Silver and Gold metals?

[lycan]

Originally Posted by SnerpGoodWord

For starters, your repeated defense of deflation.

Defense? Deflation/inflation are irrelevant, as such. This is not a theory, despite your claim, it is a well established historical fact that deflation and economic growth can coexist.

That is a position that no sensible (or for that matter, senseless but mainstream) economist would take.

Mainstream? Who cares what is and is not mainstream? Is it correct? What is mainstream shifts constantly.

Second, your confusion of fiat money with debt. This is again a classic goldbug argument, and is simply factually incorrect.

This is not a confusion of mine. All official currencies are "fiat money", including gold and silver in their time. The difference today is that we have "credit money" as opposed to "metal money". Before notes were representations of metal, now they are pure "representations" of credit.

[SnerpGoodWord]

Originally Posted by lycan

Defense? Deflation/inflation are irrelevant, as such. This is not a theory, despite your claim, it is a well established historical fact that deflation and economic growth can coexist.

Really?

Evidence time. There was a brief period in the mid 2000'swhen a few economists believed the link was weak, but 2008/9 proved them conclusively wrong. Deflation causes economic contraction. So to does extreme inflation. The best results from a growth perspective are achieved at mild inflation. This is simply a historical fact.

One issue that muddies the point somewhat is globalization. Now that everything is more connected, what matters is the globalized inflation/deflation (which correlated well but not exactly to the dollar) rather than individual currencies. Studies that focus heavily on the economies of non-US countries (as the 2004 Fed/Cal study did) can produce very unclear results if this is not taken into account.

[Brutha]

Not a Rothschild in sight. By comparison they're small potatoes.

Just because the Rothschild don't have their money in a way that allow the money to be tracked by Forbes doesn't mean that they don't have the money.

I remember a statement from Warren Buffet that Buffet knows two people who have a net worth that would put them on the Forbes list but who aren't on the list because their wealth isn't publically visible.

However, if you intend on making a living as an economist, or use your understanding of economics for anything other than intellectual masturbation, I suggest you take a closer look at your ideas. They are flawed.

SnepGoodWord actually makes a good living as a trader.

You could probably google all the issues you brought up and find half a dozen ready-made replies to all of them.

So? Most of the ready made replies are made people who believe religiously in Austrian economics but don't really have practical skills in trading or economics.
They can write in a way that spreads memes effectively. They are good at SEO.

[SnerpGoodWord]

Originally Posted by lycan

This is not a confusion of mine. All official currencies are "fiat money", including gold and silver in their time. The difference today is that we have "credit money" as opposed to "metal money". Before notes were representations of metal, now they are pure "representations" of credit.

This is pure garbage. I've basically concluded from all this that you are not in any way a student of economics. You're parroting what you read on the internet, and you've chosen what to read very poorly.

[SnerpGoodWord]

Originally Posted by Brutha

So? Most of the ready made replies are made people who believe religiously in Austrian economics but don't really have practical skills in trading or economics.
They can write in a way that spreads memes effectively. They are good at SEO.

Thing is, if we were getting actual Austrian economics, that would be one thing. The broken window fallacy and the hole digging fallacy and the resulting utility view of production, seen vs. unseen - all good stuff. Seen vs. unseen in particular is near and dear to any long term macro trader's heart. Even an actual defense of the real bills doctrine would be interesting - it's in the category of "interesting idea, never been tried" and it's hard to understand in a modern context.

I think calling internet economics Austrian is a disservice to the Austrians.

[SnerpGoodWord]

Originally Posted by Brutha

Just because the Rothschild don't have their money in a way that allow the money to be tracked by Forbes doesn't mean that they don't have the money.

I remember a statement from Warren Buffet that Buffet knows two people who have a net worth that would put them on the Forbes list but who aren't on the list because their wealth isn't publically visible.

This is a legitimate argument, but I have to get my list from somewhere. I believe the people who "should" be on the list but aren't would be somewhat further down. The bigger the pile of money, the harder it is to hide.

My real point is that claims of "shadow banking" where Rothschilds or whoever else control everything from their secret bunker are plainly false in the US. All the big banks are publicly traded, and we know who the big shareholders are. Europe has more private banks, but the claim is still highly unlikely.

Also, the Rothschild holding are actually pretty well known. For example, the English Rothschilds run N M Rothschild and Sons, which has about $5B in capital. Big, but not THAT big.

[elucidate]

Originally Posted by SnerpGoodWord

This is pure garbage. I've basically concluded from all this that you are not in any way a student of economics. You're parroting what you read on the internet, and you've chosen what to read very poorly.

This has turned into a pretty interesting thread.

[elucidate]

Originally Posted by Brutha

Just because the Rothschild don't have their money in a way that allow the money to be tracked by Forbes doesn't mean that they don't have the money.

This is what I was wondering.

Can people have so much money that they can basically choose to not be put on the list if they don't want to be there?

[SnerpGoodWord]

Originally Posted by elucidate

This is what I was wondering.

Can people have so much money that they can basically choose to not be put on the list if they don't want to be there?

Generally large amounts of money are hard to hide. If I want to bury $100M worth of gold, or even $100 bills, in my back yard I can do so. If I want to hide $2B, I might be able to get a private bank in Switzerland to do it, or hide it in some sort of weird European bearer corporation. That's getting harder though because governments don't like secret money due to the desire to collect taxes. If I wanted to hide $20B, I don't think there's any place to put it without anyone knowing.

[elucidate]

Originally Posted by SnerpGoodWord

Generally large amounts of money are hard to hide. If I want to bury $100M worth of gold, or even $100 bills, in my back yard I can do so. If I want to hide $2B, I might be able to get a private bank in Switzerland to do it, or hide it in some sort of weird European bearer corporation. That's getting harder though because governments don't like secret money due to the desire to collect taxes. If I wanted to hide $20B, I don't think there's any place to put it without anyone knowing.

This might sound silly, but what about underground bunkers? People with that amount of money could pay people to dig and dig and dig some more. There could be mini cities, and we would never know about it.

In the movie "Blow" they bought whole houses just to stash the money. Obviously there would need to be high security, but with that sort of money I'd imagine it wouldn't be a problem.

[SnerpGoodWord]

Originally Posted by elucidate

This might sound silly, but what about underground bunkers? People with that amount of money could pay people to dig and dig and dig some more. There could be mini cities, and we would never know about it.

Do I know there's not a secret bunker in Zurich full of Rothschild gold? Of course not - if I knew it wouldn't be secret

But I do know one anecdote that might be of interest and which probably shapes my views on the subject of secret vaults. In the 90's Ted Binion, a Las Vegas gambling exec, built a vault in the Nevada desert to hide silver coins and about $20M worth of chips he had "borrowed" from the Horseshoe casino which he managed.

Problem was, his stripper girlfriend's other boyfriend, who happened to be the contractor who dug the vault, knew about it. Ted was murdered in 1998 and the GF & contractor were convicted with the motive being the contents of the vault, although later re-tried and acquitted on a technicality. Point being, secret vaults in the desert have a strange habit of getting one dead.

[elucidate]

Originally Posted by SnerpGoodWord

Do I know there's not a secret bunker in Zurich full of Rothschild gold? Of course not - if I knew it wouldn't be secret

But I do know one anecdote that might be of interest and which probably shapes my views on the subject of secret vaults. In the 90's Ted Binion, a Las Vegas gambling exec, built a vault in the Nevada desert to hide silver coins and about $20M worth of chips he had "borrowed" from the Horseshoe casino which he managed.

Problem was, his stripper girlfriend's other boyfriend, who happened to be the contractor who dug the vault, knew about it. Ted was murdered in 1998 and the GF & contractor were convicted with the motive being the contents of the vault, although later re-tried and acquitted on a technicality. Point being, secret vaults in the desert have a strange habit of getting one dead.

I did consider this after I posted.

I suppose, from the rich , SMART person's point of view, killing the diggers after they had finished their designated job, before they killed you would be the name of the game.

It's dirty pool, but that's business.

[SnerpGoodWord]

Originally Posted by elucidate

I did consider this after I posted.

I suppose, from the rich , SMART person's point of view, killing the diggers after they had finished their designated job, before they killed you would be the name of the game.

It's dirty pool, but that's business.

That's probably smarter than digging a vault and not killing them, but is likely far worse than not digging a vault at all and just using the banking system. Of course Ted didn't have that option since the most valuable items in his vault were both non-negotiable and stolen.

[lycan]

Originally Posted by SnerpGoodWord

One issue that muddies the point somewhat is globalization. Now that everything is more connected, what matters is the globalized inflation/deflation (which correlated well but not exactly to the dollar) rather than individual currencies. Studies that focus heavily on the economies of non-US countries (as the 2004 Fed/Cal study did) can produce very unclear results if this is not taken into account.

Awesome rationalization. Why?

[lycan]

Originally Posted by Brutha

So?

What kind of trading does Snerp engage in?

Just for the heck of it, I used google.

Deflation | Economic History Services

"So, are all deflations bad? Not necessarily. The United Kingdom experienced several years of falling prices in the 1870-1939. However, since the deflation was apparently largely anticipated (e.g., see Capie and Wood 2004) the deflation did not produce adverse economic consequences."

Deflation does not exist in isolation and can be manifested by different reasons, good and bad. A collapse of the credit market (i.e., the realization that bad investments were made) can cause sharp deflationary pressures as the money supply is effectively contracted. This is a normal feature of any economy that makes uses of banks, with or without a metalic money. It is simply the manifestation (the making visible) of the previous farmer eating his seeds example. This does not mean deflation caused problems, it means problems caused deflation. The only real problem with deflation is if it is unforseen, causing real interest rates to rise beyond the previously calculated levels. This can cause massive wealth transfers in society which, if poorly managed, can indeed cause economic problems. Unforseen inflation has the same effect, though it is likely to be better managed. Unpredictable volatility in the price of money can cause shifts in the balance of wealth between creditors and debitors, that is all.

[SnerpGoodWord]

Originally Posted by lycan

Awesome rationalization. Why?

Because frequently local currency in small countries is irrelevant. If currencies are deflationary world-wide, but the Uzbek Bottlecap is inflationary, you can still have a deflation-triggered recession in Uzbekistan because business there isn't really conducted in Bottlecaps - it's conducted in dollars and euros.

[SnerpGoodWord]

Originally Posted by lycan

"So, are all deflations bad? Not necessarily. The United Kingdom experienced several years of falling prices in the 1870-1939. However, since the deflation was apparently largely anticipated (e.g., see Capie and Wood 2004) the deflation did not produce adverse economic consequences."

Nice lack of information. There were plenty of "adverse economic consequences" in that year range, including a depression you may have heard of. It was pretty big - a "great" depression if you will

And for reference, yes, the Pound was deflationary specifically during the great depression.

[lycan]

Originally Posted by SnerpGoodWord

And for reference, yes, the Pound was deflationary specifically during the great depression.

And why was it deflationary? What caused the price of the pound to rise?

[SnerpGoodWord]

Originally Posted by lycan

And why was it deflationary? What caused the price of the pound to rise?

Initially, rising demand for the pound in banking circles combined with no increase in supply (all such explanations must address both supply and demand). Later, hording.

[lycan]

Originally Posted by SnerpGoodWord

Initially, rising demand for the pound in banking circles combined with no increase in supply (all such explanations must address both supply and demand). Later, hording.

And why was there "rising demand for the pound in banking circles"? Define "in banking circles". What was being offered in exchange for these pounds that now had a lower value in relation to it?

[SnerpGoodWord]

Originally Posted by lycan

And why was there "rising demand for the pound in banking circles"? Define "in banking circles". What was being offered in exchange for these pounds that now had a lower value in relation to it?

First and foremost was the selling of equities both in London and US equities held by Europeans. That was the market crisis. The increased demand for cash with no new supply and resulting deflation then fueled the economic contraction and eventual hording.

[lycan]

Originally Posted by SnerpGoodWord

First and foremost was the selling of equities both in London and US equities held by Europeans. That was the market crisis. The increased demand for cash with no new supply and resulting deflation then fueled the economic contraction and eventual hording.

Why was there a selling of "equities"?

[SnerpGoodWord]

Originally Posted by lycan

Why was there a selling of "equities"?

Maybe you've heard of the crash of '29? That's the selling in question. As to why, it's complicated. A leveraged bubble is the most traditional explanation, which is reasonable in my view.

[SatvikBeri]

Originally Posted by elucidate

Oh God, who do I listen to?

You both sound like you know stuff about it. Is it possible you both come from different schools of thought and have garnered differing information? I'm aware that misinformation is rife these days...so correct information would be appreciated. You both think you are right, so who do I believe?

Here are the rules I use:

1. Whoever is more successful in said field-in this case, whoever is richer. Based on their posting histories I have good reason to believe Snerp is financially successful, I don't have any reason to believe Lycan is.

2. The one who can reference more facts. There's a big difference between citing a page that makes an argument, and citing a historical fact.

3. The one who more directly responds to the other's questions. Spinning an opponent's argument, or focusing on minor details, are great ways to show you can't really support your thesis. See How to Disagree for more details.

4. The one who is more calm emotionally.

These are how I judge who knows what they're talking about more, when people disagree and I have no knowledge of the subject matter.

Edit: If you want to see some really hard to decide debates, see the threads between Brutha and Snerp. Though often times their disagreements come down more to a difference in ideology, than to a difference in their predictions/interpretations of historical facts.

[lycan]

Originally Posted by SnerpGoodWord

Maybe you've heard of the crash of '29? That's the selling in question.

That doesn't answer my question. Why was there a crash?

[lycan]

Originally Posted by SatvikBeri

1. Whoever is more successful in said field-in this case, whoever is richer. Based on their posting histories I have good reason to believe Snerp is financially successful, I don't have any reason to believe Lycan is.

I am not financially successful. The reasons for this have nothing to do with my understanding of economics.

[SnerpGoodWord]

Originally Posted by lycan

That doesn't answer my question. Why was there a crash?

Edited to clarify.

[lycan]

Originally Posted by SnerpGoodWord

Edited to clarify.

And what happens when a leveraged bubble takes place and then collapses? To put it in other terms, what is a leveraged bubble?

[SnerpGoodWord]

Originally Posted by lycan

And what happens when a leveraged bubble takes place and then collapses? To put it in other terms, what is a leveraged bubble?

A leveraged bubble in X is when money is borrowed to speculatively buy X, triggering price increases and more buying, then (possibly due to relatively minor outside influences) price of X goes down a little bit, which triggers large leveraged losses for the buyers who bought at the highest prices. The parties with losses have to sell due to margin/performance bond constraints, which causes more price drop, more losses, more selling, and the bubble pops in a chain reaction.

In this case, X was US (and to some degree European) equities.

If you're going to make a point here, you don't have to take one sentence steps to get there. I'm cool with the paragraph

[lycan]

All investments are speculative in nature as far as definitions are concerned. However, the word "speculative" has the connotation of irrationality. Price increases do not, in themselves, cause more buying. It is when irrationality enters the picture that we speak of a bubble. A bubble is the mispricing of capital. That is, wealth is allocated in an unproductive manner due to the irrationality of those investing it. This is an inherently depressive economic activity. Bubbles cause depressions by their very nature, regardless of what happens once the bubble pops. The popping simply makes the depression visible. A leveraged bubble is a credit bubble. Money is invested in the activity of lending in an unproductive manner causing the mispricing of debt. That is, the bank invests $10 in a credit line that is worth $9 to the bank. Price of X goes down in relation to what? If you ensure inflation, the fall in the price of an investment product might be masked by a similar fall in the price of the thing in which the investment product is denominated (the currency). So the bank invests $10 in a credit line that is worth $9 to it, but through inflation, the nominal value of those $9 increases to $11, creating the illusion of profit. The illusion of profit is widespread where there is high inflation and a very serious problem that debilitates many businesses. All banks are leveraged to some degree. When the banks are forced to deleverage because they were behaving irrationaly (they were making bad investments that resulted in losses), this generates deflation. The deflation was not a cause of an economic problem, but its consequence. The deleveraging is the not the cause of an economic problem, but its consequence. The Central Bank can use its control over the currency to shield the banks (and the debitors) from their irrationality, but the bad seeds were already planted. Once the harvest from those bad seeds comes, people's perception of risk shifts. It may shift to such a degree that people become blind to real opportunities out of fear, which has a depressing economic result. But the reason this happens is because before they were blind to real risks, which also had a depressing economic result. You cannot correct one blindness with another, only with the shift in the custody of wealth from those that are blind to those that can see clearly. Inflation does not help or harm the economy. Neither does deflation. Their causes might, but in themselves, they are essentially irrelevant.