World Collapse Explained

[John Picard]

The arguments about gold's inherent value will rage forever. Goldbugs tend to be quite fervent in their appreciation for the yellow metal.

I prefer to consider it simply a commodity. Just like any other commodity, it has some intrinsic value because of its scarcity and difficulty of extraction. That cost value is higher than many other commodities simply because of the high cost associated with finding/extracting it. That "cost" value is then modified by current demand for it, just like any other commodity does.

The idea that gold (or any other metal/resource) is immune to supply/demand considerations (esp. in a post-apocalyptic scenario) is just bizarre and I take issue with the goldbugs on that point.

But what the gold-skeptics forget is that money (or rather, your local variant of it) is also subject to supply/demand considerations.

At some points in time, the supply/demand considerations favour money, at other times, gold. Money itself is a commodity, viewed in this way.

Exactly, and I've been very nervous about the Inflation Monster rearing its ugly head here, in the US. Once that happens, and the Fed suspects it will be soon, then interest rates will start increasing at which point the Fed will start to tighten (reduce) the money supply. This is exactly what Paul Volker did to combat Stagflation back in Reagan's first two years in office.

 

[Holdfast]

I doubt we'll swing back to a strict monetarist framework so soon after indulging in the keynesian binge of the past couple of years.

The easier solution would be a public spending contraction and some mild fiscal tightening, to prevent too much of monetary squeeze. The UK is beginning down this road this year, and many of the Eurozone economies are now planning much more strigent retrenchments, due to the obvious problems those countries have with the Euro. Japan will probably follow, now Naoto Kan is in charge (he's a major debt hawk compared to other Japanese PMs). That will leave China, India and the USA as the sole remaining drivers of the world economy, and given its current fragile state, I don't think the US will cut back too quickly, unless the Democrats lose control of Congress and there's then political mileage for both a Republican Congress and a Democrat President to fight over, but eventually agree on, spending restraint (cf many of the Clinton years).

 

[John Picard]

I doubt we'll swing back to a strict monetarist framework so soon after indulging in the keynesian binge of the past couple of years.

The problem is they'll be faced with it. I took Macroeconomics just last year and we discussed how Keynesian policy is outdated (ie Menu costs really aren't applicable any more). This last go around of massive spending has been (as it usually is) a dismal failure.

The easier solution would be a public spending contraction and some mild fiscal tightening, to prevent too much of monetary squeeze. The UK is beginning down this road this year, and many of the Eurozone economies are now planning much more stringent retrenchments, due to the obvious problems those countries have with the Euro. Japan will probably follow, now Naoto Kan is in charge (he's a major debt hawk compared to other Japanese PMs). That will leave China, India and the USA as the sole remaining drivers of the world economy, and given its current fragile state, I don't think the US will cut back too quickly, unless the Democrats lose control of Congress and there's then political mileage for both a Republican Congress and a Democrat President to fight over, but eventually agree on, spending restraint (cf many of the Clinton years).

Japan's economy is so stagnant it's not funny. Either way, the US Fed will eventually start tightening the reigns.

 

[Bloodwhiner]

200 years ago an ounce of gold would buy a man a very fine set of clothes.
100 years ago an ounce of gold would buy a man a very fine set of clothes.
Today an ounce of gold would buy a man a very fine set of clothes.

Gold does not change in value, the market around it changes.

 

[MANT!]

And it's SHINEY!!!