Thread: Is Gold a Myth? Board: Purgatory / Ship of Fools.
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Posted by lilBuddha (# 14333) on
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Gold is the go to investment of the paranoid in uncertain times. It tends to rise in value as stability falls.
But is this rational? In Ye Ancient Times, it was an incorruptible medium that could be used to trade for goods. A simple exchange for simple, and relatively simple, times. In these days in which things are produced in a complex supply and labour web, and many people do not actually produce anything, could it ever be more than a representative currency, just like paper money is now.
Is the concept that gold is a tangible asset one that holds water today?
Posted by Gramps49 (# 16378) on
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Not really. Looks like Bitcoin is where the action is at now. As of 17:21 PST it is worth $16805.04 US.
I am working with a 19 year old who invests in bitcoin. I don't see how he can stomach how fast it moves even in minutes.
And, since Bitcoin is base on a complex computer math program, it is a myth.
[ 12. December 2017, 00:25: Message edited by: Gramps49 ]
Posted by Palimpsest (# 16772) on
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Money is a useful shared delusion.
Posted by betjemaniac (# 17618) on
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quote:
Originally posted by lilBuddha:
Is the concept that gold is a tangible asset one that holds water today?
Yes. Up to a point.
If you're buying "notional" gold which you don't then hold in your house then it's no different to a bitcoin IMO - because then it is intangible.
However, if you buy gold physically (whether rings, sovereigns, whatever) and then keep them somewhere where you can physically lay your hands on them then it's worth having.
Little known fact, but UK pilots in the various Iraq wars -certainly 1990-91 - were flying around with a strip of sovereigns on their person (one of the reasons why the Royal Mint still makes sovereigns) - if all else fails when shot down, gold is a useful last ditch attempt to bribe your way out.
All I would say, is in the event of a general economic collapse, or mass attack that knocks out electricity for good, watch as the people with physical gold to hand make their way back to the top of the tree. IMO, at the moment we've *displaced* gold, not *replaced* it.
Posted by mr cheesy (# 3330) on
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Yes, see Making Money by Terry Pratchett.
Posted by Curiosity killed ... (# 11770) on
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Is there enough solid gold in the world to honour all the gold bonds? Originally banking systems were based on enough reserves of gold to be able to hand over gold equivalents to bank notes (hence I promise to pay the bearer a sum of). The American banking system was originally built on gold reserves at Fort Knox and the Marshall Plan redistributed gold.
These days countries have drifted away from using a gold reserves to match the gold standard in recent years for there to be articles on concerns about gold reserves from Mervyn King, Dr Alan Greenspan and the head of banking in Turkey.
Posted by Karl: Liberal Backslider (# 76) on
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I have long reasoned thus:
Money these days is numbers on computers. We're economically screwed because the numbers say we are. There must be a hypothetical set of numbers in all the financial datacentres in the world that says "AOK, no-one's screwed." So reconfigure all the computers with those numbers and job done.
I've yet to hear a coherent reason why this can't work.
Posted by Eutychus (# 3081) on
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Because it would be resisted by the people currently enriched by the general screwed-upness.
That's probably why the biblical Jubilee was never implemented, either.
Posted by simontoad (# 18096) on
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Gold was a pretty good album by Spandau Ballet, and the title song was great to sing along to.
Remember Bitcoiners, declare the profits you take and pay your tax.
Posted by Doc Tor (# 9748) on
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Any tradeable currency is only tradeable because someone else will accept its worth.
In a post-apocalyptic scenario, you might be able to trade gold for a jerrycan of petrol, but it's much more likely to go to the person who can provide you with a dozen eggs or a bushel of wheat. You can't eat gold, you can't use it go keep warm, and it makes a very poor weapon.
At the point when you offer gold for a trade, and they look you in the eye and say "got anything else?" is the point it becomes just a piece of not-particularly useful metal.
Posted by L'organist (# 17338) on
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I fear that Bitcoin is going to be the 21st century's South Sea Bubble.
Gold is useful because it is portable, and the colour changes with the purity so to a limited degree you can tell how good the gold is that you have or are offered.
But it all comes down to "worth" - as in my house is worth £XXX, when in fact your house has two values: the first (which can be quantified) is what someone else is prepared to pay for it; the second cannot be assigned a monetary value because it is shelter, security and stability for the family who live in the house.
Posted by Russ (# 120) on
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quote:
Originally posted by Karl: Liberal Backslider:
I have long reasoned thus:
Money these days is numbers on computers. We're economically screwed because the numbers say we are. There must be a hypothetical set of numbers in all the financial datacentres in the world that says "AOK, no-one's screwed." So reconfigure all the computers with those numbers and job done.
I have today reasoned thus:
Long before computers, there were three ways to survive:
- self-sufficiency - scrape a living by subsistence farming on a plot of land
- trade - make things or provide services that other people value enough to trade for
- banditry - take what you want from the labour of others.
Computerised money doesn't change anything.
It is only a medium for trade. Just like banknotes, its value is entirely dependent on others' perception of its value.
Giving everyone in the world $1m of Bitcoin wouldn't solve anything.
We know from history about hyperinflation and runs on banks and know that these are not good things. Maintaining sound money is one of the primary functions of government.
As long as gold is rare and indestructible and attractive, people will value it. In the sort of sci-fi story where this ceases to be true - whether it's a rampage of gold-devouring nanotech bugs, an alchemy that works, or an infectious psychological distaste for coloured metals - gold ceases to act as a reserve currency.
Posted by Karl: Liberal Backslider (# 76) on
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But I wasn't suggesting that. I was suggesting reprogramming with the sorts of numbers that could readily occur in real life and would mean "everything's fine". The numbers politicians and economists are complaining aren't the ones showing. The ones they think should be.
Put it another way. Suppose you buy a million £1 widgets from me. As long as my computer now says I'm £1m richer, why does it matter to me that yours says you're £1m poorer?
[ 12. December 2017, 10:47: Message edited by: Karl: Liberal Backslider ]
Posted by Tortuf (# 3784) on
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Gold is a commodity that has value because we accept that it has value. Trade used to be paid in other things that people valued like pepper, furs, silk, etc. Monetizing trade with coins made of gold and silver allowed easier forms of record keeping of value. That allowed easier collection of taxes.
Taxes allowed building and maintaining trade routes, which brought on more trade.
In a post apocalyptic world gold will still be pretty.
To us apocalypse seems to mean we lose all of our modern stuff. People, civilizations, survived and thrived for thousands of years without our modern toys. There is no reason to think that we could not also.
There would certainly be a period of loss as we have to re learn how to survive without central heat and air and supermarkets. OTOH, is worrying about it going to change anything?
Posted by hatless (# 3365) on
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quote:
Originally posted by Eutychus:
Because it would be resisted by the people currently enriched by the general screwed-upness.
That's probably why the biblical Jubilee was never implemented, either.
Is this fairly certain? I have heard doubts about the Jubilee, but mainly, it has seemed to me, on the basis that it couldn’t work, rather than that there is evidence against it.
I wonder if an imaginary Jubilee would have power just like our imaginary money does.
Posted by mark_in_manchester (# 15978) on
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Children died, the days grew cold, a piece of bread could buy a bag of gold.
Oh, and this.
Posted by Eutychus (# 3081) on
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quote:
Originally posted by mark_in_manchester:
Children died, the days grew cold, a piece of bread could buy a bag of gold.
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.
Posted by moonlitdoor (# 11707) on
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quote:
posted by Karl Liberal Backslider
Suppose you buy a million £1 widgets from me. As long as my computer now says I'm £1m richer, why does it matter to me that yours says you're £1m poorer?
The capacity of the world to produce things is limited, so how to decide what the world's capacity should be used to produce ? There are a couple of obvious possibilities. One is by government planning, which decides relative priorities and determines how much of each product should be produced.
The other is that people signal that something would have utility for them by being prepared to pay for it. As people's income is limited, they choose to buy the things which have the highest utility for them, and the aggregation of everyone's demand determines what gest produced.
If I can get your widgets without giving up any money, there is no indication whether your widgets have a higher utility to me than anything else I could get without paying, so it's not clear whether capacity should be devoted to producing them.
Obviously this approach is based on people acting as rational agents, which isn't always the case, and also requires everyone to have some money to express their demand. But central planning also has its own difficulties.
Posted by mr cheesy (# 3330) on
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quote:
Originally posted by Eutychus:
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.
I think Larry was imagining a situation whereby gold lost value compared to stuff that is actually useful - ie food.
As a song, I think it works. But I'm no longer persuaded by the theology.
But I have to say that a lot of things that are happening at the moment seem to make his songs have a special truth.
Posted by Karl: Liberal Backslider (# 76) on
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quote:
Originally posted by moonlitdoor:
quote:
posted by Karl Liberal Backslider
Suppose you buy a million £1 widgets from me. As long as my computer now says I'm £1m richer, why does it matter to me that yours says you're £1m poorer?
The capacity of the world to produce things is limited, so how to decide what the world's capacity should be used to produce ? There are a couple of obvious possibilities. One is by government planning, which decides relative priorities and determines how much of each product should be produced.
The other is that people signal that something would have utility for them by being prepared to pay for it. As people's income is limited, they choose to buy the things which have the highest utility for them, and the aggregation of everyone's demand determines what gest produced.
If I can get your widgets without giving up any money, there is no indication whether your widgets have a higher utility to me than anything else I could get without paying, so it's not clear whether capacity should be devoted to producing them.
Do I care, as long as you buy them?
Posted by Boogie (# 13538) on
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I have a brass wedding ring. I can’t wear my gold one any more due to arthritis, I need an expanding ring and can’t find a gold one anywhere.
Not a soul has noticed, not even my husband ![[Smile]](smile.gif)
Posted by hatless (# 3365) on
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quote:
Originally posted by Eutychus:
quote:
Originally posted by mark_in_manchester:
Children died, the days grew cold, a piece of bread could buy a bag of gold.
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.
I think that’s the best bit of the song. It’s much more striking to think of bread having purchasing power. Money and commodity have changed places.
In the teaching of Jesus we hear a lot that has the smell of economic radicalism. Forgiveness that is not earned. Value, in a world that could accurately price a sparrow, as something bestowed on us by God, like a divine knighthood. The full measure that is doubly over generous. A full days pay for an hour’s work.
I wonder if we like to relate money, work and economics to something definite and finite, like gold, because of fear that what we have will become worthless. We must tie it to something, then when we spend we know what to pay back.
The Gospel suggests that the power of gift, the one directional transaction, sets us free. And maybe that is true in economics, too. When the solar flare hits and all the computers forget the numbers that belong to our accounts and mortgages, if we nonetheless choose to go to work, as most people would, we would be all right. Wealth is created, ultimately, as a gift made in confidence that society will honour it.
Posted by Russ (# 120) on
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quote:
Originally posted by Karl: Liberal Backslider:
I was suggesting reprogramming with the sorts of numbers that could readily occur in real life and would mean "everything's fine". The numbers politicians and economists are complaining aren't the ones showing. The ones they think should be.
Put it another way. Suppose you buy a million £1 widgets from me. As long as my computer now says I'm £1m richer, why does it matter to me that yours says you're £1m poorer?
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.
Not quite sure how a computerised banking system that subtly lies to people could bring that about. My intuition is that you can't fool all of the people all of the time and sooner or later some real-resource consequences are going to be felt.
Are you thinking of a St Nicholas virus that randomly creates extra money in accounts that have little, that somehow magically doesn't cause inflation thereby ?
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by Karl: Liberal Backslider:
Suppose you buy a million £1 widgets from me. As long as my computer now says I'm £1m richer, why does it matter to me that yours says you're £1m poorer?
It matters because without the inherent exchange of items of value the trade itself is worthless.
Your scenario essentially means the buyer doesn't actually have to spend any money - your computer says you're £1m better off, but his says he's got the same amount as before. All well and good, you might say, but the thing is that you will also be able to buy things without actually spending any money. Which means you won't actually need to earn any money in order to get the things you want. Which in turn means that you probably won't want to put the effort in to produce the widgets in the first place (unless widget production is a hobby of yours or something).
Money only has value in as much as it's an indicator of how many goods and services you are able to buy. Once that ceases to be the case then money becomes just worthless numbers in a computer - in which case if you want someone to do something for you that they don't particularly feel like doing you'll have to offer them something other than money in order for it to be worth their while. Gold, maybe?
So what if we reprogram the computers to give everyone £1m but then keep everything else as it is - buying something means you now have less money, and so forth? Well, the average salary in the UK is about £27k per year before tax (about £20,760 after tax). That extra million quid everyone just got is - on average - the equivalent of just under 50 years of work. Or to put it another way, it means that the average person maintaining their current standard of living won't have to work for another 50 years before they need to earn money again.
The problem with this scenario is obvious. To get people to work for you, you will need to offer them significantly more money than was previously the case. This means you'll have to raise the price of your widgets in order to cover your costs, which in turn means any given amount of money you pay your staff is worth less, so you have to pay them more - a vicious cycle. This is how hyperinflation happens.
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by hatless:
A full days pay for an hour’s work.
All well and good on the first day, but once people know that's what you're going to pay how many of them will bother doing more than an hour's work tomorrow?
quote:
if we nonetheless choose to go to work, as most people would
![[Killing me]](graemlins/killingme.gif)
Posted by Karl: Liberal Backslider (# 76) on
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quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by Karl: Liberal Backslider:
Suppose you buy a million £1 widgets from me. As long as my computer now says I'm £1m richer, why does it matter to me that yours says you're £1m poorer?
It matters because without the inherent exchange of items of value the trade itself is worthless.
Your scenario essentially means the buyer doesn't actually have to spend any money - your computer says you're £1m better off, but his says he's got the same amount as before. All well and good, you might say, but the thing is that you will also be able to buy things without actually spending any money. Which means you won't actually need to earn any money in order to get the things you want. Which in turn means that you probably won't want to put the effort in to produce the widgets in the first place (unless widget production is a hobby of yours or something).
Money only has value in as much as it's an indicator of how many goods and services you are able to buy. Once that ceases to be the case then money becomes just worthless numbers in a computer - in which case if you want someone to do something for you that they don't particularly feel like doing you'll have to offer them something other than money in order for it to be worth their while. Gold, maybe?
So what if we reprogram the computers to give everyone £1m but then keep everything else as it is - buying something means you now have less money, and so forth? Well, the average salary in the UK is about £27k per year before tax (about £20,760 after tax). That extra million quid everyone just got is - on average - the equivalent of just under 50 years of work. Or to put it another way, it means that the average person maintaining their current standard of living won't have to work for another 50 years before they need to earn money again.
The problem with this scenario is obvious. To get people to work for you, you will need to offer them significantly more money than was previously the case. This means you'll have to raise the price of your widgets in order to cover your costs, which in turn means any given amount of money you pay your staff is worth less, so you have to pay them more - a vicious cycle. This is how hyperinflation happens.
OK; go back to my original proposal - program the computers with the numbers they'd have if we weren't in the shit.
Posted by no prophet's flag is set so... (# 15560) on
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Work for some is the equivalent of going hunting for a beast to drag back to the hearth to eat, or scrabbling for some leaves or berries. Unpleasant, but necessary.
For others it contains that, and also contains enjoyment. I become rather impatient with people who complain about their work, and talk about "putting in time" before their retirement and fail to take hold of what they might. This sort of attitude I think contaminates the soul, creates bitterness. Please, if you don't like your life of work, you must change it, do something to make it different. Take on risk, and learn to tolerate it. But take on the right risks, but risks nonetheless.
Posted by Karl: Liberal Backslider (# 76) on
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And how the hell do I know what are the "right risks"? Crystal balls?
If I could find an alternative to work, I'd grab it tomorrow. But the only one I can currently find is Having No Money.
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by Karl: Liberal Backslider:
OK; go back to my original proposal - program the computers with the numbers they'd have if we weren't in the shit.
Most of the numbers that would mean we weren't in the shit would be about productivity rather than how much money people have. You can't just pretend to be producing value without actually doing it - that's how pyramid schemes (don't) work.
Posted by hatless (# 3365) on
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quote:
Originally posted by Marvin the Martian:
quote:
Originally posted by hatless:
A full days pay for an hour’s work.
All well and good on the first day, but once people know that's what you're going to pay how many of them will bother doing more than an hour's work tomorrow?
quote:
if we nonetheless choose to go to work, as most people would
If my super flare hits and the UN says world banking is irretrievably broken, no currency can be trusted, no debts or assets reliably quantified, and we’ll have to start from scratch, what then? While we scratch around, sharing whatever we have in our freezers, visiting the local shops to swap, because we can’t buy in the first week, taking as gift the fresh food that is going to spoil, will teachers go to the schools? Will nurses turn up at the hospitals, police put their uniforms on, lorry drivers deliver their goods, farmers sow seeds? Of course. A few won’t. Some can’t miss the chance of a lazy day, of getting one up on everyone else, but most people would choose to work in that situation. By the end of week two even the confirmed layabouts would be back.
Posted by Boogie (# 13538) on
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I’ve always enjoyed work and worked even when I had the choice not to. Now that I’m retired I keep very busy volunteering all day, every day. Some people, like me, enjoy work for work’s sake. I was always genuinely surprised by the pay slip and said ‘wow, I even get paid for this’. Most people assumed sarcasm. I very much disliked the commute to work ‘tho and was very happy to give that up.
My brother also believes you should enjoy your work. As soon as he starts disliking his job he moves on. This means he’s never ‘climbed the ladder’ so his salary isn’t huge, but he’s happy.
Posted by Callan (# 525) on
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Originally posted by Karl: liberal backslider:
quote:
OK; go back to my original proposal - program the computers with the numbers they'd have if we weren't in the shit.
I think this assumes that the figures on the computers are entirely random. I don't think they are. I'm pretty sure, for example, that the figures on my current account are what they were when I last looked, minus, my credit card bill. I'd be quite miffed if someone could flip a switch and give me a 5K overdraft and if someone got in touch and said they could hit a switch and make me a millionaire I'd respond with the same enthusiasm as I do when someone offers to deposit £100,000 in my bank account. Multiply this across all the bank accounts in the world and you begin to see the difficulty.
And who do you give this power to, to alter any economic or monetary data on a computer system? To put this bank account in the black and that in the red? To alter the value of the house you are living in or your countries balance of trade statistics? How do you know they are honest? How do you know that they know what they are doing. If the Global economy was so simple, that by punching a few algorithms into a computer they could wipe out the negative effects of the financial crash, don't you think that the world's central banks would have done it by now? But it's not, it's big and complex, the clue being in the word global. Basically the problem with your thesis, AFAICS, is the same problem as with centrally planned economies. A handful of clever and honest people are expected to do better than billions of people of varying intelligence and integrity. But a) it's not certain that is the case and b) the mechanism for generating rulers of unyielding honesty and intelligence has not yet been discovered.
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by no prophet's flag is set so...:
Work for some is the equivalent of going hunting for a beast to drag back to the hearth to eat, or scrabbling for some leaves or berries. Unpleasant, but necessary.
Yes. Not least because some jobs are inherently unpleasant but necessary.
quote:
I become rather impatient with people who complain about their work, and talk about "putting in time" before their retirement and fail to take hold of what they might. This sort of attitude I think contaminates the soul, creates bitterness. Please, if you don't like your life of work, you must change it, do something to make it different. Take on risk, and learn to tolerate it. But take on the right risks, but risks nonetheless.
As Karl says, change it to what? My choice is between the things I dislike but can do well enough that someone will pay me a good wage for them, and the things I enjoy but no-one else values enough to give me a brass farthing for them.
Posted by no prophet's flag is set so... (# 15560) on
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quote:
Originally posted by Karl: Liberal Backslider:
And how the hell do I know what are the "right risks"? Crystal balls?
If I could find an alternative to work, I'd grab it tomorrow. But the only one I can currently find is Having No Money.
Well, don't open a pizza restaurant, but maybe consider some human service qualification, particularly related to the elderly or to children. Them's current trends. Then be prepared to move to an isolated location for perhaps up to 5 years. And be prepared to work more than full time for most of that.
Posted by betjemaniac (# 17618) on
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quote:
Originally posted by hatless:
If my super flare hits and the UN says world banking is irretrievably broken, no currency can be trusted, no debts or assets reliably quantified, and we’ll have to start from scratch, what then? While we scratch around, sharing whatever we have in our freezers, visiting the local shops to swap, because we can’t buy in the first week, taking as gift the fresh food that is going to spoil,
that's a positive view of how it would play out - my version involves the break down of civil society and a lot more looting in the initial phase, murder rates going through the roof, and the eventual settling down of what's left of humanity in feudal communities run by competing warlords...
Posted by betjemaniac (# 17618) on
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quite apart from anything else, in the event of your super flare, how's the UN (or anyone else for that matter) going to communicate to the masses about any of this? We'll basically be running a version of the UK based on what we can remember from the latter stages of Threads...
Posted by Marvin the Martian (# 4360) on
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quote:
Originally posted by hatless:
If my super flare hits and the UN says world banking is irretrievably broken, no currency can be trusted, no debts or assets reliably quantified, and we’ll have to start from scratch, what then?
Rioting and looting, mostly.
quote:
While we scratch around, sharing whatever we have in our freezers, visiting the local shops to swap, because we can’t buy in the first week, taking as gift the fresh food that is going to spoil,
I think this is optimistic at best. Most of the local shops would have been looted by people determined to get their hands on food (and other goods) by whatever means they can. Once those supplies started running low people would start raiding each others houses. With no monetary incentive to keep utility services operational it's likely that there'd be no electricity or gas to cook with anyway.
Those - especially farmers - who could control ongoing supplies of food and other essentials would most likely use them to hire security services to protect themselves, their families and their workers (who would, of course, be working for the food and the security).
quote:
will teachers go to the schools? Will nurses turn up at the hospitals, police put their uniforms on, lorry drivers deliver their goods, farmers sow seeds? Of course. A few won’t. Some can’t miss the chance of a lazy day, of getting one up on everyone else, but most people would choose to work in that situation. By the end of week two even the confirmed layabouts would be back.
I disagree. Not only would the situation mean your survival (and that of your family) no longer requires you to go to work, but it's likely that going to work would actually reduce the amount of time available for you to find food and protection.
Not that I think all traces of society would utterly disappear, of course. But I think the scenario where everyone just gets on with doing what they did before in peace and harmony is nowhere near as likely as the one where civilisation is reduced to small isolated pockets or the one where the government (and/or army) seizes the farms and uses its control over access to food rations to force everyone else to do its will.
Posted by no prophet's flag is set so... (# 15560) on
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quote:
Originally posted by Marvin the Martian:
As Karl says, change it to what? My choice is between the things I dislike but can do well enough that someone will pay me a good wage for them, and the things I enjoy but no-one else values enough to give me a brass farthing for them.
Well we're not exactly in the career advice business, but... if your life is not enjoyable, are you prepared to do what it takes to make it so? Sell assets like a house, dip into savings, and pursue something else. Being paid a wage to do something you dislike isn't a direction that encourages mental and physical wellbeing. However if you're not willing or able to take the risks, then it is necessary to become happy doing what you're doing, learning to like it.
Posted by Dafyd (# 5549) on
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quote:
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.
Inflation hurts people who have lots of liquid assets - the people with money under the mattress or in heavily liquid savings accounts. For obvious people with lots of liquid assets make up a majority of people who can fund chairs or departments in economics. Unsurprisingly therefore they tend to fund those chairs for economists who sympathise with people with lots of liquid assets. You would call that biased and unprincipled. (*) 'Unprincipled' is I think too strong: there's no conscious dishonesty going on. But bias it certainly is.
On the whole, too many liquid assets in an economy jam it up. Restricting the supply of liquid asset - that is, money - doesn't actually unjam it: it merely makes it easier to concentrate the liquid assets rather than use them for facilitating transactions. Moderate inflation, by decreasing the value of money under the sofa, encourages productive investment. Too much inflation, that is, inflation at a rate that makes transactions difficult over the medium term, is for that reason problematic. But moderate inflation doesn't penalise anyone whose money or labour is economically active since the value of their economic activity factors inflation into account.
(*) Well, you wouldn't should you exempt sympathies that you share from your general condemnation.
Posted by hatless (# 3365) on
:
quote:
Originally posted by betjemaniac:
quote:
Originally posted by hatless:
If my super flare hits and the UN says world banking is irretrievably broken, no currency can be trusted, no debts or assets reliably quantified, and we’ll have to start from scratch, what then? While we scratch around, sharing whatever we have in our freezers, visiting the local shops to swap, because we can’t buy in the first week, taking as gift the fresh food that is going to spoil,
that's a positive view of how it would play out - my version involves the break down of civil society and a lot more looting in the initial phase, murder rates going through the roof, and the eventual settling down of what's left of humanity in feudal communities run by competing warlords...
We’ve all seen the films, Hollywood films, so there are lots of guns and deaths involved as well. That’s the versions of human nature that Hollywood promotes - we are violent, selfish, and brutal, and held, barely, in check by a thin veneer of law and order which must therefore be defended with absolute rigour. I think that same thinking is involved in quite a bit of the amateur economics that flies around, too.
Rioting is a rare event. In the UK in recent years it has been police violence that has triggered it. The necessary cause seems to be a group of people who feel severely unacknowledged and unhappy with the powers - people in Brixton (goodness, it’s smart now) or Bristol (but it was only a few cars - I was in St Pauls on the so-called night of the riots and walked home at midnight and saw nothing) and more widely in 2011.
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.
A lot of financial thinking (I hesitate to call it economic thinking, because I think a lot of economists are better than this) seems to believe that money is the only motivator, and that the financial system must make people do things or they won’t. Global finance is talked about in staggering terms of trillions of dollars as if it represented an vast repository of power, and all the people, like ants, running around trying to get by on the little crumbs the mighty machine feeds them.
But wealth is largely what we make day by day. It’s interesting to reflect on how much of our wealth has a sell-by date that is either very short or instantaneous. Food, obviously, doesn’t last long. Services are short term. Education, health, security, defence, things we spend so much of our taxes on, don’t last from year to year. Hardly anything I buy existed last year. Wealth is made on the hoof.
Countries have recovered from the desolation of modern war in one or two generations.
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.
Posted by Eutychus (# 3081) on
:
The dystopianism is due less to us having got nastier than to our extremely high dependency on complex supply chains and infrastructure.
Posted by Karl: Liberal Backslider (# 76) on
:
If I sell the house NP, I have nowhere to live. If I give up my job, I have no income to rent anywhere else. Your idea sounds like a version of the rather impractical Having No Money. Unfortunately I can't wait five years to eat. You imagine I've not considered every possibility?
And it's fine to say "learn to like what you're doing" but how the hell do you do that? You might as well say "learn to fall off cliffs without dying"
[ 12. December 2017, 17:17: Message edited by: Karl: Liberal Backslider ]
Posted by no prophet's flag is set so... (# 15560) on
:
It does take some pretty significant lifestyle change and risk tolerance. Done it. Which does not mean everyone can I suppose.
Story: worked in civil service, gov't changed in the 1980s ideological days to "private good, public bad". Wife left her job, returned to school. I left my job, started on the self employment track. We sold the house, used the generated capital to live on and fund start-up. Figured we had about 18 months to figure out if we were right or wrong with the decision. We also had 2 preschoolers. We determined that we'd move to another province if needed as well (considered 2). I did work some 65-75 hours per week for the better part of a decade to make it go.
It probably sounds trite, but I drew on my grandparents and father's refugee history, thinking if they were able to restart twice in worse circumstances, should be able to as well.
Posted by Karl: Liberal Backslider (# 76) on
:
Ah, self employment. The Holy Grail. I've spent over ten years trying to think of a viable way of doing that.
Posted by Moo (# 107) on
:
A sudden influx of money can also mess up an economy. When Spain started receiving large amounts of gold from South America, the effect on the Spanish economy was very bad. The same quantity of goods was available, but now some people could afford to pay far more than they could in the past. Prices soared.
Moo
Posted by chris stiles (# 12641) on
:
quote:
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.
I don't really think the situations are comparable, you are comparing a situation of societies under excess stress to one where suddenly (via collapse of electronic payments), most people are days away from running out of food, and the ability to pay for more. With no gradualism to ameliorate the consequences.
Posted by Moo (# 107) on
:
In the US in the 1930s President Roosevelt declared a bank holiday All banks were closed, and people quickly ran out of cash. Many stores extended credit to their regular customers, and in turn were extended credit by their regular suppliers.
I don't know what happened to people who were new in town.
Moo
Posted by simontoad (# 18096) on
:
quote:
Originally posted by Eutychus:
quote:
Originally posted by mark_in_manchester:
Children died, the days grew cold, a piece of bread could buy a bag of gold.
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.
I have such a short attention span that I didn't even get past the musical intro, and that is not a criticism of the song.
Posted by k-mann (# 8490) on
:
One advantage of gold is that it's finite. You can't just print more gold.
Posted by Russ (# 120) on
:
quote:
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.
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.
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...
Posted by mr cheesy (# 3330) on
:
quote:
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.
Not sure this is really true.
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.
The second group whom inflation affects at those (a) who are negatively impacted by food and fuel price increases - which are primarily going to be those who are already in fuel and food poverty, including but not exclusively (some) pensioners and (b) those who are living on incomes which do not rise in line with inflation. People who do not get pay rises, together with those struggling to get by on zero hour contracts will find that the same amount of money will buy less.
quote:
Inflation breaks the spirit of the promise inherent in the idea of a pension while sticking to the letter.
But where is the evidence that state pensions are not increasing with inflation?
quote:
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...
I think this is a bit of a stretch. In times of high inflation, if the interest rates offered on savings do not keep up, then the value of cash savings overall reduce. But that's not a tax, because everyone is free to invest their savings in other mechanisms - including stocks and shares, which are not affected directly by inflation.
Posted by Marvin the Martian (# 4360) on
:
quote:
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.
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?
Posted by mr cheesy (# 3330) on
:
quote:
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?
I don't know - but you won't be alone. The increase in AI and robotics appears to be on the edge of wiping out a very large number of "middle class", well paying jobs.
It seems that AI efforts at various professional fuctions are increasingly accurate (for example I think I recall that an AI computer has been used in barristers chambers to timetable events without mistakes). And it doesn't take a lot of imagination to see them moving into other areas.
I don't know how that applies to you - but one would imagine that things like conveyancing are ripe for replacement with AI machines
At present, the majority of the talk has been about robotics in transport. But it seems to me that a bigger change in society would be if/when a large number of these professional middle-class jobs were to be wiped out.
Posted by Crœsos (# 238) on
:
quote:
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.
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.
Productive investment would also be problematic since "zero inflation" means nothing ever increases in value. Speaking of things that might hurt retirees, a situation where investments never accrue value ("inflate") seems like it might be harmful.
quote:
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.
Not just fixed incomes, but those relying on any kind of fixed sum of money. For example, a creditor holding a 30-year mortgage would be hurt by inflation, receiving dollars (or pounds or Euros or whatever) with progressively less purchasing power as the term of the mortgage progresses. A debtor owing a 30-year mortgage would be helped, both because the money he's using to pay off the debt has less relative purchasing power (and is therefore easier to earn) and because the value of the mortgaged property is inflating over time.
Posted by Karl: Liberal Backslider (# 76) on
:
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.
[ 13. December 2017, 14:35: Message edited by: Karl: Liberal Backslider ]
Posted by Crœsos (# 238) on
:
And here's an excerpt from a very useful long-form post by economist Brad DeLong about money and value.
quote:
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.
Read the whole thing, as the kids say these days. It's worth it. Italics from the original, bolding added by me.
[ 13. December 2017, 14:38: Message edited by: Crœsos ]
Posted by mr cheesy (# 3330) on
:
quote:
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.
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.
Posted by hatless (# 3365) on
:
quote:
Originally posted by Marvin the Martian:
quote:
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.
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?
I wasn’t thinking about the end of money or our current economic system, just imagining a little blip in the accuracy of our accounts. An inconvenient fortnight. And, yes, I’m suggesting we could recover from an inconvenient fortnight and a couple of years where we have to make up some of our figures, because the important stuff is not the ‘money’ that we always guard so carefully, but the ‘wealth’ that we create by going to work.
We’re used to thinking that our work has no value until the end of the month comes round, but to others it has value as we do it. I wonder what percentage of our GDP is made fresh every day? Education and healthcare are obvious examples. Behind them lie years of training and decades of institutional development, but the wealth they create just issues forth. At the other extreme, housing and railways last decades, though they need repairs and upgrades.
The Sermon on the Mount teases us for worrying about tomorrow. People love to save, but where is the joy? And if everyone in an economy were to save £1000 we would just cut demand, shrink the economy and create inflation.
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. And I guess we want an economic system that is as close as you can get to that in a world with a bit more goblin than angel.
Which means the emphasis should be on work, it’s quality and reward, and not on pay and debt. We are the divine bit of the system, our creating under God. The markets, exchange rates, public sector borrowing, all the things we talk about as if they were beyond challenge, forces of nature, laws, they’re not, they are merely part of what we make.
I’m just talking to myself, really. I get oppressed by economic news and personal financial responsibility and I need to remind myself that work should not be felt (or made) a curse, but partnership with the Creator.
Posted by Crœsos (# 238) on
:
quote:
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.
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.
Posted by Marvin the Martian (# 4360) on
:
quote:
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.
The alternative is to extend easy credit to workers so that they can buy the extra stuff being produced without receiving increased wages. Of course, that's what led to the whole credit crunch problem a decade ago...
Posted by mr cheesy (# 3330) on
:
quote:
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.
I suppose it depends on how one understands the term, and/or calculates inflation.
Historically this was commonly not including the price of mortgage and/or housing. It is perfectly possible to be in a situation where the prices of goods are increasing in one way, whereas the prices of housing are increasing in a much steeper way.
Posted by Doc Tor (# 9748) on
:
No, the alternative is to extend a UBI to everyone regardless. There's enough money in the pot to do that already, but it'll never happen because the poor will no longer be in (so much) thrall to the rich.
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Crœsos:
Given that one of the big drivers of inflation is increased wages you're proposing an interesting scenario.
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.
Posted by Marvin the Martian (# 4360) on
:
quote:
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.
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.
Posted by Crœsos (# 238) on
:
quote:
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.
To be clear, higher wages are inflation. You're inflating the price of a particular commodity (labor). It's possible that some other commodities might deflate in value at the same time leaving an unchanged overall average rate of inflation, but this is usually not the case. Workers are also consumers, so higher wages usually increases demand as well.
Posted by Karl: Liberal Backslider (# 76) on
:
quote:
Originally posted by mr cheesy:
quote:
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.
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.
Up to a point, but the reduction in the real value of the mortgage repayments (and remaining capital debt) would have been a thing even if inflation had been the same across the board.
Posted by mark_in_manchester (# 15978) on
:
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.
[ 13. December 2017, 16:47: Message edited by: mark_in_manchester ]
Posted by Karl: Liberal Backslider (# 76) on
:
quote:
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.
No, because they knew damned well there were no jobs at the end of those retraining opportunities.
Posted by Lyda*Rose (# 4544) on
:
quote:
Originally posted by Marvin the Martian:
quote:
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.
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.
Ursula K. LeGuin's novel The Dispossessed posits a society based on a balance of non-ownership, anarchy, service to the community, and self-determination. The story had the less pleasant jobs covered by a norm where individuals put in one day in ten for community service. Some people saw this as just a duty, but others sort of enjoyed getting out and doing something different than their usual work-a-day jobs. I realize this is fiction, and even in the story everything wasn't coming up roses, but such a system is a possibility.
Posted by mr cheesy (# 3330) on
:
quote:
Originally posted by Karl: Liberal Backslider:
No, because they knew damned well there were no jobs at the end of those retraining opportunities.
The situation wasn't quite as bad as you are suggesting here. It is absolutely true that there was unemployment, but it is also true that other heavy industries continued for a period after the mines closed. For example, ex-miners have told me that in this valley, they were able to get jobs in the local ironworks.
So getting retrained for work in one of these other local employers may well have enabled them to continue in work.
In fact, the real problems seem to have emerged later - miners moved to worse paid jobs in other industries, those then subsequently closed and young people could no longer get employment that paid proper wages. This led to migration away from the area, young people looking for work elsewhere and the increase in poorly paid local work.
The problem wasn't the miner's retraining as much as the repeated failure to find ways to replace the forms of mass employment in subsequent generations of local workers.
Posted by Gwai (# 11076) on
:
quote:
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.
When I worked in a college co-op, we all had to work a certain number of hours for the good of the co-op (in return for getting to eat there and not having to pay dining hall rates.) There when some jobs were so unappealing that they were hard to fill, we gave extra hours of credit to those who worked them. I imagine something like that could be worked. Everyone has to do 5 hours a week of scut work, for instance, or 3 hours of nasty scut work.
Posted by HCH (# 14313) on
:
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.
Posted by Callan (# 525) on
:
quote:
Originally posted by Dafyd:
quote:
Originally posted by Crœsos:
Given that one of the big drivers of inflation is increased wages you're proposing an interesting scenario.
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.
In the FDR there is a historic hostility towards inflation because, among other things, it led to the rise of the Third Reich.
Currently, in the UK, thanks to the fall in Sterling, food prices have gone up but wages show no sign of following. So you have inflation in some sectors but not in others. If you had a steady 2% inflation across the economy, it wouldn't make much difference. If prices, wages and pensions all went up together it wouldn't much matter. The problem is that inflation does not work like that. Different sectors of the economy benefit of suffer, depending on circumstances. Im not opposed to inflation, per se, one of my memories is the ERM Recession which was justified by the fact it kept inflation down, but I do think inflation ought to be controlled by the BoE.
Posted by Dafyd (# 5549) on
:
quote:
Originally posted by Russ:
quote:
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.
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.
Not all of the elderly have liquid assets and not all people with liquid assets are elderly.
I feel sympathy for elderly people. Would it be rude of me to think you feel sympathy too? Or would you rather I think you don't? But do you think we should allow our sympathies to determine our judgement? Surely not. You wouldn't want us to let partial sympathies affect our judgements of principle.
Likewise, you wouldn't want us to mistake any sentimental sympathy we feel about saving for moral approval, would you? Any duty to save for one's retirement would be imperfect, and you don't believe in imperfect duties. You don't believe savers deserve any kind of moral respect.
If the pension fund is invested in something economically productive it will be unaffected in value by inflation. Only if it's essentially liquid will inflation affect the value.
quote:
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...
The possibility of inflation is something any competent financial actor can take into account when they make their decisions.
Who do you think is making the promise inherent in the idea of a pension? Why should anyone other than the pension provider be bound by it?
Governments come in all ideological shades. Most governments tend to agree with you on low inflation. Governments are as likely to act in the interests of their party donors as in their own interests; they may even act in the interests of the country or their voters.
Posted by Crœsos (# 238) on
:
quote:
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.
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.
Posted by Doc Tor (# 9748) on
:
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.
Posted by chris stiles (# 12641) on
:
quote:
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
... and the response in the Weimar Republic as in many places elsewhere was fiscal contraction - what we call austerity today. So it's far more true to say that austerity led to the Nazis
Posted by Moo (# 107) on
:
quote:
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.
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
Posted by Callan (# 525) on
:
quote:
Originally posted by Crœsos:
quote:
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.
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.
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.
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.
(In the interest of balance, I will freely concede that we, in the UK, could have learned from the German Constitution which declares plebiscites to be verboten).
Posted by Crœsos (# 238) on
:
quote:
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.
Apples and oranges. You'll remember a war, particularly a war you've lost. You don't think much about the last economic crisis if you're in the middle of a new one.
quote:
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.
Well, you might wonder that if you were an American in 2017 who knew nothing about how his country managed monetary policy and didn't know what the Federal Reserve does. The dual mandate (short version: through its control of monetary policy the Fed should control against runaway inflation and work towards full employment*) has existed in one form or another since roughly the end of the Second World War (i.e. since before there was an FDR or Bundesbank) so I'm not convinced controlling inflation is a novel idea to American monetary policy.
It's not so much that controlling inflation is a bad idea, it's using moralizing cautionary tales that fascism is only a couple of inflation points away to discourage the other half of the dual mandate that I find objectionable.
--------------------
*To an economist "full employment" doesn't mean "everyone who wants a job has one", it means the rate of employment beyond which a wage-price inflationary spiral comes into effect.
Posted by Moo (# 107) on
:
quote:
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.
One of the main contributors to Nazism was the abolition of the monarchy. Wilhelm was not a good guy, but people were used to a monarchy, and they didn't know what to do with representative democracy. Many of Hitler's early supporters were royalists, who would have preferred the kaiser.
I'm convinced that things would have gone much better if the kaiser had been left on the throne with his wings clipped.
Moo
Posted by Doc Tor (# 9748) on
:
quote:
Originally posted by Moo:
quote:
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.
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
Commiserations. It was noted upthread that inflation does hit those on a fixed income, and that those products which are index-linked are superior, even if they do initially pay less.
Posted by Timothy the Obscure (# 292) on
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quote:
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.
The firefighters I've known don't regard firefighting as necessary but unpleasant (though I would)--they find it exciting and fulfilling. And in many rural communities in the US the fire departments are staffed by volunteers, who train intensively without pay. It used to be an assumption that everyone would participate (this has become more problematic as rural America is depopulated thanks to mechanized industrial agriculture, but that's a different issue, sort of).
Posted by Russ (# 120) on
:
quote:
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.
That sounds right to me.
I wish I understood economics better. My limited understanding is that "inflation" is used in two related senses - one that means "price rises" and one that refers to a condition of "more money chasing the same amount of goods" - an "overheating" economy - which leads to price rises.
If there are other possible causes of rising prices, then one can talk of government interventions or system shocks that cause inflation in the first sense (higher prices) but not inflation in the second sense.
Keynesianism came to be seen as inadequate due to the "stagflation" of the 1970s, where prices rose continually because the expectation of price rises became institutionalised, rather than because of second-sense inflation...
Posted by Russ (# 120) on
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quote:
Originally posted by mr cheesy:
[Inflation primarily impacts those on fixed incomes
Yes, exactly.
quote:
which might include state pensioners, but as far as I know that is inflation linked.
Depends where you live ?
quote:
Private pensions are linked to changes in value in the markets into which they're invested, which is not directly linked to inflation.
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.
Posted by ThunderBunk (# 15579) on
:
quote:
Originally posted by Russ:
quote:
Originally posted by mr cheesy:
[Inflation primarily impacts those on fixed incomes
Yes, exactly.
quote:
which might include state pensioners, but as far as I know that is inflation linked.
Depends where you live ?
quote:
Private pensions are linked to changes in value in the markets into which they're invested, which is not directly linked to inflation.
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.
Russ, there is an option called income drawdown, now completely deregulated as flexi-access drawdown, where pensioners can hold their money purchase fund (having taken the first 25% tax-free) invested, in the same way as before they drew their lump sum if they want to, and draw directly from the invested fund. Of course, this fund can run out, or shrink to nothing on the casino of the investment markets, but that's the price of freedom, eh kids?
Posted by balaam (# 4543) on
:
Bumping the thread due to Bitcoin value:
Bitcoin loses over a third of value.
Or for a more lighthearted look:
Shock as imaginary money not worth the paper it isn't written on
Posted by Crœsos (# 238) on
:
Economist Paul Krugman tweeted this about Bitcoin's current price volatility.
quote:
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 ...
The "this" he's referring to is a graph of the NASDAQ Composite Index from 1999 to 2003, a period which contains the dot-com crash.
A good high level review of Bitcoin, blockchain, and related issues can be found in an article titled "Ten years in, nobody has come up with a use for blockchain". I hope it's not too much of a spoiler to say that the author sees Bitcoin as a solution in search of a problem and a system that works a lot less well than the current status quo. A sample:
quote:
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.
[ 29. December 2017, 18:01: Message edited by: Crœsos ]
Posted by Crœsos (# 238) on
:
And because why not, there are a couple of Jesus-themed cryptocurrencies (one satirical, one allegedly serious).
quote:
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.
Posted by Crœsos (# 238) on
:
This is just getting a little too "meta".
quote:
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.
When even the enthusiasts can't make it work, maybe it's time to reassess this Bitcoin thing
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