http://2012patriot.files.wordpress.com/2011/06/executive_ord...
This is like lamenting that kids don't know enough about Chaucer or don't understand that evolution only applies to populations, not to individuals.
These kinds of small details will be forgotten intentionally by most people within months of learning them.
Quite frankly: I don't care if kids come out of high school with a functional knowledge of the effects of an inflating currency: I'd rather they understand personal finance instead of macroeconomics.
http://www.econtalk.org/archives/2012/04/eugene_white_on.htm...
Really?
People on the bottom rung end up spending all of their money, and will find it even harder to ever dig their way out. The top 1%, who cannot spend money fast enough to exhaust it, will hold onto their money which will become exponentially more valuable over time.
Capital investment will plummet, because statistically, you're better off simply holding your money. It's like holding an index fund in the stock market (your money increases with value correlated to the market), except there is practically zero risk. Any investment you make by definition will perform on average no better than the economy as a whole; so why bother investing your money with risk, as opposed to holding onto your money with no risk? They both have the same expected value.
It'd be a little harder for that to happen with Bitcoin since it's not a currency backer but a side currency but the chance it could stagnate into investment only is there. Then it's value is entirely determined by the whim of the market since it's entirely ephemeral. (Yes all monetary value is ephemeral, intangible and based on the belief and good will of the market, but thing like gold have a longer history of having value everywhere.)
LOL. Inflation is force, currency is force, but let me guess - property rights aren't a form of force right?
Sorry, but bringing the use of force into this is the first sign I'm talking to a libertarian, and one that is not open to any form of reason.
Hoarding the primary means of exchange (what BTC advocates would really like BTC to become) is a negative for society. As the hoarding increases so does the value of the item, encouraging more hoarding and less lending and concentrating wealth in the hands of those that already have it. Not really a recipe for a healthy economy.
I'm not advocating what you personally, or society should or should not do. I am simply pointing out that some people have gold and others want to take it away from them. My question is: what moral principle makes it valid for some people ("government") and makes it invalid for others ("thieves")? If the principle is "some voters voted some people via secret voting", then Hitler did nothing bad. Also, if the principle is "decision of majority" is moral, then more questions arise: on which territory do you define this majority? How can morality flip completely when 1 extra person joins another camp or gets to a legal voting age? Etc.
If you want to redistribute gold, it's up to you to show why it is justified to kick someone in a face because of "hoarding". And when you start explaining this, it will be you who comes up with some definition of property rights (maybe by saying "hoarded gold does not belong to you, but to society").
Also your Godwin (democratic taxation = Hitler) is just hilarious.
That's an overly simplistic view of the value of money. If the value of money were only based on belief, then one would except sudden collapses of monetary value without any connection to the real economy quite regularly. In a sense, money would be like the cartoon character who defies gravity until he looks down.
In reality, the value of money is based on people's demand for money. This demand is largely circular (the store wants money in exchange for goods because that's what the suppliers demand, and the suppliers demand money because that's what their employees demand, who demand it because that's what the stores want, and so on).
However, there are two decidedly non-circular sources of the demand for money. One of these sources is taxation: If the government decides that you have to pay your taxes in currency X, then there will always be demand for that currency. Even if your employer pays you in Bitcoin, you will still have to pay your income tax in whatever the local fiat currency happens to be.
The other source is debt payment: If you are in debt, you have to make certain payments (under threat of losing your house etc.).
These two belief-free sources of demand for fiat currency are the "base case of induction" for why fiat currency has value. They ensure that the viability of fiat currency does not depend on belief.
I suppose it'd be clearer if I said it's exchange value is ephemeral, ie completely determined by the faith that currency X is worth/will be accepted in exchange for some amount of currency or product Y.
There are all sorts of ways to answer to this, but all of them amount to pointing out the bleedingly obvious: Most[0] governments issue debt in the same currency that they demand tax payments in, so your condition is not really a condition at all.
If somebody holds a government bond denominated in currency X, then they will be paid in currency X. If they suddenly decide that they would prefer to be paid in currency Y, well, take it to the foreign exchange: said government does not, and does not need to, care.
[0] The governments that don't do that almost invariably end up in trouble at some point because of precisely this. On a related note, almost all stories of hyperinflation are in fact stories about foreign-currency-denominated debt.
A better metaphor is water in a desert, except instead of being consumed it's passed from one person to another without loss and actually increases when it's transferred. The item itself isn't harmful but hoarding it is extremely harmful.
It reduces supply, which boosts the value of every other outstanding dollar. I boost everybody else's current purchasing power by increasing the real value of the dollar bill in their pocket by reducing the availability of gold, since the true measure of a bill is what goods it can purchase.
Not to mention, markets take note of the true availability of gold. Hoarding gold doesn't mean it is destroyed, and the market knows that in general estimation, because the market knows in general estimate how much gold is mined / stored / sold / etc. IE that gold can and will come onto the market, whether today or when I die, and the market prices accordingly.
Any currency backed by a gold standard when I hoard, will benefit over any nations not on a gold standard or specifically with a depreciating currency. I can buy more and more and more of their exports for the same dollar.
I make everybody else that is using the US Dollar standard richer if I hoard gold. It means they can buy more real goods with their dollar. This principle is demonstrated in the 'printing' of dollars, in which increased supply devalues the dollar and makes it possible to purchase less real goods (whether you're talking houses, real estate, gold, silver, platinum, or oil as a baseline).
The same concept is demonstrated in the adoption of bitcoin. Finite supply means anybody holding bitcoins will benefit as demand goes up. Anybody holding a dollar bill would benefit from my gold hoarding.
Ask China how awesome it is to have an appreciating currency while the rest of the world foolishly destroys their currencies: China gets to buy more foreign goods every year with their same yuan notes, while the rest of the world can buy less and less (China can also more easily begin purchasing their own goods, which means less need to export; and they can more easily buy foreign natural resources, as the yuan gains against eg the dollar (since commodities are priced in dollars)).
Conversely it means that everyone exchanging labour or goods for dollars gets less, and the incentive for those of you with dollars is to keep hold of them, thereby increasing your wealth while not actually producing any economic output.
Not so good from that angle is it?
Inflation creates a strong incentive to allocate capital to productive investments.
Inflation decreases the value of a currency, and therefore people attempt to allocate capital to investments that appreciate above the rate of inflation.
Without inflation there would be less incentive to fund new companies, lend money etc...
Gold under a mattress is not productive capital.
This leads to a virtuous cycle of investment and reinvestment. Deflation is a far bigger threat than moderate, controlled inflation.
Think of the economy as a MMORPG. The game's creators (central banks) need tools to balance gameplay and keep the game (the economy) growing and interesting.
The value of fiat currency is very real. It is backed by the ultimate power on earth, the state's monopoly on violence.
My answer to everyone who thinks there is an objective distinction between productive and non-productive and advocates use of violence to redistribute resources: you are an egoistical immoral evil person who has no humility or interest in people around you. Instead of figuring out why people do what they do, you suggest pointing guns at them to do what you think is better for mysterious "society".
Yes. Trade is productive, it is the highest civic virtue. Hoarding is not productive, it makes us all poorer.
I'm not for banning the ownership of gold. I am just pointing out why the redirection of capital from bond markets, venture funds and lending into ownership of gold leads to reduced money velocity and decreases trade.
The story on why we should own gold is a highly pessimistic one. Goldbugs point to a collapse scenario as a reason to own gold. Mass economic collapse would make everyone poorer, even those with large gold reserves.
Hoarding does not make us all poorer. Your blanket statement is false.
If you're living in a country with a gold standard, and that currency appreciates, it means you can purchase more real goods, not less.
China's economy has seen its currency appreciate for the last decade, while they simultaneously get far richer. The same principle was demonstrated by the last manufacturing powerhouse: the USA.
If I hoard dollars under my mattress, which reduces circulation, then all the other dollars gain purchasing power in direct proportion to my hoarding: ie I make everybody else richer while I hoard. The exact same thing is true about gold: any currency backed by gold gains real purchasing power.
This inevitably results in massive deflation and eventually destroys the economy, rendering the accumulated appreciation worthless.
China's economy has seen its currency appreciate for the last decade, while they simultaneously get far richer. The same principle was demonstrated by the last manufacturing powerhouse: the USA.
Yes, and in both cases this happened after the countries stopped fixing the supply of money. In the US, this was moving off the gold standard, in China, this was moving off of the USD standard.