Trust Mises and Gold

[LOki]

In a deflating currency economy, salaries eventually go down.

Relevent only with fiat currency when the value of of everything goes up or remains constant. A deflated currency, where the value of that currency is based upon upon an objective standard of value rather than than some retard's capacity to print money, is simply a reflection the deflation in the value of everything being bought with it: If on one day your salary is worth $100 and it buys 100 widgets, and then your salary becomes worth $10, but you can still buy 100 widgets, then despite the deflation in your salary, it still carries the same objective value it did previously. Currency that is hard indexed to objectively etsablished value cannot deflate (or inflate) relative to value of things it's exchanged for in the manner that one founded upon some retard's capacity to print money, or force an interest rate can. The value of a currency cannot be predictably and objectively established where currency is subject to the whims of political expediencies--hence, the intrinsic weakness, and frankly moral failing, of fiat money.

Less dollars with more people and goods = salaries go down.

But the objective value of those salaries does not neccessarily have to follow.

Money, whether fiat or gold, only has value for its relative purchasing power.

Money, whether fiat or gold, has value only as a predictable representatiion of value, unless it also has some intrinsic value.

Gold does have some instric value as jewelry.

Unsubstantiated promises printed on slips of paper have, quite literally, no intrinsic value. Consider the value of the Mark in the Weimar Republic.

If the purchasing power of the currency has increased, it costs you more in purchasing power to repay a loan in a deflationary environment.

EG You borrow $1m for 20 years. Over 20 years deflation causes prices to fall by 1/2. You are making 1/2 the income. When you pay back the $1m, it is costing you $2m in equivalent purchasing power. Plus whatever interest.

Loans are more expensive for people and businesses. They borrow less and therefor can buy/produce less.

Borrowing is not a right or an entitlement. Borrowed wealth is not created wealth or earned wealth. Credit should not come easy . . . EVER, and repaying loans early SHOULD be rewarded by the minimization of the cost of the loan.

Unlike a deflationary scenario, If you just hold you're assets long term in cash, in an inflationary currency situion, I agree that would be retarded. So what do you do? You put your money in investments that keep up with inflation. That money is available for businesses and loans to buy things and increase production.

But who would loan you money if the money you repay with is objectivly worth less than the money you were loaned, even if there is more of it? You could pay higher interest . . . but then you and your lender have to predict the whims of some retards with the practically unlimited capacity to print and destroy money, or force an interest rate that erodes the value of the loan to you, or your lender, depending upon the direction of thier notion of political expediency.

 

[Iriemon]

In a deflating currency economy, salaries eventually go down.

Relevent only with fiat currency when the value of of everything goes up or remains constant. A deflated currency, where the value of that currency is based upon upon an objective standard of value rather than than some retard's capacity to print money, is simply a reflection the deflation in the value of everything being bought with it: If on one day your salary is worth $100 and it buys 100 widgets, and then your salary becomes worth $10, but you can still buy 100 widgets, then despite the deflation in your salary, it still carries the same objective value it did previously. Currency that is hard indexed to objectively etsablished value cannot deflate (or inflate) relative to value of things it's exchanged for in the manner that one founded upon some retard's capacity to print money, or force an interest rate can. The value of a currency cannot be predictably and objectively established where currency is subject to the whims of political expediencies--hence, the intrinsic weakness, and frankly moral failing, of fiat money.

Your actual salary goes down. You are correct that purchasing power is equivalent.

Less dollars with more people and goods = salaries go down.

But the objective value of those salaries does not neccessarily have to follow.

Money, whether fiat or gold, has value only as a predictable representatiion of value, unless it also has some intrinsic value.

Unsubstantiated promises printed on slips of paper have, quite literally, no intrinsic value. Consider the value of the Mark in the Weimar Republic.

Gold has no value as an exchange medium either. It only has value as trinkets to adorn ourselves with.

If the purchasing power of the currency has increased, it costs you more in purchasing power to repay a loan in a deflationary environment.

EG You borrow $1m for 20 years. Over 20 years deflation causes prices to fall by 1/2. You are making 1/2 the income. When you pay back the $1m, it is costing you $2m in equivalent purchasing power. Plus whatever interest.

Loans are more expensive for people and businesses. They borrow less and therefor can buy/produce less.

Borrowing is not a right or an entitlement. Borrowed wealth is not created wealth or earned wealth. Credit should not come easy . . . EVER, and repaying loans early SHOULD be rewarded by the minimization of the cost of the loan.

That is an issue between the borrower and lender. But you are implicitly acknowledging that the system you propose makes borrowing more costly. That is bad for an economy. I don't view that as a positive for the gold standard.

Unlike a deflationary scenario, If you just hold you're assets long term in cash, in an inflationary currency situion, I agree that would be retarded. So what do you do? You put your money in investments that keep up with inflation. That money is available for businesses and loans to buy things and increase production.

But who would loan you money if the money you repay with is objectivly worth less than the money you were loaned, even if there is more of it? You could pay higher interest . . . but then you and your lender have to predict the whims of some retards with the practically unlimited capacity to print and destroy money, or force an interest rate that erodes the value of the loan to you, or your lender, depending upon the direction of thier notion of political expediency.

In a deflationary situation, the lender doesn't need to lend, because the money increases in value just by sitting on it. You would only lend for the interest for the risk.

Which meanse the borrower not only has the cost of the interst for the risk but also the cost of having to pay it back in more costly money with less income. Because incomes are falling, that increases the riskiness of the loans, which means any lender charges higher interest.

Borrowers are screwed twice, and borrowing dramatically decreases.

Going to buy a house with a 30 year mortgage when in the future your salary is going to be only a percentage of what it is now? Maybe you'll put it off for ten years so you can hopefully save some money with your decreasing salary (besides home prices will be lower).

Buyers don't want to borrow to buy, builders don't want to borrow to build, they don't hire workers, and so on. Thru major sectors of the economy.

How is any of this good for economic growth?

With inflation, lenders don't want to sit on their money, its worth less over time. They want to lend. They charge interest for the fact that the money they will receive in the future is worth less, so they are compensated.

Borrowers pay interest, but are also paying future money worth less with higher incomes. So borrowing is less expensive.

The homebuyer buys the house. In 30 years his salary is increasing and the cost of the mortgage becomes relatively smaller. Less risk of default = lower interest rates for risk. That increase demand, increases production, increases wealth, improves the economy.

 

[LOki]

Your actual salary goes down. You are correct that purchasing power is equivalent.

As long as the value of your salary is the same as the value of your work, and the value of your work does not go down; your salary does not go down--unless your being paid in fiat money where your pay is subject to the whims of paper printing retards, in which case your salry is inderminant until you buy valuable goods.

Gold has no value as an exchange medium either. It only has value as trinkets to adorn ourselves with.

Says you.

That is an issue between the borrower and lender. But you are implicitly acknowledging that the system you propose makes borrowing more costly. That is bad for an economy. I don't view that as a positive for the gold standard.

No, I'm not. I'm asserting that the cost of borrowing should be independent of political expediencies and the whims of retards with the practically unlimited capacity to print and destroy money, or arbitrarily enforce an interest rate. That is good for the economy, and it's a positive for a currency based upon upon an objective standard of value.

In a deflationary situation, the lender doesn't need to lend, because the money increases in value just by sitting on it.

Not if you're not going to spend it.

You would only lend for the interest for the risk.

No. Off-setting risk is certainly a component of interest on some loans, but it's not the necessary component of interest. The necessary component of interest on loans is reimbursing the lender for the service of using his money that is not otherwise yours to use--and the price of that serivce is reflective of the value of that service, and should be independent of political expediencies and the whims of retards with the practically unlimited capacity to print and destroy money, or arbitrarily enforce an interest rate.

But the lender would still need to spend--on something.

You seem to think that borrowing and lending is the end-all and be-all of economics, but the fact of the matter is that buying and selling is the actual point. You seem to wish for free and easy money that is unearned, and more importantly you seem to wish that this free and easy money be exempt from any competing interest it's possessor might have in spending on himself.

Which meanse the borrower not only has the cost of the interst for the risk but also the cost of having to pay it back in more costly money with less income.

Fuck him then. Again, borrowing is not a right or an entitlement. Borrowed wealth is not created wealth or earned wealth.

Because incomes are falling, that increases the riskiness of the loans, which means any lender charges higher interest.

Incomes only really fall if their value really falls, or some paper printing retard with the practically unlimited capacity to enforce an arbitrary interest rate erodes the value of the currency.

Borrowers are screwed twice, and borrowing dramatically decreases.

Such is the nature borrowing wealth versus creating it.

Going to buy a house with a 30 year mortgage when in the future your salary is going to be only a percentage of what it is now? Maybe you'll put it off for ten years so you can hopefully save some money with your decreasing salary (besides home prices will be lower).

Buyers don't want to borrow to buy, builders don't want to borrow to build, they don't hire workers, and so on. Thru major sectors of the economy.

How is any of this good for economic growth?

Again, borrowing is not a right or an entitlement. Borrowed wealth is not created wealth or earned wealth.

Creation of wealth, rather than just borrowing it, is the definition of economic growth--and the moment you parse the difference between money and wealth, you will understand why you are wrong.

With inflation, lenders don't want to sit on their money, its worth less over time. They want to lend. They charge interest for the fact that the money they will receive in the future is worth less, so they are compensated.

This is only true where the lender's money is founded upon an objective standard rather than than one founded upon some retard's practically unlimited capacity to print and destroy money, or enforce an arbirary interest rate. Otherwise, with inflation, lenders don't want to sit on their money or lend either--they spend on themselves because it's the best guarantee of value when they can't competitively lend against the retards that set interest rates based on whims and political expediencies.

Borrowers pay interest, but are also paying future money worth less with higher incomes. So borrowing is less expensive.

Borrowed wealth is not created wealth or earned wealth.

The homebuyer buys the house. In 30 years his salary is increasing and the cost of the mortgage becomes relatively smaller. Less risk of default = lower interest rates for risk. That increase demand, increases production, increases wealth, improves the economy.

That seemed to work out just perfectly . . . last year.

 

[Iriemon]

Your actual salary goes down. You are correct that purchasing power is equivalent.

As long as the value of your salary is the same as the value of your work, and the value of your work does not go down; your salary does not go down--unless your being paid in fiat money where your pay is subject to the whims of paper printing retards, in which case your salry is inderminant until you buy valuable goods.

Repetitive

Gold has no value as an exchange medium either. It only has value as trinkets to adorn ourselves with.

Says you.

What value does it have as an exchange medium over paper?

No, I'm not. I'm asserting that the cost of borrowing should be independent of political expediencies and the whims of retards with the practically unlimited capacity to print and destroy money, or arbitrarily enforce an interest rate. That is good for the economy, and it's a positive for a currency based upon upon an objective standard of value.

Being independent of political expedencies is a different issue, and does not negate the point that with deflation the relative cost of borrowing increases.

Not if you're not going to spend it.

Which would be a relevant point if I had been talking about spending as opposed to lending.

No. Off-setting risk is certainly a component of interest on some loans, but it's not the necessary component of interest. The necessary component of interest on loans is reimbursing the lender for the service of using his money that is not otherwise yours to use--and the price of that serivce is reflective of the value of that service, and should be independent of political expediencies and the whims of retards with the practically unlimited capacity to print and destroy money, or arbitrarily enforce an interest rate.

Exactly. That "service of using money" is the time value of money. It the premise that $1000 today is worth more than $1000 in a year and so that is why you charge (and pay) interest.

But in a deflation that premise is no longer true.

But the lender would still need to spend--on something.

In a deflation, he could just sit on it and let it appreciate.

You seem to think that borrowing and lending is the end-all and be-all of economics, but the fact of the matter is that buying and selling is the actual point. You seem to wish for free and easy money that is unearned, and more importantly you seem to wish that this free and easy money be exempt from any competing interest it's possessor might have in spending on himself.

Credit is absolutely crucial to a growing economy.

Not many people can afford to buy homes with cash.

Fuck him then. Again, borrowing is not a right or an entitlement. Borrowed wealth is not created wealth or earned wealth.

No but it creates the means (capital) for creating wealth. Or having a home to live in.

Incomes only really fall if their value really falls, or some paper printing retard with the practically unlimited capacity to enforce an arbitrary interest rate erodes the value of the currency.

In a deflation income falls because there is less money in currency relative to population and real production.

Again, borrowing is not a right or an entitlement. Borrowed wealth is not created wealth or earned wealth.

Creation of wealth, rather than just borrowing it, is the definition of economic growth--and the moment you parse the difference between money and wealth, you will understand why you are wrong.

See above.

This is only true where the lender's money is founded upon an objective standard rather than than one founded upon some retard's practically unlimited capacity to print and destroy money, or enforce an arbirary interest rate. Otherwise, with inflation, lenders don't want to lend either--they spend on themselves because it's the best guarantee of value when they can't competitively lend against the retards that interst rate based on whims and political expediencies.

No, it is true based on the amount of currency -- the money supply. I agree that if lenders think that the Fed would double the money supply they would charge higher interest to reflect anticipated inflation.

Inflation doesn't prevent lending. A lender simply recoups his inflation loss with higher interest on the loan. We've had inflation for decades and it never prevented lenders from lending.

I don't know what you mean by "when they can't competitively lend against the retards that interst rate based on whims and political expediencies"

The homebuyer buys the house. In 30 years his salary is increasing and the cost of the mortgage becomes relatively smaller. Less risk of default = lower interest rates for risk. That increase demand, increases production, increases wealth, improves the economy.

That seemed to work out just perfectly . . . last year.

I never asserted that loans are risky for other reasons. You'd have risks of poor underwriting in a deflation scenario too. In fact, that is really the problem we are having. There has been deflation in the housing market, and now with the economy, deflation in lots of folks' income. Therefore the value of the homes the money was lent for has decreased and so have incomes to pay it. Folks default and houses don't have equity to cover the mortgage.

It's a perfect example of why deflation is bad. In this case, the deflation is caused in a specific market by correction of over speculation. But a gold standard monetarizes this deflationary risk.

 

[Kevin_Kennedy]

Well, actually Kevin, before you suggest that I am being obtuse, I have specifically agreed to the benfit of the gold standard many times, and I have asked you how we deal with the multiple problem of continuous deflation, many times.

To date you haven't addressed inevitable outcome of a gold standard...deflation

We both know the potential sortcomings with fiat money.

But you have yet to even acknowledge the inevitable shortcoming of the gold standard so who is really being obtuse here?

Damned right the GS prevents inflation...by creating continuous DEFLATION.

Addesss how the gold standard can NOT create that problem, if you can

If you cannot, just admit you don't know how to solve THAT problem of the gold standard, and we can agree to disagree agreeably.

Do not send me to a website and expect me to read a whole Misean tome to address this question.

If you cannot answer this question based on your readings of that school, then you are not qualifed enough to send me to a website because you did not understand what you read there, either.

What about DEFLATION?​

I didn't think you were being obtuse, or at least I didn't mean what I said in any negative terms.

You have a negative perception of deflation, but it's not negative. The market naturally moves towards lower prices in the first place, so deflation is not necessarily a bad thing.

In other words you do not have an answer.

No the market does not naturally move to lower prices anyway.

You are evading the inherent problem of imposing a gold standard on a vibrant and growing economy, Kevin.

The gold standard works perfectly in a STATIC economy, I will grant you that.

The gold stadard creates continuous DEFLATION in a growing economy, thus through that pressure the GOLD standard serves to depress economic activity.

HOW do you solve that problem or how do you structure society such that it can live with continuous deflation?

I'm prepared to accept the gold standard the moment you can explain to me why I would EVER buy anything I didn't abbsolutely positively need if I KNEW that the price of it would be lower next week, next year and so forth.

Additionally, who but an insane business person would borrow to become a producer if they knew that what they produced would continuously be decreasing in price while the GOLD they had to pay back would be continuously INCREASING in realtive value at the same damned time?

How does BORROWING work in that gold standard world?

Why do you keep avoiding answering my questions?

Because the MISES doesn't have an answer, perhaps?

We all KNOW how fiat money CAN be (doesn't have to, but certainly can be) bad.

Of course, fiat money could ALSO (if the regulators choose ) ALSO cause DEFLATION, couldn't it? they can just as easily decrease the money supply as increase it you know.

Ideally, amount of money in circulation should be some fairly consistent relationship to the amount of good and services in the market.

GOLD STANDARD cannot DO that.

How do you devise an economic system to overcome that problem?

As I said, you simply do not accept the answer given.

The market does naturally move toward lower prices. Look at the price of automobiles when they first came out, only the fairly well-to-do could afford them. Now just about everyone has at least one. Same with computers. Few at first, but now nearly everyone has at least one. That's the natural tendency of the market towards lower prices.

You personally might save your money and watch as prices decrease, but I think you're overstating the rate at which prices would decrease for one. And secondly, most people will not do that. They're going to buy the things they want or need when they want or need them. So like I said to Iriemon, you wouldn't have a "deflationary spiral" under the gold standard any more than you do now.

They would produce to make money, the same reason anybody produces now. The reason prices would be decreasing would be because raw materials cost less and it would cost less to produce the item in the first place. Everything would still be relative.

Yes, those who control it could deflate the fiat monetary supply, but they never do.

No, the amount of money does not need to correspond to the amount of goods and services, as I've told you before. The value of the money increases so the actual amount of money is irrelevant.

As I've said, Mises and the Austrians have the answers to your questions, you simply don't accept them.

 

[Iriemon]

I didn't think you were being obtuse, or at least I didn't mean what I said in any negative terms.

You have a negative perception of deflation, but it's not negative. The market naturally moves towards lower prices in the first place, so deflation is not necessarily a bad thing.

In other words you do not have an answer.

No the market does not naturally move to lower prices anyway.

You are evading the inherent problem of imposing a gold standard on a vibrant and growing economy, Kevin.

The gold standard works perfectly in a STATIC economy, I will grant you that.

The gold stadard creates continuous DEFLATION in a growing economy, thus through that pressure the GOLD standard serves to depress economic activity.

HOW do you solve that problem or how do you structure society such that it can live with continuous deflation?

I'm prepared to accept the gold standard the moment you can explain to me why I would EVER buy anything I didn't abbsolutely positively need if I KNEW that the price of it would be lower next week, next year and so forth.

Additionally, who but an insane business person would borrow to become a producer if they knew that what they produced would continuously be decreasing in price while the GOLD they had to pay back would be continuously INCREASING in realtive value at the same damned time?

How does BORROWING work in that gold standard world?

Why do you keep avoiding answering my questions?

Because the MISES doesn't have an answer, perhaps?

We all KNOW how fiat money CAN be (doesn't have to, but certainly can be) bad.

Of course, fiat money could ALSO (if the regulators choose ) ALSO cause DEFLATION, couldn't it? they can just as easily decrease the money supply as increase it you know.

Ideally, amount of money in circulation should be some fairly consistent relationship to the amount of good and services in the market.

GOLD STANDARD cannot DO that.

How do you devise an economic system to overcome that problem?

As I said, you simply do not accept the answer given.

The market does naturally move toward lower prices. Look at the price of automobiles when they first came out, only the fairly well-to-do could afford them. Now just about everyone has at least one. Same with computers. Few at first, but now nearly everyone has at least one. That's the natural tendency of the market towards lower prices.

You personally might save your money and watch as prices decrease, but I think you're overstating the rate at which prices would decrease for one. And secondly, most people will not do that. They're going to buy the things they want or need when they want or need them. So like I said to Iriemon, you wouldn't have a "deflationary spiral" under the gold standard any more than you do now.

They would produce to make money, the same reason anybody produces now. The reason prices would be decreasing would be because raw materials cost less and it would cost less to produce the item in the first place. Everything would still be relative.

You are confusing a relative reduction in price due to production efficiency versus a general reduction in price because of a deflation in the money supply.

Computers got cheaper because they could be made more cheaply. Something else went up in exchange, possibly incomes.

In a monetary deflation, prices and salaries go down because there are less dollars in currency, everything else being equal.

Yes, those who control it could deflate the fiat monetary supply, but they never do.

The Fed frequently "deflates" the money supply buy selling Govt securities and increasing fed funds rates when it thinks inflation is becoming a problem.

No, the amount of money does not need to correspond to the amount of goods and services, as I've told you before. The value of the money increases so the actual amount of money is irrelevant.

More precisely, the purchasing power of money increases. The actual value of things relative to money decrease, that includes labor.

And you have all the economic problems I've outlined in posts in this thread.

 

[Kevin_Kennedy]

In deflation prices of goods go down because the price of everything goes down. As I said, everything remains relative.

 

[Iriemon]

In deflation prices of goods go down because the price of everything goes down. As I said, everything remains relative.

Yes, that is true. And creates the problems of greater cost of borrowing, lack of incentive or purchasing, and investing all of which are harmful to the economy.

 

[Kevin_Kennedy]

I've already addressed the so-called "lack of incentive," but you're going to have to explain to me why the other two would come about.

 

[Iriemon]

I've already addressed the so-called "lack of incentive," but you're going to have to explain to me why the other two would come about.

I've explained it in this thread, previous page.

 

[garyd]

Kevin my friend you are aware are you not that gold being a commodity fluctuates in price just like every other commodity. Spain for instance all but went bankrupt while floating on a vritable sea of gold in the 15th century. To a starving man a bowl of soup is worth more than a ton of gold.

 

[Kevin_Kennedy]

Kevin my friend you are aware are you not that gold being a commodity fluctuates in price just like every other commodity. Spain for instance all but went bankrupt while floating on a vritable sea of gold in the 15th century. To a starving man a bowl of soup is worth more than a ton of gold.

Yes, I'm aware that the price of gold fluctuates. I'm not sure I understand the point of the question, however?

 

[garyd]

Simply this gold based currency is no more a hedge against various economic problems than is any currency based on anything else and done wrong can in fact hamper economic growth severely.

 

[Kevin_Kennedy]

Sure it is. A gold standard would put an end to rampant inflation for one, so it's a hedge against that. As to it being done wrong and being harmful, well that's just about anything in life right? I setup my hose incorrectly yesterday and got my shoes all wet for my trouble.

 

[editec]

People are not going to choose not to buy simply because in 6 months something might cost less. Prices go down all the time, it's the natural progression of the market as I said before, and people still buy things.

You're arguing against economic interest. People will still buy things but they will be incentivized to put off the purchase. And I disagree with your conclusion. I know people right now how are planning to buy a house but waiting to see if prices will go down furhter.

A friend of mine actually just bought a house, despite my telling him that prices will probably fall further. You're always going to have some people that are waiting for just the right deal to come along, but it won't cause a "deflationary spiral" under a gold standard anymore than it does now.

Kevin you're really not arguing your case, anymore.

We know what happens under the gold standard becuase we had the gold standard remember?

Does the populist movement jog your memory

To suggest that continuously decreasing pricing is natual or good is simple living in denial.

DEFLATION is the stake driven through the heart of your Gold Standard, sport.

I'd hoped you might have some radical economic system that somehow dealt with continous deflation, but all you have is flat out denial that continuous deflation IS a problem.

 

[Toro]

Simply this gold based currency is no more a hedge against various economic problems than is any currency based on anything else and done wrong can in fact hamper economic growth severely.

I think the gold system makes it less likely that bubbles in the economy appear, though they still have happened under a gold system. However, the gold standard does inhibit growth because the supply of money is dependent on the profitability of mining companies and has little bearing on the growth rate of the economy. The money supply should grow at the rate of the economy, at least over the long term. If it does not, then distortions occur, and they can occur under a gold standard just as easily as under a fiat system.

 

[Kevin_Kennedy]

You're arguing against economic interest. People will still buy things but they will be incentivized to put off the purchase. And I disagree with your conclusion. I know people right now how are planning to buy a house but waiting to see if prices will go down furhter.

A friend of mine actually just bought a house, despite my telling him that prices will probably fall further. You're always going to have some people that are waiting for just the right deal to come along, but it won't cause a "deflationary spiral" under a gold standard anymore than it does now.

Kevin you're really not arguing your case, anymore.

We know what happens under the gold standard becuase we had the gold standard remember?

Does the populist movement jog your memory

To suggest that continuously decreasing pricing is natual or good is simple living in denial.

DEFLATION is the stake driven through the heart of your Gold Standard, sport.

I'd hoped you might have some radical economic system that somehow dealt with continous deflation, but all you have is flat out denial that continuous deflation IS a problem.

Until we began to undermine the gold standard we had no problems with the gold standard.

 

[Kevin_Kennedy]

Simply this gold based currency is no more a hedge against various economic problems than is any currency based on anything else and done wrong can in fact hamper economic growth severely.

I think the gold system makes it less likely that bubbles in the economy appear, though they still have happened under a gold system. However, the gold standard does inhibit growth because the supply of money is dependent on the profitability of mining companies and has little bearing on the growth rate of the economy. The money supply should grow at the rate of the economy, at least over the long term. If it does not, then distortions occur, and they can occur under a gold standard just as easily as under a fiat system.

It is not necessary for the supply of money to increase because the value of the money increases.

 

[Toro]

Simply this gold based currency is no more a hedge against various economic problems than is any currency based on anything else and done wrong can in fact hamper economic growth severely.

I think the gold system makes it less likely that bubbles in the economy appear, though they still have happened under a gold system. However, the gold standard does inhibit growth because the supply of money is dependent on the profitability of mining companies and has little bearing on the growth rate of the economy. The money supply should grow at the rate of the economy, at least over the long term. If it does not, then distortions occur, and they can occur under a gold standard just as easily as under a fiat system.

It is not necessary for the supply of money to increase because the value of the money increases.

You are absolutely correct that the value of money increases but this is a bad thing, not a good thing. The higher the value of money, the greater the cost to attain it. The greater the cost to attain it, the slower the economy grows. This is a bad thing, not a good thing, and its why we shouldn't have the gold standard.

If the value of money - any money, whether that's gold or fiat currency or whatever - is fixed, and the demand for it rises, the higher the return that must be generated on that money. This is simple supply and demand. The return on money lent is the rate of interest. Higher interest rates is a drag on the economy when the interest rate does not approximate the growth rate in the economy.

The rate of economic growth is a function of productivity growth and population growth. When the interest rate is higher than the potential of the economy, this dampens economic growth. A fixed stock of money dampens economic growth and standards of living. There is no reason for this to ever happen.

 

[LOki]

Repetitive

A point worth repeating until you aknowledge it or refute it.

What value does it have as an exchange medium over paper?

For starters, one gram of gold isn't considered more valuable than another gram of gold simply because you assign a higher value to it. I'm sure if you you give it a moment of ingenuous thought, you can come up with a dozen more yourself.

Being independent of political expedencies is a different issue, . . .

No it's not.

. . . and does not negate the point that with deflation the relative cost of borrowing increases.

A point that really only applies to fiat currency based economies.

Which would be a relevant point if I had been talking about spending as opposed to lending.

You seem to think that borrowing and lending is the end-all and be-all of economics, but the fact of the matter is that buying and selling is the actual point. You seem to wish for free and easy money that is unearned, and more importantly you seem to wish that this free and easy money be exempt from any competing interest it's possessor might have in spending on himself.

Exactly. That "service of using money" is the time value of money. It the premise that $1000 today is worth more than $1000 in a year and so that is why you charge (and pay) interest.

Wrong. The service of using money that is not yours has nothing to do with time and everything to do with spending--the spending use of money--money that is not yours. Your "time value of money" is really only applicable where the value of money is set arbitraily . . . for instance, in that case where the value of money is set by some retard's practically unlimited capacity to print and destroy money, or enforce an arbirary interest rate. "Time value of money" is a game of trying yo predict the whims of retards that set interest rates based on political expediencies.

In a deflation, he could just sit on it and let it appreciate.

Only if you're talking about fiat money.

Credit is absolutely crucial to a growing economy.

It is absolutely NOT crucial to a growing economy. In no way crucial what-so-ever.

No but it creates the means (capital) for creating wealth. Or having a home to live in.

Patently wrong. The moment you parse the difference between money and wealth, you will understand why you are wrong.

In a deflation income falls because there is less money in currency relative to population and real production.

Meaningful only if you're talking about fiat money.

See above.

Nothing above refutes the assertion that borrowing is not a right or an entitlement; that borrowed wealth is not created wealth or earned wealth; that the creation of wealth, rather than just borrowing it, is the definition of economic growth . . . but your reference to "above" suggests that the moment you parse the difference between money and wealth, you will not understand why you are wrong, because you are just that obtuse.

No, it is true based on the amount of currency -- the money supply. I agree that if lenders think that the Fed would double the money supply they would charge higher interest to reflect anticipated inflation.

But as the ultimate lenders to the Government, taxpayers do not enjoy that power--this is the precise reason that money founded upon an objective standard is economicall and morally superior to one founded upon some retard's practically unlimited capacity to print and destroy money, or enforce an arbirary interest rate.

Inflation doesn't prevent lending.

Sure it does.

A lender simply recoups his inflation loss with higher interest on the loan.

Resulting in fewer loans--see? lending prevented.

We've had inflation for decades and it never prevented lenders from lending.

Sure it has, when we've had actual, value-adjusted inflation, lending has been curtailed.

I don't know what you mean by "when they can't competitively lend against the retards that interst rate based on whims and political expediencies"

The retards who can print money to lend AND pay off their debts as well as set arbitrary interest rates, have a competive advantage in the lending business over those who can't. Clear enough now?

I never asserted that loans are risky for other reasons.

One of those risks should not be the whims of retards with the practically unlimited capacity to print and destroy money, or arbitrarily enforce an interest rate.

You'd have risks of poor underwriting in a deflation scenario too. In fact, that is really the problem we are having. There has been deflation in the housing market, and now with the economy, deflation in lots of folks' income.[/quote]Lolsome. Your "deflation" is a correction from the inflation resultant from the policy whims of retards with the practically unlimited capacity to print and destroy money, and arbitrarily enforce an interest rate through the manipultion of fiat currency.

Therefore the value of the homes the money was lent for has decreased . . .

The objective value of the homes have not changed, they were just overpriced due to . . . come on, you should be able to guess it by now . . . the whims of retards with the practically unlimited capacity to print and destroy money, and arbitrarily enforce an interest rate.

. . . and so have incomes to pay it. Folks default and houses don't have equity to cover the mortgage.

Sounds like the whims of retards to me.

It's a perfect example of why deflation is bad. In this case, the deflation is caused in a specific market by correction of over speculation.

Speculation based upon what? Do you have the intellectual integrity to answer honestly?

But a gold standard monetarizes this deflationary risk.

There's no real deflationary risk involved in a gold standard--the assertion that there is, requires one to accept the fatuous notion that the objective value of a currency based in gold naturally increases while the objective value of the goods bought with it naturally decreases.