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Source: (consider it) Thread: Is Gold a Myth?
mr cheesy
Shipmate
# 3330

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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.

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arse

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Marvin the Martian

Interplanetary
# 4360

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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?

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Hail Gallaxhar

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mr cheesy
Shipmate
# 3330

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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.

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arse

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Crœsos
Shipmate
# 238

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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.

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.

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Humani nil a me alienum puto

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Karl: Liberal Backslider
Shipmate
# 76

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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 ]

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Might as well ask the bloody cat.

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Crœsos
Shipmate
# 238

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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 ]

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Humani nil a me alienum puto

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mr cheesy
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# 3330

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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.

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arse

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hatless

Shipmate
# 3365

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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.

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My crazy theology in novel form

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Crœsos
Shipmate
# 238

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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.

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Humani nil a me alienum puto

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Marvin the Martian

Interplanetary
# 4360

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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...

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Hail Gallaxhar

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mr cheesy
Shipmate
# 3330

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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.

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arse

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Doc Tor
Deepest Red
# 9748

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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.

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Forward the New Republic

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Dafyd
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# 5549

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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.

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we remain, thanks to original sin, much in love with talking about, rather than with, one another. Rowan Williams

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Marvin the Martian

Interplanetary
# 4360

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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.

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Hail Gallaxhar

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Crœsos
Shipmate
# 238

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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.

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Humani nil a me alienum puto

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Karl: Liberal Backslider
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# 76

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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.

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Might as well ask the bloody cat.

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mark_in_manchester

not waving, but...
# 15978

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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 ]

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"We are punished by our sins, not for them" - Elbert Hubbard
(so good, I wanted to see it after my posts and not only after those of shipmate JBohn from whom I stole it)

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Karl: Liberal Backslider
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# 76

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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.

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Might as well ask the bloody cat.

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Lyda*Rose

Ship's broken porthole
# 4544

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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.

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"Dear God, whose name I do not know - thank you for my life. I forgot how BIG... thank you. Thank you for my life." ~from Joe Vs the Volcano

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mr cheesy
Shipmate
# 3330

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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.

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arse

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Gwai
Host
# 11076

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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.

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A master of men was the Goodly Fere,
A mate of the wind and sea.
If they think they ha’ slain our Goodly Fere
They are fools eternally.


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HCH
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# 14313

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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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Callan
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# 525

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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.

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How easy it would be to live in England, if only one did not love her. - G.K. Chesterton

Posts: 9712 | From: Citizen of the World | Registered: Jun 2001  |  IP: Logged
Dafyd
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# 5549

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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.

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we remain, thanks to original sin, much in love with talking about, rather than with, one another. Rowan Williams

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Crœsos
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# 238

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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.

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Humani nil a me alienum puto

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Doc Tor
Deepest Red
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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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chris stiles
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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
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Moo

Ship's tough old bird
# 107

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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

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Callan
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# 525

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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).

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How easy it would be to live in England, if only one did not love her. - G.K. Chesterton

Posts: 9712 | From: Citizen of the World | Registered: Jun 2001  |  IP: Logged
Crœsos
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# 238

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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.


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*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.

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Humani nil a me alienum puto

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Moo

Ship's tough old bird
# 107

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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

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Doc Tor
Deepest Red
# 9748

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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.

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Forward the New Republic

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Timothy the Obscure

Mostly Friendly
# 292

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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).

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When you think of the long and gloomy history of man, you will find more hideous crimes have been committed in the name of obedience than have ever been committed in the name of rebellion.
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Russ
Old salt
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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...

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Wish everyone well; the enemy is not people, the enemy is wrong ideas

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Russ
Old salt
# 120

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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.

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Wish everyone well; the enemy is not people, the enemy is wrong ideas

Posts: 3102 | From: rural Ireland | Registered: May 2001  |  IP: Logged
ThunderBunk

Stone cold idiot
# 15579

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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?

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Currently mostly furious, and occasionally foolish. Normal service may resume eventually. Or it may not. And remember children, "feiern ist wichtig".

Foolish, potentially deranged witterings

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balaam

Making an ass of myself
# 4543

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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

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Love the dinner, hate the din.
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Posts: 8919 | From: Somewhere else | Registered: May 2003  |  IP: Logged
Crœsos
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# 238

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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 ]

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Humani nil a me alienum puto

Posts: 10567 | From: Sardis, Lydia | Registered: May 2001  |  IP: Logged
Crœsos
Shipmate
# 238

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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.



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Humani nil a me alienum puto

Posts: 10567 | From: Sardis, Lydia | Registered: May 2001  |  IP: Logged
Crœsos
Shipmate
# 238

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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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Humani nil a me alienum puto

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