Seen the commercials looking for your gold?

[NoDrama]

Food prices YoY have increased 8%, Oil prices have increased 100% YoY. You don't need a new TV or a New Car, but you sure as hell MUST have food and energy to even exist. You have deflation in overpriced assets, not deflation in aggregate.


People can see the disaster that is surely coming and they are buying the one and only thing that has retained its value during times of systemic collapse, Gold. Like I said only a small portion of the population is actually buying gold, but even that is edging the price upwards.

 

[IAm5toned]

what i think is funniest is what intristic value does gold have anyway? i mean its shiny and all, and doesnt rust... but you cant eat it.

 

[doc111]

what i think is funniest is what intristic value does gold have anyway? i mean its shiny and all, and doesnt rust... but you cant eat it.

It has value because we say it has value and there is essentially a limited quantity of it.

 

[hanimmal]

Food prices YoY have increased 8%, Oil prices have increased 100% YoY. You don't need a new TV or a New Car, but you sure as hell MUST have food and energy to even exist. You have deflation in overpriced assets, not deflation in aggregate.


People can see the disaster that is surely coming and they are buying the one and only thing that has retained its value during times of systemic collapse, Gold. Like I said only a small portion of the population is actually buying gold, but even that is edging the price upwards.

Actually it was in the aggregate that we had deflation.

 

[ViRedd]

And your perception dictates your reality.

So turn off youtube for a while and maybe get a good (real) economics book or two.


Because if you would actually take two seconds to look into it, you would find that over the last year we have mainly had Deflation, and that is while gold was increasing in it's stock price.

What books would you recommend?

 

[hanimmal]

I really appreciate this question from you Vi, because regardless of how we feel about different issue, I really do respect the fact that you have worked very hard and have followed everything closely over the years to build up the wealth of knowledge you do posses. And I am sorry if I am dickish sometimes, I forget that we are all people when I get typing.


Anyway,

This may sound weird but the two books I would recommend is the same book: The Economics of Money, Banking, and Financial Markets by Frederic Mishkin. But two different volumes, 1 and 9.

Volume 1 first which was published back in 87 was written at Reganomics peak.

This was the first real book that I read and it really opened my eyes to seeing exactly what was going on with the economy. I did read a couple very basic (like a novel more than a textbook) economics books, but this is stuff you already know (like why rent control is a bad thing) and won't need to learn that for the first time like I had to.

But the awesome thing is that you can just have fun with it, like it or not the problems are like puzzles and when you solve them it is satisfying. And also it really shows you exactly what economists where doing at the time and what the math models they were using to decide the policies that they had at the time. Also it is very interesting to read about what the FED was thinking and the buildup to the deregulation of the banking industry (under Clinton in 99) and what they were asking for and why.

It is just so interesting to read and know what they were doing and thinking and seeing the process they used to get there.



And the 9th edition is the newest one. This one actually covers all the things that you have just learned about (in the first book) and how they changed over the time you don't have that insight into why they were changing the economic models over the years. And is up to date with this latest crash.

I just find it amazing. Being able to see exactly why these people are doing the things they are, and learning how to predict what they are going to do for any situation that you hear about in the news.


Even if you 100% hate the banking industry and the FED I would think this knowledge would be invaluable. Because with it you will know exactly what is going on when the government dumps 750billion dollars into the banking industries reserves and holds a closed door meeting with all the major heads, and a few days later comes out and says "we will not let them fail". And how that in reality what they are doing is trying to stop a bank run.

Because if they didn't
1. the banks were already hard hit and running low on money so if the public would have panicked more they may have withdrawn more money than they had in reserve and would have to buy back bonds at a huge loss in order to be able to pay the customers. Which may lead to a wider panic and bank failures which would then lead to more and then a systematic collapse. Which would virtually wipe out everyones 401k over the age of 40 to a point it would not recover in time for it to be needed and destroy everyone that is currently relying on it and had it in stocks or mutual funds.

2. By meeting with them he seemed to be doing explaining exactly what he needed them to do for the economic theory to really play out, is say that they were excepting the money and going to ease some of the credit restrictions (even if it was not the case it was important for us to hear it). This meant that companies and people would see a light at the end of this black hole and not be so afraid to buy stuff and that it may be ok to put your money back into the stock market (remember this was the march lows when it hit bottom at 6500 to get back up to over 10k again in aug/sep).

3. By saying they won't be allowed to fail meant that they would recover eventually (even if years) to full profitability which meant if you put your money in them now in 5 years you would have made a killing (I bought bank of america at $7 and it hit $17 when I pulled it out a couple months later when I figured it would not be worth it to keep it in it anymore in the short term anyway). So it was a almost 100% fact that if you put your money in the large banks in march you would be very well rewarded long term investment wise.


Anyway sorry if I am rambling about it, this is just the stuff that really excites me. Like it or not, knowing why a theory falls apart or why they have come up with it is just fascinating! Being able to then apply the knowledge that you have learned to see what is going to happen and be able to figure out very precisely how much it would have cost to if the other decision was taken and be able to compare them is amazing.

And you can work to destroy the hypothesis that they are going on by figuring out exactly why the theory is lacking and try to come up with one that fits what you believe is happening and see if it is or if they were right.

I shouldn't have smoked before I wrote this, but there you go I needed to unwind. Anyway hope you made it this far, didn't mean to sound pro anything but amazement of the insight it gave me to what was happening.

 

[Smirgen]

These people are definitely interested in gold...
http://www.youtube.com/watch?v=L0NYzfokrXE

 

[NoDrama]

Actually it was in the aggregate that we had deflation.

Only in asset classes. You sure didn't see food prices decreasing now did you? Consumer Prices have risen as sure as the sun will set tomorrow.

 

[hanimmal]

Only in asset classes. You sure didn't see food prices decreasing now did you? Consumer Prices have risen as sure as the sun will set tomorrow.

You said aggregate, as in all encompassing, so that includes food, and everything else. And with all that together it was deflation for much of last year.

I guess you really have no clue, so I shouldn't be dickish.

But if your paying less for everything as a whole, that means that you would still be able to get your food and still get all the other stuff and due to deflation you are paying less as a whole (aggregate) than before, because it was deflation.

What you are saying is like: I drove faster to work today, because I ran a yellow light, even though it took me 5 minutes longer to get to work because of a traffic jam. It makes no sense.

 

[Illegal Smile]

I don't automatically shun any conspiracy theory, but there is nothing "exactly" going on with the economy. Beliefs about manipulation and the fed and gold... yawn. Yes it is possible to manipulate at the very small margins. This is being done now and was being done 200 years ago. But overall, the economy works according to its own rythyms and the notion that the government or any other conspirator can manipulate all that much is overhyped.

 

[doc111]

I don't automatically shun any conspiracy theory, but there is nothing "exactly" going on with the economy. Beliefs about manipulation and the fed and gold... yawn. Yes it is possible to manipulate at the very small margins. This is being done now and was being done 200 years ago. But overall, the economy works according to its own rythyms and the notion that the government or any other conspirator can manipulate all that much is overhyped.

Which is why the free market system with all its flaws is still the best system around.

 

[hanimmal]

Look no further than the inflation that Regan had to overcome to see how much the government has to stabilize/hurt the economy.

The unnaturally high employment experiment of the 70's that the goverment got a boner over led to a huge rise in inflation, and huge recession. Same with Hoover's raising taxes and cutting spending during the great depression along with the populous uproar to allow the banks to melt that continued the panic, pretty much put the nail in any chance to heal the system.

The government has a huge role in the economy. I am not sure if I posted this, but realistically how it should work is that in good times (economically) the government should raise taxes and build a surplus to keep the economy from bubbling, and when it does reach a ceiling and the economy slumps it should step back in with tax breaks, and high government spending to fill in the void created by consumption and investing dropping.

The only problem is that most politicians seem to not care (or understand) about the actual science of economics and govern from the hip. I mean seriously what a stupid idea to cap bankers pay because your pissed. What does that accomplish?

Besides maybe appeasing some of the masses, with a look see we publically whipped them, we are on your side.

 

[NoDrama]

Since consuming is 70% of the economy, Look up the word consume in a dictionary so you are on the right track, then when consumer prices do not go down, but instead go up, that is aggregate inflation, not deflation. Things like food, gasoline(which did deflate), natural gas, electricity, paper are all consumables IE once used they are gone FOREVER. Since 70% of our economy is consumption spending then it is safe to say that only asset classes suffered from price deflation while the majority of the economy saw either a price increase, or stability in prices. Don't believe the Governments CPI figures, they are calculated to always show a very small increase in inflation. Look to the actual prices you are paying for the things you have no choice but to buy ( Food, energy etc), you will see increases in most prices.

You see inflation IS money printing and as long as we are buying our own treasuries at $200 billion per month then we are going to keep seeing the price of gold go up. In reality the price of gold always stays the same, its the dollar that is devaluing itself against gold. If printing of money really worked don't you think the Romans, the Greeks, the Zimbabweans, Czechoslovakians, china, Japan and Great Britain would have been able to make it work over the last few thousand years? It does not work, at first all the new money creates a boom, but sure as death there will be a bust that will take away all the gains of the boom and then more.

The government must step aside and let all the rot in the economy kill itself off, that will be the only way to get rid of it.

 

[hanimmal]

What a bunch of nonsense.

Don't trust the government's numbers, listen to me, riiight. Or don't trust the government data, look at this internet site that happens to be selling gold, riiiight.

And before you try to make someone feel stupid by telling them to look something up, you may want to use the right word, consumption is what we spend our money on, you should have asked us to look that one up.


I would pull out the charts for you, but you already put your tinfoil hat back on (don't trust the government numbers remember) so there really is no point. We had deflation for most of '09. Inflation is not a bad thing, and it keeps the system running very well as long as it is kept in check, but since I don't have a youtube video with some scary music and a dude in a ski mask, I am not sure if people on this site will believe it.


And gold has not changed in price just the dollar's value vs it, priceless.

 

[NoDrama]

Devaluing the dollar is a good thing? for who? Exporters? Inflation is primarily a function of money printing which causes the dollar to be worth less as there are more of them. When the dollar is worth less the prices of things must be raised to make the same standard of living.



Main Entry: con·sump·tion
Pronunciation: \kən-ˈsəm(p)-shən\
Function: noun
Etymology: Middle English consumpcioun, from Latin consumption-, consumptio, from consumere
Date: 14th century
1 a : a progressive wasting away of the body especially from pulmonary tuberculosis b : tuberculosis
2 a : the act or process of consuming <consumption of food> <consumption of resources> b : use by or exposure to a particular group or audience <the document was not intended for public consumption>
3 : the utilization of economic goods in the satisfaction of wants or in the process of production resulting chiefly in their destruction, deterioration, or transformation

Fairly certain we are referring to the #3 definition, what did you think consumption meant? the first one?

You don't consume cars, homes, businesses, Road Graders, Streets, Telephone poles etc etc etc


FWIW there was no bubble in gold during the depression. It was ILLEGAL for a US citizen to even own gold, so any bubbles in gold at the time were only a flight to quality by the big banks and foreign countries that were buying gold as fast as they could since the US depression affected the entire world. Gold is was and always will be the ultimate " Money".

I will call you on your bubble argument when gold hits 1500 dollars, then you can tell me more about how its all going to burst any second.

 

[lopezri]

I don't think the "gold bubble" argument can hold much water. Gold is considered the international standard for value. If you think about it, everything boils down to being paid a certain value for goods, services, or labors. Therefore when you work you get paid. What you get paid is ultimately backed by gold. The reason for the value of the dollar going down isn't because the value of gold is going up or that there is a shortage of gold. The reason the dollar goes down is because the Federal Reserve uses the same amount of gold to back up more of the paper-money they produce.

Say for example, that in 1930, the Federal Reserve used $100,000.00 worth of gold to back up $100,000.00 worth of paper money. Now, instead of keeping the amount of gold equal to the dollar amount of paper money, the Federal Reserve prints another $100,000.00 worth of paper money but still only backs it up with the original $100,000.00. Now the gold only represents half the value of the $200,000.00 worth of paper money. So now the paper money is only worth $.50 on the dollar because the U.S. didn't actually have another $100,000.00 in gold to back up the additional $100,000.00 of paper-money.

Because of this, we get inflation because now something that was once bought from a country with a stable economy that was worth $1.00 is now going to cost $2.00 because our dollar is worth half of the gold standard.

 

[golddog]

Grow your own.

Gold and Bullets - now let's talk about inflation.

Gold will hold it's own, how much will you pay for bullets when our government tries to ban them?

Peace -

 

[lopezri]

Devaluing the dollar is a good thing? for who? Exporters? Inflation is primarily a function of money printing which causes the dollar to be worth less as there are more of them. When the dollar is worth less the prices of things must be raised to make the same standard of living.



Main Entry: con·sump·tion
Pronunciation: \k&#601;n-&#712;s&#601;m(p)-sh&#601;n\
Function: noun
Etymology: Middle English consumpcioun, from Latin consumption-, consumptio, from consumere
Date: 14th century
1 a : a progressive wasting away of the body especially from pulmonary tuberculosis b : tuberculosis
2 a : the act or process of consuming <consumption of food> <consumption of resources> b : use by or exposure to a particular group or audience <the document was not intended for public consumption>
3 : the utilization of economic goods in the satisfaction of wants or in the process of production resulting chiefly in their destruction, deterioration, or transformation

Fairly certain we are referring to the #3 definition, what did you think consumption meant? the first one?

You don't consume cars, homes, businesses, Road Graders, Streets, Telephone poles etc etc etc


FWIW there was no bubble in gold during the depression. It was ILLEGAL for a US citizen to even own gold, so any bubbles in gold at the time were only a flight to quality by the big banks and foreign countries that were buying gold as fast as they could since the US depression affected the entire world. Gold is was and always will be the ultimate " Money".

I will call you on your bubble argument when gold hits 1500 dollars, then you can tell me more about how its all going to burst any second.

Referring to the above quote in RED -

Inflation has nothing to do with maintaining a "same standard of living".

Inflation is caused because when the U.S. trades with other countries that are selling us our goods, services, or labors, we have less value of trading exports.

Prices aren't raised so we can continue to make the same amount of money so that we can continue to live the way we want. Prices are raised because the cost of the goods has to still be paid back at an equal amount to the importer.

 

[doc111]

I don't think the "gold bubble" argument can hold much water. Gold is considered the international standard for value. If you think about it, everything boils down to being paid a certain value for goods, services, or labors. Therefore when you work you get paid. What you get paid is ultimately backed by gold. The reason for the value of the dollar going down isn't because the value of gold is going up or that there is a shortage of gold. The reason the dollar goes down is because the Federal Reserve uses the same amount of gold to back up more of the paper-money they produce.

Say for example, that in 1930, the Federal Reserve used $100,000.00 worth of gold to back up $100,000.00 worth of paper money. Now, instead of keeping the amount of gold equal to the dollar amount of paper money, the Federal Reserve prints another $100,000.00 worth of paper money but still only backs it up with the original $100,000.00. Now the gold only represents half the value of the $200,000.00 worth of paper money. So now the paper money is only worth $.50 on the dollar because the U.S. didn't actually have another $100,000.00 in gold to back up the additional $100,000.00 of paper-money.

Because of this, we get inflation because now something that was once bought from a country with a stable economy that was worth $1.00 is now going to cost $2.00 because our dollar is worth half of the gold standard.

US currency hasn't been backed by gold sice 1933:

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

 

[hanimmal]

I am fairly certain I didn't say it was going to pop immediately, but it is a good idea to keep your eye on it if you own gold. That is why I used the word soonish. They are still collecting it, once that slows the demand will be high, the price will still rise, and that is when I would be most worried about the pop.

And you should know that consumption is the term used when talking about it in economic terms, consumption is all new finished goods purchased. You were being an ass to tell me to look it up. It was an attempt you continue to use to try to belittle me. You did fail, because I really could care less about your failed vocab lesson.

And you if you can consume gas, you are telling me, that a car with 300k miles on it that has no prayer of moving, is not consumed?

You don't consume cars, homes, businesses, Road Graders, Streets, Telephone poles etc etc etc

Every one of these are new and get used up. It is considered consumption when it is newly made, and not counted again in GDP. Because it will eventually be replaced when its no longer used.

When you buy new finished goods or services it enters into consumption. Which along with business investment and government and net export make up GDP.

But hey, cannot trust anything math or science if it involves anything about reality of what the government does, according to you, so I guess why even bother measuring things like GDP or inflation.