costs are not 5.25 per pound. And your savings... can buy fewer items for the same amount of money. As such, it's "good" for people who borrow, but bad for people who save.
As for your texas dollar vs california dollar. Have you never tried to buy gas in those two states? It really is that way. ($5 per gallon in Cali, $2.50 per gallon in Texas)
Value to me is an extange of some arbitrary number of dollars for something. If you upset that balance, there will be people who will gain value, others will lose. For example if you make $50k a year (lets assume after taxes) you get $50k "value". If inflation hits, you still make $50k a year, but may only get $45k "value". You effectively took a 10% "pay cut" because you get less value for the same.
That's the whole argument, the government spends so much money, the only way people can see out of the debt is to inflate. Thus making it cost... say double for everything. (Effectively making your debt in half). It costs a lot to people who save.
@Intaris wrote:
Inflation doesn't cost savers anything, this is a myth.
Banks adjust their interest rates in their accounts based on interest. The same with interest rates on loans.
Here in Switzerland I can get a 2% mortgage on my house but my savings account will yield me a whopping 0.25% interest.
In Ireland I get nearly 3% interest on mysavings but also have to fork out 5-6% for the same mortgage.
Guess how the inflation in both countries is.
Anyone who looks at their long-term interest reates without taking inflation into account is always going to be left with the feeling that they have "lost" something.
Shane.
When measured in dollars I can follw that point but when meausred in real goods (gas food etc) What I could get with money was reduced in a single day by 10%. THe total was reduced every time the sent the printing presses running for each of the QEs. Now they are doing a continual QE (trying to hide the efect?). The total dollar amount of what is in my 401K has not gone down (I pulled out before the crash). But what I can purchase with that total is now reduced.
Barrels of oil is up.
Gas is up.
Food is up.
Electricity is up.
So the total number of gallons of gas I can but with my savings is reduced compared with pre-QE.
BUT,
The number of shares of the DOW I could buy with the gold I acquired is (suprisingly) the same.
Look at the Weimar Republic for an example of printing money is paid for by those that have their wealth stashed away in curency that is being devalued.
Money lost so much value that is was used as scratch paper.
Money ws used as wall-paper
Image from Hyperinfalation in Weimar republic in wikipaedia for more.
What prompted the Weimar Repubic was the Treaty of Versi (spelling?) which settled the first world war and laid the cost of all participants on Germany to repay. They printed money to pay the debt because they could not pay what was due any othr way. The rest is history.
The US has not only a debt that has to be serviced but also unfinanced promises. I believe it was David Buckner how explained the total of what we owe and what we are on the hook to pay amounts to the GDP of the entire world for one year.
Printing money is only one option to pay off the debt. The other option is to back-off our spending to something less than what the gov't takes in and using the extra to start paying down the debt.
But to reduce the budget congress will have actually pass a budget that does that. The last budget that was passed (going on four years now) included the "stimulus package" which include the Extra money for the stimulus. While the House of representatives has passed new budgets since then, harry reed has prevented a budget to come to the floor for concideration. this has effectively frozen the budget at the level when the stimulus was inacted.
More ranting...
THe US debt clock show (as of this evening ) shows I owe $52,653. My wife owes, my son owes, my daughter-in-law owes, Olivia owes the same.So we owe $263,265. I would be happy to write out a check to the government for that total in exchange that they fix the budget. But they would have to act NOW! If they put it off to long it would be beyond my means. The total for my family is going faster than I can save (See above both Princess and I are experienced profesionals and save about 60% of what we take in).
But as I said above we are going for gold silver and lead.
A year ago lead wa not in my list. But I have admited to myself that letting Washington fix things is foolish at best. So I am trying to prepare for a new set of "metal era"s. (not iron age, bronze etc). When the interest rates go back up again, serivicing the debt will eat up the income of the country. Nothing left. So I am looking for a time when lead will trump all other metals. Provided we can maintain some type of civility we may be able to lay our guns aside and start trading. Then we move to the silver/gold age which will allow trade between communities. Only after that can we move back into a paper age.
Done with my rant... for now,
Ben
