China's State Press Calls for 'Building a de-Americanized World'

> why do you think bullion currencies are more common during times of warfare? Because inflation runs crazy during warfare and therefore people trying to save their earnings go for gold, silver and others in order to avoid losing the face value of their fiat currencies. And by the way, the Gold standard was abandoned in History mainly to fund the war in Europe during the 1st world war, and then later in the 20th century because of the expenses of the US military policy during the Cold war.

> when are countries incentivized to "expand their credit line to the infinite"? Look at the current situation in the US. Everyone knows they will never pay their debt, yet it keeps growing. You can expect things to crash hard down the road.

> would you rather have a currency that can modify its inflation/deflation rate based on any number of relevant factors, or a currency whose inflation/deflation rate is tied to the rate of mining of some rocks in the ground?

The later, obviously, because Gold is neutral and does not belong to any government. The US Dollar, the Euro and other fiat currencies are all controlled by different central banks with different agendas. I have no control over what they can do in the future. But Gold is tangible, and there's not much Gold being extracted nowadays to change the face value of it.

Why do you think China is building a huge Gold reserve currently, and buying Gold as much as they can from all over the world? Do you think they are just plain stupid ?

http://goldprice.org/charts/history/gold_all_data_o_usd.png

And no, there has not been a "run for Gold" or things like that, Gold is not used as a currency anywhere a demand is still relatively low and stable.

So that gives you a sense of how much inflation you have been getting over the years. It's certainly faster than the official numbers. And anyone who has lived through the past 30 years should know very well that you could buy more commodities with a single dollar in the 80s than you can buy nowadays with the same amount.

Regarding savings -> you know most people do not get paid directly in cash, right? Most if not not all employers require de facto a bank account in order to pay salaries (we are not in the 60s anymore) and most of the savings go and stay there when you work. These savings become funds that the bank can use to emit loans and different financial services to private companies.

Saving is a matter of time preference, specifically, preferring to consume in the future. That implies carrying forward surplus value from today to be spent tomorrow. Let's say you have a choice of how to go about it: G, or W.

Strategy G is to stash gold in a mattress. Strategy W is to buy stock of Webvan/Amazon.

Let X = present value to save T = timestamp at present d = value delta t = time delta

Now at time T+t you want to have X+d value where d=0 is okay, but (d < 0) is unacceptable.

Now the choice between G and W is as follows: W has to offer you a higher rate of return than merely holding the gold in strategy G.

Gold will increase in value (price) if more produce is offered in exchange at time T+t, assuming stock of gold is constant (which it is, to an approximation).

So what Webvan/Amazon must offer a rational investor is a better return than the rest of the aggregate efforts of human-kind. They must have high productivity.

This is precisely what makes capitalism and free-floating interest rates so efficient, capital is allocated to the most productive enterprises.

The ratio between spending preferences now and in the future determines the interest rate. A high interest rate implies that only higher-credit (in the sense of faith in their success) companies will get money.

The highly risky investments will simply not happen. There won't be any bubble mania.

In your conception, the idea that stashing gold is not productive is merely another way of saying "gold stashers don't fund Webvan" when looked at through this lens.

But it is good they don't! Everybody should have the right to sit on the side-lines and watch.

When the word "unproductive saving" and "hoarding" are used, they usually refer to this leave-me-alone strategy.

In periods of hard-money we saw great advancements in the standard of living of peoples around the world [ref Thiel?].

The free market always beats a planned economy. It doesn't matter if the planning is overt like the Soviet model or merely a plan to distort time preferences.

With no inflation, my risk free investment of money under a mattress produces no return. My risky investment with the company has the probability of a positive or a negative return.

With inflation, I'm forced to make a risky investments to break even. True, I can no longer keep my money under a mattress but I'm still an unsophisticated investor and choose to park my labour in houses for example which inevitably leads to a housing bubble.

With deflation, I agree, people would rather not invest in a business producing a lower return than the rate of deflation but why would that deflation occur? One reason could be more goods chasing the same amount of money implying real economic growth.

The problem I have with the current inflationary system is the distribution of new money, if all currency held and prices denominated in that currency increased by the same factor. It would result in a nominal increase in prices. No one would be richer or poorer after the increase. The current system distributes new money to people who directly interact with the central bank, rewarding them at the expense of everyone else.

Tightened version has been put in the right place: https://news.ycombinator.com/item?id=6553774

The only reason people choose to store their labour in bitcoin today is that they predict the same amount of bitcoin will buy the same or greater labour in the future less the costs of converting to/from bitcoin (transaction costs). The only reason they'd store their labour in any other way is if they were getting a better deal.

Said another way, if bitcoin's primary use was as a currency the silkroad shutdown should have lowered the price of bitcoin proportionally. People using bitcoin as a currency could convert into it at the last possible minute instead of holding it. You need people treating it as a store of value for it to have a price tomorrow.