pier0188

GDP Is 'Better'

More deninger drivel. What about that collapse of society you were carping about earlier this year. Your ability to prognosticate is about as good as your ability to analyze.

The Dangers of Fiat Money: 'End the Fed,' by Ron Paul

What I find amazing is that the article writer has any credibility at all spreading the FUD that he does. He's supposed to be some sort of uber-economist, yet he lacks the basic truth-telling reasoning of a rational human being. I'm not sure what agenda he is pushing, but it's one that lacks any real world application, nor appreciation for what really happens in the world.

If this is the type of person heading up the charge against the Fed, and for Ron Paul, I weep for the future of this country.

The Dangers of Fiat Money: 'End the Fed,' by Ron Paul

What 3000 years shows us is that we were an agrarian economy with little to no progress, low quality of life, and disintermediated economy and world. If that's what your advocating, good luck to you.

3000 years shows us that people valued a shiny rock over rationality. Gold has just as much fiat value as a paper dollar, it's only worth as much as somebody's willing to pay for it and has little to no intrinsic value. However, it does lock an economy into a narrow path that eventually results in it ripping itself apart as the key variable, human nature, takes hold.


On Oct 04 02:34 PM roy piper wrote:

> There are two possibilities. One....that your currency is really
> worth SOMETHING, as in gold. Or.....two...that you currency is backed
> by nothing, fiat. There is no third option. Given this choice, history
> going back 3000 years show that the former is the inevitable survivor.
> To believe otherwise just shows the power of fantasy over experience.

The Dangers of Fiat Money: 'End the Fed,' by Ron Paul

And what type of person would just put $1MM under the mattress and not invest it in anything? What type of person wouldn't be working one day since that period, earning wages that keep up with inflation in the long-run?

That person is a moron. Sorry, but if you think that's justification for your position, you might as well join the mattress investment crowd and lose your money also.

Looking at time as a static position is stupid, but it's one that people of your position advocate constantly. It ignores time, humanity, and progress. All of which gold-standard people love to ignore.


On Oct 04 05:10 PM roy piper wrote:

> Chap, I feel you are wrong on every single count. The way to see
> this is too look at this mind experiment. If, in 1932, you had 1
> million dollars and went to sleep until today under a gold standard,
> you would have the same purchasing power now as then. But under the
> inflationary money supply we have had, you would have lost 93% of
> your purchasing power. What you spend it on now would only get you
> 70,000 worth of goods and services in today's dollars. The remaining
> 930,000 worth has been transferred to other people via inflation.
> If I had 1,000,000 in gold at that time, I would have over $20,000,000
> in the value of gold now, due to the declining dollar, and inflation
> would not have existed for me.
>
> If anyone here wants to learn more about how this all works, read
> the all-time classic "Economics In One Lesson" by Henry Hazlett.
> This book, which can be read on a lazy weekend, was one of the best
> selling books of the early 1960's, the last time in America where
> money was a centerpoint of public discourse. It can change your life.
> Seriously!

The Dangers of Fiat Money: 'End the Fed,' by Ron Paul

I shut down from this retarded "article" the second the fool said the "purchasing power" of the dollar is now .05. Sorry, but the "purchasing power" of the dollar is not .05 since purchasing power is a measure of what you can buy today with the same currency *OF TODAY*. Can you buy a melon today with the money you make today? Why, yes, you can. Can you buy the same number of melons today with the salary you have today as you could buy yesterday with yesterday's salary? Why, yes, you can.

Only fools believe that "purchasing power" is a static idea that remains anchored in history. It is a flexible idea that moves with a currency. This is what is known as "purchasing power parity" on a global scale. Has inflation increased in the US beyond the remainder of the world, tossing the dollar in the drink to such a point as we cannot buy foreign goods with the same number of dollars? Pretty much, no.

Has inflation increased so much as people can't buy the same goods as they could previously? Pretty much, no.

I know some tools will begin to spout on about how long-term wages haven't kept up with long-term inflation, yet, they cannot provide one data source to back up this assertion. They use anecdotal evidence of two-income families being a requirement now. However, when confronted with the fact that families now spend, on average, far more on extraneous expenses as they did before, their arguments fall apart. What's even more interesting is that the capital gained by economic efficiency (spurred by our intermediated monetary system), has allowed the amount of money spent on *FOOD* to decline as a % of income earned. Same with housing.

Yet, somehow, the same lame-ass argument comes back about dual-incomes and how much worse it is compared to the 19xx. However, let's consider the voluntary nature of expenses.

How many bills did somebody have back in 1930? Did you have a cable bill, cell phone bill, internet bill, AC (power) bill? Did you have an ipod you must have, or music you must buy for it? Did you have a Wii (which requires games), or a GPS? Did you have XM radio which requires a monthly payment, or an education that requires a loan payment?

Ohh, you're telling me now that you don't spend more money on *DISCRETIONARY* items? Wake the fvck up.

24 Trillion Reasons to Buy Gold

What sad is that people actually listen to Kiyosaki, so yes, it could be the start of a retail boom.

As farf as the $24T, that'd require every piece of debt guaranteed by the government to default and the principal payments required. That is a foolish idea.

A Golden Hedge Against the Dreaded Dollar

>
>
> Dividends on the S&P have been averaging 1.7% of late and are
> being cut even more by companies: economictimes.indiatim...

But historically they are far higher, the div yield only needs to be ~3.2% to equal gold's current (and very inflated) performance. In fact, historical div yields are about this number.



> The rest of what you bicker about is related to inflation. My definition
> of inflation is "an increase in the money supply via fiat printing
> and credit."

Great, that is *YOUR* definition. YOUR definition excludes increases due to wages (decreases due to productivity), increases due to other imput variables (such as oil, remember when people said the raise in oil was solely because of the dollar?), what about destruction of wealth? Less dollars on the market.

You see, YOUR definition of inflation, just like your definition of gold vs inflation, is limited.


> As the government prints and produces more money, it devalues the
> dollar (you know...that thing that gold is priced in).

That isn't completely the case. If there is the same amount of money in circulation AND they add more money AND the goods generated (economic growth) represented by such money hasn't increased, THEN you have monetary inflation. However, when you have wealth destroyed through asset destruction (RE bust), you have fewer dollars out the same amount of basic goods.

> To explain; If all the goods in the world cost 1 million dollars
> and you doubled (inflated) the money supply to 2 million dollars,
> then it would now cost twice as much money (dollars) to purchase
> all the goods in the world. This is what's occurring since the Reagan
> administration.

Yes, but what if the goods increased? What if then they suddenly decreased and the leverage decreased accordingly?


> Gold is priced in dollars and thus will have the same price increase
> in dollars when the money supply is doubled (again, despite the Fed,
> U.S. Treasury, Central Banks, etc. who try and discourage people
> to invest in gold rather than dollars) - yes there are supply and
> demand issues to. Unlike U.S. dollars though, the supply of gold
> is limited (by the way, you keep addressing other issues that aren't
> related to the issue we are discussing, but I must point out your
> misunderstanding of what a true gold standard its. It's not a "gold
> backed" currency.

Again, you make claims that there is such a strong relationship between the value of the dollar, or inflation, and gold. You have yet to provide ONE SINGLE SOURCE for this claim. Yet, you can simply go to google, put in "correlation between gold and inflation", and you find the same magic number, -0.28. Refute it or stop parroting it.

> Your comment that gold is a measurement of risk is right. Risk of
> holding U.S. dollars, the more of which are created results in (my
> definition of) inflation.

No, gold is a flight to safety when ALL other assets aren't attractively priced and/or perceived risky. Not just the dollar or governemnt debentures. If you correlated the VIX to gold, you get a stronger correlation than inflation to gold.

> I like Mish. I read him to get some good perspective on things. I
> also like Gary North. I enjoy the back and forth between Mish, Schiff
> and North.
>
> As I pointed out in my blog piece, this is just the beginning of
> the decoupling and it will get worse. I'm presently doing my own
> research on the inflation/deflation and will post it in the near
> future. I can see valid points in both sides of the debate and that's
> why I am doing the research myself.

Great, you think it's a decoupling. Yes, it is a decoupling, but your reasons for the decoupling are wrong. Temporary decoupling of the dollar to gold have occured many times in the past, mainly because of flight to safety vs all other asset classes. The data backs that up.


> You said; "I do like how you don't even address my points, point
> by point. Such as, why would government spending cause inflation
> if the amount of wealth (and currency) eliminated form the system
> offsets such spending?"
> So, I answered your questions to the history of gold, inflation and
> the dollar since 1971 and proved my point, but I see you are stuck
> on analyzing recent wealth destruction. I'll make a comment and end
> the discussion till I have completed my analysis, but this will give
> you a hint.
>
> You are commenting on "asset deflation" which can occur at the same
> time as "monetary inflation."
>
> Bernanke is on record in his 2002 speech that he will utilize Friedman's
> helicopter if he has to in battling (asset) deflation. Naturally
> you'll agree this is what is occurring in record figures with the
> stimulus, bailouts etc. that are happening. As I have mentioned,
> one needs to add to this all of the other issues of the day that
> are occurring (healthcare expenditures, cap trade, other environmental
> mandates, pension guaranty assoc. close to needing a bailout, FDIC
> already inquiring about funds, future obligations to Fannie and Freddie,
> result of the 2nd round of ARMS expiring, the coming Insurance company
> crisis with bad real commercial real estate, state (California) funds
> needed, infrastructure crisis fedupbook.com/blog/bud.../
> etc etc., and that's just what we know of today. And did I mention
> the military needs? Lastly, future obligations to medicare and social
> security.
>
> So that is what is on the horizon.
>
> But I ask you...and I got this from an article I came across in my
> research written by a CFA:
>
> Where is that example of “a modern, major nation where the domestic
> purchasing power (as measured by CPI) of its purely symbolic &
> independent currency uncontrollably grew in value at a rapid rate
> over a sustained period, despite the best efforts of the nation to
> stop this rapid deflation?
>
> If actual history is what matters to you rather than theoretical
> discussions, unfortunately, we have a long history of what happens
> with nations in severe economic distress, when they have a symbolic,
> independent currency (not explicitly tied to another currency). That
> history isn’t one of those fiat currencies soaring in purchasing
> power, despite the best efforts of the economically wounded nation
> to keep that from happening. No, the very well established pattern
> is that the currency collapses in value (price inflation), even as
> the purchasing power of assets is collapsing (asset deflation), much
> like what is happening with Iceland today."

Comparing Iceland or Zimbabwe, or South America to the US is simply ridiculous. They are hyperbolic cheerleading headlines intended to get people scared, but in reality, there are massive differences between our current situation and those situations. First off, we still have the world's largest economy and, as a ratio of total leverage to GDP, we are far better off than almost any major economy in the world. Second, there was nothing to Iceland, Iceland WAS the banks. This is quite different than the US since we also have manufacturing, Ag, IT, Drugs, and a plethora of other industries.

You can compare numbers all you want (garbage in, garbage out), but without rudementary contextual inputs, your conclusions will be wrong.
>
> Just so happens I wrote an article comparing the U.S. Economic numbers
> to that of Iceland before Iceland's blow up last year: fedupbook.com/blog/bud.../
>
>
> Lastly, you have not offered any statistics at all in your replies.
>
>
> Somehow I don't expect you to change in your responses though. People
> like you try to draw people like me into the game of trash talking.
> I wrote to Mish and told him he shouldn't have gone after Schiff
> the way he did as in the end, we all like the study of Austrian economics
> and are bullish on gold long term (Mish whether it is inflation or
> deflation and Schiff and North because of inflation, including me).
> He didn't agree. I won't go to the level of personal attacks and
> don't care to continue this conversation with you.

Mish was right on about Schiff, who happens to be yet another person who talks a big talk about US economy decoupling, dollar crashes, and gold skyrocketing. However, when it came to actual application of his "knowledge", he fell flat on his face and should be called out. While I don't agree with Mish on a lot, I happen to think that if more so-called "brokers" and "investment advisors" were called out, publicly, and very harshly, we'd avoid this type of economic trap.

A Golden Hedge Against the Dreaded Dollar

Derr...forgot to address one final subject.

"
Comparing gold to Tulip Mania isn't realistic. Gold was never mentioned in the book, "Extraordinary Popular Delusions and the Madness of Crowds," but John Law's "paper money" was. "

So, because it was mentioned in a book you happen to agree with, that means that it is actually applicable? Wow, great one. Why not pick and choose all sources, excluding the remainder of knowledge. That's a great way to diversify your intellect and avoid tunnel vision, which is obviously what you suffer from.

I do like how you don't even address my points, point by point. Such as, why would government spending cause inflation if the amount of wealth (and currency) eliminated form the system offsets such spending?

A Golden Hedge Against the Dreaded Dollar

I missed the reply to your "decoupling" idea. There is a decoupling of gold to every major currency. Why? Because gold is a measurement of risk, not of inflation.


On Jul 12 10:26 PM pier0188 wrote:

> LOL. Now you're getting even more delusional.
>
>
> 1. Comparing gold to the S&P 500 omits one very important fact,
> dividends. When was the last time gold paid dividends?
>
> 2. Gold isn't higher because inflation, gold is higher because of
> risk. Comparing common measurements of volatility (such as VIX)
> yields a much higher correlation coefficient than gold to inflation
> (which has a -.28 correlation, which is very weak).
>
> This, overall, is the key to what you're missing. You can keep diverting
> to tangential topics and hyperbole, referring to Von Mises, but the
> base fact is, the numbers *COMPLETELY* disagree with you.
>
> You have yet to show one piece of evidence that ties gold to inflation.
> Heck, even Mish did a piece on Gold not equating to inflation, and
> he's one of the biggest anti-Fed people out there.
>
> The problem is, you gold-bugs focus on singular pieces of the equation
> rather than considering the whole of the equation. You focus on
> the "evil" Fed, but you miss the "evil" people (the wrong is not
> in the tool, but in the wielder of the tool). Furthermore, you thing
> that eliminating the Fed and going to strict gold currency would
> be a panacea, yet you forget that debts can be had with or without
> a gold backed currency, you just simply change how much the currency
> is worth relative to gold.
>
> Furthermore, you ignore the fact that we were in debt far worse
> in the past than now.
>
> Taking a look at your blog, you seem like an intelligent fellow,
> if a bit mislead, and one that misses the very obvious. The data.

A Golden Hedge Against the Dreaded Dollar

LOL. Now you're getting even more delusional.


1. Comparing gold to the S&P 500 omits one very important fact, dividends. When was the last time gold paid dividends?

2. Gold isn't higher because inflation, gold is higher because of risk. Comparing common measurements of volatility (such as VIX) yields a much higher correlation coefficient than gold to inflation (which has a -.28 correlation, which is very weak).

This, overall, is the key to what you're missing. You can keep diverting to tangential topics and hyperbole, referring to Von Mises, but the base fact is, the numbers *COMPLETELY* disagree with you.

You have yet to show one piece of evidence that ties gold to inflation. Heck, even Mish did a piece on Gold not equating to inflation, and he's one of the biggest anti-Fed people out there.

The problem is, you gold-bugs focus on singular pieces of the equation rather than considering the whole of the equation. You focus on the "evil" Fed, but you miss the "evil" people (the wrong is not in the tool, but in the wielder of the tool). Furthermore, you thing that eliminating the Fed and going to strict gold currency would be a panacea, yet you forget that debts can be had with or without a gold backed currency, you just simply change how much the currency is worth relative to gold.

Furthermore, you ignore the fact that we were in debt far worse in the past than now.

Taking a look at your blog, you seem like an intelligent fellow, if a bit mislead, and one that misses the very obvious. The data.

A Golden Hedge Against the Dreaded Dollar

That's great and all, but it still doesn't answer the question why you think gold is a good inflation hedge. It simply isn't statistically speaking. You ignore the data and make up all sorts of drivel in return, it is actually pretty amusing. Show me ACTUAL numbers that shows how gold has increased with inflation and is a good "hedge". You can't because there simply is no data to back up your assertion.

Then you go on to counter with increased government spending. Wow, good analysis, what 4th grader hasn't gone that far?

Why don't you finish the equation rather than leaving it half built?

The increased government spending is countered by the trillions of dollars in assets that have been written off. It is countered by the immense amount of RE "wealth" that has vanished. It is countered by the fact that R/CMBS bonds are valued far less, as are many securitized assets. Those assets "vanishing" is a counter to your inflationary vision, as is most other assets depreciating.


So, in summary, you parrot the same old gold-bug shtick that was parroted back in the early 80s. Why don't you look at stocks from there compared to gold and the dollar? Which one wins? Certainly not gold.

Gold mania is a bubble driven by financial innovation (double leveraged future funds), just like tulip bulbs, tech stocks, and RE.


On Jul 12 05:56 PM Doug wrote:

>
> Things have changed since 2000. Read my reply to American in Paris
> above.
>
> The real point is that inflation is on the horizon because of the
> government spending that is occurring. How is this spending going
> to be accounted for when our government doesn't live within its taxable
> means? Answer: Inflation and/or higher taxes. We're getting both
> in the years to come. But higher taxes doesn't get a politician
> elected (think Mondale here). So inflation is the only viable solution
> and the price of gold will rise with it.
>
> On Jul 12 03:27 AM pier0188 wrote:

A Golden Hedge Against the Dreaded Dollar

Not sure why everybody parrots the "gold is an inflation hedge" hyperbole. Gold's relationship to inflation, M3, the USD Index, is very weak, at best.

The last time gold was at these prices was in the early 1980s and every shoe-shine boy in the street was parroting the same advice. When you see that you know to run away from gold.

What Else Are the Banks Hiding?

Why should the banks consolidate the assets? They sold most of them in securitizations, holding only the equity tranches. The holders of the bonds are the ones taking the risk at this point.

I laugh at the fact that people scream about the credit card trusts, when the banks are only responsible for a small portion, yet make enough in spread to cover that.

Calling the securitizations into account for consolidation and saying that they are fundamental risks of the bank ignores accounting principals and reality. It is misleading and intellectually bankrupt, something which isn't too surprising from this website's contributors recently.