livingnote

Re: Money is WHAT?
« Reply #20 on: February 01, 2009, 11:43:05 AM »
Anyway, enough doom&gloom for me, time to build something  ;D
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Quote from: emrr
F-in' hook some Sh*t up and see if it catches on fire


EEMO1

Re: Money is WHAT?
« Reply #21 on: February 01, 2009, 11:58:03 AM »
The global warming hoax seems to be pretty much along the lines of that document, the biggest piece of social engineering of modern times.

 "global warming" fuss only makes sense to me if the outcome is slapping tax to breathing. carbon dioxide and all...

JohnRoberts

Re: Money is WHAT?
« Reply #22 on: February 01, 2009, 12:07:09 PM »
It's interesting how people are influenced by visuals and believe movies are the literal truth...

Several questions.  Debt should be looked at in terms of % of GDP.. our debt as a fraction of our total economy is no where near as high as it was in some past crisis, but it is high and we shouldn't borrow to fund things that should be funded in real time.

Re: capitalism, free markets, and regulation.  Capitalism and free markets are the most effective way to create wealth. More wealth means the total pie is getting bigger so everybody should benefit. There is a lot of debate over how this "created" wealth should be shared between those who created the idea or concept and the labor that executes the concept. In general the plans are unique and rare, otherwise the labor wouldn't need the entrepreneurs, and labor is to a great extent fungible and a commodity whose exchange is bartered for.  There is also risk of financial loss associated with funding a new company which must be rewarded, or nobody will create new businesses.  That's all well and good but it is the nature of any system when positive feedback (profit motive) is involved is to be unstable. Involving human nature does not add stability. So people will often overreact based on expectations. The history of free markets is littered with many bubbles over the centuries. When the tulip bubble crashed in the late 16th century people were trading acres of land for single Dutch tulip bulb. Depending upon your age you've witnessed several bubbles recently.. Financial derivatives (currently valued at pennies on the dollar),  housing/real estate (down huge from recent highs and still falling), oil (still below normal), Stock market (1987, 1929,.....) , etc.

One contributing factor to most crashes is unrealistic expectations that some pricing trend will continue without correction (prices always correct). These bubbles get amplified by availability/use of credit. One could argue (I will argue) that the housing bubble was almost completely fueled by low interest rates, easy credit standards, and greedy people thinking they could get something for nothing.  Oil was driven higher than rational by a shortage in marginal supply which naturally increased volatility in prices, and speculation that it too would go up forever (prices always correct). When the oil bubble burst the excesses of this speculation have yet to work their way through the system. The derivatives mess has multiple causes but I don't blame regulation per se. There were numerous corporations, who are in trouble now, who simply showed poor judgement. These instruments were the classic house of cards with no credible value and everyone just played along until the music stopped. I see the failure in corporate judgement parallel to the failure in personal judgement for all these people who bought homes, for too much money, with mortgages they knew (or should have known) they couldn't afford.

There is a place for government and regulation but it is not to replace personal judgement and responsibility. The SEC is an embarrassing failure in their inability to catch a $50B ponzu scheme that had been reported to them several times over the last several years... WTF..

We don't need a bunch of new regulations to say so and so derivatives are worthless, or to tell individuals they shouldn't buy homes they can't afford. Hold the buyers and the lender directly responsible for those loans, and I assure you both banks will stop lending and most people will stop trying to borrow stupidly. The remaining ignorant who try to borrow, won't be able to find a bank to lend to them, and if one does it will go out of business, problem solved.

As long as the government tries to use our tax money to manage things that can't be managed it will put incentives on the wrong behavior. Hopefully we won't throw out the baby with the bath water.. It is scary to hear our new leader criticize private businesses for wanting to use private aircraft vs. sitting in airports for the better part of day each trip... When I see the president sell air force one, his criticism will have more credibility, but still be wrong. Injecting government types inside to micromanage failing businesses will be the final nail in their coffin.   

We need less government not more... They need to focus on their real responsibilities and not expand their scope into every facet of our lives. The constitution was pretty specific in not laying out such a broad portfolio for them to manage. Healthcare existed a few hundred years ago, but people were expected to fend for themselves, etc.   

Of course I could be wrong...

JR

PS: My beer yeast (and me) give off CO2... more nonsense... The need to outlaw volcanos.
   
Visit https://circularscience.com to hear what properly "cleared" drums sound like.

dmlandrum

Re: Money is WHAT?
« Reply #23 on: February 01, 2009, 01:26:51 PM »
Anyway, enough doom&gloom for me, time to build something  ;D

And therein is the flaw to the argument: You assume all economics is a zero-sum game, with the creation of wealth being impossible. I can start with a pile of wood whose only intrinsic value is warmth from burning, and turn it into a beautiful table that I can then sell for many of those interest-bearing dollars. It didn't cost me much in the way of my own money, but rather, my time and skill.

That is how wealth is created from non-tangible assets. Economics is not a zero-sum game.
Darren Landrum

Be comforted that in the face of all aridity and disillusionment
And despite the changing fortunes of time,
There is always a big future in computer maintenance.

livingnote

Re: Money is WHAT?
« Reply #24 on: February 01, 2009, 01:38:50 PM »
Yes but where do the dollars come from to pay for the table I made?
My Stuff: Livingnote's META

Quote from: emrr
F-in' hook some Sh*t up and see if it catches on fire

sahib

Re: Money is WHAT?
« Reply #25 on: February 01, 2009, 02:29:29 PM »

From you.


State acquired some gold, kept it in its safe and printed the banknote against that gold.

Gave me a job.

I spent a month working.

Then I got a wage.

A tax is taken off my wage.

State got some of its money back from me.

I bought the table from you.

But state also taxed you.

Eventually state got its money back, and still has the gold.

All that happened is we both spent some time of our lives for a paper that allowed a transaction between us.

If you ask about the gold?

We both are supposed to own it.

livingnote

Re: Money is WHAT?
« Reply #26 on: February 01, 2009, 03:37:57 PM »
Quote
State acquired some gold, kept it in its safe and printed the banknote against that gold.

State doesn't print anything. Private bank prints stuff and lends it to state, and adds interest. State guarantees, in return, to pay interest via tax revenues. But since states don't print their own money, they go under in debt, how should you pay debt + interest on a currency you borrow but can't print yourself?

That's the way it's built, sadly. The beauty of it is that the whole issue exists completely separate of the economy in its entirety. It has nothing to do with GDP etc, so we monkeys can wiggle around as much as we like. It's not a zero sum - it's a minus sum.

Edit: of course it's a plus sum w.r.t. productivity, but all + in money form is a — somewhere else - the concept of the balance sheet would not work for banks otherwise.
« Last Edit: February 01, 2009, 03:51:06 PM by livingnote »
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Quote from: emrr
F-in' hook some Sh*t up and see if it catches on fire

Holger

Re: Money is WHAT?
« Reply #27 on: February 01, 2009, 04:07:03 PM »
Brave Lukas... :)
Political economics is complicated. But you are right, economically the balance is always zero: the outstanding debit of one is the debt of another...

sahib

Re: Money is WHAT?
« Reply #28 on: February 01, 2009, 06:59:54 PM »
Quote
State acquired some gold, kept it in its safe and printed the banknote against that gold.

State doesn't print anything. Private bank prints stuff and lends it to state, and adds interest. State guarantees, in return, to pay interest via tax revenues. But since states don't print their own money, they go under in debt, how should you pay debt + interest on a currency you borrow but can't print yourself?

Not necessarily.

For example in Turkey state prints the money.

Anyhow, at the end all roads lead to Rome. Banks go bust and state buys them out with the tax payer's money. So the big brother never loses. Of course there have been cases in the history that some big brothers lost and became a fish food. Even then there is the re-incarnation. The debts are written off, business as usual.

« Last Edit: February 01, 2009, 07:01:36 PM by sahib »

ENS Audio

Re: Money is WHAT?
« Reply #29 on: February 01, 2009, 08:31:21 PM »


Re: capitalism, free markets, and regulation.  Capitalism and free markets are the most effective way to create wealth.
   

Thats exactly what I mean is do you see capitalism and the free markets as on type of "model" or as what I believe came later on under the name "Capitalism" as a "guise"/ a "ruse" to reinitiate the Lord/Serf landowner system that was so predominant in Russia and in Europe during a period of time in which people under the "free market" were no longer servants of oligarchs or rich nobles and landowners but were actually owning their land and businesses..thus sprouting small/independant communities in which could control trade and finances according to their own terms...but the experiment went terribly wrong or was it doomed to start with???

Did the remaining ruling elite fear that through the complete freedom of the "free market" that they would no longer be relevant??  Or did issues such as trying to function in a "post Civil - War era" (US folks) without the use of slave labour compromise the experiment??  Or was it issues such as Unions and the Federal Gov and the march towards Socialism in which "Conservatives" like to rant on about???


Or....Fudge it who cares??  I dont know why I find such interest in a subject that I find to be so boring and lame?? ;D


JohnRoberts

Re: Money is WHAT?
« Reply #30 on: February 01, 2009, 09:26:42 PM »


Re: capitalism, free markets, and regulation.  Capitalism and free markets are the most effective way to create wealth.
   

Thats exactly what I mean is do you see capitalism and the free markets as on type of "model" or as what I believe came later on under the name "Capitalism" as a "guise"/ a "ruse" to reinitiate the Lord/Serf landowner system that was so predominant in Russia and in Europe during a period of time in which people under the "free market" were no longer servants of oligarchs or rich nobles and landowners but were actually owning their land and businesses..thus sprouting small/independant communities in which could control trade and finances according to their own terms...but the experiment went terribly wrong or was it doomed to start with???

Did the remaining ruling elite fear that through the complete freedom of the "free market" that they would no longer be relevant??  Or did issues such as trying to function in a "post Civil - War era" (US folks) without the use of slave labour compromise the experiment??  Or was it issues such as Unions and the Federal Gov and the march towards Socialism in which "Conservatives" like to rant on about???


Or....Fudge it who cares??  I dont know why I find such interest in a subject that I find to be so boring and lame?? ;D

I'm not sure I completely follow your question, but capitalism is not a form of government, while capitalism and democracy function well together.

China is an interesting example where their very old civilization got infected with capitalism via the return of Hong Kong to them by the British several years back. Creating wealth is a good thing for a poor (per capita) nation. So China has embraced that while trying to keep control over a very diverse population. China is a work in process so it will be interesting to see if they can embrace capitalism while ignoring the democracy that goes hand in glove.

The soviets are another case where they are trying to walk the line of growing businesses (wealth) without giving people full property rights. It seems every so often, friends of that government end up with the somebody else's business property. Makes investing in their stock market a little risky.

JR
 


Visit https://circularscience.com to hear what properly "cleared" drums sound like.

Greg

Re: Money is WHAT?
« Reply #31 on: February 02, 2009, 01:32:17 PM »
Money Supply:
http://bigpicture.typepad.com/comments/2005/11/chart_of_the_we_2.html
(I tried to just post the chart but it wouldn't work)

After reading and attempting to comprehend the rapid increase in the money supply, I started buying gold in the high $700s... it closed at $929 per ounce Friday. I'm not telling anyone to buy gold, but it has been a much better place to help preserve the few bones I have stashed away.

I do not think Fractional Reserve Banking is wise.
Greg Stein
New Orleans, LA

JohnRoberts

Re: Money is WHAT?
« Reply #32 on: February 02, 2009, 02:12:22 PM »
Free investment advice is worth exactly what you pay for it, but I see the recent dollar strength as a short term fear trade rather than based on long term fundamentals, so gold (GLD) and oil (USO) are probably going to rise (some?) from here, unless there is a world wide depression (always possible with congress making protectionist noises, but not probable).

The current low inflation environment is unusual and probably caused by the recent past excesses in inflated housing (due to funny mortgages) and high commodity prices (oil speculation, etc). Governments have been known to monetize debt by printing currency, and this low inflation environment certainly leaves the door open for them to do that.

While I own a modest position in a basket of commodities, gold is kind of a specialized IMO short term anti-dollar bet, with end user demand as jewelry and such hedges against inflation. I don't follow that market closely but I have heard rumors that brides in India (a major consumer) have started balking at the high prices, and since these are discretionary purchases unlike oil and food, the price of gold may not go all the way up to the sky (all prices correct). Additionally this gold trade as a hedge against inflation is not a new concept, so there may be many other's already in this a short term trade, so if winds shift, look out below. The good news is that gold has intrinsic value, so will not drop to zero, but if you look at a historical chart for the price of gold (adjusted for inflation) it is not "cheap" today.



That chart stops in 2007 so it's up 30%+ since then, enough time for slow money to jump on the bandwagon. One can look at this chart two ways... it could move up another 100% to meet, historical highs, or down 50% toward long term averages.. Do you feel lucky? Another, perhaps safer way to play this M1 theme is to buy TIPS, which are inflated adjusted so will track up if inflation is re-ignited, and should not drop significantly held to term.

Prudent investing means not putting all your (golden) eggs in one basket. Diversify, diversify, diversify. One could argue that it might be a good time to start looking at real estate, especially if you can get the dual benefit of getting away from renting. Housing is not at a definitive bottom yet, but unless there is a huge overshoot on the downside, which I don't expect, we may be within single digits of a bottom, so buying a house to live in for 5-10 years could be OK and a fair investment. While buying homes as a pure investment is gambling and what got so many into trouble in this last housing cycle. 

or not.... The future hasn't happened yet so it's hard to be precise.

JR

PS: For any amateur chartists, that 1980 peak is a classic "head and shoulders" chart pattern, at least for the inflation adjusted data.
Visit https://circularscience.com to hear what properly "cleared" drums sound like.

Greg

Re: Money is WHAT?
« Reply #33 on: February 02, 2009, 02:43:51 PM »
Good post, John. I also have a basket of commodities in addition to gold. I do own some "paper gold" via GLD, but don't think I'm a nut if I think it's wise to keep a few ounces of the real stuff lying around (in a safe). And I assume you mean the physical commodities themselves, not commodity producing companies. I have some short positions, but will never give specifics because the downside of shorting is infinite and I don't want to feel responsible for someone getting wiped out based off my sh*tty advice.

Real estate investing never made sense to me. Having owned a house for a couple years, I see it as a depreciating asset once all expenses, maintanance, and any interest is factored in. I bought a house because I want a nice place to live. I'm not looking to get rich on it. As for house flipping, that seems totally dependant on the availibity of cheap money. I can see that the Fed is trying to revive this by driving down interest rates, but the bubble cannot be re-inflated. They rarely are.
Greg Stein
New Orleans, LA

JohnRoberts

Re: Money is WHAT?
« Reply #34 on: February 02, 2009, 03:38:15 PM »
Housing when you consider the value of shelter should not be a net loser, while buildings may depreciate, someone wiser than me (and that covers a lot of people) once said the beauty of real estate is they stopped making any more land. So there is a finite amount, with an ever growing demand for it.

That is perhaps why the recent reversal caught so many by surprise. There have been a few local housing bubbles before but nothing ever this globally widespread. People will always have to live somewhere so it's just a matter of getting supply down to present demand, now that the speculators have left Dodge. If you want to get rich, figure out what the speculators are gambling on now. If gold, look out.

I track this latest housing bubble back to the end of the last stock market bubble (dot com stocks) when all the stock traders looked for alternate asset classes to gamble on. Our fed was all too happy to pump money into housing to replace job losses in other parts of the economy, but you never get a free lunch in economics, so this created a class of speculators in housing which was bad enough, then the government took it up a notch and created all these liar-loan mortgages, and that house of cards collapsed under it's own weight. We will be paying for that debacle for years to come. While I wish I wasn't paying for other people's obvious mistakes.

I predict housing will return to a more normal upward trajectory once we get the donkey back on the cart trail... Low new housing starts is actually a good sign for this inventory realignment with the market.

I'm not smart or brave enough to play short.  I concede it serves a function in an efficient market. That said I wouldn't mind bringing back the uptick rule and policing naked short sellers more closely who I believe have distorted the market for some company's stocks.   

Of course I could be wrong...

JR
Visit https://circularscience.com to hear what properly "cleared" drums sound like.

sahib

Re: Money is WHAT?
« Reply #35 on: February 02, 2009, 04:38:40 PM »
Money Supply:
http://bigpicture.typepad.com/comments/2005/11/chart_of_the_we_2.html
(I tried to just post the chart but it wouldn't work)

After reading and attempting to comprehend the rapid increase in the money supply, I started buying gold in the high $700s... it closed at $929 per ounce Friday. I'm not telling anyone to buy gold, but it has been a much better place to help preserve the few bones I have stashed away.

I do not think Fractional Reserve Banking is wise.


You are on the right track.

Although I have been living in the UK in the past 23 years, I was born and brought up in Istanbul, Turkey where people still do not believe in shares or paper stuff. Money is either put in on brick and mortar or gold. Where as here in UK overwhelming majority of people invest in the shares. What happens? Couple of economic downturn,  the overwhelming majority out of that overwhelming majority loses. You might as well go and bet on the horse. I do not see a difference.

I have never believed in shares. Even private pension funds did not make sense to me but I was kind of ambivalent and paying some amount until I had a new accountant, Murray McNicol. Murray was I think slightly younger than I was and when I bough my business premises the first thing he asked me to do was to stop my private pension and put that money in my building. I was sad when he decided to chuck it all in. It was the best financial advice I have ever got. I paid off my building 12 years earlier. Even though the property market is in the gutter at the moment, if I sold it I would get more than twice the lump sum that I would receive when I retired, of course if I was lucky in the first place and at the age of 65. I still have 18 years to go. If I keep the building for another 18 years I would easily double that money.

Now, back to gold. I have an Armenian jeweller friend in Istanbul and one day we sat down in his Grand Bazaar workshop talking about world economics. This was his very basic, rock bottom calculation. The population of Turkey is around 75 million. An average family has five children, including the parents that makes 7, giving us around 11 million families. An average family has minimum 250 grams of gold. I mean this is really a poor stuff we are talking about. I know families who have literally kilograms stashed under their pillows. If you walked the streets of any city you'll realise that people are wearing that weight of jewellery casually. However, in the worst case scenario there is 2,678 tons of gold in people's hands. We are also not talking about 8-14 carat crap that you get here in UK, this is  22-24 carat stuff. But when you look at the statistics on wealth there is a big drop between UK and Turkey. But when you look at this picture who is actually rich? An economic downturn like the one we are going thorugh now, here in UK we are burgered, in Turkey, who cares? Yes people are always moaningt but life goes on. Same thing applies to other Eastern and Asian countries.

At the moment the whole stock market system is based on taking majority's wealth from their hand and placing it with a small minority. But I still agree with John that the capitalism is the only system at the moment we have that creates wealth. But what we need is a strong regulation and this can only come from a system that has strong social state values. What we have here is the abuse of capitalism. It is like having a fire place in your house. It heats you nice and warm but you can never get too close because it will burn you.
« Last Edit: February 02, 2009, 04:40:16 PM by sahib »

Greg

Re: Money is WHAT?
« Reply #36 on: February 02, 2009, 05:02:57 PM »
Agreed... no one is making more land, but "real estate" it more than just a function of the land. My family owns some farm land in MS, and even though no one has ever considered selling it, it has undoubtedly increased in value and will probably continue. I can see land as more of an investment than real estate.

I also agree with your thoughts on the dot com pop earlier this decade. We should have experienced a severe recession after the dot com bubble burst, but the money injected into the "system" to stave off recession was mal-invested (to use a Mises word) into all things housing. In my spare time, I like to read Austrian economic books and I'm sure you can sense some of that by what I say.

As for the uptick rule, I have read many criticize it. And I'm definitely not trying to knock down any specific company... when I see a bubble (there is one that still exists IMO), I think it's a good speculative strategy to short it. I was short investment banks several months last year via an ETF, and it worked out. If the Fed keeps pumping in money, I'll see if another bubble manifests itself. If I find one, I'll probably short that, too.
Greg Stein
New Orleans, LA

sahib

Re: Money is WHAT?
« Reply #37 on: February 02, 2009, 05:16:52 PM »

Agreed.

By the way my wife and I had a fantastic holiday/vacation in New Orleans. When the floods happened my heart sunk.

JohnRoberts

Re: Money is WHAT?
« Reply #38 on: February 02, 2009, 05:46:56 PM »
Funny you mention farm land in MS... When I moved to MS over 20 years ago I started looking around for raw land to possibly invest in since land is that investment that always goes up  :'(  right?

After several years I saw lots of land but no deals.. at least around me.. the land values have no doubt gone up some in the 20+ years I've been here but no obvious investments since population growth locally was not dramatic. I recall seeing significant real estate increases in more wealthy, populated centers. A friend owns 50 acres just outside Atlanta and he is sitting on a gold mine (long term). Another friend inherited 7 acres in NJ outside NYC, he is set for life. I could have hundreds of acres outside Hickory MS and mostly have a bunch of dirt, and maybe pine trees.

To Sahib's point. I bought an acre of land with 3 BR brick house for less than a parking space costs in NYC or Boston... I paid off my mortgage early as that was my best local land investment, and got into the stock market early enough that even with the dot com bubble popping I still did well.. Of course if I was smart enough to swap out of stocks and into bonds at the top I'd be living on an island somewhere now.

I don't own gold but repeat it has merit in that it will never go to zero like stocks can, but looking at the chart I posted earlier it is subject to vicious speculative swings, so I can't say whether it is cheap or expensive right now.. I find it a little amusing that the TV ads to get people to melt down their personal jewelry now says that the price of gold has "changed" recently, not "gone up" recently like they used to. The price was dropping the first two weeks of Jan, and is down from a little over a year ago (I am just an amateur chartist, but it looks like it will retest old highs around $1k so up a few percent from). Individual stocks can go to zero but a diversified basket of good companies will not. This is not stock advice but I own companies like P&G, Johnson and Johnson, Disney, and even some speculative stocks too.. I believe in TASER, but the market doesn't.  ::) 

It is hard to argue against owning your home long term, but if you must borrow, the old rules of saving up a significant down payment, and only committing to a manageable fixed rate mortgage. If you can afford it a 20 year mortgage will save you huge interest costs over a 30 year, and 10 year note is even better, if you can swing it. In any case make sure there are no prepayment penalties in the mortgage you do get, so you can pay it down sooner when you hit the lottery.

Buying cars with cash from savings is a good practice. I am currently driving a 12+ year old car that I bought with cash and will drive it as long as I can since my capital these days is tied up in growing my business. My next ride may be a used car, instead of new if my cash is still better employed in my business. 

JR 
Visit https://circularscience.com to hear what properly "cleared" drums sound like.

guy_4

Re: Money is WHAT?
« Reply #39 on: February 07, 2009, 05:06:30 PM »
Hi,
Livingnote : State doesn't print anything. Private bank prints stuff and lends it to state, and adds interest.
You're right !  search for " Article 104 "   and " Maastricht "
It started in France in 1973,  Maastricht went later and locked it all.

Sahib : For example in Turkey state prints the money
When Turkey will be in EC your government will not be allowed to print money anymore !

This system is generating a debt of around 80 billions of euro per year for France, and there is no way to reimburse it, anytime...
 
Guy
"If you think it is expensive to hire a professional, wait until you hire an amateur ! "   Red ADAIR


 

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