Blended gold-fiat $ monetary system?

[GreyICE]

This morning I was standing in Dubai airport looking at a 1 Kg goldbrick, it is rather small.

It's an interesting fact, but Gold is roughly 50% denser than lead, and lead itself is a ridiculously dense material (to the point where, due to our experiences with Iron/Steel and Aluminum, almost no one guesses how much a lead roll weighs).

 

[Toke]

I recall gold as about 20g/cm3
It reminds me of stories of the IRS and bikers on welfare.
IRS agent weighting a gold chain in the hand, "this feels like 150.000Kr, how did you afford that?, we better keep it"

 

[stevea]

Laugh all you like laughing girl - the fact is that Krugman is second rate. No one seriously takes his work as on par with Maurice Allais or Edmund Phelps. Many aspects of Krugmans work are derivative IMO, but then again I've read his papers and you apparently haven't.

Some interesting and prescient comments about Krugman from 2003 !
http://mises.org/daily/1318

If you don't believe the Nobel's are recently political smooches rather than deserved awards -then you'll need to explain Algore and Obama's prizes. without your typical ocean of rationalizations.

===

Anyway this thread is rather pointless - we already have this imagined dual currency situation. Anyone can obtain and use US gold currency. No one does for some fairly obvious reasons - already cited.

 

[Francesca R]

Laugh all you like laughing girl

[ . . . ]

http://mises.org

 

[GreyICE]

Francesca, I am shocked and appalled at your answer to Stevea's post.


































Seriously, that's a 3 dog post. How could you mistake it for a one dog post?

 

[TriskettheKid]

I think you are waterboarding the language to claim that mining gold or choosing to not mine gold is "manipulation". Any rational person would expect these activities. It's rather difficult to "corner the market" in gold, since the annual production is only ~1.5% of the supply.

No, it would be fairly easy to corner the production market.

If the current rate of production is 2500 tonnes per year, and I find a mine that can produce 500 tonnes per year, I'm sitting pretty.

Buying up the producers until I've at least got the capability to produce 1500 tonnes a year would mean that I would effectively control production of gold in the world.

And since the population of the world continues to rise, I'd effectively be able to cause massive problems with currency.

-----

Also, mises.org?

Seriously?

 

[Michael Redman]

What, exactly, do the anti-Fed folks think the country would be like if the Fed hadn't been created? When they say things like 95% value lost to inflation, do they imagine that otherwise our labor would gain us 20 times the buying power it does now?

 

[TriskettheKid]

What, exactly, do the anti-Fed folks think the country would be like if the Fed hadn't been created? When they say things like 95% value lost to inflation, do they imagine that otherwise our labor would gain us 20 times the buying power it does now?

It's hard to say, but I'm getting "we'd still be on the gold standard" would probably be worked into their answer somewhere.

You might even get a fantasy history of the creation of the Fed in their answer.

 

[drkitten]

What, exactly, do the anti-Fed folks think the country would be like if the Fed hadn't been created?

"In the Big Gold Standard Mountains there's a land that's fair and bright
Where the handouts grow on bushes and you sleep out every night
Where the boxcars are all empty and the sun shines every day
On the birds and the bees and the cigarette trees
Where the lemonade springs where the bluebird sings
In the Big Gold Standard Mountains

"In the Big Gold Standard Mountains all the cops have wooden legs
And the bulldogs all have rubber teeth and the hens lay soft boiled eggs
The farmer's trees are full of fruit and the barns are full of hay
Oh, I'm bound to go where there ain't no snow
Where the rain don't fall and the wind don't blow
In the Big Gold Standard Mountains

"In the Big Gold Standard Mountains you never change your socks
And the little streams of alcohol come a-trickling down the rocks
The brakemen have to tip their hats and the railroad bulls are blind
There's a lake of stew and of whiskey too
You can paddle all around 'em in a big canoe
In the Big Gold Standard Mountains"

 

[Michael Redman]

That sounds nice. Let's do it!

 

[drkitten]

When they say things like 95% value lost to inflation, do they imagine that otherwise our labor would gain us 20 times the buying power it does now?

To be (slightly more) fair, I think they imagine they'd still be able to live on inherited capital produced by the labor of their forefathers -- or alternatively, have a much more comfortable retirement than they're currently experiencing, because they didn't plan properly decades ago.

My grandfather, for example, left an estate worth approximately five hundred thousand dollars when he recently passed away. Had he left it all to me, I could have lived quite comfortably off the 4-5% more or less risk free interest I can get from a properly chosen CD ladder.

... for about five years, perhaps. To actually survive long-term on that kind of money, I'd need to be able to reliably get more like 8-9%, which I can't get with a simple and secure CD ladder. Or, more likely, I'd have to work for a living and just use Grandpa's money as a supplement or as a retirement investment of my own.

So, basically, I think the gold bugs are mostly whiney spoiled trustafarians.

 

[Michael Redman]

Well, the problem, to my poorly educated mind, is that it seems they are claiming virtually everyone has lost vast amounts of purchasing power due to the creation of the Fed and the end of the gold standard. I have to wonder, if everyone had so much more purchasing power, where would all the additional goods and services come from?

 

[drkitten]

Well, the problem, to my poorly educated mind, is that it seems they are claiming virtually everyone has lost vast amounts of purchasing power due to the creation of the Fed and the end of the gold standard.

Yes, that's the claim.

I have to wonder, if everyone had so much more purchasing power, where would all the additional goods and services come from?

The goods and services have been stolen from us honest folks by the bankers (notice I didn't say "Jewish," although I probably could have) in their currency manipulations. They buy goods with the moral equivalent of "counterfeit" money which takes them away from the rest of us. The reason I don't live in a million dollar Manhattan townhome is because the senior staff of Goldman-Sachs bought and paid for it with Monopoly money, and were therefore able to bid higher than I could.

Absolute lunacy, of course. That's like saying the reason I can't get free cancer sticks from the cigarette trees is because they're planted on Bernacke's private estate.

 

[Francesca R]

When they say things like 95% value lost to inflation, do they imagine that otherwise our labor would gain us 20 times the buying power it does now?

Hardly, since there would be no reason for nominal wages to have risen other than increases in labour productivity. In fact the labour income share of GDP has been roughly constant at 55% (you can view back to 1930 in the NIPA database). If national income was being fleeced from employees then the labour share would have lost out big time to profits (capital's share of income).

Of course, this gets handwaved away with declarations that any official statistic that can be produced is a lie.

 

[Francesca R]

To be (slightly more) fair, I think they imagine they'd still be able to live on inherited capital produced by the labor of their forefathers -- or alternatively, have a much more comfortable retirement than they're currently experiencing, because they didn't plan properly decades ago.

Since inherited wealth would have earned a real rate of interest (determined by the average rate of growth of the economy) independently of what inflation was--and it's been something between 2% and 3% over the long haul--they haven't got much of a case with that.

The only way the real rate could have been elevated beyond the trend growth rate of output--such as to 8%--would be if deflation of 8% had been engineered, so that zero interest was still an 8% annual gain in buying power.

Of course anybody sensible is aware that 8% real interest rates caused by -8% price deflation for a couple of generations would likely go hand in hand with utter economic catastrophe.

 

[Michael Redman]

The reason I don't live in a million dollar Manhattan townhome is because the senior staff of Goldman-Sachs bought and paid for it with Monopoly money, and were therefore able to bid higher than I could.

Well, when we abolish the Fed, and go back to the gold standard, there are going to be an awful lot of us living in that townhome.

 

[drkitten]

Since inherited wealth would have earned a real rate of interest (determined by the average rate of growth of the economy) independently of what inflation was--and it's been something between 2% and 3% over the long haul--they haven't got much of a case with that.

No, you can't tell me the rate at which inherited wealth will grow, or would have grown. That would depend on where I invested it, surely. If I put it into fur-bearing trout ranches and jackelope farms, it would have gone to zero. If I put it into my mattress, it would have stayed at a fixed number of nominal dollars, and if I had bought Microsoft at the IPO, it probably would have grown much more than average.

And that's part of why I think the gold bugs are lazy, whiny trustafarians. They seem unwilling to accept the idea of investment risk, and so want to essentially lock in the real value of their current wealth. If I put my money into currency in my mattress, I'm locking in a zero nominal rate. If I can equally lock the economy into a zero growth rate for the money supply, then I can't lose anything, and will collect risk-free gains as productivity enhancements increase the amount of goods and services out there.

The only way the real rate could have been elevated beyond the trend growth rate of output--such as to 8%--would be if deflation of 8% had been engineered, so that zero interest was still an 8% annual gain in buying power.

But I think that's exactly what they want, whether they realize it explicitly or not.

Of course anybody sensible is aware that 8% real interest rates caused by -8% price deflation for a couple of generations would likely go hand in hand with utter economic catastrophe.

... which is why no one sensible is a gold bug.

 

[Francesca R]

No, you can't tell me the rate at which inherited wealth will grow, or would have grown. That would depend on where I invested it, surely.

"Real interest rate" refers to the (post inflation) return on cash held in a short term interest bearing deposit. Not default free (as in T-bills) but no duration (like long term bonds have) and no risk premium (like equities embody) but still lent in the market (unlike mattress money). In theory and in practice the real rate has approximated to the trend growth rate of the economy.

 

[Francesca R]

And that's part of why I think the gold bugs are lazy, whiny trustafarians. They seem unwilling to accept the idea of investment risk, and so want to essentially lock in the real value of their current wealth.

You can (and historically it has been simple to achieve in the US and other productive economies) lock in the real value of current wealth--and then some--without assuming investment risk. That's why even T-bills have returned something like 2% after inflation.

But to lock it in, you can't consume it, beyond consuming the 2% or thereabouts real risk free return, which is the compensation for deferring consumption that the economy "offers".

 

[drkitten]

You can (and historically it has been simple to achieve in the US and other productive economies) lock in the real value of current wealth--and then some--without assuming investment risk.

Not quite. As you admitted in the earlier post, this only approximates the value of current wealth. And it assumes a degree of trust in the evil Druish bankers that run the economy that many gold bugs are unwilling to grant.

After all, the evil Druish bankers could always simply devalue the currency. In fact, isn't that what they're doing piecemeal via inflation? [No, of course it isn't, but their eyes will glaze over when you explain the difference.]

I think you're giving the gold bugs credit for too much rationality.