The end of commerce

Re: The end of commerce

PostBy: lsayre On: Wed Jun 04, 2014 5:32 pm

Here is the link to the BLS (US Bureau Of Labor Statistics) CPI inflation calculator.

http://data.bls.gov/cgi-bin/cpicalc.pl? ... year2=2014

I have it set for 1971 to 2014. It shows that $5.85 are need today to purchase what $1 would purchase in 1971. This means that the current dollar is worth only 17 cents in 1971 terms. 83% of its buying power has vanished since the end of the gold standard.

The flip side to this is that gold has gone from $40.62 to $1243.60 per Troy ounce since 1971.
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Re: The end of commerce

PostBy: rberq On: Wed Jun 04, 2014 6:18 pm

lsayre wrote:Here is the link to the BLS (US Bureau Of Labor Statistics) CPI inflation calculator ... I have it set for 1971 to 2014. It shows that $5.85 are need today to purchase what $1 would purchase in 1971. This means that the current dollar is worth only 17 cents in 1971 terms. 83% of its buying power has vanished since the end of the gold standard.

That's a great link, thanks for posting it. If you set the inflation calculator for 1950 to 1971, you find that $1.68 was needed in 1971 to buy what $1 would buy in 1950. By your math, 41% of its buying power vanished in 21 years on the gold standard, which is about equivalent to your example of 83% in 43 years without the gold standard. In fact, if you consider compounding (which requires a more-energetic mathematician than myself :P ), I think pre-1971 inflation was WORSE than post-1971. Post-World-War-II inflation, then, has been more or less steady and horrible both before and after the gold standard ended. Something else is going on aside from the presence or lack of a gold standard.
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Re: The end of commerce

PostBy: jpete On: Wed Jun 04, 2014 6:25 pm

samhill wrote:Well then it should be easy for you to answer about the wages earned back then, you take inflation in account for costs but why not earnings? Yourself & some others sure do make some (the way I take them) belittling remarks about what some do for a living at times.


Because wages(earnings) are the cost of labor? If you made a $1 in 1913, you'd need to make $23.91 today just to stay even. I thought that was apparent.

And we haven't even added in the additional cost of government which everyone has to pay for but doesn't get included in any CPI number.
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Re: The end of commerce

PostBy: jpete On: Wed Jun 04, 2014 6:32 pm

rberq wrote:
lsayre wrote:Here is the link to the BLS (US Bureau Of Labor Statistics) CPI inflation calculator ... I have it set for 1971 to 2014. It shows that $5.85 are need today to purchase what $1 would purchase in 1971. This means that the current dollar is worth only 17 cents in 1971 terms. 83% of its buying power has vanished since the end of the gold standard.

That's a great link, thanks for posting it. If you set the inflation calculator for 1950 to 1971, you find that $1.68 was needed in 1971 to buy what $1 would buy in 1950. By your math, 41% of its buying power vanished in 21 years on the gold standard, which is about equivalent to your example of 83% in 43 years without the gold standard. In fact, if you consider compounding (which requires a more-energetic mathematician than myself :P ), I think pre-1971 inflation was WORSE than post-1971. Post-World-War-II inflation, then, has been more or less steady and horrible both before and after the gold standard ended. Something else is going on aside from the presence or lack of a gold standard.


Rampant money printing without anything backing it up?

The Bretton Woods Agreement came during WWII which tied the world to the US dollar which was allegedly hedged with gold.

I don't believe that at any time since 1913, you could go to a bank and demand gold or silver for your Federal Reserve Notes even though they stuck with that lie for a while.

Once Nixon closed the gold window for good, all doubt was removed and since all the other nations had hitched their wagon to us, they had no choice but to do over the cliff with us.

https://en.wikipedia.org/wiki/Bretton_Woods_system
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Re: The end of commerce

PostBy: lsayre On: Wed Jun 04, 2014 6:44 pm

As I said earlier within this post (when I said that I stand by the Constitutions declaration that only silver and gold themselves can be accepted as money) a Factional Reserve system is about the same (regarding being doomed to failure through abuse and also being the breeding ground for corruption) with or without "nominal" gold backing. And since 1934 the backing with gold was merely smoke and mirrors, since by then the government had forcedly confiscated the peoples gold and made it illegal to possess, meaning that there was not even the potential for the redemption of FRN's upon demand in gold from that point on. So the banks had no need to actually keep a real 10% reserve of gold since there was no public access to it. The entire brief history of the "gold standard" was a farce. I believe it was around 1975 when it once again became legal to possess gold.

I also stated that the problem kicked into high gear in conjunction with the Vietnam war and the War on Poverty, when the facade of maintaining a 10% reserve became just that for the entire nations Federal Reserve banking system. These were both well entrenched issues of unaffordability well before 1971, and in fact caused the severing from any remaining vestiges of gold backing in 1971.
Last edited by lsayre on Wed Jun 04, 2014 7:25 pm, edited 2 times in total.
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Re: The end of commerce

PostBy: jpete On: Wed Jun 04, 2014 6:59 pm

Larry correct me if I'm wrong but I believe Gresham's Law explains rberq's question.

http://www.investopedia.com/terms/g/greshams-law.asp

A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new coin ("bad money") is assigned the same face value as an older coin containing a higher amount of precious metal ("good money"), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.
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Re: The end of commerce

PostBy: lsayre On: Wed Jun 04, 2014 7:12 pm

jpete wrote:Larry correct me if I'm wrong but I believe Gresham's Law explains rberq's question.

http://www.investopedia.com/terms/g/greshams-law.asp

A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new coin ("bad money") is assigned the same face value as an older coin containing a higher amount of precious metal ("good money"), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.


I agree, and (though we've been down this road before in other threads) 'Legal Tender laws' are the primary driver of Gresham's Law. When 'the people' are left alone to choose what is or is not honest money, Gresham's Law can be reversed. Once again the blame falls upon government force meddling and muddling up free markets and the freedom of choice.

It used to be theorized that productivity and investment sprang directly from savings, but in a world of fiat currency wherein 70% of the nations GDP is measured by spending alone (and savings are not even part of the GDP equation), personal savings are suddenly the US equivalent of Iran's calling us the Great Satan. We are all being encouraged to spend and to speculate, and not to be foolish and save. The world of economics itself is turned upside-down by a fiat money based monetary system.
Last edited by lsayre on Wed Jun 04, 2014 7:26 pm, edited 2 times in total.
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Re: The end of commerce

PostBy: lsayre On: Wed Jun 04, 2014 7:15 pm

The reason why the governments CPI inflation calculators only go back to 1913 (and Fiat FRN's) is that until then mild and continuous deflation was the rule. Since then inflation is the rule, and the only game in town. Deflation directly rewards savings, and inflation is a tax who's purpose is to discourage and destroy honest savings, and to breed an environment of speculation (gambling).
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Re: The end of commerce

PostBy: rberq On: Wed Jun 04, 2014 7:49 pm

jpete wrote:
rberq wrote:Post-World-War-II inflation, then, has been more or less steady and horrible both before and after the gold standard ended. Something else is going on aside from the presence or lack of a gold standard.

Rampant money printing without anything backing it up?

You are misunderstanding or evading an Inconvenient Truth. :) If the gold standard is important, and the dollar was backed by gold from 1950 to 1971, but not backed after 1971, then why was inflation roughly equivalent in both periods? Note I am only talking about 1950 and later, when the Great Depression and two World Wars were not in the mix.
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Re: The end of commerce

PostBy: jpete On: Wed Jun 04, 2014 7:52 pm

rberq wrote:You are misunderstanding or evading an Inconvenient Truth. :) If the gold standard is important, and the dollar was backed by gold from 1950 to 1971, but not backed after 1971, then why was inflation roughly equivalent in both periods? Note I am only talking about 1950 and later, when the Great Depression and two World Wars were not in the mix.


And you're ignoring the fact that even though we said we had a gold standard, we really didn't. See Greshams Law above.
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Re: The end of commerce

PostBy: rberq On: Wed Jun 04, 2014 8:00 pm

lsayre wrote:We are all being encouraged to spend and to speculate, and not to be foolish and save.

Yes. That is the stated purpose of the Fed's "target rate" of 1.5 percent inflation: to steal the money I have saved up all these years, though they don't phrase it quite that way. Or did I just read their target is now 2 percent instead of 1.5? :mad:
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Re: The end of commerce

PostBy: lsayre On: Wed Jun 04, 2014 8:19 pm

rberq wrote:You are misunderstanding or evading an Inconvenient Truth. :) If the gold standard is important, and the dollar was backed by gold from 1950 to 1971, but not backed after 1971, then why was inflation roughly equivalent in both periods? Note I am only talking about 1950 and later, when the Great Depression and two World Wars were not in the mix.


Because the Dollar wasn't "nominally" backed by (unaudited and multiple times over leased) gold to any greater extent than 10%, and in reality this level of backing would most likely be dreaming. The "gold standard" was only smoke and mirrors to lend credence to fractional reserve banking and breed confidence in it among the ignorant masses. As I said, no one could convert their paper into gold, so in effect there was no gold.

Lets start with a small chunk of gold in a fault, and sell it to 100 people, all of whom believe that they possess equal title to it. After all, each has been given a piece of paper called an FRN (a note) as claim to "their" gold, but no one is allowed to see the gold or touch the gold or possess the gold or audit the gold, so who owns the gold that the paper claim purports to give ownership to, and why is it even necessary? Under such a fractional reserve system the temptation of the next step is to give 10,000 people claim to it, then 100,000, etc... Heck, under this system (scam) you could even show the gold to each person (if you actually had any) as assurance that it is right there in the vault for safe keeping and your claim check is perfectly valid. Just don't show all 100,000 at once, as then the game is up. Such is the essence of fractional reserve banking.
Last edited by lsayre on Wed Jun 04, 2014 8:29 pm, edited 1 time in total.
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Re: The end of commerce

PostBy: rberq On: Wed Jun 04, 2014 8:22 pm

jpete wrote:... you're ignoring the fact that even though we said we had a gold standard, we really didn't. See Greshams Law above.

The Investopedia link on Gresham’s Law says, “If the value of the metal in the old coins was higher than the coin's face value, people would melt the coins down and sell the metal.” That is what happened, and that’s a good argument against a gold standard – as gold becomes more and less plentiful and has more and less non-monetary value, it distorts the monetary system. If, for example, gold suddenly became totally worthless industrially, and nobody wanted gold jewelry any more; or if Saudi Arabia discovered vast reserves of gold under the oil so they could buy our whole country 10,000 times over; then would we still want our currency tied to gold?

But I take your point about not really having a gold standard when we said we did. I agree we really should have SOME standard, just not a GOLD standard. IMHO it should be a standard based on Gross National Product or something of that nature. In simple terms, if the country produces 100 million widgets this year, and 105 million next year, then the money supply should expand by 5 percent so that there remain the same number of dollars-per-widget.
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Re: The end of commerce

PostBy: rberq On: Wed Jun 04, 2014 8:27 pm

I think we are saying much the same thing, we are just quibbling over details. You are saying there should be a gold standard. I am saying there should be a realistic standard, but gold is a poor choice.
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Re: The end of commerce

PostBy: jpete On: Wed Jun 04, 2014 8:38 pm

rberq wrote:I think we are saying much the same thing, we are just quibbling over details. You are saying there should be a gold standard. I am saying there should be a realistic standard, but gold is a poor choice.


Gold has never NOT been desirable. In fact the word "dollar" is derived from the word "Thaler" which was a silver coin used everywhere for thousands of years.

https://en.wikipedia.org/wiki/Thaler

Whatever we use for money has to meet certain criteria. It has to be durable, portable, easily divisible and of verifiable quality. Only gold and silver meet those criteria.

Over the years, we've used everything from clam shells, to salt(ie. a man isn't "worth his salt"), spices and tobacco. In the end, it always goes back to gold and silver.

The "value" of a gold coin is ~equal to the cost it took to make it. What did it cost to get the ore out of the ground, transport it, refine it and mint it? If a huge vein of gold were suddenly found, all those costs would still be there. Yes, there might be some inflation, but not near as much as the Fed ramping up a printing press at the push of a button.

The market will easily readjust for the new hard money supply. How does business reach equilibrium when the Fed is printing $80 billion a month?

It costs the Fed about a nickel to print a $1 note which they will happily sell you for $1. Not a bad profit don't you think? They make 95 cents for every dollar bill in circulation.

http://www.federalreserve.gov/faqs/currency_12771.htm
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