mises.org— What if the money supply had been fixed since 1959 and the economy remained on a steady growth path? An economist crunches the numbers and find price heaven.
Oct 25, 2006View in Crawl 4
"Games like Halflife 2 play much better on a $500 card."Half-Life 2 runs at 1600x1200 with shadows, anti-aliasing, etc. on my $150 AGP card. Obviously the more you spend, the better it will run, the point is that you don't NEED to spend ridiculous amounts of money on a graphics card to get a playing experience that's competitive with a console.
1995 1gb HDD = AU$1200 (ie: 320gb = AU$384,000)2006 320gb HDD = AU$135hmmm, me thinks the price of storage has offset the price of my house fairly well.
"The truth of the matter is that the vast majority of people don't understand economics. This includes most economists!"Generally, (non-Austrian) economists have even less understanding of economics than normal. Mainstream econ fries your brain. If you want to know something about economics, and you have the choice of asking, say, Paul Samuelson, or asking your neighbor's 10 year old, go to the neighbor's kid every time!
@pinoycowboy:You've missed the point, you idiot! Debt is good when you're borrowing to invest in the production of something valuable and that will generate cash to pay the principal and the interest many times over.
take it easy ramiro. who is to say that the debt people are currently undertaking is not being used to invest in the production of something valuable right now? i would like to think that most reasonable long-term debt is taken on under the assumption that the product/property/service purchase will create value in future periods. where in my comment does it indicate otherwise? to add to that, where in your initial comment does it say anything of that sort one way or the other?also, US deflation might seem great over the short-term, but in the long-term, consumer spending would be reduced to a bare minimum; the C in C+I+G is absolutely the largest component of our GDP. additionally, on a global scale, investment in US goods, relative to the US dollar, would decline in value. finally, as far as allowing people to save w/o penalty for a nice retirement nest egg, there are plenty of vehicles available to accommodate for this. most private retirement accounts outperform inflation and T-Bills. so for those who don't save, one way or another, sucks to be them.and by the way, i too dislike wage floors.so how about not calling someone else an idiot under pretenses created in your own head? it's just unnecessary.
i have expressed no doubt in my statements besides that which i allow for a small margin of error - also ignorant spenders who max out their credit cards and HELOCs to purchase A/V equipment and expensive cars w/o the means for comfortable repayment (again a minority). regardless, the aforementioned people hold no bearing to my argument because nothing that inflation/deflation does affects this kind of behavior - these people are just stupid.so where are the big investments in capital goods? lets separate the terms investment and expenditure - simplifying expenditure as a sum of money spent in return for a good that is fully depreciated upon purchase. expenditure (which was what i was referencing) in capital goods would pretty much be the purchase of anything. as far as investments in capital goods - investment real estate has been hopping (notice i say investment and not residential). it would appear that according to morgan stanley's REIT index, investment in real estate is its highest volume. additionally, asset based securities such as futures and commodities are heavily invested in. the morgan stanley commodities index also shows record high volume.to add to that, the investments represent either the issuance of debt (in bond form) or a sell-off of equity (in stock form) from the respective public companies to the private sector. on a private level, i can really only site the purchase of investment grade real properties, which has been at all time highs, as supported by REIT indicies.there, my friend, is an example of where "investments" in capital goods are going. and let me assure you that the only rock that i'm living under is on top of a chicago sky scraper in my plush ass office.one love
@DragularHello Dragular,you remarked:> You act as though inflation is the fault of one government,But inflation has always been the work of government, even more so since replaced metal currencies by its fiat currencies: The mechanism of inflation is started by government. More to the point, it is started by the government issuing new debt. When the government needs money, it simply writes the sum onto a piece of paper and sells that paper -- as a debt certificate -- to a bank. The bank carries that debt certificate to the Fed, which utters the magic word "Lombard", thus transforming said certificate into cash.The bank takes the cash from the Fed in exchange for the government's debt certificate. Then it utters its own magic word: "fractional reserve". This converts its cash "reserve" into a multiple in credit money which it can lend out with interest.This should make clear how government and the banks inflate the money supply through the Fed, and how government and the banks profit from this arrangement. The rest of us, who have to earn our money through work and particularly those of us who depend on income streams with little flexibility -- wage earners, pensioners etc. -- have to pay for this scheme through the depreciation of our incomes.> without realizing there are factors outside of government> control that influence inflation.Those are minor compared to the ever faster turning of the money crank. But you are right in the following way: There might be a point when people will have lost their confidence in money altogether, when they just try to rid themselves of it as soon as they receive it. At that point inflation will indeed be outside government's control. And if you think the political class of a civilised western country would be too enlightened to let things go that far: remember the bipartisan destruction of Germany's Reichsmark in 1925.> You also point out numerous faults of the government causing inflation> without pointing to any sort of alternative.Pointing out the source of the disease shows the strategy for curing it.> What's your solution, dissolve the fed?Returning to the times of constitutionally guaranteed monetary stability: that would be a good first step.
@FrankBattagliayou wrote:> Say you want to start a widget factory. You have a (..) plan> that will produce widgets (...) Say your widget factory can> produce a 5% return on investment every year (...). Now, say> you go (...) to investors in> (1) an economy with a 5% inflation rate> (2) an economy with no inflation> (3) an economy with a 5% deflation rate> (...)> In the first economy, where (hoarded) money (...) loses value,> a 5% return sounds like a good idea, and the investment occurs> and widgets get made.I am afraid I do not see this happening. If I expected inflation to destroy my profits, I would not invest in the first place. I would use the money for consumption instead.> In the second economy, (hoarded) money (...) holds its value.> A 5% return is still a good idea, but not as advantageous. The> risks involved (...) weigh more heavily than in the first> economy.Actually, the risks you mention weigh more heavily in the first economy: not only is the investor sure to reap no real profits, he might even lose his investment. In the second economy however, the risk of loss is mitigated by the expectation of profits.> Overall, less investment in widget factories will occur because> the incremental gain over "mattress investments" is less. I am afraid you artificially limiting the investor's options to either hoarding and investing. There is a third alternative which it appears you fail to mention, namely consumption. This is what anyone of us would do with our wealth if we saw no way to at least keep its value.At this point presumably someone might ask what consumption is but somebody else's income, which merely shifts wealth around. But this is in fact wrong, an illusion created by mistaking money for wealth. Real wealth are goods, and goods that are being consumed are not available to anybody else. To put it simply, the real wealth I consume no-one can invest. > In the third economy, I can get a 5% return by just sitting on my money. There is no reason at all for me to invest in a widget factory that carries additional risk. Thus no widgets get made.But of course there is a reason: more wealth in your future. If faced with the choice of earning a 5% return or a 10% real return on your savings, would *you* turn down the opportunity, particularly if you start calculating cumulative interest?
arramolOct 26, 2006
"Games like Halflife 2 play much better on a $500 card."Half-Life 2 runs at 1600x1200 with shadows, anti-aliasing, etc. on my $150 AGP card. Obviously the more you spend, the better it will run, the point is that you don't NEED to spend ridiculous amounts of money on a graphics card to get a playing experience that's competitive with a console.
zhulienOct 26, 2006
1995 1gb HDD = AU$1200 (ie: 320gb = AU$384,000)2006 320gb HDD = AU$135hmmm, me thinks the price of storage has offset the price of my house fairly well.
miseseanOct 26, 2006
"The truth of the matter is that the vast majority of people don't understand economics. This includes most economists!"Generally, (non-Austrian) economists have even less understanding of economics than normal. Mainstream econ fries your brain. If you want to know something about economics, and you have the choice of asking, say, Paul Samuelson, or asking your neighbor's 10 year old, go to the neighbor's kid every time!
ramiroOct 26, 2006
@pinoycowboy:You've missed the point, you idiot! Debt is good when you're borrowing to invest in the production of something valuable and that will generate cash to pay the principal and the interest many times over.
pinoycowboyOct 26, 2006
take it easy ramiro. who is to say that the debt people are currently undertaking is not being used to invest in the production of something valuable right now? i would like to think that most reasonable long-term debt is taken on under the assumption that the product/property/service purchase will create value in future periods. where in my comment does it indicate otherwise? to add to that, where in your initial comment does it say anything of that sort one way or the other?also, US deflation might seem great over the short-term, but in the long-term, consumer spending would be reduced to a bare minimum; the C in C+I+G is absolutely the largest component of our GDP. additionally, on a global scale, investment in US goods, relative to the US dollar, would decline in value. finally, as far as allowing people to save w/o penalty for a nice retirement nest egg, there are plenty of vehicles available to accommodate for this. most private retirement accounts outperform inflation and T-Bills. so for those who don't save, one way or another, sucks to be them.and by the way, i too dislike wage floors.so how about not calling someone else an idiot under pretenses created in your own head? it's just unnecessary.
pinoycowboyOct 26, 2006
i have expressed no doubt in my statements besides that which i allow for a small margin of error - also ignorant spenders who max out their credit cards and HELOCs to purchase A/V equipment and expensive cars w/o the means for comfortable repayment (again a minority). regardless, the aforementioned people hold no bearing to my argument because nothing that inflation/deflation does affects this kind of behavior - these people are just stupid.so where are the big investments in capital goods? lets separate the terms investment and expenditure - simplifying expenditure as a sum of money spent in return for a good that is fully depreciated upon purchase. expenditure (which was what i was referencing) in capital goods would pretty much be the purchase of anything. as far as investments in capital goods - investment real estate has been hopping (notice i say investment and not residential). it would appear that according to morgan stanley's REIT index, investment in real estate is its highest volume. additionally, asset based securities such as futures and commodities are heavily invested in. the morgan stanley commodities index also shows record high volume.to add to that, the investments represent either the issuance of debt (in bond form) or a sell-off of equity (in stock form) from the respective public companies to the private sector. on a private level, i can really only site the purchase of investment grade real properties, which has been at all time highs, as supported by REIT indicies.there, my friend, is an example of where "investments" in capital goods are going. and let me assure you that the only rock that i'm living under is on top of a chicago sky scraper in my plush ass office.one love
jpjanssenOct 27, 2006
@DragularHello Dragular,you remarked:> You act as though inflation is the fault of one government,But inflation has always been the work of government, even more so since replaced metal currencies by its fiat currencies: The mechanism of inflation is started by government. More to the point, it is started by the government issuing new debt. When the government needs money, it simply writes the sum onto a piece of paper and sells that paper -- as a debt certificate -- to a bank. The bank carries that debt certificate to the Fed, which utters the magic word "Lombard", thus transforming said certificate into cash.The bank takes the cash from the Fed in exchange for the government's debt certificate. Then it utters its own magic word: "fractional reserve". This converts its cash "reserve" into a multiple in credit money which it can lend out with interest.This should make clear how government and the banks inflate the money supply through the Fed, and how government and the banks profit from this arrangement. The rest of us, who have to earn our money through work and particularly those of us who depend on income streams with little flexibility -- wage earners, pensioners etc. -- have to pay for this scheme through the depreciation of our incomes.> without realizing there are factors outside of government> control that influence inflation.Those are minor compared to the ever faster turning of the money crank. But you are right in the following way: There might be a point when people will have lost their confidence in money altogether, when they just try to rid themselves of it as soon as they receive it. At that point inflation will indeed be outside government's control. And if you think the political class of a civilised western country would be too enlightened to let things go that far: remember the bipartisan destruction of Germany's Reichsmark in 1925.> You also point out numerous faults of the government causing inflation> without pointing to any sort of alternative.Pointing out the source of the disease shows the strategy for curing it.> What's your solution, dissolve the fed?Returning to the times of constitutionally guaranteed monetary stability: that would be a good first step.
jpjanssenOct 28, 2006
@FrankBattagliayou wrote:> Say you want to start a widget factory. You have a (..) plan> that will produce widgets (...) Say your widget factory can> produce a 5% return on investment every year (...). Now, say> you go (...) to investors in> (1) an economy with a 5% inflation rate> (2) an economy with no inflation> (3) an economy with a 5% deflation rate> (...)> In the first economy, where (hoarded) money (...) loses value,> a 5% return sounds like a good idea, and the investment occurs> and widgets get made.I am afraid I do not see this happening. If I expected inflation to destroy my profits, I would not invest in the first place. I would use the money for consumption instead.> In the second economy, (hoarded) money (...) holds its value.> A 5% return is still a good idea, but not as advantageous. The> risks involved (...) weigh more heavily than in the first> economy.Actually, the risks you mention weigh more heavily in the first economy: not only is the investor sure to reap no real profits, he might even lose his investment. In the second economy however, the risk of loss is mitigated by the expectation of profits.> Overall, less investment in widget factories will occur because> the incremental gain over "mattress investments" is less. I am afraid you artificially limiting the investor's options to either hoarding and investing. There is a third alternative which it appears you fail to mention, namely consumption. This is what anyone of us would do with our wealth if we saw no way to at least keep its value.At this point presumably someone might ask what consumption is but somebody else's income, which merely shifts wealth around. But this is in fact wrong, an illusion created by mistaking money for wealth. Real wealth are goods, and goods that are being consumed are not available to anybody else. To put it simply, the real wealth I consume no-one can invest. > In the third economy, I can get a 5% return by just sitting on my money. There is no reason at all for me to invest in a widget factory that carries additional risk. Thus no widgets get made.But of course there is a reason: more wealth in your future. If faced with the choice of earning a 5% return or a 10% real return on your savings, would *you* turn down the opportunity, particularly if you start calculating cumulative interest?