There is a very close relationship between debt and the supply of money.
All money is created as debt, as is easily understood after viewing Money as Debt. You're almost there but hesitant to say it, or so it seems. If we all pay off our debts, there's no more money. It is really that simple.
Establishment of the Federal Reserve System in 1913. This acts as a central bank, and tries to regulate monetary supply, primarily by adjusting interest rates.
The first task of the Fed is to maintain the value of the US dollar. It has lost some 95% of its value since 1913, so that is definitely not working. Saying that the Fed "tries to regulate monetary supply" could mean anything, from overflowing the markets with debt-ridden funds, as in the past decade, to suddenly withdrawing lots of money, as it did in 1913, and, in my view, soon will again. For whom does the Fed work? The American people? It's a taboo question, but perhaps not a bad one.
You use terms like "real growth" and "real GDP" as if these are knowable. They are not. For all we know both may have been negative for years, a possible fact hidden by -exponentially- increasing money supplies, aka debt.
One thing you haven't touched upon is what Henry Liu called: The rise of the non-bank financial system. That is, the debt instruments issued by institutions other than banks. These instruments have allowed the rise of the derivatives industry, which at their present estimated value (sic) of close to $500 trillion have the potential to bring down the entire existing global financial system.
Derivatives are far more important than homeowners defaulting on loans, both because of the much bigger numbers involved, and because underlying assets have been leveraged to a far higher extent. The world has never had anything remotely like them, which makes it hard to oversee, but all governments, banks, pension plans etc. are deeply invested in them, and that is scary.
It is tempting to try and see a link between peak oil and the economy, but it's not very clear so far in what I've read here. I doubt the causality of the link very much; the financial system is imploding on its own accord, in my view. Allowing the creation of 100-fold leverage on any asset one can think of is an insanity that could not even be balanced if we had 10 times as much oil as today.
One last thing: oil prices seem to be on the rise these days, but are they really, or are we fooling ourselves? For instance, did they rise in Euro's? Can't be much. Could that be why pump prices are still relatively low? Nobody addresses this, might by a US blinder kind of issue. The dollar just reached another all-time low vs the Euro.
I couldn't find a Euro chart offhand, but this one should be cause for pause when discussing oil prices:
Thanks for saying it for me. The inflation that you blame on the fed is to an extent necessary; the prospect of cash depreciation is a goad to invest rather than hoard, and 3% is considered sufficient motivation. This keeps the cards on the table and moving. Compounded over time, we shouldn't have a loaf of bread or an hour of work be the same as 1910, but the reality has been not a smooth curve but a lumpy one. Nuther lump coming, but is it up or down?
We may see the fall of the non bank financial system, and much faster than its rise, as is common in the sawtooth world of such things.
The inflation that you blame on the fed is to an extent necessary; the prospect of cash depreciation is a goad to invest rather than hoard....
P, I don't know where that idea comes from, but it's pretty wild. A quick look at exponential functions says it's doomed from the start. It simply forms the basis for a consumer society, I would think, and that's not going very well.
As long as people have not fulfilled their (basic) needs, they will spend in order to do so. When they have, why entice them to spend more? As all money is issued as debt, they will only get deeper into debt, so who benefits from that 3% inflation? Not the people.
We may see the fall of the non bank financial system, and much faster than its rise, as is common in the sawtooth world of such things.
It will bring down the banks as well, or at least I can't see how it couldn't. The entire system is neck-deep invested in derivatives.
Then there is the obvious connection to a growing population. Picture a village with a fixed number of people and you could conceive of a steady-state economy with no inflation. Keep adding people and this triggers all the other pressures to adopt 'inflationary' systems such as resource extraction and fiat money. Population expansion must, I believe, be seen as the fundamental driver behind expansionary economics.
P, I don't know where that idea comes from, but it's pretty wild.
No it's not. In periods with very low inflation or even deflation like around 1900 other mechanisms were used to achieve the same effect, for instance the Woergl stamp scrip. This currency was used to rejuvinate a small city and it worked by causing money to "rust" by forcing people who held the cash to pay to keep it valid.
This practically forced investment and usage of the money rather than hoarding, as people are wont to do when a currency is deflating. It had an amazing affect on the town, by all accounts.
These days inflation is used to achieve the same thing. Rather than sit on piles of cash waiting for them to get more valuable, people invest. They do this even if they don't realise it - by holding their money in savings accounts or pensions.
It's widely accepted that a small amount of inflation "greases the wheels".
As long as people have not fulfilled their (basic) needs, they will spend in order to do so. When they have, why entice them to spend more? As all money is issued as debt, they will only get deeper into debt, so who benefits from that 3% inflation? Not the people.
Why entice them to spend more? Perhaps because people spending money is how things get done? If everybody bought only the minimum they needed to survive and hoarded the rest our civilisation would grind to a halt. Nothing new would be created, infrastructure would decay, our society would become a pathetic joke.
You want money to circulate, you want investment. What you don't want is too much new money entering the system because that can cause nasty feedback loops.
Also, whilst it's true that the money system is based in "debt" that's not necessarily a bad thing. The word has many negative connotations, but having money be issued via bank loans has both pros and cons when weighed against alternatives (like full reserve banking or Ripple-style mutual credit systems).
Why entice them to spend more? Perhaps because people spending money is how things get done? If everybody bought only the minimum they needed to survive and hoarded the rest our civilisation would grind to a halt. Nothing new would be created, infrastructure would decay, our society would become a pathetic joke.
Sounds like a prescription for exactly what we need. (although, I do believe our society is already a pathetic joke for holding on to growth as one of its core values)
Anyone touting inflation as a good thing doesn't understand exponential functions.
Inflation does one thing only: it depreciates the value of your assets, while debasing the value of your currency.
And you wish to make the point that that is a positive thing, and our civilization would even grind to a halt without it.
That may be true for a civilization based on American Idol, McMansions and Cheese Doodles, but why would we wish to save or maintain that? Aren't the limits sufficiently clear yet? How much longer will it take?
Of course. if what you have loses value all the time, and what you need gets more expensive at the same time, you will have to go and work and dig holes and what not, in order to make up for that loss, and you'll get mighty active, but that’s good for who exacttly? For you? Who do you think collects as profit what you are losing?
The early 1900's are not a case pro inflation, they were a time where an inflation based economy was showing the same cracks that we see around us now. Fight the evils of inflation with more of the same. Real promising.
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Inflation ultimately can only destroy societies. And my, look around you.
Inflation reduces the value of currency, which makes sustainable investments more compelling.
Consider a forest that I own. If there is no inflation ... if there is deflation, in fact ... then it's in my best interest to clear cut the forest straight away. I'll get a lot of money up front and that money will become more valuable year after year! But if there is some mild inflation, then it's in my best interest to run the forest sustainably, because I get a guaranteed income each year (the price of wood will rise along with the price of everything else to match the increase in money supply). In other words I invested and produced value rather than hoarding currency and eliminating value.
You're right that inflation can destroy societies - just like deflation can, if allowed to get out of control. Your position on the early 1900s don't make any sense - the Great Depression was a time of deflation, not inflation.
You seem to be fixated on 1929. Before 1929 but still very much a part of the early 1900s (part of that same 20th century), we saw numerous financial events that demonstrated the hazards and folly of inflation.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
While I understand the point Mike was making, it does provide a valuable counterpoint: The way in which this forest is *considered* is from a purely economic standpoint, and that's the tragic rub of our whole economic way of life -- EVERYTHING is reduced to its pure economic value regardless of any other value ethic!
IMHO this all encompassing capitalist economic meme is our ruination as a species. We need a land ethic that supports our basic communal ecologically based survival needs first and foremost. In other words, the forest is valuable as an intact healthy ecosystem that supports our life and all the other living things that contribute to the same! As soon as we diminish this land ethic valuation and substitute it with an economic one we devalue and diminish our own survivability.
Hence the lesson we are soon to learn as a species: Nature does not make economic compromises with anyone!
1. What is economy but the mathmatical analysis of scarcity of resources?
2. Why are you considering an entire math science to be "bad" just because humans used it to understand better how to destroy Earth? Economy isn't bad and that's the issue we face. The problem is that it worked too well, not too bad.
3. Isn't morality only a traditional-based "economy" of things? We all have learned by moral that we should be in more of a harmony with the environment (the greens), but isn't that a purely economical stance of sustainable existence? Aren't you confusing "Economy" with "PR using economical terms to rape the Earth"?
I'm not against what you're saying. I'm against the way you're saying it. The program you present (get the ecological issues back to politics, aka society, from the economics) has some problems, but essentially I agree with it. Society should decide what is best for the ecossystem first, and only thereafter what is best for particular economies.
But this kind of thought will be referred to as "communist" or "extreme left nugget thinking", and so I wouldn't bet on it.
I'm sorry but I do not accept your definition of "economy" as a "mathematical analysis of scarcity of resources." I do believe this is way too narrow a definition of what should constitute a healthy and life sustaining *economy* and our understanding of it.
Secondly, I did specify the particular economic analysis system I was referring too: "all encompassing capitalistic" one. Your suggestion that I was inferring all economic (or math based) analysis "bad" is a misguided interpretation of your own making.
However, as to your suggestion that such an economy as you conceive it, as a mathematical abstraction, "worked too well, not too bad" in *destroying the earth* only serves to prove my point!
Without an ecological ethic (or however else one wants to call it) to guide us, all our scientific and mathematical genius can not save us from continually doing harm via these lofty methodological abstractions -- they need to be grounded in earth based limits and our acceptance of them. In short we need to accept that we aren't demi-gods over this earthly creation but mere caretakers, and very ignorant and fallible ones at that.
Finally, I don't care what anyone may think to negatively label such thoughts as representing. We don't have as much choice in this matter as we pretend we think we do and/or will have. The way we are going about accounting the economy of the world is without a doubt leading us to ruin. Ultimately, earthly reality and the very real limitations that rules the natural world here and within ourselves will prevail over our ecologically unhinged abstract economic conceits.
Whether we make amends before our civilized destruction is complete is *the bet* we are wagering and it is the only one none of us can predict with certainty, but make no mistake we are betting against ourselves daily with our unethical economy as is!
Thus my assertion stands: Nature does not make economic compromises with anyone!
If the Woergl stamp script worked so well, then why wasn't it revived during the Great Depression at least in Woergl? Why are there no more examples of this system working in the years after this one experiment?
When I'm looking at an idea for an oil well one of the first things I look for is evidence that other people or companies are doing a similar type of prospect.Its confirmation that my idea isn't too outlandish. And its the same with other ideas, I don't mind being fairly original but if I'm too original its not a very good sign. Bob Ebersole
Democratic forms of government were invented by the Greeks several hundred year before Christ. After a relatively brief period of experimentation these forms of government disappeared from the world for over a thousand years. Did this disappearance constitute 'proof' that democracy was a bad idea?
And, by the way, the Woergl was deliberately suppressed at the request of the Austrian central bank. The case was fought up to the Austrian supreme court which ruled in favor of the central bank. What a surprise.
Peak oil guarantees that any debt based system that depends on infinite growth is doomed. So by itself, peak oil guarantees our current monetary system, even without the non-bank financial system, is doomed.
Our current system has so many deficiencies that it seems to be doomed, with or without peak oil. I agree that the non-bank financial system is a big part of the problem. It seems like the whole system will collapse fairly soon. Any push from oil prices, or the drop of the dollar, or knowledge of peak oil, will only help it along.
When I started trying to tackle this subject, I found myself with too big a topic to handle. I divided the subject up into three posts, but even these got long. I stayed away from the non-bank financial system because I needed to contain the topic somewhat. Perhaps I can do another post later with some other issues. In this post, I do mention off-balance sheet financing of banks as one issue.
That´s why i maintain that GOLD is the only real money in existence. It ain´t debtbased and can´t be printed out of thin air. Sure you can´t go and buy milk for a gold piece, but its a sure thing for wealth preservation of ones hardearned savings.
Gold is ‘real money’ only in the presence of a healthy economic system in which relatively wealthy people exist who want to deck themselves out in gold trinkets. If everyone is worried about where their next meal is coming from or how they are going to keep warm this winter a whole warehouse full of gold will not be of much use to you.
Couldn't one say that about any good, be it a precious metal, mineral, commodity, or a chicken? They aren't debt-based and can't be printed out of thin air either.
What I'm nervous about is your use of the word "only". I would argue that there is a large basket of stuff that can be used to efficiently store value, and that picking a single one isn't wise.
Couldn't one say that about any good, be it a precious metal, mineral, commodity, or a chicken? They aren't debt-based and can't be printed out of thin air either.
Unlike other commodities, gold is not perishable, does not rust or corrode and takes very little space to store. 500 gold coins - which can easily fit in a small briefcase - can buy you a decent house in most parts of the US.
Also, gold has a 5000 year history as a store of value. I would argue that silver is also "money", but not as much as gold.
Of course. And that's the reason for my use of the word "efficient".
Diamonds would also qualify and have far better value density than gold. Many currencies would do the trick. I'm actually fond of land as a store of value.
In case it wasn't clear, my point was not that one shouldn't buy gold, but rather buy a diversified basket of assets to cover yourself no matter what happens.
Gold is a universal currency. I know I spend a lot of time in Asia. And yes you can but a litre of milk with gold. In fact gold is the prefered currency especially in Chinese communities. You can buy and wear standard weigh gold earings / sleepers in any pierce-able point on your body. The minimum is about 5g. They will even give you change. This is handy to know as you can buy or have made a large amount of these if you are traveling from say Thailand to China via indochina just as an example. It is also common in Central asia to use a chain you can cut links out of. I have done this in Tashkent.
Diamonds are no good as money. How do you value it? A goldcoin as a Krugerrand is recognised by almost everyone around the world, and are smaller more convinient pieces of value than diamonds.
For the average Joe Blow.
In the not too distant future, your labour and health will be your biggest asset.
Wealth eventually will be seen in land barons.
Livestock, farmland and the ability to defend it, will be all that matters.
Big land barons will be like the monarchs of old.
The worth of gold will be determined by how well it can keep you alive, if a gold coin can't buy your next meal then I would say it was worthless.
Initially labour will be very, very cheap. There will be enormous competition to provide it.
The inevitable crash in populations, will be the only pressure relief.
Paying for and providing security may be a growing trend.
The big problem with diamonds is that the price is far, far higher than their cost of fabrication. If the De Beers cartel falls apart, the price of diamonds will quickly fall to around the price of fabrication. Even in a world with scare fossil fuels, I'm sure diamonds can be manufactured for less than 1/10th the current market price.
I learned about the value of diamonds when I went to sell my mother's jewelry after she died, to help fund the estate (needed to raise money to pay bills). Furs older than three years old are worthless. You can't give them away. No one wants them. Furs older than one year, but newer than three years old have a value of about 1/25 of their retail price.
Costume jewelry is worthless, about $5.00 per pound.
"Gold-filled" anything is worthless. 18K to 22K gold is worth the melt value, anything less than 18K is worthless.
Diamonds are worth 1/10 of the retail value, if they are big enough (>1/10 carat). My mother's wedding ring, with an insurance valuation of $4250, brought $430.00. I checked this value on Ebay, and this is the general state of the market. Diamonds bought at retail are *NO* store of value. Diamonds at wholesale may be valuable, but unless you're one of the diamond traders, you aren't going to get a diamond for the true wholesale value.
Steuben glass is worth 1/10 of retail value. And so on. Mass-marketed collectibles are worthless (but check prices on Ebay, some of that stuff has deceptively high prices). Usually anything stamped "Made in China" is worthless. Silverware is worth the melt value. Make sure it's sterling, silverplate is worth the melt value of the copper which comprises most of it, unless of course it's more than 150 years old and has recognizable hallmarks from a recognized UK or Irish silversmith (same for silverware).
Land only works as a store of value where there is some authority that grants land rights and protects them. Without such a government (and note that not all governments protect land rights or even recognize them), your land can be alienated at will.
Silver is actually a pretty good place to park your money too, but it's big problem is storage. The price of gold (when calculated by weight) is almost 50 times greater than silver. Furthermore, a 1-ounce silver coin is larger than a gold coin of the same weight, because silver is lighter. So if you're storing silver coins for the coming disaster, you are going to need over 50 times the storage space. A large safe-deposit box could store over $1 million worth of gold, but only $20,000 in silver.
Of course, after the US$ collapses and you go to the corner gas station with a 1-ounce gold coin, it's going to be awfully difficult to get change. In that case, silver would certainly be better.
Sure you can store value in any tangible good. Bu if we talk about money, gold is and has been THE money for 5000 years around the globe. Why should it cease to be money now, come what may?
And it takes little space, is easily hidden and transported.
Cash is just a set of tokens valued by others. I think if you actually tried to live your daily life using only gold you'd be quickly disabused of the notion that gold is "real money" at least in the west.
Try to imagine going to the local supermarket, or gas station, and attempting to pay using gold coins. Do you think they'd accept? Or would they point out that it's a lot easier for them to understand the value of a $20 bill than a piece of metal which may or may not actually be gold (how many people have even seen a real gold coin these days?).
Another problem with using gold as money is that there isn't enough to go around and hasn't been for decades. It's also far more valuable as a useful material for things like semiconductor manufacture than it used to be. Hoarding gold makes no sense. I'd much rather try and buy things using IOUs in my local community than haul around easily-stolen pieces of gold!
"try to imaging going to the local supermarket, or gas station, and attempting to pay using gold coins"
I have never suggested that. As long as we have some kind of paper money working, you of course use it for daily purchases.
But the gold coins preserves the value even in the not so unlikely hyperinflation we perhaps are going to endure.
Then you exchange your gold coins now and then, whenever you need to a little more paper money for daily needs.
If you travel abroad, you can always have some goldcoins in your purse, for exchange to the local paper money.
If we have a collapse, and the paper money systems collapse. What do you think has more value; The old paper notes, or the gold coins?
Anyway, as i said in the thread before, you should first take care of other preps, and only buy gold if you have eccess savings left after the preps are made.
Once gold reached spectacular highs of $750/oz. only to be liquidated at $300/oz. a few years later. Some who trusted in gold to save them became greatly disappointed.
Some who trusted in the value of their real estate are seeing fortune dissappear before their eyes.
On the dollar bill it was written, "In God We Trust." One cannot trust the government in these times, rather that the government is doing all it can to dilute the value of the U.S. currency without producing favorable returns. Iraq is in its worse year of the war. Republicans indicated they were in Iraq to stabilize it, yet Iraq would have been more stable if they have never conned Americans into supporting the war in the first place.
I thought they were mountain tops with boom boxes tucked away in the corners to blast out the sounds of music. (Vellcomin to my Cabaret. Everything is beautiful. The show girls are bea-u-tiful. The sounds of boots stomping is bea-u-tiful. Life is a Cabaret ole' chum.)
I presume, that all know what happened in the Weimar Republic at that time.
There is a story from that time of a hotelboy in Germany, who got a one oz goldcoin as a tip from an american guest.
The boy kept the coin, and eventually the hotel went bust. The hotel owner stood in the corridor and said out loud, that if he could get one oz of gold for the hotel, then he would sell it.
The hotelboy happened to stand there hearing what he said. He asked the hotel owner: do you really mean it? Yes said the hotel owner. Then i will buy the hotel said the boy and gave him the coin.
The boy managed to get the hotel on its feet again, and after the war he traveled abroad and founded a worldwide hotel chain. The boys name was Hilton.
So you see in some years you can perhaps at least buy a fine mansion for a few gold coins.
Nice urban legend, but this bio of Conrad Hilton doesn't back it up. It has him in Texas, not Germany, at the time of the great hyperinflation in 1923. Was it somebody else instead?
I see a drop in the dollar as a very positive thing right now. It is a way to boost fuel prices while supply is also increasing. Since the US is doing little otherwise to control oil consumption, this gives at least a push in the right direction. With the building trade slowing, this will turn out to be a very good time for insulating existing building and converting their heating to geothermal heat pumps. We are already seeing substantial European investment in renewables in the US. This is likely to increase as the potential for export improves. The key thing that we need to shake loose of is the yuan's dollar peg. Getting oil sold in Euros might just do that job.
I can kind of see your point that debt as we use it now is tied to growth; we certainly do not have jubilee cycles these days. I listened to two young people join in the sermon on Sunday interpreting the reading about the unjust steward. Neither they nor the priest recalled that a regular cancellation of debt is biblically mandated. Still, they all did well interpreting a difficult text. Now we are going to pay our debt in devalued currency. Is this unjust or ordained?
UAW feels strong enough to strike. They know that there are going to be a lot of cars built with better fuel efficiency and they want to be sure that they are the ones to build them rather than robots. We are not done with economic growth because there is a very big energy conversion to undertake and a huge export market to serve. Because the US is good at process engineering, it will be the US that does much of the industrial work for the energy conversion. The rest of the world is just making sure that it does not cost them too much to buy our products since they will be essential. The losers who speculated in the dollar as a reserve currency will also be winners as they get solar panels, wind turbines and plug in hybrids at a reduced price. Hopefully we will not decide to hold a single currency once we have built up our foriegn reserves. The way I see it, we've baited our hook with the US market in consumer goods to catch the largest possible market in durable goods and having let China run out on our line long enough so that their government's continued control requires what we can provide, it is now time to reel in the profits (Chinese New Year pun intended). The Chinese tradition of not eating all the fish may be as old as the biblical tradition of not allowing debts to build up. They both speak to sustainability in interesting ways.
All money is created as debt, as is easily understood after viewing Money as Debt. You're almost there but hesitant to say it, or so it seems. If we all pay off our debts, there's no more money. It is really that simple.
The first task of the Fed is to maintain the value of the US dollar. It has lost some 95% of its value since 1913, so that is definitely not working. Saying that the Fed "tries to regulate monetary supply" could mean anything, from overflowing the markets with debt-ridden funds, as in the past decade, to suddenly withdrawing lots of money, as it did in 1913, and, in my view, soon will again. For whom does the Fed work? The American people? It's a taboo question, but perhaps not a bad one.
You use terms like "real growth" and "real GDP" as if these are knowable. They are not. For all we know both may have been negative for years, a possible fact hidden by -exponentially- increasing money supplies, aka debt.
One thing you haven't touched upon is what Henry Liu called:
The rise of the non-bank financial system. That is, the debt instruments issued by institutions other than banks. These instruments have allowed the rise of the derivatives industry, which at their present estimated value (sic) of close to $500 trillion have the potential to bring down the entire existing global financial system.
Derivatives are far more important than homeowners defaulting on loans, both because of the much bigger numbers involved, and because underlying assets have been leveraged to a far higher extent. The world has never had anything remotely like them, which makes it hard to oversee, but all governments, banks, pension plans etc. are deeply invested in them, and that is scary.
It is tempting to try and see a link between peak oil and the economy, but it's not very clear so far in what I've read here. I doubt the causality of the link very much; the financial system is imploding on its own accord, in my view. Allowing the creation of 100-fold leverage on any asset one can think of is an insanity that could not even be balanced if we had 10 times as much oil as today.
One last thing: oil prices seem to be on the rise these days, but are they really, or are we fooling ourselves? For instance, did they rise in Euro's? Can't be much. Could that be why pump prices are still relatively low? Nobody addresses this, might by a US blinder kind of issue. The dollar just reached another all-time low vs the Euro.
I couldn't find a Euro chart offhand, but this one should be cause for pause when discussing oil prices:
Brent Spot/dollar commodity charts
- development last 3 month(s)
Thanks for saying it for me. The inflation that you blame on the fed is to an extent necessary; the prospect of cash depreciation is a goad to invest rather than hoard, and 3% is considered sufficient motivation. This keeps the cards on the table and moving. Compounded over time, we shouldn't have a loaf of bread or an hour of work be the same as 1910, but the reality has been not a smooth curve but a lumpy one. Nuther lump coming, but is it up or down?
We may see the fall of the non bank financial system, and much faster than its rise, as is common in the sawtooth world of such things.
P, I don't know where that idea comes from, but it's pretty wild. A quick look at exponential functions says it's doomed from the start. It simply forms the basis for a consumer society, I would think, and that's not going very well.
As long as people have not fulfilled their (basic) needs, they will spend in order to do so. When they have, why entice them to spend more? As all money is issued as debt, they will only get deeper into debt, so who benefits from that 3% inflation? Not the people.
It will bring down the banks as well, or at least I can't see how it couldn't. The entire system is neck-deep invested in derivatives.
Then there is the obvious connection to a growing population. Picture a village with a fixed number of people and you could conceive of a steady-state economy with no inflation. Keep adding people and this triggers all the other pressures to adopt 'inflationary' systems such as resource extraction and fiat money. Population expansion must, I believe, be seen as the fundamental driver behind expansionary economics.
No it's not. In periods with very low inflation or even deflation like around 1900 other mechanisms were used to achieve the same effect, for instance the Woergl stamp scrip. This currency was used to rejuvinate a small city and it worked by causing money to "rust" by forcing people who held the cash to pay to keep it valid.
This practically forced investment and usage of the money rather than hoarding, as people are wont to do when a currency is deflating. It had an amazing affect on the town, by all accounts.
These days inflation is used to achieve the same thing. Rather than sit on piles of cash waiting for them to get more valuable, people invest. They do this even if they don't realise it - by holding their money in savings accounts or pensions.
It's widely accepted that a small amount of inflation "greases the wheels".
Why entice them to spend more? Perhaps because people spending money is how things get done? If everybody bought only the minimum they needed to survive and hoarded the rest our civilisation would grind to a halt. Nothing new would be created, infrastructure would decay, our society would become a pathetic joke.
You want money to circulate, you want investment. What you don't want is too much new money entering the system because that can cause nasty feedback loops.
Also, whilst it's true that the money system is based in "debt" that's not necessarily a bad thing. The word has many negative connotations, but having money be issued via bank loans has both pros and cons when weighed against alternatives (like full reserve banking or Ripple-style mutual credit systems).
Why entice them to spend more? Perhaps because people spending money is how things get done? If everybody bought only the minimum they needed to survive and hoarded the rest our civilisation would grind to a halt. Nothing new would be created, infrastructure would decay, our society would become a pathetic joke.
Sounds like a prescription for exactly what we need. (although, I do believe our society is already a pathetic joke for holding on to growth as one of its core values)
Anyone touting inflation as a good thing doesn't understand exponential functions.
Inflation does one thing only: it depreciates the value of your assets, while debasing the value of your currency.
And you wish to make the point that that is a positive thing, and our civilization would even grind to a halt without it.
That may be true for a civilization based on American Idol, McMansions and Cheese Doodles, but why would we wish to save or maintain that? Aren't the limits sufficiently clear yet? How much longer will it take?
Of course. if what you have loses value all the time, and what you need gets more expensive at the same time, you will have to go and work and dig holes and what not, in order to make up for that loss, and you'll get mighty active, but that’s good for who exacttly? For you? Who do you think collects as profit what you are losing?
The early 1900's are not a case pro inflation, they were a time where an inflation based economy was showing the same cracks that we see around us now. Fight the evils of inflation with more of the same. Real promising.
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Inflation ultimately can only destroy societies. And my, look around you.
Inflation reduces the value of currency, which makes sustainable investments more compelling.
Consider a forest that I own. If there is no inflation ... if there is deflation, in fact ... then it's in my best interest to clear cut the forest straight away. I'll get a lot of money up front and that money will become more valuable year after year! But if there is some mild inflation, then it's in my best interest to run the forest sustainably, because I get a guaranteed income each year (the price of wood will rise along with the price of everything else to match the increase in money supply). In other words I invested and produced value rather than hoarding currency and eliminating value.
You're right that inflation can destroy societies - just like deflation can, if allowed to get out of control. Your position on the early 1900s don't make any sense - the Great Depression was a time of deflation, not inflation.
I believe that ilargi was referring to
You seem to be fixated on 1929. Before 1929 but still very much a part of the early 1900s (part of that same 20th century), we saw numerous financial events that demonstrated the hazards and folly of inflation.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
While I understand the point Mike was making, it does provide a valuable counterpoint: The way in which this forest is *considered* is from a purely economic standpoint, and that's the tragic rub of our whole economic way of life -- EVERYTHING is reduced to its pure economic value regardless of any other value ethic!
IMHO this all encompassing capitalist economic meme is our ruination as a species. We need a land ethic that supports our basic communal ecologically based survival needs first and foremost. In other words, the forest is valuable as an intact healthy ecosystem that supports our life and all the other living things that contribute to the same! As soon as we diminish this land ethic valuation and substitute it with an economic one we devalue and diminish our own survivability.
Hence the lesson we are soon to learn as a species: Nature does not make economic compromises with anyone!
1. What is economy but the mathmatical analysis of scarcity of resources?
2. Why are you considering an entire math science to be "bad" just because humans used it to understand better how to destroy Earth? Economy isn't bad and that's the issue we face. The problem is that it worked too well, not too bad.
3. Isn't morality only a traditional-based "economy" of things? We all have learned by moral that we should be in more of a harmony with the environment (the greens), but isn't that a purely economical stance of sustainable existence? Aren't you confusing "Economy" with "PR using economical terms to rape the Earth"?
I'm not against what you're saying. I'm against the way you're saying it. The program you present (get the ecological issues back to politics, aka society, from the economics) has some problems, but essentially I agree with it. Society should decide what is best for the ecossystem first, and only thereafter what is best for particular economies.
But this kind of thought will be referred to as "communist" or "extreme left nugget thinking", and so I wouldn't bet on it.
I'm sorry but I do not accept your definition of "economy" as a "mathematical analysis of scarcity of resources." I do believe this is way too narrow a definition of what should constitute a healthy and life sustaining *economy* and our understanding of it.
Secondly, I did specify the particular economic analysis system I was referring too: "all encompassing capitalistic" one. Your suggestion that I was inferring all economic (or math based) analysis "bad" is a misguided interpretation of your own making.
However, as to your suggestion that such an economy as you conceive it, as a mathematical abstraction, "worked too well, not too bad" in *destroying the earth* only serves to prove my point!
Without an ecological ethic (or however else one wants to call it) to guide us, all our scientific and mathematical genius can not save us from continually doing harm via these lofty methodological abstractions -- they need to be grounded in earth based limits and our acceptance of them. In short we need to accept that we aren't demi-gods over this earthly creation but mere caretakers, and very ignorant and fallible ones at that.
Finally, I don't care what anyone may think to negatively label such thoughts as representing. We don't have as much choice in this matter as we pretend we think we do and/or will have. The way we are going about accounting the economy of the world is without a doubt leading us to ruin. Ultimately, earthly reality and the very real limitations that rules the natural world here and within ourselves will prevail over our ecologically unhinged abstract economic conceits.
Whether we make amends before our civilized destruction is complete is *the bet* we are wagering and it is the only one none of us can predict with certainty, but make no mistake we are betting against ourselves daily with our unethical economy as is!
Thus my assertion stands: Nature does not make economic compromises with anyone!
Mike Hearne:
If the Woergl stamp script worked so well, then why wasn't it revived during the Great Depression at least in Woergl? Why are there no more examples of this system working in the years after this one experiment?
When I'm looking at an idea for an oil well one of the first things I look for is evidence that other people or companies are doing a similar type of prospect.Its confirmation that my idea isn't too outlandish. And its the same with other ideas, I don't mind being fairly original but if I'm too original its not a very good sign. Bob Ebersole
Bob,
Democratic forms of government were invented by the Greeks several hundred year before Christ. After a relatively brief period of experimentation these forms of government disappeared from the world for over a thousand years. Did this disappearance constitute 'proof' that democracy was a bad idea?
And, by the way, the Woergl was deliberately suppressed at the request of the Austrian central bank. The case was fought up to the Austrian supreme court which ruled in favor of the central bank. What a surprise.
Roger
Peak oil guarantees that any debt based system that depends on infinite growth is doomed. So by itself, peak oil guarantees our current monetary system, even without the non-bank financial system, is doomed.
Our current system has so many deficiencies that it seems to be doomed, with or without peak oil. I agree that the non-bank financial system is a big part of the problem. It seems like the whole system will collapse fairly soon. Any push from oil prices, or the drop of the dollar, or knowledge of peak oil, will only help it along.
When I started trying to tackle this subject, I found myself with too big a topic to handle. I divided the subject up into three posts, but even these got long. I stayed away from the non-bank financial system because I needed to contain the topic somewhat. Perhaps I can do another post later with some other issues. In this post, I do mention off-balance sheet financing of banks as one issue.
That´s why i maintain that GOLD is the only real money in existence. It ain´t debtbased and can´t be printed out of thin air. Sure you can´t go and buy milk for a gold piece, but its a sure thing for wealth preservation of ones hardearned savings.
Gold is ‘real money’ only in the presence of a healthy economic system in which relatively wealthy people exist who want to deck themselves out in gold trinkets. If everyone is worried about where their next meal is coming from or how they are going to keep warm this winter a whole warehouse full of gold will not be of much use to you.
Couldn't one say that about any good, be it a precious metal, mineral, commodity, or a chicken? They aren't debt-based and can't be printed out of thin air either.
What I'm nervous about is your use of the word "only". I would argue that there is a large basket of stuff that can be used to efficiently store value, and that picking a single one isn't wise.
Couldn't one say that about any good, be it a precious metal, mineral, commodity, or a chicken? They aren't debt-based and can't be printed out of thin air either.
Unlike other commodities, gold is not perishable, does not rust or corrode and takes very little space to store. 500 gold coins - which can easily fit in a small briefcase - can buy you a decent house in most parts of the US.
Also, gold has a 5000 year history as a store of value. I would argue that silver is also "money", but not as much as gold.
Of course. And that's the reason for my use of the word "efficient".
Diamonds would also qualify and have far better value density than gold. Many currencies would do the trick. I'm actually fond of land as a store of value.
In case it wasn't clear, my point was not that one shouldn't buy gold, but rather buy a diversified basket of assets to cover yourself no matter what happens.
Gold is a universal currency. I know I spend a lot of time in Asia. And yes you can but a litre of milk with gold. In fact gold is the prefered currency especially in Chinese communities. You can buy and wear standard weigh gold earings / sleepers in any pierce-able point on your body. The minimum is about 5g. They will even give you change. This is handy to know as you can buy or have made a large amount of these if you are traveling from say Thailand to China via indochina just as an example. It is also common in Central asia to use a chain you can cut links out of. I have done this in Tashkent.
Diamonds are no good as money. How do you value it? A goldcoin as a Krugerrand is recognised by almost everyone around the world, and are smaller more convinient pieces of value than diamonds.
My stupid opinion..........
For the average Joe Blow.
In the not too distant future, your labour and health will be your biggest asset.
Wealth eventually will be seen in land barons.
Livestock, farmland and the ability to defend it, will be all that matters.
Big land barons will be like the monarchs of old.
The worth of gold will be determined by how well it can keep you alive, if a gold coin can't buy your next meal then I would say it was worthless.
Initially labour will be very, very cheap. There will be enormous competition to provide it.
The inevitable crash in populations, will be the only pressure relief.
Paying for and providing security may be a growing trend.
The big problem with diamonds is that the price is far, far higher than their cost of fabrication. If the De Beers cartel falls apart, the price of diamonds will quickly fall to around the price of fabrication. Even in a world with scare fossil fuels, I'm sure diamonds can be manufactured for less than 1/10th the current market price.
I learned about the value of diamonds when I went to sell my mother's jewelry after she died, to help fund the estate (needed to raise money to pay bills). Furs older than three years old are worthless. You can't give them away. No one wants them. Furs older than one year, but newer than three years old have a value of about 1/25 of their retail price.
Costume jewelry is worthless, about $5.00 per pound.
"Gold-filled" anything is worthless. 18K to 22K gold is worth the melt value, anything less than 18K is worthless.
Diamonds are worth 1/10 of the retail value, if they are big enough (>1/10 carat). My mother's wedding ring, with an insurance valuation of $4250, brought $430.00. I checked this value on Ebay, and this is the general state of the market. Diamonds bought at retail are *NO* store of value. Diamonds at wholesale may be valuable, but unless you're one of the diamond traders, you aren't going to get a diamond for the true wholesale value.
Steuben glass is worth 1/10 of retail value. And so on. Mass-marketed collectibles are worthless (but check prices on Ebay, some of that stuff has deceptively high prices). Usually anything stamped "Made in China" is worthless. Silverware is worth the melt value. Make sure it's sterling, silverplate is worth the melt value of the copper which comprises most of it, unless of course it's more than 150 years old and has recognizable hallmarks from a recognized UK or Irish silversmith (same for silverware).
Stainless steel "silverware" is worthless
Land only works as a store of value where there is some authority that grants land rights and protects them. Without such a government (and note that not all governments protect land rights or even recognize them), your land can be alienated at will.
Silver is actually a pretty good place to park your money too, but it's big problem is storage. The price of gold (when calculated by weight) is almost 50 times greater than silver. Furthermore, a 1-ounce silver coin is larger than a gold coin of the same weight, because silver is lighter. So if you're storing silver coins for the coming disaster, you are going to need over 50 times the storage space. A large safe-deposit box could store over $1 million worth of gold, but only $20,000 in silver.
Of course, after the US$ collapses and you go to the corner gas station with a 1-ounce gold coin, it's going to be awfully difficult to get change. In that case, silver would certainly be better.
Sure you can store value in any tangible good. Bu if we talk about money, gold is and has been THE money for 5000 years around the globe. Why should it cease to be money now, come what may?
And it takes little space, is easily hidden and transported.
Cash is just a set of tokens valued by others. I think if you actually tried to live your daily life using only gold you'd be quickly disabused of the notion that gold is "real money" at least in the west.
Try to imagine going to the local supermarket, or gas station, and attempting to pay using gold coins. Do you think they'd accept? Or would they point out that it's a lot easier for them to understand the value of a $20 bill than a piece of metal which may or may not actually be gold (how many people have even seen a real gold coin these days?).
Another problem with using gold as money is that there isn't enough to go around and hasn't been for decades. It's also far more valuable as a useful material for things like semiconductor manufacture than it used to be. Hoarding gold makes no sense. I'd much rather try and buy things using IOUs in my local community than haul around easily-stolen pieces of gold!
"try to imaging going to the local supermarket, or gas station, and attempting to pay using gold coins"
I have never suggested that. As long as we have some kind of paper money working, you of course use it for daily purchases.
But the gold coins preserves the value even in the not so unlikely hyperinflation we perhaps are going to endure.
Then you exchange your gold coins now and then, whenever you need to a little more paper money for daily needs.
If you travel abroad, you can always have some goldcoins in your purse, for exchange to the local paper money.
If we have a collapse, and the paper money systems collapse. What do you think has more value; The old paper notes, or the gold coins?
Anyway, as i said in the thread before, you should first take care of other preps, and only buy gold if you have eccess savings left after the preps are made.
Once gold reached spectacular highs of $750/oz. only to be liquidated at $300/oz. a few years later. Some who trusted in gold to save them became greatly disappointed.
Some who trusted in the value of their real estate are seeing fortune dissappear before their eyes.
On the dollar bill it was written, "In God We Trust." One cannot trust the government in these times, rather that the government is doing all it can to dilute the value of the U.S. currency without producing favorable returns. Iraq is in its worse year of the war. Republicans indicated they were in Iraq to stabilize it, yet Iraq would have been more stable if they have never conned Americans into supporting the war in the first place.
Germany's banking system collapsed in the 1920s. Anybody want to tell us what that resulted in?
Cute blonde girls in waving cornfields.
I am sixteen going on seventeen.
Lots of them.
Cornfields?
I thought they were mountain tops with boom boxes tucked away in the corners to blast out the sounds of music.
(Vellcomin to my Cabaret. Everything is beautiful. The show girls are bea-u-tiful. The sounds of boots stomping is bea-u-tiful. Life is a Cabaret ole' chum.)
I presume, that all know what happened in the Weimar Republic at that time.
There is a story from that time of a hotelboy in Germany, who got a one oz goldcoin as a tip from an american guest.
The boy kept the coin, and eventually the hotel went bust. The hotel owner stood in the corridor and said out loud, that if he could get one oz of gold for the hotel, then he would sell it.
The hotelboy happened to stand there hearing what he said. He asked the hotel owner: do you really mean it? Yes said the hotel owner. Then i will buy the hotel said the boy and gave him the coin.
The boy managed to get the hotel on its feet again, and after the war he traveled abroad and founded a worldwide hotel chain. The boys name was Hilton.
So you see in some years you can perhaps at least buy a fine mansion for a few gold coins.
Nice urban legend, but this bio of Conrad Hilton doesn't back it up. It has him in Texas, not Germany, at the time of the great hyperinflation in 1923. Was it somebody else instead?
No it was not somebody else. It was just a nice urban legend. Why do you have to come and spoil it???
Gail,
I see a drop in the dollar as a very positive thing right now. It is a way to boost fuel prices while supply is also increasing. Since the US is doing little otherwise to control oil consumption, this gives at least a push in the right direction. With the building trade slowing, this will turn out to be a very good time for insulating existing building and converting their heating to geothermal heat pumps. We are already seeing substantial European investment in renewables in the US. This is likely to increase as the potential for export improves. The key thing that we need to shake loose of is the yuan's dollar peg. Getting oil sold in Euros might just do that job.
I can kind of see your point that debt as we use it now is tied to growth; we certainly do not have jubilee cycles these days. I listened to two young people join in the sermon on Sunday interpreting the reading about the unjust steward. Neither they nor the priest recalled that a regular cancellation of debt is biblically mandated. Still, they all did well interpreting a difficult text. Now we are going to pay our debt in devalued currency. Is this unjust or ordained?
UAW feels strong enough to strike. They know that there are going to be a lot of cars built with better fuel efficiency and they want to be sure that they are the ones to build them rather than robots. We are not done with economic growth because there is a very big energy conversion to undertake and a huge export market to serve. Because the US is good at process engineering, it will be the US that does much of the industrial work for the energy conversion. The rest of the world is just making sure that it does not cost them too much to buy our products since they will be essential. The losers who speculated in the dollar as a reserve currency will also be winners as they get solar panels, wind turbines and plug in hybrids at a reduced price. Hopefully we will not decide to hold a single currency once we have built up our foriegn reserves. The way I see it, we've baited our hook with the US market in consumer goods to catch the largest possible market in durable goods and having let China run out on our line long enough so that their government's continued control requires what we can provide, it is now time to reel in the profits (Chinese New Year pun intended). The Chinese tradition of not eating all the fish may be as old as the biblical tradition of not allowing debts to build up. They both speak to sustainability in interesting ways.
Chris