American Banks Dumping Dollars for the Yen

NoDrama said:

Nationale Bank van België Has been Belgium's Central Bank since 1850. Unless your 160 years old you wouldn't know what a gold standard was like. WW1 broke the back of gold as so many countries had to resort to inflationary finance.

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Anyway sorry for previous statement of mine
I respect statements backed by a decent explanation.. Not just statements..

So to go into this.. yes the gold standard has long been removed and i am certainly not over 170 years old lol..
But back then (before 2002) this was belgium currency.; now its the euro.. The belgian central bank designs the belgium euro notes but does not have control over the amount of printing itself..
That is where the central european bank comes in.. It can simply be compared to the american FEDs but then in a slightly less aggressive posture..

Just a little add to this.. The european parlement has allot of european central bank board members in it.. the MPs we elect for europe council have very little to say compared to these Board members..
Its just a earopean example of the feds.. really...

Just a little add to this.. The european parlement has allot of european central bank board members in it.. the MPs we elect for europe council have very little to say compared to these Board members..
Its just a earopean example of the feds.. really...

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If this is the way it is with the FED, it is because they don't want the politicians to hold too much power over the fed boards.

Here there are 12 district federal reserve banks, the regular banks (that wanted to be apart of the FED and bought their stocks (buy in basically if you like poker)) all vote for the heads of those Federal Reserve district banks, and from those heads the federal reserve board picks the....... blah blah basically this is all ways to shield the FED board from too much political bullshit.

This allows them to make the not popular decisions, and at the same time allows the politicians to have a entity to blame that really doesn't matter because they dont get voted for their offices.


Jeff

your interpretation of the graph is hilarious. there are very few govt non degree workers. when there are non degree workers in govt jobs, the govt(taxpayer) pays for the education and they move up govt jobs to get about 40 % more salary. also, eunteprenues are often undereducated. so if a guy gets out of high school and starts a successful business he is being compared to a govt worker who is getting paid a union wage to do a union job. while going to college on your dime.

you often compare apples to goats....

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Jeff you still fail to see the fact that the educated workers, who you yourself just said is the vast majority, would make about 20% more money if they quit their government job and went to work in the private sector. That is from your own link when you look into the numbers. So right there you can see from your own articles information that this whole notion of somehow government workers are overpaid is bullshit, they can and do make more money in the private sector when you look at the actual jobs that they can get.

Where did you pull out this 40% number from?

Mr. Kushman

That is completely non-sensical. Digging up gold is like printing money? I mean metaphysics aside, that is just asinine.

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Yeah NoD handled this.

I am not an expert of how it effects the economy.

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No problem, you proved this with your post!



NoD, we go back too far not to respect what you bring to the table. I like our back and forths, because you force me to not only do some good investigating, and really work to make sure what I am saying is not only accurate and complete, but also makes sense. And if I miss on those, you are right there to call me out on it.

Ahhh Yes Han, you know me well. The price of gold in 1913 was about $20 per ounce avoirdupois ( Extra credit if you know what that means) in 1932 gold was about $20 per ounce. Now in 1933 Roosevelt Revalued gold to $35 per ounce, but that is not inflation so I don't count it. In Fact, not counting Roosevelts theft, Gold was the same price from 1833 all the way until 1970. In 1971 Nixon took us completely off the gold standard and that is when the TRUE inflation began. Now you may ask yourself, "Sure, but what about previous to 1833?" well we weren't on a Gold standard then, we were on a bimetallic (Gold and Silver)standard. The mining of large deposits like in California around 1850(49'ers), caused price levels to be very unstable in the short run, but did not cause widespread inflation.

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So here is the thing, (this may come out sounding weird, but lets see). If we look at the dollar. It is valued at exactly 1 dollar, no matter what time period we are in. From 1917, to today, 1 dollar = 1 dollar. But we both know quite well that the one dollar has purchased vastly different amounts of goods. Inflation has decreased the amount it can purchase, but at any time it is always one dollars worth of goods right?

This is the same as gold. It can have one value attached to it, but that does not mean that the goods it purchases does not fluctuate. This is why we have inflation and deflation back when gold was used. I know you may want to attribute it to bankers notes, or whatever, but we both know gold was king back in the day as anti-counterfeiting techniques were not that great and not as trusted.


You get that with deflation or hyperinflation is more about the demand for those currencies changing, not about the actual printed amount changing on the currency right?

It is the same with gold, in times where there was increased demand for goods, it would take more gold to buy what you want right? Because of demand, it does not mean that the price of gold (because it was the currencies of the time right) had to change, just what the gold was able to buy. So as more gold is exchanged for the same goods because you have more demand for the products, that would be inflation would it not? And if there were a surplus of goods, that would mean that there was most likely going to be some deflation because the same amount of gold would buy more goods.

This is just the nature of money, we use it as a means of exchange, when the exchange is steady you have little inflation or deflation, but it doesn't mean it will always be the case.

As JP Morgan once said " Gold is money, and nothing else".

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Kind of a funny quote. Because I know how you are interpetting it, but really if you break it down:

Money is anything that stores value right, so basically this is the whole reason there is m1, m2, and m3 (no longer reported because it only accounts for like 2% of transactions) is the different classifications of money and their liquidity. Currency is just a very liquid form of money right?

So what JP Morgan is saying above I think you are interpetting as "gold is currency, nothing else is currency."

Where I take it as "Gold is a form of money, and has no other importance that makes it special."

hanimmal said:

So here is the thing, (this may come out sounding weird, but lets see). If we look at the dollar. It is valued at exactly 1 dollar, no matter what time period we are in. From 1917, to today, 1 dollar = 1 dollar. But we both know quite well that the one dollar has purchased vastly different amounts of goods. Inflation has decreased the amount it can purchase, but at any time it is always one dollars worth of goods right?

This is the same as gold. It can have one value attached to it, but that does not mean that the goods it purchases does not fluctuate. This is why we have inflation and deflation back when gold was used. I know you may want to attribute it to bankers notes, or whatever, but we both know gold was king back in the day as anti-counterfeiting techniques were not that great and not as trusted.


You get that with deflation or hyperinflation is more about the demand for those currencies changing, not about the actual printed amount changing on the currency right?

It is the same with gold, in times where there was increased demand for goods, it would take more gold to buy what you want right? Because of demand, it does not mean that the price of gold (because it was the currencies of the time right) had to change, just what the gold was able to buy. So as more gold is exchanged for the same goods because you have more demand for the products, that would be inflation would it not? And if there were a surplus of goods, that would mean that there was most likely going to be some deflation because the same amount of gold would buy more goods.

This is just the nature of money, we use it as a means of exchange, when the exchange is steady you have little inflation or deflation, but it doesn't mean it will always be the case.

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Yep i can agree with this statement. Now go and look at commodity prices during the Metallic standard from 1750-1913. You will notice that the long term trend on prices of all commodities was DEFLATIONARY. Which means that regardless of demand, your gold was worth a little more each year because it bought a little more each year. Of course some SHORT term volatility will always be in the mix, but it was a minor thing considering the trend. To tell the truth when I started looking at history of prices it surprised me to find that fact out. Post 1913 you start to have inflation, with the majority of it after 1971.

A dollar is not a store of value, you cannot store it, it will eventually rot away. Bury a dollar bill in the ground along with a gold coin. come back in 10,000 years and see which one is still there. Paper is not a store of anything except an IOU.

Gold does not go up in value, the dollar goes down.

So I started to gather all kinds of data and realized I was going to have to spend a few hours working in all the sources to show you and get good charts to show how prices adjusted with gold.

And then I realized we can just use what you have written. You get how values can change in respect to the item your working with. So we can look at your gold being used.

So using what you know of history, you know there were many tech advances in this time, from the cotton gin, to understanding separating duties to get better economies of scale ect. So at one side you have a movement (very slowly) from substance farming communities and a lot of direct trading, to a more modern economy with industries and mass production means. This also leads to an increase demand for a more flexible currency as people have a harder time trading goods and services gold increases in it's usefulness.

It makes perfect sense that the value of the gold would increase as it's use became more needed, while other goods actual prices decrease as the economies of scale set it.

So either way, you understand the fact gold can fluctuate, and you know that there is an ever increasing amount dug up so it shouldn't be too much of a stretch that gold can experience long term inflation if more gold comes to the market than an expansion of goods right?

So Evan if all of that is not enough for you to see gold and cash essentially works the same way, and are going to stick to gold can only be deflationary long term, I would ask why is this preferred to you?

With deflation, a business has less incentive to expand, which means less jobs because their money is growing so any gain has to be larger than the loss. People have less reason to lend out money, because the risk vs reward is increased because the value is increasing on your savings, while borrowing is also decreased because paying back a loan is more expensive as every dollar you borrow is more expensive to pay back, on and on. Basic market contraction.

With inflation it's obviously the opposite, savings is directed more to investing as they want returns to outpace the value lost, borrowing is increased due to paying it back is cheaper long term, ect. A small amount of inflation has been shown to lead to more job creation, which is why those two things make up the bulk of the Feds goals.

But even all that aside, what is the point, they both essentially end up being the same thing, except with currency our government has more control over the value of our dollar than anyone else. With gold the countries that produce the most gold would be the ones that end up with the most control over our wealth.


As for the burying thing. A house is also a store of value, but burying it for ten thousand years would also destroy it's value.

I can agree that if your having 30% deflation per year you are having a problem. But less than .2% a year does nothing to peoples spending habits. IMO slight deflation is much better than Inflation for everyone but the borrower. There will never be enough gold produced to keep up with world population therefore you never see widespread inflation when on a gold standard. Its not like fiat currency where they can create any amount they want with a book keeping entry.People don't have to take out loans from banks, they can save. A gold standard rewards savers. Inflation rewards the banks because they get first dibs on use of the money that they are allowed to create when lending. A gold standard can protect the elderly and retired. The Price of Gold only fluctuates when denominated in fiat currency. Didn't I just show you how the price of Gold didn't change for 130 years? During that time we did not have a Fiat currency. The only time you see the Dollar value of gold change is after Nixon closed the Gold Window and took us completely off the Gold Standard.

A proper home may be a store of value, but its basically worthless if you need to move and it might take years to sell. Gold can be liquidated near instantly and you can put it in your pocket. Heck you don't even have to liquidate it, you can just use it as money. There are very few things in the world that will do that. Not diamonds, not rare art, not cars or real estate. Oh and one other thing, ask 50% of the people of this nation if their home is a store of value and you will get a different answer.

I can agree that if your having 30% deflation per year you are having a problem. But less than .2% a year does nothing to peoples spending habits. IMO slight deflation is much better than Inflation for everyone but the borrower. There will never be enough gold produced to keep up with world population therefore you never see widespread inflation when on a gold standard. Its not like fiat currency where they can create any amount they want with a book keeping entry.People don't have to take out loans from banks, they can save. A gold standard rewards savers. Inflation rewards the banks because they get first dibs on use of the money that they are allowed to create when lending. A gold standard can protect the elderly and retired.

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Anything over 3% changes is pretty disruptive plus or minus. By saying that deflation is better for everyone but the borrower, you mean savers. And in America borrowers really drive the economy because they are the ones opening new businesses and hiring workers, buying the goods and services, and even the ones making loans. Savers are definantly needed, but in america we still have savers, and they tend to do very well when they do with their returns from investing those savings.

And I would also argue that the best way to protect our seniors is to have a more vibrant and educated younger workforce in place.

The Price of Gold only fluctuates when denominated in fiat currency. Didn't I just show you how the price of Gold didn't change for 130 years? During that time we did not have a Fiat currency. The only time you see the Dollar value of gold change is after Nixon closed the Gold Window and took us completely off the Gold Standard.

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How much has the price of a one dollar bill changed since 1862? Because I am saying the price of a currency doesn't matter, it is what goods it can purchase.

A proper home may be a store of value, but its basically worthless if you need to move and it might take years to sell. Gold can be liquidated near instantly and you can put it in your pocket. Heck you don't even have to liquidate it, you can just use it as money. There are very few things in the world that will do that. Not diamonds, not rare art, not cars or real estate. Oh and one other thing, ask 50% of the people of this nation if their home is a store of value and you will get a different answer.

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Ask 50% of people to locate mississippi on a map and see what happens.

Im fine with gold, but I just really think it shouldnt be considered some kind of super currency. And I think that the us fiat currency works just as well, and has been working very well for the american economy since we went off of it. It is able to be manipulated, and that blows but at the same time it is a good thing to be able to have some control over it at times of turmoil.

And although I know you dont trust them, having the fed and banks who have the most to lose if the monetary system goes off the rails, and the most expertise with handling money is a big relief to me. Having politicians, other countries and private mining companies in control of the worlds monetary systems is a scary thought.

stop arguing about the metallic standard for buying shit. do you really want to go back to the stone age??

paper money has given humans far more opportunities for becoming wealthy than gold bars ever did. it also made the process of becoming rich a lot more peaceful.

redivider said:

stop arguing about the metallic standard for buying shit. do you really want to go back to the stone age??

paper money has given humans far more opportunities for becoming wealthy than gold bars ever did. it also made the process of becoming rich a lot more peaceful.

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Were you under the impression that the whole time we were on a gold standard that everyone had to lug around coins? You weren't aware that we had paper money for the entire time along side silver and gold?

hanimmal said:

Anything over 3% changes is pretty disruptive plus or minus. By saying that deflation is better for everyone but the borrower, you mean savers. And in America borrowers really drive the economy because they are the ones opening new businesses and hiring workers, buying the goods and services, and even the ones making loans. Savers are definantly needed, but in america we still have savers, and they tend to do very well when they do with their returns from investing those savings.

And I would also argue that the best way to protect our seniors is to have a more vibrant and educated younger workforce in place.

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No im saying low deflation is better for everyone not JUST savers. We are talking LOW deflation, something would take 20 -30 years to drop the price by 5% kind of low deflation.

How much has the price of a one dollar bill changed since 1862? Because I am saying the price of a currency doesn't matter, it is what goods it can purchase.

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Yep, I agree.

Ask 50% of people to locate mississippi on a map and see what happens.

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It wasn't a question of how dumb people are, it was a question of how many homes now are in a NEGATIVE EQUITY type situation or no growth situation. I wouldn't call my house a store of value when i bought it for 900,000 but now it is only worth 300,000, you dig?

Im fine with gold, but I just really think it shouldnt be considered some kind of super currency. And I think that the us fiat currency works just as well, and has been working very well for the american economy since we went off of it. It is able to be manipulated, and that blows but at the same time it is a good thing to be able to have some control over it at times of turmoil.

And although I know you dont trust them, having the fed and banks who have the most to lose if the monetary system goes off the rails, and the most expertise with handling money is a big relief to me. Having politicians, other countries and private mining companies in control of the worlds monetary systems is a scary thought.

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Gold is not immune from the laws of supply and demand. I am not saying that gold has a constant value and is immune from normal free market operations, what I am advocating is that gold has stability of value and represents perhaps the best monetary method of saving. In a free society, one is certainly free to store that which one values, so long as it is understood that the value of one’s savings is not immune from the influence of the market. You have seen that this is true in the history of gold's value, certainly there are times when it was too plentiful and did not buy as much (1849), BUT as long as the market is free it will always find its mean value again.

Inflation causes people to spend their money as fast as they can so they get full value for it. Savers of cash lose approx 30% of their spending power every 10 years in our Fiat monetary system. This causes people to invest their money in the hopes that they can at least create enough of a return to outrun inflation or at least even it up so in the end they have made up for their loss of purchasing power. BUT here is the thing, investing carries RISK. The only Risk Gold carries is that someone may steal it, as long as you do a good job of keeping it away from would be thieves you are safe. Under a gold standard you cannot cause massive inflation since you cannot create gold, you have to mine it out of the earth. It puts up a limit on creation of credit , people will only lend to low risk people, the way it should be. There would not be these ruinous credit derivatives lurking around the corner either.

How would other countries/mining companies run the monetary system? Nonsensical statement that you need to think more about.

I think what redivider was really trying to say was that he likes FIAT (not paper) money the best because there are no limits to how much can be created through credit. The thing with credit though is that it brings with it ruinous INTEREST. Under a Gold Standard the interest rates are much lower because there is no race to beat inflation. I wonder if he even knows we were on a Gold Standard until 1971, which wasn't the stone age and no one used gold coins or silver for that matter.

So no problem I can see how deflation can be fine too, I am just in favor of a small mount of inflation, because (no real way to deny this) it forces people that are worried about it (which is not people that spend their money all the time, nor does it stop people who use 401k's and the such because the tax write off nullifies any inflationary loss really right, and pretty much destroys the inflationary trends allowing for large compounding growth) to invest their money so they know they are outpacing it at the very least.

How would other countries/mining companies run the monetary system? Nonsensical statement that you need to think more about.

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Basically what I mean is what happens if we are on the gold standard today and china and india dumps all their gold onto the market? It would drive down demand for it (excess supply basically) and decrease the amount our money will buy. Just like you had said, you get that it can have inflation or deflation, it is not somehow immune, but we would not be as in control as we are with the currency we print and distribute ourselves.


But one thing you said at some point, the banks do have first dibs. One of the things I am going to try to do a research paper on is what would happen if instead of increasing the monetary supply through bank deposits, the fed basically put in a deposit into x amount of citizens accounts (picked at random of course, and once you get a deposit (based at say 3% of yearly earnings for the previous year) that is a time deposit that the people cannot withdraw for an entire year so that the banks are able to lend it out. I have not thought it through a tremendous amount, but it seems like it may be on a interesting track of thought.

I think what redivider was really trying to say was that he likes FIAT (not paper) money the best because there are no limits to how much can be created through credit. The thing with credit though is that it brings with it ruinous INTEREST. Under a Gold Standard the interest rates are much lower because there is no race to beat inflation. I wonder if he even knows we were on a Gold Standard until 1971, which wasn't the stone age and no one used gold coins or silver for that matter.

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You are thinking a personal non secured line of credit I take it?

Because I can use someone elses example. Take a 30% credit card and use it to buy a $6k grow room set up. That is a great investment (if you are legal) right.

Or if you need to take out a 10% loan for a reliable car to get you to a car that pays you $50k when all the jobs close enough to you only pay $30k, it is a good deal.

There are a million examples. You cannot blame interest and the way they need to be higher because many people have gotten too credit card (and second mortgages) crazy over the last couple decades.