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The Economic News Isn't All Bleak

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Re: The Economic News Isn't All Bleak

#51

Post by DenisM »

jerf wrote: post #50
DenisM wrote: post #46

Earlier quoted context omitted.

False choice fallacy: either "no hyperinflation" or "rampaging mobs". In fact several countries have survived hyperinflation without the mobs. Once again, Russia 1998, Argentina 2001, Icelad 2008. On the other hand USA 1930 and Nazi Germany saw confiscation of gold by the government and it might make sense to prepare for that as well by storing your gold abroad.

Actually, rather than a false choice fallacy, my real point is that no matter how prepared you are, you can always hypothesize a situation for which your preparation is insufficient. Concluding that therefore, any given action (in this case, saving dollars) is a bad idea because it "might not be enough" is an invalid argument. One must argue about probabilities. I personally do not rate a hyperinflation of the US dol…

>>I personally do not rate a hyperinflation of the US dollar without massive upheaval a very strong probability; your other cited examples weren't the foundation of the global economy.

Well, I cited at lest some foundation to my argument - there were numberous cases where serious devaluation did not coincide with too much social disorder. I don't see how being "the foundation of global economy" makes Americans any more likely to riot and pillage. The only cases I can think of this happening in developed countries is an outright revolution, for which there does not seem to be basis in US right now.

You're quite right to worry about government doing the pillaging though. While probability is low, the consequences would be disastorous and if one is hedging their bets might as well include this possibility. Hence why I suggested keeping your goods abroad - that way you are diversified across two political systems.

Re: The Economic News Isn't All Bleak

#52

Post by bokonist »

davidw wrote: post #49
fallentimes wrote: post #42

Earlier quoted context omitted.

Great answer - thank you. If you have a blog/site you should definitely write about this.

The internet is full of gold bug blogs. Here's one response to the gold bug arguments, by Nobel prize winner Krugman: http://web.mit.edu/krugman/www/goldbug.html Even libertarians like Arnold Kling don't really have much time for the gold standard: http://econlog.econlib.org/archives/2007/01/the_new_deal_an.... (and in other articles) Generally, it's not regarded as territory for "serious economists", although of cou…

The two most interesting posts I've read in defense of gold are these two: http://unqualified-reservations.blogspot.com/2007/11/who-hec... and here http://unqualified-reservations.blogspot.com/2008/02/return-...

Both are much better than the Krugman piece.

Re: The Economic News Isn't All Bleak

#53

Post by davidw »

tokenadult wrote: post #8
timr wrote: post #6

Earlier quoted context omitted.

Great post. One thing I found interesting about this piece was the blatant revisionism on display in the second paragraph of the article: "less than two years ago, conventional wisdom dictated that the housing bubble would be painful but that global economic growth would remain stable." Forgive me, Mr. Writer, but my recollection is that less than two years ago, few people in the mainstream were acknowledging that a…

"my recollection is that less than two years ago, nobody in the mainstream was acknowledging that a housing bubble even existed." My recollection is different, because I was reading Business Week more than three years ago. The housing bubble has looked like a bubble for a long time to people who considered how much faster house prices increased than wages. Michael Lewis's collection of articles, Panic, http://www.ama…

The Economist, which isn't exactly some small rural newspaper, talked about housing looking bubbly a few years ago.

Re: The Economic News Isn't All Bleak

#54

Post by anamax »

unrealwh wrote: post #19
medearis wrote: post #3

A few months ago, Goldman Sachs "experts" were predicting oil at over $200/barrel. Obviously, things didn't work out that way, which is why the concluding paragraph is exactly right -- information now travels faster than ever in our economy, which will affect the way the economy rebounds. Still, nobody knows exactly what will happen. It seems to me that the best predictor of how the economy is doing is the way that i…

$200/barrel is indeed wrong, its a lowball number. i expect $500 or more. where do you think all those trillions the Fed is printing up now will end up? what happened the last time the Fed printed up trillions in 2002? commodity bubbles! excess liquidity ALWAYS creates inflation, and inflation always chases up the value of finite stores of value, namely commodities. nothing goes straight up or straight down...the thi…

> $200/barrel is indeed wrong, its a lowball number. i expect $500 or more.

Where are you stashing what you're buying?

You are putting your money on that prediction, right?

Re: The Economic News Isn't All Bleak

#55

Post by Prrometheus »

davidw wrote: post #49
fallentimes wrote: post #42

Earlier quoted context omitted.

Great answer - thank you. If you have a blog/site you should definitely write about this.

The internet is full of gold bug blogs. Here's one response to the gold bug arguments, by Nobel prize winner Krugman: http://web.mit.edu/krugman/www/goldbug.html Even libertarians like Arnold Kling don't really have much time for the gold standard: http://econlog.econlib.org/archives/2007/01/the_new_deal_an.... (and in other articles) Generally, it's not regarded as territory for "serious economists", although of cou…

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se.

The gold standard, having been around for 2,000 years, is the constant subject of serious study by economists.

Re: The Economic News Isn't All Bleak

#56

Post by davidw »

Prrometheus wrote: post #55
davidw wrote: post #49

Earlier quoted context omitted.

The internet is full of gold bug blogs. Here's one response to the gold bug arguments, by Nobel prize winner Krugman: http://web.mit.edu/krugman/www/goldbug.html Even libertarians like Arnold Kling don't really have much time for the gold standard: http://econlog.econlib.org/archives/2007/01/the_new_deal_an.... (and in other articles) Generally, it's not regarded as territory for "serious economists", although of cou…

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se. The gold standard, having been around for 2,000 years, is the constant subject of serious study by economists.

There are certainly a few serious, respectable economists who favor the gold standard - I said only that "most don't", not that anyone who does is a not a "serious economist".

Incidentally, I think the "because we did it that way for a long time" argument is a terrible one. There are plenty of things we've done for a long time as humans and as societies that aren't very good, and are worth discarding. I don't think the gold standard is a good idea myself, but in the arguments for it, there are better ones than that one.

Re: The Economic News Isn't All Bleak

#57

Post by Prrometheus »

davidw wrote: post #56
Prrometheus wrote: post #55

Earlier quoted context omitted.

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se. The gold standard, having been around for 2,000 years, is the constant subject of serious study by economists.

There are certainly a few serious, respectable economists who favor the gold standard - I said only that "most don't", not that anyone who does is a not a "serious economist". Incidentally, I think the "because we did it that way for a long time" argument is a terrible one. There are plenty of things we've done for a long time as humans and as societies that aren't very good, and are worth discarding. I don't think t…

That's not a good argument for the gold standard, but it is a good argument for studying it as a serious monetary policy.

Re: The Economic News Isn't All Bleak

#58

Post by curiousgeorge »

Prrometheus wrote: post #55
davidw wrote: post #49

Earlier quoted context omitted.

The internet is full of gold bug blogs. Here's one response to the gold bug arguments, by Nobel prize winner Krugman: http://web.mit.edu/krugman/www/goldbug.html Even libertarians like Arnold Kling don't really have much time for the gold standard: http://econlog.econlib.org/archives/2007/01/the_new_deal_an.... (and in other articles) Generally, it's not regarded as territory for "serious economists", although of cou…

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se. The gold standard, having been around for 2,000 years, is the constant subject of serious study by economists.

Not really. The last nail in the coffin of serious research on the gold standard was "Golden Fetters" by Eichengreen. It has a phenomenal and indisputable country-by-country timeline showing the cycle of deflationary behavior stopping during the Great Depression in country after country shortly following (4-6 months) the effective abandonment of the gold standard. One can argue that N=20 is not significant research, but there is a reason no-one will take you seriously if you do.

I personally haven't met anyone who has argued for the gold standard and has read it although that may be a comment more on the academic backgrounds of the people who used to write pro-gold stuff and stuff it into my inbox back in college than the theoretical basis of the argument. So while gold may have a place as an investment (especially as a hedge against inflation) in large part people who spend considerable breath on extolling its virtues using words like "intrinsic value" and "stability" and "natural" are kooks. Their choice of the word "natural" is also odd since gold coinage is hardly more natural than paper and in fact is less easy to control the asset base.

When economists talk about not repeating the mistakes of the 1930s, they are by and large talking about the importance of maintaining liquidity in the system to prevent deflationary spirals, and avoiding liquidity traps. They are also cognizant of Keynes' proof that Say's Law does not work once people want to start doing things like holding liquid assets, and the dismal performance of things like the zero-inflation policy in Canada and other countries through the 1990s.

I'm amazed by the number of Internet libertarians who have jumped on this bandwagon.

Re: The Economic News Isn't All Bleak

#59

Post by patrickg-zill »

curiousgeorge wrote: post #58
Prrometheus wrote: post #55

Earlier quoted context omitted.

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se. The gold standard, having been around for 2,000 years, is the constant subject of serious study by economists.

Not really. The last nail in the coffin of serious research on the gold standard was "Golden Fetters" by Eichengreen. It has a phenomenal and indisputable country-by-country timeline showing the cycle of deflationary behavior stopping during the Great Depression in country after country shortly following (4-6 months) the effective abandonment of the gold standard. One can argue that N=20 is not significant research,…

You make some interesting points and I will definitely hunt down the "Golden Fetters" piece. However I would ask whether you have looked into the argument that gold restricts the ability of the gov't to expand, in that there is a built-in expense to more spending when you have a gold-backed currency.

It appears (to me and probably others) that part of the current problems the USA is facing is due to a govt that grows and grows, without a method to have a feedback loop that would restrict it - currently it seems the answer is to just print (electronically or physically) more $100 bills (which cost about 4 cents to make).

Re: The Economic News Isn't All Bleak

#60

Post by bokonist »

curiousgeorge wrote: post #58
Prrometheus wrote: post #55

Earlier quoted context omitted.

Selgin and White wrote some papers in defense of the gold standard. Hayek was sympathetic to a commodity standard, though not the classical gold standard per se. The gold standard, having been around for 2,000 years, is the constant subject of serious study by economists.

Not really. The last nail in the coffin of serious research on the gold standard was "Golden Fetters" by Eichengreen. It has a phenomenal and indisputable country-by-country timeline showing the cycle of deflationary behavior stopping during the Great Depression in country after country shortly following (4-6 months) the effective abandonment of the gold standard. One can argue that N=20 is not significant research,…

As a result of World War I, the governments of the world printed far more money than they had backed in gold. Eventually, people realized that the government did not have enough gold to redeem all the paper currency. People rushed to the bank to withdraw so they could get their money out first. At this point, the government had to either devalue the currency or leave the gold standard. Sticking to the gold standard at the previous valuation was a recipe for ruin. Most countries chose to leave the standard altogether. But they could have simply devalued, learned their lesson about diluting, and returned to a gold standard.

The lesson the Keynesians took from this episode was not to go on a gold standard in the first place. The lesson the Austrians took was that government should not dilute the currency. Since all government's prefer to dilute the currency, and most "mainstream economists" are government funded, mainstream economists are almost all Keynesian, not Austrian.

The best two articles I've read in defense of gold are these two: http://unqualified-reservations.blogspot.com/2007/11/who-hec... and http://unqualified-reservations.blogspot.com/2008/02/return-...

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