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Originally posted by hatless:

There were opportunists, I have read, during the blitz. A bombed jewellers might be hard to walk past, though a surprising number of passers by would actually prefer to stand guard.

I don’t see rioting and looting as a favoured option for many people that I know were there to be a new crisis.

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Originally posted by Eutychus:

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Originally posted by mark_in_manchester:
Children died, the days grew cold, a piece of bread could buy a bag of gold.

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Wrong thread to point this out on, I know, but that has long struck me as one of the worst ever examples of twisting a line to get a rhyme - surely it should be the other way round, gold buying bread? - besides promoting Rapture™ theology.

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Originally posted by Dafyd:
Inflation hurts people who have lots of liquid assets - the people with money under the mattress or in heavily liquid savings accounts.

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Originally posted by Russ:
Inflation primarily hurts the elderly. Those who've paid into some form of pension fund all their working life and are now in their retirement essentially living off the capital they've accumulated.

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Inflation breaks the spirit of the promise inherent in the idea of a pension while sticking to the letter.

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Inflation is a stealth tax on savers. Governments are borrowers rather than lenders, so by your logic it's in their self-interest to maintain the fiction that a little inflation is a good thing...

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Originally posted by hatless:
I’m saying that the real power is in people, because we are the wealth creators. And that we are not a bunch of violent crazies just waiting to be triggered into a Hollywood apocalypse, but in crisis as in ordinary times, we are largely well meaning, considerate, cautious, helpful people. I think this is good economics and good theology.

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Originally posted by Marvin the Martian:


My job is to analyse income forecasts. That's a job and a couple of decades worth of acquired skills that will literally not even exist in your scenario. What will I have to offer in return for food that will be of any value to the ones who can give it to me?

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Originally posted by Russ:
The numbers economists want to see might show rising employment with rising production with zero inflation. So that there's more wealth produced without anyone being the poorer for it.

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Originally posted by mr cheesy:
Inflation primarily impacts those on fixed incomes - which might include state pensioners, but as far as I know that is inflation linked. Private pensions are linked to changes in value in the markets into which they're invested, which is not directly linked to inflation.

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Let us start out with a world of publicly-known technology and constant returns to scale in everything. People happily make things and trade them. And everything sells at its resource cost.

One of the things people make is little disks of gold, usually decorated with pictures of bearded men on one side and allegorical female figures on the other, with lettering saying things like: "Fecund Augustae" or "Concordia Militum" or "Fides Exercituum" on them. These little gold disks trade -- like everything else -- at their cost of production: the cost of digging the ore out of the ground, extracting the metal from the ore, and stamping the disk into the right shape.

<snip>

It is simply not the case that we can cheaply and easily buy things with money because it is valuable. It is, instead, the case that money is valuable because we can cheaply and easily buy things with it.

One way into the tangle of understanding why it is wrong is to ask each of us why we are happy accepting money in exchange when we sell useful commodities. Hint: it's not because we are looking forward to going down to the bank, exchanging our bank notes for the little disks of gold usually decorated with pictures of bearded men on one side and allegorical female figures on the other with lettering saying things like "Fecund Augustae" or "Concordia Militum" or "Fides Exercituum" on them, taking our little disks home, and feeling happy looking at them.

That's not why we accept money.

We accept money because if we don't have any money we have to buy commodities with other commodities, and when we do so we are unlikely to receive the cost of production for what we sell. Have you ever tried to buy a latte at Peets with a copy of Ludwig von Mises's Money and Credit? It does not go well.

The fact is that your wealth is only worth its cost of production if you are liquid -- if you can wait to sell until somebody willing to pay full cost of production comes along, which is not every minute. The use-value of money is that it allows you to time your other transactions so that you can realize the full exchange value of what you sell, rather than having to sell it at a discount.

Thus there is no paradox: no sense in which the existence of fiat money creates a situation in which society must necessarily think that it is richer than it is, with claims to total wealth valued at more than the value of total wealth itself. You think -- correctly -- that your fiat money has value, and that value is just equal to the discount from its cost of production that your other wealth incurs because it is illiquid. But what if the government prints more fiat money than the illiquidity gap in your other wealth? Well, then people will say: "I don't need to hold all this extra money. I would be liquid enough with less." Everybody will try to run down their money balances, and so the price level will rise until the real money stock is just what people think covers the illiquidity gap between their other wealth and its cost of production.

What von Mises misses completely is that the size of this illiquidity gap can and does change suddenly and drastically -- and it is the business of the central bank and of the government to alter the quantity of money to keep such changes from disrupting the real economy.

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Originally posted by Karl: Liberal Backslider:
Yes, this last point is one reason why the baby boomers are now so comfortable. They bought in the 70s for next to nowt and now own properties worth hundreds of thousands. But more significantly, by the 90s the mortgage repayments were tiny in real terms, and in many cases early repayment was easy because what had been a massive capital loan in 1975 was now a couple of thousand or so. Then their parents died, and they sold their houses for a hundred grand, paid off their own mortgages, and ran to the bank with the other 90 odd grand.

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Originally posted by Marvin the Martian:

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Originally posted by hatless:
I’m saying that the real power is in people, because we are the wealth creators. And that we are not a bunch of violent crazies just waiting to be triggered into a Hollywood apocalypse, but in crisis as in ordinary times, we are largely well meaning, considerate, cautious, helpful people. I think this is good economics and good theology.

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Your scenario was one where there is no longer any such thing as money. Where the only tradable commodities anyone has are what they already own (a necessarily finite resource unless they are one of the very few who can generate new resources) or what they can do. How many people are going to be able to provide enough goods or services to someone who owns food that the food owner will give them a daily supply in return? Not many - not least because the food owners will only be able to pay out a certain amount of food before they no longer have enough for themselves. So what will everyone else do? Quietly starve or take matters into their own hands and steal what they need?

My job is to analyse income forecasts. That's a job and a couple of decades worth of acquired skills that will literally not even exist in your scenario. What will I have to offer in return for food that will be of any value to the ones who can give it to me?

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Originally posted by mr cheesy:
I'm sorry to press this point, but it is important.

Of course, due to historic inflation everything which cost £10,000 in 1975 is now worth £100,000 in today's money. This is a historic inflation calculator

That's not the issue in-and-of-itself. The problem is not that the value of money has changed but that some assets have wildly increased in value far beyond inflation.

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Originally posted by Crœsos:
Given that one of the big drivers of inflation is increased wages you're proposing an interesting scenario. One where production rises (either through increased productivity per worker or increased number of workers), but worker wages remain stagnant. Working harder or more efficiently won't increase wages, because that would inflate labor costs. Since wages are flat it's a bit of an open question as to who is going to buy the marginal increase of the "rising production". A small, neo-feudal ownership class, perhaps? Most of the increased production you posit would have to be channeled into goods or services directly consumed by this ownership class, both to prevent inflation and because they're the only ones with additional income as a result of the production increase.

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Originally posted by Crœsos:
I think it's more accurate to say that some assets have inflated in value well beyond the average rate of inflation, which is always going to be the case with averages.

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Originally posted by Crœsos:
Given that one of the big drivers of inflation is increased wages you're proposing an interesting scenario.

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Originally posted by hatless:
In a world of angelic beings we would all work unpaid in service of human need, making fine food, deep therapies, wonderful films, and leading tours of natural wonders. Work would be it’s own reward.

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Originally posted by Dafyd:
I believe that other schools of economics don't necessarily agree that wage increases necessarily lead to higher inflation when accompanied by higher production.

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Originally posted by mr cheesy:

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Originally posted by Karl: Liberal Backslider:
Yes, this last point is one reason why the baby boomers are now so comfortable. They bought in the 70s for next to nowt and now own properties worth hundreds of thousands. But more significantly, by the 90s the mortgage repayments were tiny in real terms, and in many cases early repayment was easy because what had been a massive capital loan in 1975 was now a couple of thousand or so. Then their parents died, and they sold their houses for a hundred grand, paid off their own mortgages, and ran to the bank with the other 90 odd grand.

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I'm sorry to press this point, but it is important.

Of course, due to historic inflation everything which cost £10,000 in 1975 is now worth £100,000 in today's money. This is a historic inflation calculator

That's not the issue in-and-of-itself. The problem is not that the value of money has changed but that some assets have wildly increased in value far beyond inflation.

So a house bought in 1975 for £10,000 being worth today £600,000 or more.

If inflation happens to everyone, then nobody benefits. The problems occur when there are market bubbles and where some benefit wildly more than others.

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Originally posted by mark_in_manchester:
I see what you mean (reply to Marvin) - but at the same time I remind myself, on the very odd occasion I enter the Arndale (shopping centre), that although working in a teenage girls' clothes shop (the music! the conversation! the monotony!) is my idea of capital H Hell, not many working in there would want to swap for my job - with which I'm very content.

Also, I don't remember the miners being that excited about retraining opportunities in 1984.

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Originally posted by Marvin the Martian:

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Originally posted by hatless:
In a world of angelic beings we would all work unpaid in service of human need, making fine food, deep therapies, wonderful films, and leading tours of natural wonders. Work would be it’s own reward.

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That's as maybe, but we can't all be doing enjoyable jobs like that. Someone still needs to empty the bins, look after the sewers, go down the mines, and do all the other nasty/dirty/dangerous jobs that even in a perfect society of angelic human beings would have to be done. Humanity being what it is I'm sure there would be some who would find sufficient enjoyment or satisfaction in such work to freely choose to do it for no other reward, but would they be enough? I doubt it.

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Originally posted by Karl: Liberal Backslider:
No, because they knew damned well there were no jobs at the end of those retraining opportunities.

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Originally posted by Marvin the Martian:
That's as maybe, but we can't all be doing enjoyable jobs like that. Someone still needs to empty the bins, look after the sewers, go down the mines, and do all the other nasty/dirty/dangerous jobs that even in a perfect society of angelic human beings would have to be done. Humanity being what it is I'm sure there would be some who would find sufficient enjoyment or satisfaction in such work to freely choose to do it for no other reward, but would they be enough? I doubt it.

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Originally posted by Dafyd:

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Originally posted by Crœsos:
Given that one of the big drivers of inflation is increased wages you're proposing an interesting scenario.

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Certainly conservative economists like to say that wages must be kept under control to prevent the dreaded inflation. (I suppose Russ buys the premise so its justified in arguing against Russ.)
I believe that other schools of economics don't necessarily agree that wage increases necessarily lead to higher inflation when accompanied by higher production.

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Originally posted by Russ:

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Originally posted by Dafyd:
Inflation hurts people who have lots of liquid assets - the people with money under the mattress or in heavily liquid savings accounts.

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Inflation primarily hurts the elderly. Those who've paid into some form of pension fund all their working life and are now in their retirement essentially living off the capital they've accumulated.

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Inflation breaks the spirit of the promise inherent in the idea of a pension while sticking to the letter.

Inflation is a stealth tax on savers. Governments are borrowers rather than lenders, so by your logic it's in their self-interest to maintain the fiction that a little inflation is a good thing...

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Originally posted by Callan:
In the FDR there is a historic hostility towards inflation because, among other things, it led to the rise of the Third Reich.

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Originally posted by Crœsos:
Not true, and one of the more persistent economic myths. The period of German hyperinflation was from 1921 to 1923. And yes, it was pretty disruptive as economic crises go, but it had been resolved for a decade by the time the Nazis took power. On the other hand when the Nazis came to power in 1933 Germany (and the rest of the developed world) was in the midst of the Great Depression, a demand shock that was, if anything deflationary

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Originally posted by Doc Tor:
IIRC, steady, moderate inflation is actually good for the economy, as it devalues debt, year on year. That house you mortgaged 25 years ago for what felt like a king's ransom is now payable with chump change.

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Originally posted by Crœsos:

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Originally posted by Callan:
In the FDR there is a historic hostility towards inflation because, among other things, it led to the rise of the Third Reich.

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Not true, and one of the more persistent economic myths. The period of German hyperinflation was from 1921 to 1923. And yes, it was pretty disruptive as economic crises go, but it had been resolved for a decade by the time the Nazis took power. On the other hand when the Nazis came to power in 1933 Germany (and the rest of the developed world) was in the midst of the Great Depression, a demand shock that was, if anything deflationary. It's kind of like attributing the election of Barack Obama to the dot.com collapse of 2000-2001 while ignoring the much more immediate financial crisis of 2007-2008.

On the other hand "beware inflation or you get Nazis" has just the kind of moralizing that rentiers like to promote as hazards of inflation.

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Originally posted by Callan:
National Socialism didn't arise ex nihilo out of the Wall Street Crash, though. You might as well discount Germany's defeat in the First World War, as a factor, on the grounds that happened even earlier than the hyperinflation.

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Originally posted by Callan:
The people who put together the FDR, after the Second World War, pretty much put together constitutional and economic arrangements, which were purposed designed around the question - how can we stop right wing nationalists taking power? And, as I say, one of the things they were concerned about was keeping inflation under control. Whatever the rights and wrongs of their political analysis, they do appear to have done a better job of keeping the fash away from the levers of power than some other countries I could mention. If I were an American in 2017 I might be asking "what can we learn from these guys?" rather than claiming that the Bundesbank exists purely for the convenience of rentiers.

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Originally posted by Callan:
National Socialism didn't arise ex nihilo out of the Wall Street Crash, though. You might as well discount Germany's defeat in the First World War, as a factor, on the grounds that happened even earlier than the hyperinflation.

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Originally posted by Moo:

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Originally posted by Doc Tor:
IIRC, steady, moderate inflation is actually good for the economy, as it devalues debt, year on year. That house you mortgaged 25 years ago for what felt like a king's ransom is now payable with chump change.

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And the people (many elderly) who invested in bond funds to supplement their Social Security payments are out of luck. My income from my bond funds is $7000 a year less than it was fifteen years ago. Meanwhile, prices have gone up.

Moo

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Originally posted by HCH:
I'm not sure I agree with that. I think there are some necessary, unpleasant jobs that require extensive training. For instance, fires happen, and we need firefighters, and they need to be trained. Untrained firefighters might easily get themselves killed. Likewise, if people go to a beach and swim, lifeguards are needed, and people train to become lifeguards. It would be unreasonable and inefficient to require everyone to master all such skills so they could each take a shift.

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Originally posted by Dafyd:

I believe that other schools of economics don't necessarily agree that wage increases necessarily lead to higher inflation when accompanied by higher production.

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Originally posted by mr cheesy:
[Inflation primarily impacts those on fixed incomes

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which might include state pensioners, but as far as I know that is inflation linked.

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Private pensions are linked to changes in value in the markets into which they're invested, which is not directly linked to inflation.

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Originally posted by Russ:

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Originally posted by mr cheesy:
[Inflation primarily impacts those on fixed incomes

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Yes, exactly.

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which might include state pensioners, but as far as I know that is inflation linked.

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Depends where you live ?

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Private pensions are linked to changes in value in the markets into which they're invested, which is not directly linked to inflation.

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If I have it right, before you retire the value of your private pension rises and falls with the market performance of the funds it is invested in. When you retire, that find is used to buy an annuity - you pay the lump sum over to someone in return for a promise that they'll pay you a certain income each year for the rest of your life. With a calculation based on distributions of life expectancy and the return they think they can get from investing your capital. If inflation kicks in after you've retired and the annuity isn't index-linked, you lose out.

Whereas those who are in debt with fixed payments find the real value of the payments that they have promised to make reduces.

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Bitcoin's recent moves remind me of this, at around 50X the speed. Plunges, partial recoveries, then the big fall. Of course tech stocks have some underlying value ...

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In many countries, and often our own, a little bit of ability to keep a few things private from the authorities probably makes the world a better place. In places like Cuba or Venezuela, many prefer to transact in dollars, and bitcoin could in theory serve a similar function. Yet there are two reasons this hasn’t been the panacea it’s assumed: the advantages of government to the individual, and the advantages of government to society.

The government-backed banking system provides FDIC guarantees, reversibility of ACH, identity verification, audit standards, and an investigation system when things go wrong. Bitcoin, by design, has none of these things. I saw a remarkable message thread by someone whose bitcoin account got drained because their email had been hacked and their password was stolen. They were stunned to have no recourse! And this is widespread — in 2014, the then-#1 bitcoin trader, Mt. Gox, also lost $400m of investor money due to security failures. The subsequent #1 bitcoin trader, Bitfinex, also shut down after a loss of customer funds. Imagine the world if more banks had been drained of customer funds than not. Bitcoin is what banking looked like in the middle ages — “here’s your libertarian paradise, have a nice day.”

<snip>

Second, government policies are designed to disrupt terrorist financing and organized crime, and prevent traffic in illegal goods like stolen credit card numbers or child pornography. The mainstream preference is to have transactions private but not undiscoverable under warrant  —  ask “should the government have a list everyone you’ve paid money to,” and most will say no; ask “should the government be able under warrant to get a list everyone a child pornography collector has paid money to,” and most will say yes.

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Unlike the satirical Jesus Coin, Christ Coin says it’s an earnest product. The coin advertises itself as “the first pre-mined Christian-based Cryptocurrency. It is used to financially reward people who read the Bible, post/view content and interact with the community on the Life Change Platform.”

In a Facebook message, Christ Coin told The Daily Beast that the product was not a joke. But a wave of satirical (but still functional) currencies like Jesus Coin are blurring the distinction between earnest and parody technobabble.

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Miami Bitcoin Conference Stops Accepting Bitcoin Due to Fees and Congestion

Next week the popular cryptocurrency event, The North American Bitcoin Conference (TNABC) will be hosted in downtown Miami at the James L Knight Center, January 18-19. However, bitcoin proponents got some unfortunate news this week as the event organizers have announced they have stopped accepting bitcoin payments for conference tickets due to network fees and congestion.

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