Economic History and the Future Crunch...

[Michaelangelica]

I am very glad you all are discussing this issue. The concern in Michaelangelica's post is not only the collapse of the dollar, but the collapse of civilization. I have attempted to warn people of that are headed for economic disaster and war for several years, because all industrial economies are dependant on oil, and we are running out of oil. I still painfully remember everyone telling me we had plenty of oil, and how wrong I am about economic matters, and why we invaded Iraq. My strongest effort however, is not the economic problem, but the civilization one. What makes humans civilized? That is not the subject of this thread, I am just responding to the concern, and will start a thread so we can explore what makes us civilized and how we might weather through an economic collapse.

 

I am optimistic about Homo sapiens. . .(most days).

 

We should see the final reporting of companies affected by the sub-prime crisis in the next twelve weeks.

 

I think if we all pull together we can help solve the many problems our species has.

 

But Armageddon is certainly a USA theme song

So those that feel that way might like to post on these threads too?

http://hypography.com/forums/social-sciences/13109-apocalypse-christains.html?highlight=Armageddon

 

http://hypography.com/forums/philosophy-humanities/1607-armageddon-going-happen.html

 

I have posted what I see happening (economically) here

http://hypography.com/forums/social-sciences/13245-economics-business-sub-prime-crisis-how-5.html?highlight=sub+prime

 

Gold at $1,000+ an ounce. I remember when it was $35. It is a pity I wasn't born rich. I would be very much richer now.:bwa:

I would be investing in metal detectors in Oz at the moment.:)

Off and rushing: gold's rise spurs amateur prospectors

Off and rushing: gold's rise spurs amateur prospectors - National

Metal Detectors Sell Out Near Beaches As Gold Prices Hit Record Highs - Orlando News Story - WKMG Orlando

:: Coiltek Gold Centre ::

[Boerseun]

The first time I read about the US not being able to back its currency was an article in the NY Times, around 2003/4. The guy said that he reckons as people start losing faith in currency, they will once again start looking to gold as a safe haven. Back then, gold was trading at around $400/ounce. He predicted that as the sale of dollars back to the States increase, gold should double within two years. Well, it's now two years later, and gold is trading at more than $700/ounce!

 

Could this be the first signs of the global meltdown to come? The dollar losing more than 30% to the the Euro, and gold almost doubling, and still rising?

 

Think about this! Scary stuff, indeed...

 

And, oh yes - if you have any spare cash lying around, invest in GOLD!.

So.... did anybody listen to me? Did anybody heed my advice? Gold is now trading at $1,200+ per fine ounce - and rising.

[Pyrotex]

So.... did anybody listen to me? Did anybody heed my advice? Gold is now trading at $1,200+ per fine ounce - and rising.

Uuuuhhhhhh....

 

No. Who the hell has any spare cash lying around? All my savings are tied up in annuities and a 401(k) plan that only gives me the option of investing in bonds or mutual funds.

[Buffy]

So.... did anybody listen to me? Did anybody heed my advice? Gold is now trading at $1,200+ per fine ounce - and rising.

Well what's really amusing is that Glenn Beck is sending all his teabagging fanboys to Goldline where you can buy gold for only $1800/oz! In the minds of the anti-science folks, that's known as a "steal!" :eek_big:

 

Oh and I bet *now* is a great time to buy! :shrug:

 

If you want to know what God thinks of money, just look at the people he gave it to, :phones:

Buffy

[Doctordick]

I couldn't sleep so I thought I would boot my computer and surf the forum for a little while. Looking for recent posts, I happened upon this thread and was moved to tell a little story.

 

Way back when I was a child, dollar bills used to say (in that little piece of black print that now says “This note is legal tender for all debts public and private”), “This note is legal tender for all debts public and private and is exchangeable for lawful currency at any Federal Reserve Bank”. So I asked my dad, what's “lawful currency”? My dad said, “it's a buck and it spends so don't worry about it”. Well, I couldn't find anyone who could give me an answer so I stopped asking but I actually continued to worry a little over the years.

 

Sometime around 1963 my grandfather, who lived alone on the old family farm (360 acres which, by the way, my great-great grandfather had purchased for $82 around 1810) had a heart attack and the doctor said it was dangerous to leave him alone so my dad had him move in with him and my mother in town. Now my grandfather wouldn't take paper money. As far as he was concerned, it was fake. He also didn't trust banks. It turned out he had somewhere around three thousand dollars in silver coins in a chest. My dad said he would not allow such a pile of cash in our house as it would attract thieves and that my grandfather would have to open a bank account. :eek_big:

 

Well everybody knows what happened in 64. The government stopped using silver certificates and if you didn't turn them in for silver they became equivalent to Federal Reserve Notes. About a year later, the government began making those copper/silver sandwich coins and about the same time the price of silver went to about six dollars an ounce. I asked my grandfather how he felt about the change in coinage. He said it didn't bother him since, as far as he was concerned, the money was gone when George put it in the bank.

 

My grandfather pointed out to me that the constitution says, “no state may make anything except gold or silver lawful currency” and it has never been repealed. Furthermore, he said, the United States is a union of independent states and that the federal government was never authorized to create money. This stuff is just worthless “Banker's Paper”!

 

Well, it turns out he is right. The US Government has only authorized the printing of United States Demand Notes on one occasion. During the Civil War, troops were paid in gold coin and raiders often stole payrolls so the treasury laid aside some fixed amount of money in gold and printed up United States Notes, “Yankee Greenbacks”, which were redeemable for lawful currency at any treasury office. By the way, silver and gold certificates came into existence when the treasury department was authorized to store citizens gold and silver free of charge (which the government eventually confiscated; gold in 32 and silver in 64).

 

The only place gold certificates are still used is in government dealings with the Federal Reserve Banks (I think; that may very well have stopped by now).

 

So lets get to “Bank Notes”! They are “Notes”; IOU's issued by the banks just like the note on your house. Banks have been doing that since the sixteen hundreds. In the US the first major problem with banks and bank notes occurred in the 1830's. As a consequence, the Federal government made it illegal for any bank in the United States to print “Bank Notes” unless they had an American Bank Charter. In order to get a charter, they had to be run by reputable people and have their books examined by the treasury department to insure they were solvent.

 

Well, during the civil war, a lot of American Banks went under and the resulting crisis was fixed by making it illegal for any bank in the United States to print “Bank Notes” unless they had a National Bank Charter. In order to get a charter and maintain that charter, they had to be run by reputable people and have their books examined by the treasury department every 25 years to insure they were solvent.

 

Well everyone should know what happened to the National Bank Notes in the great depression. That crisis was fixed by making it illegal for any bank in the United States to print “Bank Notes” unless they had a Federal Reserve Charter. In order to get a charter and maintain that charter, they had to be run by reputable people and have their books under constant examination by a body called the Federal Reserve Board to insure they remained solvent. The Federal Reserve Board was created to insure that no Federal Reserve Bank ever prints “more bank notes than they can reasonably expect to redeem”.

 

No one ever tells you that the Federal Reserve Banks are not owned by the government. Not only are they private institutions, but they are “closely held corporations” which means they have fewer than 25 stockholders and don't have to publish their books or name their stockholders. At the moment they personally have borrowed from us something around four hundred billion dollars interest free (that would be the cash notes, the IOUs you have in your wallet).

 

The Federal Reserve Board was pushed into allowing the Federal Reserve Banks to print enough bank notes to finance WWII on the grounds that loaning it to the Government was not a risky loan. When the Federal Reserve system was first started, I believe the standard for overextended was something like printing more bank notes than five times your base deposits. (I could be wrong on that.) That would be a requirement that the bank had to have twenty cents on deposit for every dollar note it printed (20% was presumed to be enough to stop any run on the bank).

 

The Federal Reserve Board has steadily reduced the requirement until it is something less then seven and a quarter cents today. Oh, by the way, the Federal Government also guaranteed that no Federal Reserve Bank would ever go bankrupt. After all, the government has the protection of the Federal Reserve Board to watch their books.

 

The point of all this is the fact that sometime around 1970 France decided to redeem the dollars they held and they started pulling gold out of the United States at thirty five dollars an ounce. Since what they were holding were Federal Reserve Notes, they couldn't go directly to the treasury department but had to first exchange those notes for gold certificates at the Federal Reserve Banks. In order to stop the “run on the bank” the congress redefined the dollar to I think something like forty seven dollars an ounce. It didn't stop the run so Nixon pulled the plug, refusing to redeem the gold certificates (the news put it as, “he closed the gold window” and we went off the gold standard).

 

The most important fact wasn't that they were afraid France would pull all the gold out of Fort Knox (at the time, France did not have enough dollars to do that) but rather that they would drive the Federal Reserve system bankrupt when the government had guaranteed that such a thing would never happen. Now that was a real crisis.

 

By the way, do any of you know what a dollar is? The constitution requires congress to publish an account of its receipts and expenditures annually in dollars. It is also congresses duty to define a dollar. The last time they did that was under Nixon and, as far as I know, it hasn't been redefined since.

 

What I am getting at is the fact that the dollar is defined to be one forty seventh an ounce of gold. That fact is confirmed by the fact that when the treasury sells gold (which it does occasionally) it sells it at the current price and marks the sale price difference as a profit on the books. I think that is done to maintain the “value of a dollar”. I suspect that, if it every really comes to a crisis, they will decide to let the Federal Reserve system go bankrupt and go back to the gold standard; the government is still sitting on Fort Knox. There are some subtle things which can be done there. Remember, the people in charge are not stupid; whatever happens, they will be in good shape.

 

As my grandfather said, having a bank charter is a license to steal.

 

Have fun – Dick

 

PS, I may have some details wrong above but the thrust is pretty close to correct and most economists don't find any fault with the situation. As far as they are concerned, governments create money. I was always told that economies create money. Governments have always counterfeited money. It is funny but at one time, after putting copper in their gold coins, Rome actually stamped known counterfeit coins as authentic because the counterfeits actually contained more gold than the official coins. Life is just a big joke!

[Buffy]

Very nice post Doctor!

 

But there's one issue that is somewhat implied by your grandfather's attitude that I think is just as commonly held as it is wrong: that somehow silver and gold are "more real" than paper notes.

 

The reason for this is obvious: the current abundance of them and the rate of production balanced against demand have proven somewhat stable throughout human history, and that has caused them to have relative stability in "value" as a currency, in a way that is not controlled by governmental actors.

 

The primary problem with any paper (or copper-nickle sandwich) currency, is the temptation of governments to print more of them when they think they need to, causing "unnatural inflation". It's that tendency of human nature that creates a *perception* that paper money is less real, but it does not really make it so.

 

While gold has continued to be rare, silver actually is much less so, and its price on a percentage basis has fluctuated much more wildly over time, going up with abundance and being yanked down due to new inventions that require it in large quantities (I think I remember reading that the advent of photography caused the price of silver to jump significantly, but had little effect on it's use as *currency* at the time because it's value was pegged).

 

What we have with Boerseun's last post is actually indication of a price bubble in gold, because world-wide currencies' inflation should be roughly equivalent to increases in the price of gold over the long term. In fact it is just as "unreal" as any other currency: as I allude to in my last post, anyone who buys gold at $1800/oz is likely to end up losing a pretty big chunk of money over the next several years as the economy comes back and people dump gold for investments in stocks and bonds which are incredibly attractive now (or actually the Euro, which is now getting close to being undervalued).

 

The point here is "value" is an ephemeral thing, based solely on people's perceptions "at the moment". It used to be that land was always a "sure thing" but just about everyone everywhere now can see that even that is subject to bubbles and loss of "value". "Value" is simply what a big enough group of people say it is at any one time. And they can create "currencies" by agreeing to a "value" being assigned that can be used as a proxy for exchange of goods. Those currencies can be gold, silver, stone wheels, glass beads, or paper.

 

And no matter how much faith you put in a particular currency, fate can make you poor or rich in an instant.

 

One of the interesting sociological/technological twists in Star Trek was that the invention of the Replicator made any such currency irrelevant because you could duplicate anything if you had a matter-antimatter reactor. So they had to *invent* "gold-pressed latinum" as a substance that "couldn't be created in a replicator" and so was still used as a "currency" although mostly between thieves, since everyone else in the universe worked on "credits" in the computer network (what does that sound like?).

 

------------------------------------

 

The Doctor's complaints about the Fed are valid, but I think it's important to note that the solution is more transparency, not to throw it out (something that Tea Baggers and Leftist Anarchists seem to agree on). There is an advantage to the Fed not being directly controlled by the government (I'm not sure I'd want any of the last 7 or 8 congresses to have run it), but to be in the public interest, it's activities have to be completely open so as to prevent the self-serving thievery that The Doctor notes.

 

That's how it begins. All it takes is for one impressionable youngster to join Starfleet, and the next thing you know, a whole generation of Ferengi will be quoting the Prime Directive and abandoning the pursuit of latinum. It's the end of Ferengi civilization as we know it, and it's all your fault! :lol:

Buffy

[Doctordick]

Hi Buffy, I have read a lot of your posts and I cannot think of one where I had much disagreement with you. I don't disagree here. Fundamentally I agree with everything; however, if you liked that story, I have another for you. When people ask me what I did (before I retired) I often answer, “my life was an adventure”. I once even studied economics (I think I was one of those “perennial” students you hear about; I have spent something like 27 years in official classes listening for wisdom). To make a long story short, after finishing the actual class work in economics I was facing the doctoral qualifying exam. So I checked out all the exams given in previous years so I would know what to expect (the questions were all filed in the library back to the eighteen hundreds). As opposed to any of the other fields, the economic exams included absolutely no answers whatsoever.

 

I went to the chairman of the department and asked him why there were no answers given for any of the questions. He said, and I quote, “Oh, the answers aren't important; it's how well you can defend your position.” I looked at him and said, “You realize that's the definition of Bull **** don't you?” That is essentially the day I left economics.

 

I never did agree with most of what the economists had to say anyway. In my opinion, they swept all the problems under the rug before they even began to build their theories. To begin with, economics is supposed to be the study of “the exchange of goods and services” and that is not what they study. What they study is “the exchange of money” actually without establishing what “money” really is. Money is essentially no more than a promise even when it is solid gold or silver. When you get down to survival you can't eat gold. Its only value is the promise that others will want it.

 

In my opinion, wealth is a very misunderstood concept. Everyone in the world measures his wealth in terms of those he familiar with. A man can feel wealthy with two cows if everyone he knows only has one cow. When I was an economic student I came up with what I thought was a good idea. It seemed to me that wealth should be measured by the percentage of societies output one received divided by what percentage of the population one is. Advances in technology don't really amount to a change in wealth as the impact is soon lost on the populations attitudes: i.e., the gains are very shortly presumed part of ordinary life. I used it to compare the jobs in ancient Rome to the same jobs in our society and discovered quite interesting results. Slaves are roughly the same the world over; they get what they need to survive and that is about it. And I agree, employees are essentially “wage slaves”; it is actually sort of like they complained about being slaves and the people in charge said, “Ok, we'll give you wages instead of required goods and services and you can be free to work for anybody who wants you, now go back to work”. You know the Emperors slaves who ran the grain imports from Egypt lived pretty well.

 

I also thought about taxes (back when I was studying economics, the top tax rate was 67%). From my perspective, income taxes are unfair to everyone. People say the graduated tax is on the rich but it isn't, it's on the high earners, a substantially different group. If you were already rich, there were lots of well paying tax exempt investments you could make; but, if you started the year out broke and made a hundred thousand dollars, uncle Sam got more than you did (unless you cheated and I suspect most “high earners” did). They are also unfair to the poor. Why should someone pay taxes when they can't even feed their family decently.

 

So I worked out what I thought was a fair income tax. It worked like this: first add up the national expenditure on food, clothing, housing, transportation and medical care (make education free, just like the roads) and divide that total by the population. That gives you survival costs at the average life style. Then don't charge an income tax until a persons income is above that cost for him plus his dependents. Call what is left after that amount is subtracted his “discretionary” income. Take the federal budget for last year divided by the gross “discretionary” income and charge everyone exactly that rate of tax. If a person wants a fancy house or a fancy car let them have it; but they have to buy it with taxed money. If the poor wanted to get ahead, they could live below the average and invest some of their income. Seemed fair to me; however, I guarantee you couldn't get political support for such a thing.

 

Those numbers are not hard to get, so I tracked the required tax rate for a while. When I first started, it was between eighty and ninety percent (I find it interesting that the top income tax rate back in the fifties was ninety percent). Under the Carter administration, because of the jump in housing costs, the required tax rate on “discretionary” income went over one hundred percent. After that I stopped tracking it.

 

One thing such a tax rate pointed out clearly was that the recession under Carter was simply caused by the fact that the population had to reduce the average living style. I suspect the same thing is going on right now.

 

That brings up another interesting observation. My grandfather knew exactly what he owned, including the food stocks in his cellar (he considered a six months supply the minimum) but had utterly no idea as to how much he earned in a year. My father, on the other hand, knew, almost to the penny, what he earned in a year but but had no idea as to what his personal worth was. Why? Well of course, he had to calculate his income every year; something my grandfather never even worried about (he was essentially self sufficient and never earned much of anything; all he had to pay was his property taxes). Of course, he never had electricity, telephone or indoor plumbing but he got by; he had books to read for intertainment.

 

That suggested to me that we ought to have a small tax on total net worth (in a way, that is what property tax is supposed to be) just to make everyone calculate their actual net worth every year. If they did that, they might see some of their expenditures in a more realistic light. :phones:

 

One last story and I'll go away. When I was a small child, I wanted toys but I was told we couldn't afford such things. But I knew my mother kept a jar in the pantry in which she put all her spare change so I asked her why we couldn't use some of that money. She told me the money in the jar was to pay off what she owed Sears. Now she used to go to Sears regularly (I don't really know if it was once a week or once a month as I was too young at the time to notice). She always took me with. If I stood on my toes and pulled hard on the counter I could just barely see the book the clerk was writing in. My mother would pour the coins out of her purse and the clerk would count them up and mark them off in the book. I watched that number get smaller and smaller because I knew, when it got to zero, I could get some toys. :eek2:

 

Well, after a while, it got real close to zero; but, about that time, she bought a new chair for the living room. She had lied to me! The money in the jar wasn't to pay off Sears, it was for a new chair. I never said anything to her about it but I think it had an important influence on me. In my mind, you got to use your credit “once” and, from then on, you paid cash for everything. I am fully confident that my mother had no idea as to what she originally bought from Sears but she was paying interest on the purchase forever nonetheless. As a consequence, I have done my very best to avoid using my credit my whole life and, in the long run, I think the course has paid off quite well. I like that old phrase “never a lender nor borrower be”.

 

Oh, one last thought; investing is a gamble at best and the only thing worse than investing is not investing. Profound advice for anyone reading this. ;)

 

Have fun -- Dick

[Buffy]

As opposed to any of the other fields, the economic exams included absolutely no answers whatsoever.

 

I went to the chairman of the department and asked him why there were no answers given for any of the questions. He said, and I quote, “Oh, the answers aren't important; it's how well you can defend your position.” I looked at him and said, “You realize that's the definition of Bull **** don't you?” That is essentially the day I left economics.

I don't think you looked at many other fields: I got exactly the same answer in an archaeology class I took.

 

And while it's probably arguable that fields that rely on mathematics are more prone to claims of the existence of "right answers," you'll have to chuckle about the fact that I find no "right answers"-albeit no wrong ones either--from your fundamental equation! :)

 

What is *always* lacking in *all* fields of science--admittedly many more so in "young" fields with much blather among the kernels of useful knowledge--are absolutely right answers to all questions.

 

I'll just reiterate for the chattering classes: I'm not here to defend the many silly theories propounded--and even hailed as "truths"--by too many who should know better, but rather to defend a field of scientific pursuit that today can provide us with important guides and in the future may in fact provide rather effective predictive models (something I'll argue will require recursive closure to achieve!).

 

To begin with, economics is supposed to be the study of “the exchange of goods and services” and that is not what they study. What they study is “the exchange of money” actually without establishing what “money” really is.

Now this I will vociferously argue is a false statement. Maybe the "economists" you dealt with foolishly did this: I will agree that it was in the vogue back in the 50's and 60's, but that's like arguing astronomers are foolish based on the theories of Plato or even Kepler's quest for mapping the planetary orbits onto the regular polyhedra.

 

Money is essentially no more than a promise even when it is solid gold or silver. When you get down to survival you can't eat gold. Its only value is the promise that others will want it.

Yep! :eek:

 

In my opinion, wealth is a very misunderstood concept.

Amen.

 

Wealth is ephemeral because it is *based* on money, not on value, and it ignores time.

 

I consider Boerseun to be very wealthy because he has a couple of cows, but because of the political unrest in his country, he could be both without his cows or a place to keep them.

 

Gary Coleman was very wealthy as a teenager, and yet spent most of his life poor, because he was forced through circumstance to deal with his "wealth" as "money" and it rapidly disappeared.

 

Warren Buffet proves that with a *lot* of money, and a willingness to bet radically on highly diversified investments, that ongoing "wealth" can be achieved in a seemingly long-lasting fashion.

 

What the latter shows is that *relative* abundance of money in combination with intelligent investing, can indeed create what might be defined as wealth.

 

So,

Oh, one last thought; investing is a gamble at best and the only thing worse than investing is not investing. Profound advice for anyone reading this. ;)

Yep! :cheer:

 

I also thought about taxes (back when I was studying economics, the top tax rate was 67%). From my perspective, income taxes are unfair to everyone. People say the graduated tax is on the rich but it isn't, it's on the high earners, a substantially different group. If you were already rich, there were lots of well paying tax exempt investments you could make; but, if you started the year out broke and made a hundred thousand dollars, uncle Sam got more than you did (unless you cheated and I suspect most “high earners” did).

What's little recognized is that what these high tax brackets did was *not* to make people move off shore, but rather to cause those people who made lots of money to use their political influence to create tax shelters, and then to reduce those top tax brackets too.

 

The top 5% earned 37% of the total income in the US and paid 60% of the total income taxes, BUT the average income in this group is $3.3 MILLION, and their *actual* tax rate paid was only 20%! (source: Internal Revenue Service figures for 2007 as quoted by the Tax Foundation which is a strongly right-leaning source, but at least their tables are clean....)

They are also unfair to the poor. Why should someone pay taxes when they can't even feed their family decently.

...and the tax-cut experiment is instructive: the Bush tax cuts were the biggest transfer of "wealth" ("money" as we're discussing it here) in history, yet resulted in the biggest contraction in the jobs market since the great depression:

This was *the* full scale experiment for "Trickle-Down" Economic Theory.

 

The verdict based on data? Epic Fail.

 

Now of course this experiment is indeed *repeatable* for those who'd like to try it, but I'd say it's not exactly worth the pain.

 

So really, your suggestion:

So I worked out what I thought was a fair income tax. It worked like this: first add up the national expenditure on food, clothing, housing, transportation and medical care (make education free, just like the roads) and divide that total by the population. That gives you survival costs at the average life style. Then don't charge an income tax until a persons income is above that cost for him plus his dependents. Call what is left after that amount is subtracted his “discretionary” income. Take the federal budget for last year divided by the gross “discretionary” income and charge everyone exactly that rate of tax. If a person wants a fancy house or a fancy car let them have it; but they have to buy it with taxed money. If the poor wanted to get ahead, they could live below the average and invest some of their income. Seemed fair to me; however, I guarantee you couldn't get political support for such a thing.

...not only couldn't you get support for this, it would be far in excess of the "allowance" provided by the bottom bracket of the Tax Rates in the US.

 

What's interesting from a political viewpoint is that, the vast majority of tea baggers who make less than what your scheme would call the "zero-tax" line will fight to the death over any increases in taxes that under this scheme would fall even more disproportionately on the rich.

 

Under the Carter administration, because of the jump in housing costs, the required tax rate on “discretionary” income went over one hundred percent.

Yep. Bottom line is that really, only the top 30% or so even *have* discretionary income.

 

One thing such a tax rate pointed out clearly was that the recession under Carter was simply caused by the fact that the population had to reduce the average living style. I suspect the same thing is going on right now.

"On average" yes, there are reductions in "living style", but not at the top end at all.

 

And of course it's important to note that the contraction under Carter was a nasty combination of coming off the hangover of releasing Nixon's foolish price controls and the oil price shock from the Arab oil embargo (which Economics tells us was an example of market disruption created by artificial manipulation of supply).

That suggested to me that we ought to have a small tax on total net worth (in a way, that is what property tax is supposed to be) just to make everyone calculate their actual net worth every year. If they did that, they might see some of their expenditures in a more realistic light. :evil:

Ooooooooooh! Double taxation! :rolleyes: Next you'll be supporting the "death tax!"

 

I agree this is a good--if for most folks terribly depressing--exercise.

 

Interestingly with property taxes, you have to pay the tax due on the total value of the house, in spite of the fact that the bank owns most of it.

 

Maybe we could get those filthy rich banks pay for their "cut" of the property taxes, eh? :evil:

As a consequence, I have done my very best to avoid using my credit my whole life and, in the long run, I think the course has paid off quite well. I like that old phrase “never a lender nor borrower be”.

I won't argue too hard about this, but our advancement as a society has always been all about borrowing from the rich in order to do things....it's called uh, "investing".... :evil: :cheer:

 

But really, who's to say that your mom made the improper investment, going for the chair instead of the toy? The comfort of your fat relatives tushes over your enlightenment? Hmmmmph. I would have bought you the toy myself....

Have fun -- Dick

As usual, I am! Thanks for the great post, Doctor! :cheer:

 

Sometimes your best investments are the ones you don't make. :Crunk:

Buffy

[Doctordick]

I don't think you looked at many other fields: I got exactly the same answer in an archaeology class I took.

No, I suppose I didn't; I tended to look at what are normally referred to as hard sciences; my experience with “business” suggested that economics could perhaps be a hard science. Actually I even found “physics” to be running on substantial quantities of “bull ****”.

... you'll have to chuckle about the fact that I find no "right answers"-albeit no wrong ones either--from your fundamental equation! :)

Nor do I; those who expect “right answers” are looking in the wrong direction. The only purpose I have found for that work is to cut out some rather definite “wrong answers”.

What is *always* lacking in *all* fields of science--admittedly many more so in "young" fields with much blather among the kernels of useful knowledge--are absolutely right answers to all questions.

It has been my impression that human beings generally consider having an answer to be far more valuable than not having one; they push this to the extent that they would prefer to be wrong rather than admit to not having ready answers to their questions. That goes to my statement that “belief” is not a necessary aspect of a proper mental attitude at all and those who consider such a thing to be necessary are actually blinding themselves to the possibilities. Most people seem to think that “belief” is a necessary part of logical thinking. Believe me, it isn't.

Now this I will vociferously argue is a false statement. Maybe the "economists" you dealt with foolishly did this: I will agree that it was in the vogue back in the 50's and 60's, but that's like arguing astronomers are foolish based on the theories of Plato or even Kepler's quest for mapping the planetary orbits onto the regular polyhedra.

Well Buffy, I am afraid I can't agree with everything you say.

Wealth is ephemeral because it is *based* on money, not on value, and it ignores time.

Here you have brought up another issue close to my heart. Economics is, without a doubt, an “uncertain” predictor of events. As such, it seems to me that some of the mechanisms physicists have invented to handle uncertainty should have application in economics. In particular, I am drawn to the very issue you have just brought up. Since “money” is actually defined to be “the most easily exchanged capital asset”, I see the dichotomy as one of “price” and “value”. Prices are reckoned in an order measured via that “exchanged capital asset” whereas values are reckoned in an order measured directly by the items themselves.

 

To clarify what I have just said, let me point out that, in the absence of a market, the price of an item is totally unknown: one could say that price has an infinite uncertainty. On the other hand, if a market is sufficiently complete that absolutely anything you might want has a definite fixed price, then value is a totally uncertain measure. In order to establish a value ordering between items one would have to make the decision as to which one you would keep given that the other could never be replaced. Look around the world from that perspective and you should recognize that the “economic market” is not driven by “value” at all. This is just an opinion and I cannot say that I have a workable solution based on that view; however, as I mentioned earlier, I did derive most of the standard “laws of economics” from my fundamental equation and that position seems to be pretty consistent with my price/value dichotomy.

I consider Boerseun to be very wealthy because he has a couple of cows, but because of the political unrest in his country, he could be both without his cows or a place to keep them.

Ah, but have you estimated the value of Boerseun? I think we are dealing with serious uncertainty here. :lol: :lol:

Warren Buffet proves that with a *lot* of money, and a willingness to bet radically on highly diversified investments, that ongoing "wealth" can be achieved in a seemingly long-lasting fashion.

Dosen't that “seemingly” somewhat destroy the idea that anything has been “proved”? :D

What the latter shows is that *relative* abundance of money in combination with intelligent investing, can indeed create what might be defined as wealth.

My point is that you really cannot make such a statement until you create a solid universally usable definition of “wealth”. Furthermore, how much of that wealth you refer to was gained at the expense of someone else.

 

I have, on occasion, suggested that any exchange which could be shown to have amounted to taking advantage of someone else's stupidity should be made legally null and void. I told my wife such a law should be put in the “Cruelty to animals” category.

 

...not only couldn't you get support for this, it would be far in excess of the "allowance" provided by the bottom bracket of the Tax Rates in the US.

 

What's interesting from a political viewpoint is that, the vast majority of tea baggers who make less than what your scheme would call the "zero-tax" line will fight to the death over any increases in taxes that under this scheme would fall even more disproportionately on the rich.

That was my point Buffy. I was talking about “fair” not “apt to “yield wealth and power to a nation”. The rich have alway taken everything they could from the poor. It's no different now than it was in ancient Rome.

 

Were you aware that there was no “wage tax” in the United States prior to WWII. Roosevelt declared a national emergency and officially asked the population to volunteer their labor. Prior to that event, their time was considered to have value; a value for which their wages were compensation. Since “sale of their time” was not income (it was considered exchange of equally valued commodity), it was not subject to income taxes. After Roosevelt's declaration, since their labor was volunteered, any pay they got was “war profit”, at least beyond absolute necessities.

Yep. Bottom line is that really, only the top 30% or so even *have* discretionary income.

It didn't used to be that way. The wealth and power of this country was built on cooperation of the populace and education, not the greed of the super rich. We are headed in exactly he same direction of any of those countries which concentrate their wealth in a few people.

"On average" yes, there are reductions in "living style", but not at the top end at all.

Which brings up another issue. Why should politician's income (who supposedly work for us) not be constrained to the average income of the collective population?

Maybe we could get those filthy rich banks pay for their "cut" of the property taxes, eh? :evil:

Seems reasonable to me.

I won't argue too hard about this, but our advancement as a society has always been all about borrowing from the rich in order to do things....it's called uh, "investing".... :rolleyes: :evil: :cheer:

In the old days, it was the “want to be rich” borrowing from the average. Now it seems to be the “super rich” borrowing from the middle class. I think the real historical investment source should be documented accurately. I really don't know how it would come out.

 

I have another tale for you all. Back when I was in business, a machinist who worked for me had a friend who's son worked for the Ford motor company. One day, when his friend's son came by the machine shop to get something machined for his father, I brought up the issue of just giving the plans for the Model T plant to some undeveloped country and let them build an economy the same way we did. His answer was interesting.

 

He said such a thing could not possibly work because the cost of building a Model T with the processes used in the twenties would be far beyond what anyone could afford today. He said those figures were available at Ford (their planning department) and that at todays (that would be back in the 70's now) prices for labor and materials, a Model T would cost more than a Rolls Royce. He said the increases in productivity since then were simply out of sight.

 

Now that struck me as quite strange. The Model T's fame was that it was so cheap anyone could afford one. So exactly who got the benefit of all that productivity increase? Actually, I think the share of the output of the U.S. going to the average citizen has been plummeting since the civil war. It is just hidden from us by the increases in productivity.

 

My mother once asked me why it was that the property tax percentage on their house had more than doubled since the twenty's, the value of the house had increased by a factor of twenty and the new houses in town were worth two or three times what her's was and yet the village couldn't afford to keep things up. It was a small town and she knew no one was stealing any of that money. Back in the twenty's the tax was enough to build streets, schools, water systems and lots of expensive infrastructure and now they couldn't keep the streets free of pot holes.

 

Add to this the fact that I had recently described the house I grew up in (it was built before the depression by her father) to an architect. You know, one of those old lath and plaster walls, eight inch maple trim around the ceilings with a carved cross section to hold “buttons” for wall hangings. Just a lot of hand made details not available at all any more. He said you couldn't built a house that way today for millions of dollars. But my grandfather didn't build it with cheap foreign labor. The wood was cut locally and the people who built his house lived in houses just like it.

 

The whole thing is that increase in productivity just mentioned. I told my mother that the problem was, people today are living in productivity enhanced tar paper shack's and consuming goods produced by productivity enhanced procedures but that “filling pot holes in the street” still required a man with a shovel and there wasn't any “productivity enhanced” shovels available.

Sometimes your best investments are the ones you don't make. :phones:

Oh Yeah, we have had our share of losses; but, as I often point out to my wife, when I see business properties costing millions standing empty and for sale for years, we have not done as bad as a lot of others.

 

In many respects, life is a joke!

 

Have fun -- Dick

 

PS, I loved Tom Lehrer when I was in college. I wish I had some of his records today.

[Turtle]

...I'll just reiterate for the chattering classes: I'm not here to defend the many silly theories propounded--and even hailed as "truths"--by too many who should know better, but rather to defend a field of scientific pursuit that today can provide us with important guides and in the future may in fact provide rather effective predictive models (something I'll argue will require recursive closure to achieve!).

...

Sometimes your best investments are the ones you don't make. :rolleyes:

Buffy

 

indeed.

 

Applications

The Nash equilibrium concept is used to analyze the outcome of the strategic interaction of several decision makers. In other words' date=' it is a way of predicting what will happen if several people or several institutions are making decisions at the same time, and if the decision of each one depends on the decisions of the others. The simple insight underlying John Nash's idea is that we cannot predict the result of the choices of multiple decision makers if we analyze those decisions in isolation. Instead, we must ask what each player would do, taking into account the decision-making of the others.

 

Nash equilibrium has been used to analyze hostile situations like war and arms races[1'] (see Prisoner's dilemma), and also how conflict may be mitigated by repeated interaction (see Tit-for-tat). It has also been used to study to what extent people with different preferences can cooperate (see Battle of the sexes), and whether they will take risks to achieve a cooperative outcome (see Stag hunt). It has been used to study the adoption of technical standards, and also the occurrence of bank runs and currency crises (see Coordination game). Other applications include traffic flow (see Wardrop's principle), how to organize auctions (see Auction theory), and even penalty kicks in soccer (see Matching pennies).[2] ...

Nash equilibrium - Wikipedia, the free encyclopedia

[HydrogenBond]

Free enterprise may be the most efficient way to distribute resources. However, even free enterprise has built in inefficiencies.

 

These inefficiencies are connected to sales, marketing and advertising. Resource inefficacy creates the skim that shifts wealth distribution.

 

The basis for this observation, came to one day when I heard a good salesman, who was bragging, say, " I can sell snowballs to an Eskimo". If you think about this statement, since snow is so abundant in Alaska, and this guy can convince an eskimo to pay for sometimes with little value, due to an extreme supply, that means he can create resource inefficiencies based on objective standards. The snowball transaction may add up subjectively (resources plus entertainment plus warm fuzzy feelings) but that is subjective resource efficiency. The skim that shifts wealth occurs between the values of the objective and subjective resource efficiency.

 

There are truth in advertising laws, because without them there would be even less objective resource efficiency. If I could say anything, I could tell you the car I am selling you gets 50mpg, even if it gets 20mpg.

 

If I am really good, you leave happy with a good subjective deal, but by all objective measures this is not objective resource efficiency, since will be hidden costs in gas. The difference between the subjective and objective efficiency is the skim that shifts the wealth distribution. The person who thought they got more for his money, now has hidden gas costs that pay another group bonus skim.

 

Although one can not say direct lying words when advertising, one can still use other subjective tactics as long as the transcript reads properly by the law. This is where other subjective marketing tools have been designed to widen the gap between objective and subjective efficiencies, so there is more skim.

 

Someone in business is less likely to fall for subjective fluff, and will tend to focus on objective efficiency, since the bottom line is the cost. They will shop around and use several distributers. They will get stun on occasion. But all and all this makes the business end efficient in an objective way. This is less skim leaving businesses.

 

If GM told a car dealing this new color is so pretty, the dealer should pay $10,000 more per unit, they would say keep those cars. But the good car salesman, who can also sell snowballs to eskimos, who is looking for skim, might try the pretty angle. Consumers are not all that bright ,since they are conditioned that subjective entertainment is more important than objective education. If the wealth shifts, why be surprised.

 

This may sound sexist, but men are known to exaggerate or even lie to women for benefit. Since culture is far more feminine today than in the past, men have more women (spirit of culture) to create subjective enhancements. If you plot the graphs from 1960 to present as a function of social changes shifting from a masculine to feminine culture, one can see this correlation.

[charles brough]

Not sure whether this is the right forum, but here goes...

 

In the 1930's the US refused to accept payment for goods and services from other countries with currency. They demanded gold. This was in the wake of the global depression sparked off with the 1929 Wall Street collapse. This resulted in the US ending up with more than 80% of the world's gold in their vaults. Now hang on a minute...

 

Since the 1970's, the international oil trade was done in US dollars. Countries had to stock up on dollar reserves in order to purchase oil on the two international oil bourses, in New York and London. These countries' vaults are brimming with US currency, only to supply their domestic oil demand. This was all well and good, and sort of made the US currency the de facto world currency. It also made sense for the US, because it expanded the US' influence further, into the very heart of other countries' economies. This all changed in the early 2000's with the creation of...

 

The Euro.

 

Baghdad decided early on after the acceptance of the Euro in the EU to create its own oil bourse, where trading is to be done exclusively in Euros. This makes sense, seeing as most of Baghdad's sales are to the EU. Baghdad went ahead with this planning, and eventually (amidst great objection from the US and Britain) did open its doors for oil trading. Two months later, the US invaded. I am by no means saying these happenings are related - but just keep it in mind. Teheran is planning the same thing - to set up an international trading oil bourse in Teheran to trade exclusively in Euros. The US is eyeballing Teheran.

 

Any case, I digress. I have read that countries around the world are more interested in trading oil in Euros currently, because Europe seems to be less prone to military action, with the resulting stabilising influence on the currency. So, countries are standing in line to sell their dollars back to the US, who, ultimately, must honour the value of the dollar and accept it. It is, after all, their currency. But there's a little problem here. It seems as if the US can only honour five percent of the money put into circulation since the '70s, or petrodollars, as they are more commonly known. In other words, as countries proceed in trading oil in Euros rather than dollars, the American market will become bogged down with useless currency. The dollar will start losing value and ultimately collapse. Matter of fact, the dollar have already lost more than 30% against the Euro since its inception. But think about this for a minute: The Dollar is the de facto World Currency. And there is 95% more dollars in supply than can be backed by the US. In other words, once the oil trade is shifted significantly from Dollar trade to preferred Euro trade, the World Economy will collapse. The 1930's depression (which in a big way contributed to WWII) would look like a Sunday picnic in comparison.

 

Could this maybe explain the US' current foreign policy? Could this maybe explain why the US is so insistent on oil trade in dollars? Is the US' international interventions of late not based on protecting the oil supply, but rather to suppress the Euro trade in oil, and in doing so attempting to prevent global economic collapse? Or simply to hide the fact that the system put in place since the 1970's is inherently flawed?

 

Come what may - the mere fact that the US cannot back 95% of its currency will eventually result in a global meltdown.

 

I know - I have made some sweeping statements here, and will try and find the links. But I'm sure the US government is stressing a little right now.

 

The reason I've put this in History is simply because I believe however this pans out, we are seeing history in the making...

 

Thoughts?

 

Yes, as you say, it will come, but the big question is "when?"

 

Also, as you write, the "meltdown" will be global. We are talking about the whole civilization because it is the richness and military power of the US that has enabled our "human rights," "equality," and "democracy" doctrines to bring some unity to our ideologically ("religiously") divided world. People everywhere have adopted Western secularism a la USA because of associating it with her richness and power. They all have hopes of achieving our success simply by adopting our ideals. We led them on by promoting the "GLobal Society" and the "GLobal Economy" to give them hope that they will also achieve our success.

 

And when we deflate like a over-expanded balloon, the hopes of everyone will collapse. It will then be a survival of the fittest between Islam, Christendom, and the Hindu and East Asian Marxist world over the globe's di\eminishing resources and space.

 

Somewhere along in that process, however, conditions will become so bad that people will be forced to adopt a new and advanced ideology capable of replacing all the old and hence obsolete ones that now fracture our world and turn us all of the one race, the Human race, into fighting ourselves. This is what has happened over and over again in history. A new ideology replaces the older ones.

 

Does anyone have any idea what such an ideology would have to be like to succeed? No? Then it is time to get informedd!

 

 

Brough