Tapering called off

Other discussions not related to the Permanent Portfolio

Moderator: Global Moderator

Kshartle
Executive Member
Executive Member
Posts: 3561
Joined: Thu Sep 22, 2011 4:38 pm

Re: Tapering called off

Post by Kshartle » Thu Sep 19, 2013 8:59 am

Gumby wrote:
Kshartle wrote:
Gumby wrote: KShartle... It's simply because you've asked a question that doesn't happen in reality. You can't expect a descriptive framework — based on reality — to answer a question about hypothetical fantasylands where counterfeiters are causing moral issues. It just ain't going to happen.

But, hey... Keep it up with the bedtime stories. I'm sure you'll figure something out from them.
Which one doesn't happen in reality? People don't counterfeit or people don't borrow money? What alternate reality are you talking about?
There are no "perfect" counterfeiters. Counterfeiters commit fraud. You are basically talking about a crime and MR is simply a manual for the banking system.

For instance, your descriptive car manual doesn't cover crimes of car theft. That doesn't make the manual incorrect. It simply means that the manual isn't interested in discussing crime.

You have this desire to turn every conversation into a political one. And I just don't care about political conversations that much.
When did I mention politics? Are you telling me if you study/believe MR you can no longer understand the effects of counterfeiting? That last question is really rhetorical.
Kshartle
Executive Member
Executive Member
Posts: 3561
Joined: Thu Sep 22, 2011 4:38 pm

Re: Tapering called off

Post by Kshartle » Thu Sep 19, 2013 9:06 am

MediumTex wrote: The time to do something about out current system will be when the economy has completely healed and private sector credit is expanding at a healthy rate.  At that point, the Fed should aggressively raise rates to make sure that credit expansion doesn't begin to fuel more speculative asset bubbles.
Do you think it's possible QE is actually hurting the economy? If it is in fact hurting it, will they ever stop and why in your opinion?
Gumby
Executive Member
Executive Member
Posts: 4012
Joined: Mon May 10, 2010 8:54 am

Re: Tapering called off

Post by Gumby » Thu Sep 19, 2013 9:38 am

Kshartle wrote:When did I mention politics?
You always mention politics. Every question and retort is setting up another conversation about how bad the government is and how it steals from us and how we are all slaves, etc. Oh the government this and oh the government that. On and on... Who cares? This is an investment forum — we just want to know why the government is able to avoid nominal defaults on LTTs and we'll take care of the inflation with stocks and gold.
Kshartle wrote:Are you telling me if you study/believe MR you can no longer understand the effects of counterfeiting? That last question is really rhetorical.
Look. If this line of questioning about counterfeiting is somehow connected to inflation (what we are really interested in here), then please explain yourself with real data. Show us how massive counterfeiting is supposedly destroying our purchasing power with real data and then we can continue. But, if you'd rather stick to bedtime stories, fairytales and fantasyisland scenarios, then I'm afraid we're done here.

The entire credit-based monetary system is based upon the Credit Theory of Money. You need to learn that theory if you want to understand why everyone on the planet and $14 trillion in S&P 500 market cap can get by with only $3.4 Trillion in base money.

The real world of economics is complex. There is credit, there are banks, there are deposits, there are money market funds, there are Primary Dealers, there are Treasury auctions, there are direct bidders and indirect bidders, there are excess reserves, there's IOR, there's FFR, there's overnight lending, and there are contracts that hold all of those operations together, and so on. Those are our realities — not some silly island with "Pointedstick notes". Trying to boil our economic realities down to fairytales and island bedtime stories will miss the real complexity entirely. And it seems that you are hoping to avoid that complexity so that you can inject your political morals into the conversation.

But, I keep telling you that I don't care about politics. If you have evidence of significant inflationary effects from "counterfeiting," then get on it with already and show us.
Last edited by Gumby on Thu Sep 19, 2013 12:54 pm, edited 1 time in total.
Nothing I say should be construed as advice or expertise. I am only sharing opinions which may or may not be applicable in any given case.
tennpaga
Global Moderator
Global Moderator
Posts: 3126
Joined: Tue May 17, 2011 1:44 pm

Re: Tapering called off

Post by tennpaga » Thu Sep 19, 2013 10:12 am

moda0306 wrote: Eventually there won't be enough gold to pay off all the debt plus the outstanding interest payments.  The lack of the growth of the gold supply would create a market crash, eventually.
The implication of this is that significant resources would have to be expended to dig more gold out of the ground.  This would be incredibly silly.  I can't decide if it would be less or more dumb than financial engineering, though.
* Gresham's Law: Bad behavior drives out good.
* Gresham's corollary: Avoid participating in systems where good behavior cannot win.

https://fs.blog/2009/12/mental-model-greshams-law/
Kshartle
Executive Member
Executive Member
Posts: 3561
Joined: Thu Sep 22, 2011 4:38 pm

Re: Tapering called off

Post by Kshartle » Thu Sep 19, 2013 10:18 am

TennPaGa wrote:
moda0306 wrote: Eventually there won't be enough gold to pay off all the debt plus the outstanding interest payments.  The lack of the growth of the gold supply would create a market crash, eventually.
The implication of this is that significant resources would have to be expended to dig more gold out of the ground.  This would be incredibly silly.  I can't decide if it would be less or more dumb than financial engineering, though.
Or the price of gold just has to go up. The price in relation to other stuff...if gold is functioning as money.
User avatar
moda0306
Executive Member
Executive Member
Posts: 7611
Joined: Mon Oct 25, 2010 9:05 pm
Location: Minnesota

Re: Tapering called off

Post by moda0306 » Thu Sep 19, 2013 1:37 pm

Kshartle wrote:
TennPaGa wrote:
moda0306 wrote: Eventually there won't be enough gold to pay off all the debt plus the outstanding interest payments.  The lack of the growth of the gold supply would create a market crash, eventually.
The implication of this is that significant resources would have to be expended to dig more gold out of the ground.  This would be incredibly silly.  I can't decide if it would be less or more dumb than financial engineering, though.
Or the price of gold just has to go up. The price in relation to other stuff...if gold is functioning as money.
There's still not enough gold to sustain the level of debt denominated in gold plus interest to be paid in gold. It's simple math.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

- Thomas Paine
Kshartle
Executive Member
Executive Member
Posts: 3561
Joined: Thu Sep 22, 2011 4:38 pm

Re: Tapering called off

Post by Kshartle » Thu Sep 19, 2013 1:50 pm

moda0306 wrote:
Kshartle wrote:
TennPaGa wrote: The implication of this is that significant resources would have to be expended to dig more gold out of the ground.  This would be incredibly silly.  I can't decide if it would be less or more dumb than financial engineering, though.
Or the price of gold just has to go up. The price in relation to other stuff...if gold is functioning as money.
There's still not enough gold to sustain the level of debt denominated in gold plus interest to be paid in gold. It's simple math.
All loans are not due at the same time. Every individual loan can still be paid off if the borrower can provide goods and services required to trade for the required amount. Some will not be able to do this. They will default just like they do in dollars. The total amount of money in circulation does not require expansion to accomodate new production. Prices will fall to adjust. Rapidly moving prices can cause additional confusion in the marketplace and difficulties in planning that reduces efficiency. I think falling prices because money is gaining value causes fewer problems than rising prices due to money losing value.

If you had an island with 100 people, and 10 of them have gold and loan in to the other 90, all payable in 30 days with interest, some will not be able to pay. Those lenders who lent more foolishly will lose. Having someone counterfeit the gold to ensure everyone can pay does not change the fact that there was a loss, it only spreads it around to everyone, rewarding the risky unprofitable lenders at the expense of the prudent intelligent lenders. In that way also it makes us poorer by missallocating resources towards less profitable ventures (guys borrowed gold and bought stuff that had value but combined them and ended with less value than required for the loan to be made good).

Ideally the amount of money in circulation would rise to meet exactly the value of new goods and services. Who on Earth can possibly be in charge of this monumental task and not abuse that power?
User avatar
moda0306
Executive Member
Executive Member
Posts: 7611
Joined: Mon Oct 25, 2010 9:05 pm
Location: Minnesota

Re: Tapering called off

Post by moda0306 » Thu Sep 19, 2013 2:17 pm

Kshartle,

There is some healthy level of debt given a certain amount of productive investment.  With the same amount of gold servicing an ever-growing nominal debt-base, it will eventually fail to meet those demands.

Unless you're arguing that our total aggregate debt plus interest to be paid should be limited to the amount of gold already in mined existence, which would significantly hamper investment.

Debt may appear an awful thing, but some amazing entrepreneurs depend heavily on debt early on, and never would have been able to bring their innovation to market without that tool.

I'm surprised that people so supportive of "businessmen" want to limit their access to economic tools to bring their ideas to market by limiting our growth to the quantity of a shiny yellow metal.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

- Thomas Paine
User avatar
technovelist
Executive Member
Executive Member
Posts: 6261
Joined: Wed Sep 15, 2010 11:20 pm

Re: Tapering called off

Post by technovelist » Thu Sep 19, 2013 2:24 pm

moda0306 wrote: Kshartle,

There is some healthy level of debt given a certain amount of productive investment.  With the same amount of gold servicing an ever-growing nominal debt-base, it will eventually fail to meet those demands.

Unless you're arguing that our total aggregate debt plus interest to be paid should be limited to the amount of gold already in mined existence, which would significantly hamper investment.

Debt may appear an awful thing, but some amazing entrepreneurs depend heavily on debt early on, and never would have been able to bring their innovation to market without that tool.

I'm surprised that people so supportive of "businessmen" want to limit their access to economic tools to bring their ideas to market by limiting our growth to the quantity of a shiny yellow metal.
One more time: No, limiting debt to the amount of gold in existences would NOT hamper investment. The total amount of goods in existence is NOT increased by printing money. All printing money can do is to REARRANGE existing goods. Thus, there is no increase in REAL investment available by printing money.

Of course NOMINAL investment can be increased by printing money; that is one of the effects of the "money illusion". But real investment cannot be increased other than by saving (spending less than one earns).

This is elementary, people.
Another nod to the most beautiful equation: e + 1 = 0
User avatar
moda0306
Executive Member
Executive Member
Posts: 7611
Joined: Mon Oct 25, 2010 9:05 pm
Location: Minnesota

Re: Tapering called off

Post by moda0306 » Thu Sep 19, 2013 2:37 pm

technovelist wrote:
moda0306 wrote: Kshartle,

There is some healthy level of debt given a certain amount of productive investment.  With the same amount of gold servicing an ever-growing nominal debt-base, it will eventually fail to meet those demands.

Unless you're arguing that our total aggregate debt plus interest to be paid should be limited to the amount of gold already in mined existence, which would significantly hamper investment.

Debt may appear an awful thing, but some amazing entrepreneurs depend heavily on debt early on, and never would have been able to bring their innovation to market without that tool.

I'm surprised that people so supportive of "businessmen" want to limit their access to economic tools to bring their ideas to market by limiting our growth to the quantity of a shiny yellow metal.
One more time: No, limiting debt to the amount of gold in existences would NOT hamper investment. The total amount of goods in existence is NOT increased by printing money. All printing money can do is to REARRANGE existing goods. Thus, there is no increase in REAL investment available by printing money.

Of course NOMINAL investment can be increased by printing money; that is one of the effects of the "money illusion". But real investment cannot be increased other than by saving (spending less than one earns).

This is elementary, people.
Generally, entrepreneurs can't build a widget factory unless there is debt to help them pay for the cost of it. Lack of credit prevents investment from occurring that otherwise could have.  If I have a great idea, but instead of our economy being limited by productive potential it's limited by not enough quantity of medium of exchange, we have a situation where we're far less productive than we otherwise could be.

This, my friend, is elementary.  Not only is an economy's growth limited by insufficient monetary expansion, but it's actually a policy decision.  As some of the other threads have shown, gold was a store of value initially used to help governments, not individuals.

I'm not saying that simply printing gobs of money will miraculously make our economy a utopia.  But it's monetizing an economy in the first place that leaves us exposed to the Mexican standoffs that we call recessions.  Having a fixed money supply amidst a growing economy is a recipe for disaster.  We might as well use bartar at that point.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."

- Thomas Paine
Kshartle
Executive Member
Executive Member
Posts: 3561
Joined: Thu Sep 22, 2011 4:38 pm

Re: Tapering called off

Post by Kshartle » Thu Sep 19, 2013 2:42 pm

technovelist wrote: This is elementary, people.
Evidently it is not. I thought I explained clearly how prices just adjust to the new money/goods equilibrium. Rapid changes of either the numerator or denominator cause planning problems but the reality is they only move rapidly if rapid inflation or deflation is possible. Those are only possible when you use money substitues and not real money. Real money isn't going to just appear and dissapear in huge quantites or the market will not choose/use it.

Evidently this is extremely advanced. I can't believe we go through this every single week.
Kshartle
Executive Member
Executive Member
Posts: 3561
Joined: Thu Sep 22, 2011 4:38 pm

Re: Tapering called off

Post by Kshartle » Thu Sep 19, 2013 2:46 pm

I give up. Stuff can't be made unless we can get our hands on enough gold first.

They had a great economy going with all kinds of production that was profitable and self-sustaing and growing and then they ran out of gold. They got stuck in neutral until they could find another mine or pull it out of teeth from corpses in their graves.
Post Reply