IS Gold Money?

Get my "rocks off" by mentioning what you mentioned a mere 5 minutes ago?

columbiacounty
2 minutes ago
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Member since: Jan 2009
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there's nothing better than belittling people whose opinion you disagree with. that's working for all of us.

Oh good, C0C0 is here to repair human nature.

RS: "Currencies come and go, Gold is still with us."

But NOT as a currency. Anywhere on the face of the planet.

For good reason - it doesn't work.

RF: "the arguments you are making AGAINST gold are the SAME arguments and actually more relevant arguments you can make about the fallacy of currency"

No. Dollars are not a Ponzi scheme. Dollars are just an accounting measure, so that all prices - including the price of gold - can be measured in the same unit.

"in times of economic collapse currency goes into the shitter usually as a loss leader."

No. In fact, in times of economic collapse the gold standard is dropped - see Great Depression - because it is essentially unworkable.

"because their CURRENCY is tied to their political system and it has no value once it is apparent that their is no base to support that type of flawed leadership and economic structure"

No. Because they did not have a currency that worked as an effective price mechanism. Keynes knew this in the 1920's and 30's, and predicted the demise of their economic systems.

so your position seems to again come down to USD vs gold. that has never been the question or issue here, all of your "no's" above essentially are figments of the US economic system. crack open one of your stale eco 101 textbooks and look at examples of currency collapses and then tell me about Ponzi schemes and the intrinsic value of paper currency.

moreover, your last example is particularly entertaining as it validates my point of view. yet, you are using it as an example to support your argument. priceless...currencies have indeed failed, and failed miserably due to flawed socio-economic conditions. and gold was the little train that could when all else failed in those examples. what a maroon.

I'm not confusing anything, RF; unfortunately, 'tis you.

There are 3 issues here:

1) A properly run "fiat currency";
2) An improperly run "fiat currency":
3) Does gold "fix" the problem of an improperly run "fiat currency"?

Throughout history there are examples of properly and improperly run "fiat currencies." The US dollar and British pound are perhaps the best examples of properly run "fiat currencies"; the Swiss franc is another, as is the Japanese yen, as was the German mark in its day.

Examples of improperly run "fiat currencies" include the Argentine peso and most Latin American currencies until recently; most Asian currencies before their collapse in the 1990's. The mark under the Wiemar Republic, Zimbabwe, and a whole host of other improperly run "fiat currencies."

The fundamental difference between a properly and improperly run "fiat currency" is that with the former central banks don't "print" money, which essentially means simply crediting banks' reserve accounts with money that did not exist before. That is NOT what the Fed is doing today. A properly run "fiat currency" adjusts interest rates to a set inflation rate, and lets exchange rates fall where they may.

Now then - is gold, as a "currency," better than a properly run "fiat currency"? The answer throughout history is NO.

It is NO for a number of reasons:

1) A "true" gold standard would have a money supply limited by the amount of gold in existence, which is finite. Therefore, wealth would be limited to the amount of gold there is, and all economic transactions would be zero-sum games. That is, if you make money I have to lose money, because there is only so much gold to go around, and the money supply can't grow.

2) Since there has never been a "true" gold standard, the next "best" thing is to have the currency "backed" by gold. This would allow a fractional reserve system (whereby banks lend out more money than they actually have), which would eliminate the zero-sum-game problem, but it in turn creates a different problem: since by definition there would be more money in circulation than gold existed, if everyone asked for their money in gold at the same time (as happened in the Great Depression, and with Charles DeGaulle in the 1970's) there isn't enough to go around, which reveals the truth: money is not actually backed with gold, because there isn't enough gold.

So the system collapses.

3) The third system, similar to the second one, is where every country has its currency pegged to a certain amount of gold. This produces a fixed exchange-rate system, which, as today's euro, falls apart when economic fundamentals do not coincide with the fixed exchange rate. That is, under today's floating exchange rates, exchange rates, over time, are a function of interest rates and inflation (or just "real interest rates), but under a gold-peg system they would not be, so under a system like this, if the gold-pegged exchange rates did not coincide with economic reality, a parallel, black-market system would develop, reflecting the actual economic (not-gold-pegged) exchange rate, plus a risk premium.

In this system, it would have to be illegal for people to own gold outright, because since gold is what all currencies are pegged to, if those pegs did not reflect economic reality, people WOULD start to use gold (or any other currency) at its economic value, not at its pegged value, and thus the system will fall apart.

That is similar to what happens today in Argentina and Venezuela, where they have "official" exchange rates that bear no resemblance to economic reality: interest rates and inflation. In the case of Argentina and Venezuela they peg their "official" exchange rate to the US dollar; they could just as well do it to gold or the euro or the price of oyster shells, because those "official" rates bear no resemblance to economic reality, so a black market develops.

The last question then becomes, since a "pure" gold standard does not work because of the limited supply of gold and the zero-sum-game result of that standard, does the gold standard provide any discipline over "fiat currencies" that would cause them to be managed better?

The answer is, historically proved, no. Because:

1) There would still be a fractional reserve banking system, so bubbles and crashes could still occur, because the money supply is not actually liked to the gold supply. Google "18th Century Financial Panics" and read about US economic history in the 1800's, under the gold standard.

2) In times of depression, everyone one demand their money in gold, and there isn't enough to go around, so the gold standard has to be suspended.

3) Because a pegged currency does not allow exchange rates to float in response to economic conditions, it is not possible to expand the money supply to offset the decrease in the velocity of money during recessions and depressions. Therefore, they only get worse, and a downward deflationary spiral follows, almost inevitably followed by an upward inflationary boom. See "18th Century Financial Panics" for more details.

That is why the gold standard is routinely dropped during depressions and recessions. Read the difference between the economic recoveries in France (which kept the gold standard) and Britain and the US (which dropped the gold standard) in the Great Depression, for more information.

So, in the end, your clever little quip, "gold was the little train that could when all else failed in those examples," is not even close to being true. If it were then every central bank in the world would be running back to the gold standard, but they're not.

And keep in mind that if we were to return to the gold standard, YOU WOULD NOT BE ALLOWED TO OWN GOLD, because if you did it would allow for the development of a black market that did not reflect the official, gold-pegged prices of currencies.

So your plan would fail there, too.

Well, once again rangersfan is left speechless.

whatever you wanna call it, it went down in value today.

Down in value or down in price?

If gold WERE money, it would be a HIGHLY volatile currency. We would have had massive deflation then inflation then deflation then inflation again, monthly or even DAILY based on the herky-jerky movements of the commodity. It would be highly disruptive to the US economy if the price of ordinary things went up and down by 10% or more as frequently as monthly.

Oh Jason and the Herkey Jerkey, aren't these things best left private.

If gold were money or currency, then ordinary things would be priced in gold. So no, "ordinary things" wouldn't be volatile in dollars.

In any case, people are quite ok with price volatility. Every American is impacted by the price of gasoline or oil, many directly and the balance certainly indirectly.

Apparently the Herkey Jerkey has gotten to me. That's why I always do it with a snug but not too tight helmet.

If gold were money or currency, then ordinary things would be priced in gold. So no, "ordinary things" wouldn't be volatile in _gold_.

I'd say the average consumer is definitely NOT ok with the upward swings in gas prices. The economy shows the strain clearly at the higher levels. Try again.

And you seem to have the tightest helmet. Bar none.

>upward swings

Most swings go both ways.

well stevie, again your logic is turning on itself. you are citing examples of failed currencies as a reason not to own gold.

you keep citing USD as the reason gold holds minimal value though the vast majority of currencies over the ages have indeed failed and in times of complete apocalyptic economic collapse, people who are able turn to gold or other hard commodities have down so routinely to preserve wealth. it has happened throughout history countless times (why don't you try googling currency collapses) and see what comes up.

so, your position is to center your argument around the current currency pillars (USD, british pound, swiss franc) as a proxy argument to why gold has little or no utility as "currency". that wasn't the question and totally misses the point as to its historical value from the beginning of civilized societies and why it will continue to have that same value (with its associated volatility) going forward. you think currencies don't have similar volatility? ask the folks in the middle east whose currency can lose as much as 30% in ONE DAY so the run to the store in the morning to buy goods knowing full well by the afternoon those same goods won't be available without another huge markup.

you see stevie, what you continue to fail to understand is that the vast majority of the world has seen destabilization in their monetary systems time and time again because cash is not only an "accounting measure" but really is a true reflection of the socio-economic framework of that particular country or region. and despite of a couple of successful examples, man has failed miserably in balancing those naturally connected issues. why do you think communist china embraced capitalism as part of their political experiment. same for the Russians - although interestingly the Chinese actually are way ahead of them on this and why putin-lead Russia is taking steps backwards.

maybe when we see world peace (never) and true economic opportunity for all (never) then speculative runs on currency will cease and gold will have much less value and utility as currency. until then, your logic is one dimensional and is indeed very flawed, despite your Wikipedia and eco 101 textbook knowledge.

"you are citing examples of failed currencies as a reason not to own gold."

I did no such thing. You can own gold. You can own oyster shells, you can own apartment buildings, you can own a fleet of taxis. You can own whatever you want. However, it does not make it money, or a good currency.

BUT NOT UNDER THE GOLD STANDARD - WHEN YOU CAN'T OWN GOLD.

"totally misses the point as to its historical value from the beginning of civilized societies"

Um, bleeding used to have value from the beginning of civilized societies to cure illnesses; that doesn't mean that it worked.

"you think currencies don't have similar volatility?"

Under the gold standard, YOU CAN'T OWN GOLD.

"what you continue to fail to understand is that the vast majority of the world has seen destabilization in their monetary systems time and time"

That is an improperly run currency system - GOLD DOES NOT FIX THAT PROBLEM.

"gold will have much less value and utility as currency"

GOLD HAS NO VALUE OR UTILITY AS A CURRENCY. It is not a currency anywhere on the face of the earth. Nowhere.

Discussing this with you is like discussing it with a block of stone.

To quote a phrase, "your logic is one dimensional and is indeed very flawed." It's not MY "econ 101 textbook knowledge"; it is the universally held opinion of every economists and central banker in the world.

If gold was a good currency, then they'd switch to it. It's not. IT DOESN'T WORK. It never did.

Read history, silly-billy.

Just read history.

"How High Will Gold Go? Try 'Infinity' The former Congressman Ron Paul, an outspoken believer in gold, predicted on CNBC that "the dollar will collapse totally" and gold prices "will go to infinity."..."

http://www.cnbc.com/id/100825680

Yeah, I saw that.

Very likely it is.

But he'll have to get over the same problems that RF can't get over:

1) Gold is not a currency anywhere on the face of the earth;
2) If you have a "true" gold standard there can be no fractional-reserve banking, so our economy falls apart as business becomes a zero-sum game;
3) If you have a currency pegged to gold then it has to be illegal to own gold;
4) If all currencies are pegged to gold then it's a fixed exchange-rate system, which falls apart over time.
5) The worse the economy gets - historically - the more likely it will be that any gold standard would be dropped (Civil War, WWI, Great Depression, WWII, etc.) because of its inherent limitations.
6) You can't eat gold.

stevie, dont i recall you railing about qe by the fed too?

What traded down today?

"dont i recall you railing about qe by the fed too?"

Yes I did, and I was wrong.

sound an alarm, please sound an alarm!! stevie admits he was wrong!!!! alas, he did ever so reluctantly as his "logic" (once again) was turning on itself......you couldn't have had it both ways so nice preemptive mea culpa.....

http://www.youtube.com/watch?v=WkqgDoo_eZE

I have a question for the crowd. I know from my teen that they look down on the incessant FB YouTube/video posters. How many here actually click on rs's? There's almost never any response. Why would he bother? Bored? Bloomberg terminal not providing the requisite level of excitement? Finished daily calculations of food prices at fairway and wants to ignore the pain?

I actually got a kick out of this one.

Thanks for the YouTube link RS. Broke some of the monotony in this gold thread, and its great to see that rangersfan appreciated it. Maybe if Stevejhx appreciates it too they can find common ground. Yt has the power to bring people on both sides of this difficult gold argument together.

good night sweet heart well its time to go

I'm not sure the Fed did the right thing yesterday, either, about announcing plans to withdraw QE, with inflation at 1% and unemployment rising.

And gold falling 8%.

I'm waiting for Riversider to admit that in all of his years of clamoring about inflation, it has not happened. In fact, we're now headed into deflation.

I, too, once believed the inflation story, but I was wrong. I think the Fed is wrong now, but only time will tell.

And I won't ever believe the gold story.

Wholesale prices went up 0.5% last year annualized that and it comes out to 6% inflation. Sure sounds like inflation to me.

Oh wait take out energy and food prices and it goes down to .01% increase. So yeah according to the government there is no inflation.

CONSUMER inflation, including EVERYTHING, was up 1.4 % YOY in May, idiot. And that has been trending down. Food & Energy CPI was actually lower than overall you nut.

Okay Jason the retard show us all your "Food and Energy CPI" numbers and statistics.

And another thing you retard where are you quoting your "food and energy CPI" numbers from?

First, renter, you don't pay wholesale prices.

Second, nothing is geared to the "core" inflation rate - it is simply more accurate in the medium-term than the consumer price index, because it's less volatile. Anything that's pegged to the CPI is not pegged to the "core" rate. It is just used for setting policy.

The Fed usually uses the PCE (personal consumption expenditures) rate for targeting inflation. That rate is currently showing deflation:

http://www.forbes.com/sites/afontevecchia/2013/04/29/the-feds-favorite-measure-of-inflation-continues-to-fall-qe-is-here-to-stay/

which is probably why the stock, bond, and gold markets are all reacting savagely to yesterday's announcement on tapering QE. They seem to be ignoring what their own data show: that we are entering into a dangerous phase of deflation or at least disinflation, but they're tightening monetary policy nonetheless.

Maybe they know something the markets don't - but I doubt it.

how much lower is cpi from reduced enrgy costs ? IMO, enrgy is down because of greater amounts not reduced demand. I know RE, Health care and food all cost more now.

You are an idiot joey. A complete and total idiot. Here is one of hundreds of news stories from TWO DAYS AGO saying overall inflation was up 1.7% but core up only 1.4%. There is this thing called Google, you know.

"Inflation may be stabilizing, data suggest
Inflation is showing signs of stabilizing. The Labor Department says the consumer price index edged 0.1% higher last month, after two months of decline. The increase suggests that a worrisome downward trend in core inflation could be coming to an end. Reuters (6/18) "

http://www.reuters.com/article/2013/06/18/us-usa-economy-prices-idUSBRE95H0HZ20130618

The ultimate source is this, shit for brains:

"CPI for all items rises 0.1% in May; shelter rises, gasoline flat, food declines"

http://www.bls.gov/news.release/cpi.nr0.htm

The difference between normal ten year US Treasuries and 10-year tips is what the bond market says inflation is expected to be going forward for ten years.

"June 19, 2013...The yield gap between 10-year Treasuries and Treasury Inflation Protected Securities, a gauge of traders’ expectations for consumer prices over the life of the debt that’s called the 10-year break-even rate, reached a 17-month low this month. It touched 2 percentage points on June 13, the lowest level since January 2012, compared with an average of 2.38 percentage points over the previous 12 months..."

http://www.businessweek.com/news/2013-06-19/treasuries-decline-after-fed-says-risk-to-economy-has-decreased

Shut the F*#) up, idiot.

"Commodities From Gold to Oil Slump on Fed Outlook, China Crunch

Commodities tumbled by the most since July as everything from gold to crude oil and copper dropped on concern that the Federal Reserve may phase out stimulus and as China’s cash crunch worsened."

Gold is down 6% so far today, silver down 8%. TODAY. What CURRENCY moves up and down like that so much (mostly down lately)? No ACTUAL currency. What would have cost you an once of cold a year ago or so now costs you 1.5 ounces. But Gold is an inflation hedge. yeah right.

quote was from http://www.bloomberg.com/news/2013-06-20/commodities-from-gold-to-oil-slump-on-fed-outlook-china-crunch.html

Well Ranger & Riversider & Renter, I hope you're willing to give up your theory on gold today. Dow is down 2.42%, or 366 points. Gold is down $94, or 6.84%.

In one day. If gold really were that magical money you're talking about, it should be soaring right now. Peter Schiff & Ron Paul say it's going to skyrocket, have a "vicious" rally.

What happened?

"marco_m... I know RE, Health care and food all cost more now."

Shit christ almighty...WRONG.

"CPI for all items rises 0.1% in May; shelter rises, gasoline flat, food declines"

http://www.bls.gov/news.release/cpi.nr0.htm

"Medical Costs Register First Decline Since 1970s"

http://blogs.wsj.com/economics/2013/06/18/medical-costs-register-first-decline-since-1970s/?mod=WSJ_hps_MIDDLENexttoWhatsNewsThird

"Dollar Surges as Bernanke Sparks Carry Trade Plunge...

The dollar surged against counterparts worldwide ranging from Australia’s currency to Turkey’s lira as the Federal Reserve’s signal it is getting closer to reducing monetary stimulus pushed volatility to the highest in a year and spurred losses in carry trades...."

The dollar UP, gold DOWN....HMMMM....

http://www.bloomberg.com/news/2013-06-19/dollar-remains-higher-before-u-s-housing-manufacturing-reports.html

So ranger, I'm curious, how do you feel about your little quip that "and gold was the little train that could when all else failed," since what is failing the most right now is that little train?

I told you - no one wants gold during deflation. It's as good as any other hard asset during inflation (not very, that is), but NO ONE wants it during deflation.

Are you willing to admit you were wrong yet?

Or are you buying on the dip - because it's still dipping....

renter, pls refrain from calling Jason a retard - its very unbecoming. mentally challenged is a more acceptable term for him these days.....

I think that's what occurs when posters show no respect. It comes back at them.

I think gold is no longer the trusted asset class it has been. because of new products you can find more efficient ways to hedge inflation and even earn income. I say it goes lower....much lower

Gold is not a hedge against the CPI so much as a loss in faith in holding paper currency. If and/when the dollar resumes depreciating against physical commodities(gold in particular) demand for the metal will pick up. What we're seeing now in Gold is a correction. Also all these new fangled products come with counter-party risk.

Long term we now what the Fed has done is monetize the debt. Right now banks are not circulating all those reserves due to restrictions on their balance sheet. I don't see that holding true indefinitely. Gold will see another day. It always has, and always will.

bing freeking bong!

and btw stevie, biggest issue right now for the USD and the us economy IS deflation - agree there. doesn't change the historical and present day value of gold or its inherent value. right now, all asset classes deflating (at least for the past few days) which is not too dissimilar to 2008. meaningless in the grand scheme of things and even more so concerning the utility of gold. means absolutely nothing. certainly wasn't trying to call any short term movements and consistently said rather hold USD but that might change shortly. Bernanke certainly crapped his pants....

I look at things form the trading perspective and not so much the academic side. Another killer for gold is that the true consumers or it, the Indians, wont be buying as much because the rupee is getting crushed lately.

What are the RE bulls saying today after the last 2 days of the spanking with rates higher and going higher ?
fundamentals back in the market, repricing with rates higher ? Everything sold off but nothing was bought not stocks not MBS not treasuries ! A mass destruction of wealth! Where did all the $ go?

Talk amongst yourselves

its financial withdrawal...like waking up with a nasty hangover after a 2 year long party

Gold has no "intrinsic value" - no commodity does. BTW, where's Matson?

What's the intrinsic value of fiat currency? Zero

Riversider: "If and/when the dollar resumes depreciating against physical commodities(gold in particular) demand for the metal will pick up."

OMG that's a laugh. Basically it means that if commodities cost less (gold in particular!) people will buy more of them.

Um, duh.

Commodities don't "depreciate" against the dollar. Commodities are priced in dollars, like houses and cars.

"Long term we now what the Fed has done is monetize the debt."

No we know no such thing. The Fed has not "monetized the debt." The debt was always in money. There is no such thing as "monetizing the debt."

"What's the intrinsic value of fiat currency? Zero"

If you mean the value of the linen it's printed on, not much. That's the whole point. Money doesn't require an "intrinsic value" to be worth something. It's a price setting mechanism. The fact that is or is not "worth" something in and of itself means nothing; this is a concept we've known quite well for nearly a hundred years.

Ranger: "doesn't change the historical and present day value of gold or its inherent value."

You're right. As a currency, it didn't have one, & it didn't work. And you've shown no example in history where it did.

Because it didn't.

Probably the best simple explanation of how the Fed looks at inflation, ever:

http://www.marketwatch.com/story/bernanke-doesnt-fear-deflation-but-should-2013-06-21?pagenumber=1

Renter should take a look.

stevejhx -- long time, how u been??not sure how u can say there is no such thing as monetizing the debt. Sounds like a bernanke line akin to, "pay no mention to the man behind the curtain" --

http://www.kc.frb.org/speechbio/hoenigpdf/Washington.DC.Fiscal.02.16.10.pdf

Hoenig (page 7) in Feb 2010 -- Monetize: One option for dealing with a fiscal imbalance is for the central bank to succumb to political pressure and monetize the debt. As deficits and debt levels within a country rise relative to national income, interest rates tend to rise as well. In this instance the central bank is often pressured to keep rates low and encouraged or required to assist the markets in facilitating the government's funding needs. If the central bank succumbs to this pressure, its balance sheet will expand, bank reserves will grow, and inevitably the money supply will increase. This process often appears benign at first, but if it goes on unchecked, the outcome is almost always higher levels of inflation and ultimately a loss of confidence in the value of the currency and the economy. Walter
Bagehot’s famous dictum about banks holds equally true for governments—once their soundness is questioned, it istoo late. At that moment, governments and their citizens are forced to make
sizeable, painful fiscal adjustments.

Jason the problem with your way of thinking is you act like a robot. You believe 100% what the newspaper headlines state and copy and paste it to prove your point. Hey look everyone the Daily News or Reuters News headline says CPI is only .1% so therefore we have no inflation. Let me copy and paste it to prove this all to you. . The Labor dept says we no inflation and you spit it out like it's coming from the prophet Moses.

Steve as far as deflation you seem to believe it is the worse thing on the face of the earth and that if the US got into deflationary episode it would mean the end of the US economy. Quite frankly I would welcome deflation. Sure like to see a drop in health care costs, gasoline and oil, a drop in public transportation would be nice too.
In Brazil there are riots in the streets on high taxes and runaway inflation. No where in our history books has there been riots on the streets about deflation.Could you imagine people protesting that they don't like the price decreasing for healthcare or education.Gee hasn't the cell phone industry experience deflation over the last 20 years and they continue to do well. Why the fed made a ceiling on 2% CPI is beyond me. I can't even imagine what 2% CPI really is in terms of real inflation.2% CPI really means 10% real inflation.

prob with deflation is it also brings a drop in asset prices, that when combined with large debt burdens, basically destroys those that are levered to much. I guess the response to that is, 'well they deserve it, or they took the risk'...very true, but deflation trickles down and in the end, those people that may be enjoying lower gas prices and lower healthcare costs, may also be out of a job soon.

I'm well, UD, thanks! Off of Facebook, though - inline ads got to me, like filtering spam from an inbox.

Hoenig has been wrong about everything. "Monetize" means "convert into currency." The debt is in currency already, represented by treasury bonds, denominated in dollars. What the Fed is doing is increasing the money supply by buying those bonds. It doesn't change the bonds, or the debt. All it does is increase the money supply.

"As deficits and debt levels within a country rise relative to national income, interest rates tend to rise as well."

There is no evidence of that. Japan has the highest debt-to-GDP ratio in the world, and even before the current money-supply expansion, it had the lowest interest rates.

"its balance sheet will expand, bank reserves will grow, and inevitably the money supply will increase."

That's the whole point of it.

"This process often appears benign at first, but if it goes on unchecked, the outcome is almost always higher levels of inflation and ultimately a loss of confidence in the value of the currency and the economy."

There is no question that if a central bank does this FOREVER it will lead to inflation. But when the velocity of money is at zero, and inflation is at zero, and interest rates are at zero, the whole point is precisely to cause inflation.

The problem with deflation is worse than that: it causes a downward spiral that's hard to stop, because people think, "Why should I buy it today when it will be cheaper tomorrow?"

Renterjoey: "No where in our history books has there been riots on the streets about deflation."

OMG, how ignorant. Google "Hoovervilles" and "Depression Soup Kitchens," and read this article - "The Tumultuous 19th Century" - then get back to me with your apology.

http://www.advisorone.com/2010/01/01/the-tumultuous-19th-century

Focus on the part of "activating the militias."

renterjoey the problem with your way of thinking is you act like an idiot conspiracy theorist. EVERYONE in the global bond market is fooled, 99% of economist are fooled, and only dumb shits like joey who can't even use Google know the REAL truth.

"No where in our history books has there been riots on the streets about deflation."

You are a fucking idiot. The US had a lot of revolutionary talk and anarchist terrorism and plenty of deadly riots during the great deflationary period in the late 19th century. Try reading HIGH SCHOOL HISTORY books shit for brains.

http://en.wikipedia.org/wiki/The_Great_Deflation

http://en.wikipedia.org/wiki/List_of_incidents_of_civil_unrest_in_the_United_States#19th_century

http://en.wikipedia.org/wiki/Anarchism_in_the_United_States

okay Jason tell us in your own words (without copying and pasting) why deflation is definitely linked to and is the true cause of depression.

Please Stevejhx no help from you let this retard reply on his own.

"EVERYONE in the global bond market is fooled, 99% of economist are fooled, and only dumb shits like joey who can't even use Google know the REAL truth."

99% of the economists are fooled. What does that even mean?

It might mean that the 1% (if even that many) tend to be "nostalgists, survivalists and conspiracy theorists", as http://rationalwiki.org/wiki/Gold_standard_(economics) puts it.

"99% of the economists are fooled. What does that even mean?"

I am being sarcastic, moron. The WSJ, Bloomberg, the FT and others survey economists. They ALL think inflation will remain low for the foreseeable future, here and in all advanced economies. And the bond market across the whole rich world says inflation is now, and is expected to be low for the next ten years. And yet you are somehow gifted with secret knowledge that none of these people have.

"okay Jason tell us in your own words (without copying and pasting) why deflation is definitely linked to and is the true cause of depression."

This is not some test, dumb shit. Why re-write what's already been written and freely available from experts?

Not that they'd have to be. The other weekend I found out that a friend carries around four or five little gold coins in his money clip. He's otherwise intelligent, a physician, so I passed it off that they were just pretty objects that're fun to look at and play with. I didn't want to suggest that I thought he thought they were to delay his death come the end of the world. That'd be like suggesting he believed in astrology.

"And the bond market across the whole rich world says inflation is now, and is expected to be low for the next ten years"

Retard

"Why re-write what's already been written and freely available from experts? "

Yup leave it to the experts. Let them do all the thinking for you. This is why you are a robot

"The other weekend I found out that a friend carries around four or five little gold coins in his money clip."

Maybe he's Greek and wants a few spare ones to be placed in his mouth when he dies, to pay the toll to cross the River Styx.

Or the Tappan Zee.

HAHAHAHAHAHAHAHA!

Other than crossing the Styx, gold has no special values, and it is no better than - and in fact not as good as - "fiat currencies." Anybody who believes otherwise is just fooling himself.

Or hasn't read the economic history of the western world.

economists are always good...matter of fcat theyve accurately predicted 11 of the last 10 recessions.

marco, my Tappan Zee joke was better.

what fiat currency has retained ANY sort of value as long as gold? just curious.....

and when did you change ur mind on qe? you were railing about the "foolishness" of that exercise for many months.....

renter, dont bother with jason. he isn't even lucid when he is fully medicated.....

Hey Steve why aren't still making your know it all comments about the housing and rental market in Manhattan. For the past several years you you use to fill up all the threads with your predictions that the rental and Manhattan condo/co-op market will continue to go down and down and down and down and down. You are not doing that anymore.
I wonder why.
I guess you got tired about making wrong predictions over and over and over again. Time to move onto Best something totally unrelated like "is gold money?"

"I guess you got tired about making wrong predictions over and over and over again. "

Like your predictions that gold would go up and inflation would spiral out of control?

Looks like Jason the Retard's anger problem has flared up.

"what fiat currency has retained ANY sort of value as long as gold?"

That question doesn't even make sense, as gold is valued in $$$, which is a "fiat currency."

"when did you change ur mind on qe?"

When the inflation predictions didn't come true.

"why aren't still making your know it all comments about the housing and rental market in Manhattan."

Because I live in Ft. Lauderdale now.

"I guess you got tired about making wrong predictions over and over and over again."

No. My predictions were relatively accurate. Manhattan prices still remain about 20% below peak, and in nominal terms have not budged since 2006, I think. Adjusted for inflation they're down ~30%; with increasing mortgage rates, I don't know what will happen.

They will most likely stay stagnant for years to come, as incomes catch up to prices.

Dudes, what's happening to gold? If the stock market falls shouldn't gold rise as a "safe haven"?

Or maybe gold doesn't have the properties that you think it does?

stevie, take your nose out of your eco 101 textbooks from the 80's. asset classes deflating across the board is not new news except to rusty relics of yesteryear.......wait for the next wave of articles on this so you have some additional new source data - or in your case, bs reference posts.

but steve why should the stock market fall. After all according to you everything is fine the economy is doing wonderful.
Could it have something to do with interest rates going up? You would think there would be other entities out there beside the Fed buying treasuries. Or maybe not.

"asset classes deflating across the board is not new news except to rusty relics of yesteryear......."

Gold is not a "relic of yesteryear"?

FYI Econ textbooks say the same thing now as they have since the 1930's.

"After all according to you everything is fine the economy is doing wonderful."

I never said any such thing. In fact I said that I thought the Fed might have made a mistake as inflation is low & falling.

There have always been more purchasers of Treasurys than the Fed. In fact, the Fed can only purchase Treasurys on the secondary market, so all new issues are purchased by primary dealers.

But that still doesn't answer my question about gold: people should be piling into gold right now according to your theory; it's not happening.

Please enlighten.

you are the relic of yesteryear, stevie, not gold.

if you think gold down in this environment somehow undermines my "theory" on its value, then you didnt read any of my posts.

and you cannot be enlightened, you are part of the scrapheap of yesteryear (rusty relic referenc yet again).

you are only wrong when you admit your wrong - too far gone.......keep posting me when gold dips another .6% to reaffirm your faulty logic.

"There have always been more purchasers of Treasurys than the Fed. In fact, the Fed can only purchase Treasurys on the secondary market, so all new issues are purchased by primary dealers."

You may want to check your facts are that one Steve.

"I said that I thought the Fed might have made a mistake as inflation is low & falling."

Oh so you think inflation is low and falling(lol). So whats wrong with low inflation. Who gave the Fed the right to determine that we should have at least 2 % inflation which would reduce our buying power 24% over 10 years. Whats' wrong with 0% percent inflation. I guess if we had minus .01% inflation that would be like an atomic bomb hitting our economy.

"You may want to check your facts are that one Steve."

Steve is correct. You, as usual, are an idiot. The Fed cannot buy USTs directly from the Treasuries, they buy on the secondary market.

"Whats' wrong with 0% percent inflation. I guess if we had minus .01% inflation that would be like an atomic bomb hitting our economy."

You keep claiming inflation is REALLY a lot higher than the official figures, with zero proof, and alternately saying its below 2% but should be lower. Its idiotic and stupid.

The reason deflation is bad is because if prices keep falling, consumers hold off purchases waiting for further price drops (lowers Consumption or "C"), real interest rates turn low or negative, making holding on to cash a better option than investing, and businesses do not want to invest because their revenues and profits are falling along with lower prices (lowers Investment or "I"), so GDP is lower all else equal, because GDP = C+1+G+ net exports. Its super simple, basic HIGH SCHOOL econ, which you obviously failed.

But that still doesn't answer my question about gold: people should be piling into gold right now according to your theory; it's not happening.
Probably due to weak holders once they get flushed it should go back up again and if in fact we are heading in a deflationary period then there's going to be more printing of money a lot more printing throughout the global market. Interesting times for sure.

Renter, you don't know what you're talking about. Really, a degree in home economics won't help you.

First, as I said, the Fed cannot buy treasurys directly, only through the secondary market. Therefore, by definition there are more buyers of treasurys than the Fed, because the Fed does not own all treasurys.

Long-term interest rates are the average of expectations of short-term interest rates, and not related to the Fed's buying treasurys. The money supply and interest rates are not the same thing. The purpose of the Fed's QE program is to increase the money supply, not to lower interest rates, and it doesn't lower interest rates. What lowers interest rates is how people think that the Fed will manage short-term interest rates in the future.

Jason has reexplained what I've already explained about inflation a million times. Congress gave the Fed the right to manage the value of money. They do that by adjusting the interest rates (among other things). 2% inflation is considered manageable to avoid deflation, which is what Japan has been fighting for a decade, since they set their inflation rate at 1%. Deflation is far worse than inflation because inflation is easy to control - raise interest rates and constrict the money supply - but deflation is not, because it takes a lot to convince people to start spending if they think that prices are going to fall in the future.

"Probably due to weak holders once they get flushed"

But in your theory there shouldn't be any "weak holders" given the current economic situation, right?

stevie, all this is not that hard to figure out. first off, despite your one-dimensional thought process, you know that i never espoused a short term view on the direction of gold. in fact, i said i would rather be a holder of USD right now and still have that same view today but that could change shortly as the market gets over bernanke crapping his pants.

gld (as a short term bet) fell out of favor simply because it was a crowded trade. and when the hedgies an their wanna be brethren decided to exit, they did en masse. another sure sign it was time to exit came when the crazies from fox et al become paid spokepersons for gold "exchanges" and third party vendors touting it for the doomsday prepper crowd. but, i digress.

ultimately, gold will come back and come back big - not this year but probably sooner than you think. and it will enivitably fall big again too. but its not going anywhere. and it will outlive most of your precious fiat currencies. next.......

"people should be piling into gold right now according to your theory; it's not happening."

Are you blind? Steve and I have been arguing for 600 posts now that people should NOT be investing in gold. Maybe 5% of their TOTAL portfolio should be in a BASKET of commodities, including gold, but what crack are you smoking?

"the purpose of the Fed's QE program is to increase the money supply, not to lower interest rates,"
Steve I have no idea have many economic courses you took in college but do yourself a favor and don't try to get a job in in that field for no one will hire you.

Let me dumbsplain it for you, Joey. Think of all the threads here where people say "buy now or be priced out forever!" There is an optimal level of price increases where inflation does not cause panic or severe hardship, but where its ENOUGH to prod people to buy. It works for housing, and it works for other things too.

Well renter, if you don't understand what the purpose of QE is, then you're not going to get far.

The Fed is buying treasurys, but also agency bonds. The purpose is to increase the money supply, and Bernake said as much in his press conference last week, when he said that interest rates will remain low for years to come.

Proof of this is that long-term interest rates just rose by 1% in the last week, and the Fed has not at all altered its plans for buying Treasurys or agency bonds. It said it MIGHT start to reduce its purchases, but it hasn't. The ECB said the same thing - they said they MIGHT buy sovereign bonds on the secondary market. They didn't, but interest rates fell.

Buying bonds may or may not affect interest rates; it depends on how many other people want to buy bonds at the same time. If bond traders think that interest rates are likely to rise in the future, they will be less inclined to buy bonds, which will lower the demand and raise interest rates. Obviously they have already started to do that, even though the Fed is still buying the same amount of bonds.

Once again, your theory flies in the face of fact.

"ultimately, gold will come back and come back big"

In the long run, we're all dead.

There's nothing wrong in trading in gold, Jason, as long as you know what it is: a commodity whose price goes up and down. It is not magical, it is not money, and its price cannot be determined based on any of the normal rules for pricing, such as discounted cash flows, etc.

It exists, it makes nice jewelry.

Jason could get a gold plated retard helmet.

Steve keep telling yourself and others that the QE money printing program is really not intended to keep interest rates low.

If QE "money printing" was to keep rates low, then how come it's still going on but rates went up?

If the Fed buys bonds it MAY decrease the interest rate, but not necessarily. It will depend on what other bond traders are doing. The primary function of QE is to increase the money supply, which again MAY decrease the interest rate, but not necessarily.

The primary purpose of increasing the money supply is to offset the decrease in velocity. That MAY work, but it may not.

The Fed does NOT directly control interest rates. It can influence interest rates, notably short-term rates, but the longer the time frame, the less effect the Fed has. Its one weapon is that it can create all the money it wants, so if it makes up its mind no one can stop it.

But still, as you can see in recent action, the Fed does not control what the bond market does. It can only influence it.

The GOAL if QE is to lower long term rates, true, but the actual direction of interest rates has not moved lock step with QE. In fact, interest rates on LT debt DECLINED BOTH when QE1 ENDED and again when QE2 ENDED.

It is ALSO to prod some inflation...see my "buy now..." comment above.

No Steve you are wrong. The primary purpose of the QE program is to keep interest rates low to stimulated the economy.

If QE "money printing" was to keep rates low, then how come it's still going on but rates went up?
Good question grasshopper now why don't you give us your thoughts on that one.