Originally posted by: BansheeX
I don't understand what you're trying to say. There have clearly been times when gold is the better thing to be in.
That is in short term bursts that never, ever last. Ever in U.S. history. So your point is what, that people should become day traders and make money off gold during short time intervals? Seems overly time-exhaustive when you can build and hold equity for 30 years and get vastly superior returns.
It's not never the best move because some years ago you could have made 10x as more in a tech stock bubble had you timed the buy and sell perfectly. This collapse is far worse than the one we had in the 70s, and gold reached a high of $1000 then. Adjusting for inflation, why shouldn't it go much higher this time? Every fundamental is pointing to it, what is your reasoning for not buying it eight years ago or now? Did you flip some houses or something and make out like a bandit? Tell me, oh prescient one, how you used your knowledge to outperform me.
I've been outperforming you for 30 years, since my return has been 6.5%+
compounded annually. What has been the return on gold compounded annually over the last 30 years? Yeah, practically nothing in comparison. Do you understand it yet? This isn't about timing the market (equity was
clearly overpriced by 98/99/00 with P/E's of 25-30 on average. This is about long-term investments (since savvy people think long-term, naturally), and in the long-term, the undeniable fact is that real return on equity pulverizes gold over
any 20 or 30 year period since 1802. So you invested in gold at the absolute bottom in the early 00's, good for you. This is irrelevant since I can easily come up with a similar scenario where someone bought stock at the bottom of the 01 crash and sold it at the top of the bull market in 07, so I?ve cherry picked a time interval just like you did. What isn?t cherry picked; 206 years of market averages, far more relevant than any short-term (3-10 year) gains you?re positing.
Hedge fund centered or not, it's mass fucking liquidation. Stop nitpicking. When people sell equities for dollars to pay off massive short-term debts on their resetting ARMs and CC bills after losing their job, does that not increase demand for dollars by default? It's not like we're on a gold standard where liquidation converts into a gold money market account. It might take a while longer for the herd to understand that even dollars aren't safe this time. You're dealing with a sheeplike populace and several generations that have known nothing but dollar = money, stocks = up always, fdic = safety. You should listen to my parents, fucking blindsided. I told them to put at least 50% into gold, but their garbage 401ks had no option for it, and they can't withdraw early without the government laying waste to it like everything else they can touch. In retrospect, they got clobbered so bad that the penalty would have been better. Try convincing someone that's going to happen before the fact.
Your point about hedge funds makes no sense, they're a drop in the bucket, so let?s just get that out of the way. So foreign countries retreating to our short-term T-bills has
nothing to do with
some hedge funds pulling out of emerging markets. It means nothing when their impact in percentage terms is relatively tame.
The issue here is simple; you don't want to acknowledge that when push comes to shove in a recessionary global environment, foreign countries retreat to our dollars because people value their
relative value and stability to other currencies. Perception and trust are important words in economics and finance, it has been the bedrock of our markets for centuries. And U.S. dollars are a direct representation of U.S. investments, which are treasured throughout the world. Knowing this, the global economy naturally doesn't benefit from dumping U.S. dollars, China included, unless it's over a long period of time (which is fine, nothing wrong with that). This does not stop the U.S. from moving from 3rd world country ad infinitum, helping to raise their standard of living in the process (like we've done with China), because there is a mutual benefit to everyone involved on average. The terms of trade in that scenario are comparatively wonderful, and getting off gold helps give us monetary policy flexibility we didn?t have before 1971 to do just that.
Uhhhh, you are missing a key distinction between gold and fiat here. There is a fundamental difference between material scarcity and manufactured scarcity of a common material. Gold isn't manufactured scarcity like a fiat note, it's collected from the earth. There is no way to magically increase the supply in a way that doesn't involve labor and material costs. That guarantees safety from debasement. Government can't create gold out of thin air to pay for things, they have to use honest, physical appropriations. It did work, it did get us to reserve currency status, it did give us the highest GDP growth in the history of the country. There is no academic debate worth listening to that gold cannot work. Greenspan himself has a love affair with it.
And what you continue to ignore and/or fail to understand is that the mere
perception (again, important word in economics) of there being potentially more gold under the earth's crust is a big reason why gold was abandoned since, in relation to fiat, it offers no serious net benefit. The added flexibility for a country's monetary and fiscal policies and free capital flows by getting off of restrictive fixed exchange rates is why we went to fiat (and so did everyone else). You can more easily stave off disaster, increase the money supply and mitigate cost-push inflation. Whole new currency arbitrage industries have been created as a result of fiat. Gold on the net offers nothing substantial. If you think it does, you should write a paper and have it peer reviewed. If not, why front like you're some cutting edge guru? Why pretend like material input matters when you can't explain precisely
why it matters? WHY? What data suggests gold-backed dollars due to material input costs would make us a more successful economy?
And Greenspan hasn't been a gold proponent for a good 2 decades, good grief.
If you really think you know your stuff, I'd be entertained to see you call in Schiff on his Wednesday radio broadcast. You clearly want to discredit Austrian economics and gold, he'd be happy to take your call.
He'd repeat ad nauseum what he said before. He'd tell us bond rates will eventually go up (no indication of that), he'd tell us the dollar will collapse (it hasn't), he'd say the global market place will recover more quickly and/or not be affected nearly as much as the U.S. (patently absurd so far), etc. He'd tell us that the collapse is coming and, when he's eventually wrong, who knows what he'll say. I mean really, the guy thinks the Fed
didn't let the money supply contract in the 30's. You can't reason with a guy like that, it is simply undeniable fact they let the money supply contract and it was in all likelihood the overwhelming reason the GD was prolonged for years and years. Fed learned from that and adjusted, and the results are decades of record growth in GDP, wages, standards of living, etc. Results speak for themselves.
Whoopity effing doo, so make fractional reserve banking illegal. The only reason the Fed was created was to psychologically stop runs by providing emergency funds to meet depositor demands and get them to think the money was there. Too bad they decided to fiddle with the interest rate lever instead.
And what exactly is this supposed to mean when quite clearly the FDIC, Fed, and gov't insured bonds have helped to stabilize an increasingly complex global market place? I mean really, are you deluded into thinking we are capable of regulating the market place without the Fed and FDIC? You really are that detached from reality I guess. Without certainty and stability you have runs on banks like we had in 1907, total chaos. You can?t have that in a sophisticated economy where a far higher percentage of Americans and foreigners are dependent on our economic success. Stakes are much higher, and a central bank was a logical progression. Every country followed suit, and the world has been extraordinarily better off for it.
No, I'm pointing out that his appeal would be met with the same ridicule and ignorance by a more numerous and deceitful adversary. You just don't get it. How common throughout history have we managed to even achieve a sliver of economic or political freedom? Why didn't peer review change that? The powers you want are so concentrated and easy to exploit, it's difficult to believe anyone who considering only his own self-interest would defend them so vehemently.
You have no concept that peer review means anyone, anywhere, can offer up an argument and affirm, or not, research presented in a paper. Peer review by its very nature is open to anyone and therefore controlled by no single self-interest(s). Some of the best economists come from deep, rural India who came to the U.S. with absolutely no interest or connections to anyone in the Western world, and made it big in academia. Your layman bullshit about concentrated power reeks of fringe libertopian militia paranoia.
STOP IT. This is so scripted. Do you even have an ounce of skepticism in your body? It doesn't matter what the OBJECTIVE is or what it SEEKS to do. Humans can't be trusted to do it. The result has been everything they sought to mitigate. Banking panics and depressions are beyond comparison! These people are being given the powers that they could easily abuse to create costs far worse than what they were seeking to solve.
Please cite specific examples of where we have abused our economic powers worse today than we did before 1913. Seriously, give up, you're not going to find a significant difference. You're just not, and no amount of "Socialist!" fear mongering is going to convince anyone sane here.
Sometimes you have to understand where you're in the system with the least costs and the most benefits. You can't dream up this central plan where 1 office takes away all our guns to solve violence, distributes wealth to solve poverty, distributes jobs to solve unemployment, fixes the price of risk, fixes the price of goods, fixes the price of labor, and it all ends happily ever after. This is nonsense of the highest degree. A benevolent dictator COULD IN THEORY be more efficient than any form of government we know. So long as he and his perpetual successors know well and mean well. FAT CHANCE it happens for very long in practice, and your academic money controlling theories are the same damn thing.
Except the cold, hard reality is that this system since 1913 has worked better than any previous system in the 19th century. The stats speak for themselves. You can talk about ideals, hopes, dreams and generalized nonsense about benevolent dictators all you want (the Fed is nothing close to this, total and utter mis-characterization). Bottom line; it has worked. Your ideals have long been attempted and abandoned, they aren't coming back and for very, very sound reasons (complexity, flexibility, and most of all results).
Your rebuttal doesn't even make any sense. That was a factual statement, politicians do spend millions of their own money getting into low-paying positions of controlling other people's money. And they CONSTANTLY get caught doing far worse than overpaying or wasting it. You're verifiably insane if you're disagreeing with that. You respond by telling me that "I don't understand" and it's because "I wasn't formally trained." Wtf kind of arrogant, copout response is that? Now you know why I ignore your fucking posts. I'd ban you in ten seconds flat if I were an admin, it's infuriating to discussion.
You're infuriated because you don't understand, really, you don't. You would accept my point as fact if you had any clue that the Fed is not under political control so your point about politicians mismanaging money (a fact that is not relevant to your point or this discussion) means nothing in the case of the Fed, whom dictate monetary policy independent of Congress. The legislative/executive branches dictate the
fiscal policies (taxes, etc.), they do no dictate when to cut interest rates.
Here's what I want you to do. Tell me why the Weimar and Zimbabwe hyperinflations happened and how our intellectual money printers over here are incapable of it. Tell me what restrictions you would place on government regarding monetary policy. Tell me why so many U.S. politicians throughout history have been caught taking kickbacks in exchange for legislative power, grants, contracts, academic advisory seats, you name it.
Zimbabwe and Weimar are irrelevant in the case of the U.S. since no one uses their money as reserve currencies, they don't have established trust or the established perception of reliability. Most of all, however, hyperinflation will come about when the government has inadequate tax revenue to pay for its spending. Although the gov?t might prefer to finance this budget deficit by issuing debt, it may find itself unable to borrow, perhaps because lenders view the gov?t as a bad credit risk (which describes Zimbabwe and Weimar well since no one has any reason to trust lawless, unregulated economies). So to cover the deficit, the gov?t turns to the only mechanism at its disposal,; the prenting press, and the result is rapid money growth and hyperinflation. This is what happened in Zimbabwe and Weimar, not in the U.S. Our velocity of money says we?re perfectly capable of handling a large infusion of cash, especially knowing that the alternative of letting the money supply shrink led to the Great Depression (the Fed didn?t have a fucking thing to do with it in the 20?s).
Immaterial, homes are asset prices. We pay for them. People would have noticed and resisted the inflationary runup if it hadn't been taken out of the numbers, and the subsequent fall would have never materialized.
Christ almighty, you just don't understand a god damn thing about how businesses operate; the whole process of asset inflation and deflation
is the business cycle, it's systematic risk. Why the hell would you include that in inflationary numbers that try to measure the inherent worth of a currency when the whole point of businesses is to make money? You'd stifle investment and get nothing but perpetual stagnation and wage decline if you pretended that inflation was 10%+ a year based on speculative equity fluctuations. Even if the way we measure inflation is flawed based on your analysis, you can still ascertain that inflation has been low using those same standards year-to-year as the relative growth in inflation has been remarkably consistent.
It is inflation, in a market economy with a market money, prices don't go up on homes 10% a year and gold 80%. People WITH money to bet make tons of money off poor suckers who came along for the ride and are oblivious to its implosion.
Wake up reject, people have been getting 6-7% returns on equity over every single damn 20 and 30 year period in U.S. history since 1802. Get it through your skull, you're not educated on the statistics.
Now look at the aftermath and tell me that more people gained than lost from the tech/housing bubble. The paper values of their retirement accounts imploded, their homes imploded. Anyone who thought they were building this huge retirement nestegg saw it implode more than prices. People displaced themselves to take jobs that could have only existed in the inflationary boom. People who weren't even involved are getting tapped into to pay for the losses. That's your defense for inflation? A conduit for short-term speculative gains benefiting some generations and dooming others? Wow, some system, Evan. I say we turn the tables and encourage steady savings and production as a means of generating wealth, not pumping cash into people's hands to gamble on bubbles.
You say this as if anyone here buys your bullshit when stocks have historically been great bets over the long run, totally pulverizing the commodities you prop up. As explained above, including asset inflation is the highest order of stupidity when you're trying to give businesses an accurate gauge of the worth of their medium of exchange. It puts them at the mercy of speculative ups and downs, while core CPI measures
actual swings in relative exchange rates and perceived values of goods and services. Yes, hedonics is key here because investment and growth is ALL about perception, dating back centuries and centuries before the Fed ever existed.
And no it would not be irrational to include it, it would tell people what the fuck is going on and point a big fat arrow at volatile money creation instead of speculators who use it. People thought they were getting rich. They quit their jobs, expected appreciation on just owning a home would pay more. It was total insanity, the gains were far above inflation numbers and people STILL look at them for guidance. They WANT to believe them, they are unwitting lemmings eager to look smart by telling everyone that a recession isn't here yet because the government numbers say we're growing.
None of this is the least bit true. Most economists, for very good reasons, believe inflation is a
good thing in moderation. It helps to grease the wheels of labor markets. The supply and demand for different kinds of labor are always changing. Sometimes an increase in supply or decrease in demand leads to a fall I the equilibrium real wage for a group of workers. If nominal wages can?t be cut, then the only way to cut real wages is to allow inflation to do the job. Without inflation, the real wage would be stuck above the equilibrium level, resulting in
higher unemployment. Remember now, those dastardly empirical studies confirm that nominal wages rarely fall and that workers are reluctant to accept cuts in their nominal wages.
It's not magic. Interest rates are pricing the risk of loaning money out. Private banks can compete and loan at their own rates, it's easy. If it didn't work, we wouldn't have had the industrial revolution.
It did work, I never said it didn?t in the past; but it worked with a far simpler and almost entirely non-existent GNP:GDP differential. Letting interest rates adjust on their own means during panics you can?t help to stimulate investment by cutting interest rates, leading to
uncertainty and pessimistic
perceptions of market viability. We can avoid all that with some sensible interest rate adjustments. Not central planning where everything is nationalized, that's jumping the shark. Softening the blow is reasonable, and it's certainly nothing like socialism. Crying out loud.
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