Moneyness by FOFOA

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Indiana Jones
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Re: Moneyness by FOFOA

Post by Indiana Jones » 07 Feb 2012, 20:44

Boefke wrote:HRN: So, gold is an alternative to dollars or Euros?
Jim Sinclair: Physical gold is the answer. An individual who holds gold will have more time and ability to function.

He must be kidding us here. Unbelievable that he makes such a (sorry for the word) stupid statement.

FOFOA's dilemma: When a single medium is used as both store of value and medium of exchange it leads to a conflict between debtors and savers. FOFOA's dilemma holds true for both gold and fiat, the solution being Freegold, which incidentally also resolves Triffin's dilemma.

I am not going to describe the disadvantages of using gold as that specific medium. Just al the discussions and posts dealing with freegold are recommended to read, you only change the word $ into Gold. And as almost everybody is saying they aren't reading FOFOA any more, why am I going to describe them here.....

I thought Jim was a bit further down the road, but it seems obvious he still is in the hard money camp. No problem, don't we all learn more on this subject everyday? :lol:
This has been said soooo many times about Jim ....until you realize he takes it step-by-step ...... ;)

Now he steps into a hyperinflation scenario.
What do you prefer to be paid with in such a scenario: euro, dollar .... or maybe rather physical gold ?

I sure like to be paid with ph gold during such a scenario and ph gold, for me, suddenly becomes a Sov; UoA & MoE. When hyperinflation is over, gold loses the last mentionned 2 functions to new money (digits, coins or paper) ...... :D
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Boefke
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Re: Moneyness by FOFOA

Post by Boefke » 07 Feb 2012, 21:29

Okay, Was he talking about the hyperinflational period? Didn't notice it.....

If that's the case it's obvious what he means. But than we come to a subject where we both disagree on. My guess is that the Euro cant hyperinflate, because you can always buy gold with this currency.
I know your opinion is different here.

I prefer to talk of the period after this HI-period. Probably this period won't last that long....

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Indiana Jones
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Re: Moneyness by FOFOA

Post by Indiana Jones » 07 Feb 2012, 21:59

Boefke wrote:Okay, Was he talking about the hyperinflational period? Didn't notice it.....

If that's the case it's obvious what he means. But than we come to a subject where we both disagree on. My guess is that the Euro cant hyperinflate, because you can always buy gold with this currency.
I know your opinion is different here.

I prefer to talk of the period after this HI-period. Probably this period won't last that long....
Because we disagree on euro/s future, it is very hard to talk about 'what comes after hyperinflation'.
In my opinion the euro is like the dollar, a reserve currency by default.
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Malcolm
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Re: Moneyness by FOFOA

Post by Malcolm » 01 Mar 2012, 06:50

Some 'money is' quotes by FOFOA's friend Aristotle:

1. Money is merely the ethereal middle-ground of contracts,...

2. Money is more about the Rule of Law than anything else. An understanding of money -- Form and Function --...*REQUIRES* an understanding of banking. This, to the extent that a person can't hope to claim a mastery of the monetary phenomenon that exceeds his or her mastery of banking as a System of Practices.

3. The depositors' money is physically distributed (unlike the ledger creation of credit-money used today,) but it would not be long before the depositors who had thus risked their deposits for a return came to have faith that their full deposit would be returned with interest, and acted on faith as though the Gold was actually still at their immediate disposal. But inevitably, the day always comes when confidence is in short supply, and depositors rush en masse to reclaim their deposits, feeling that money in-hand is more desired than the prospects of any returns that the bank may have to offer, or perhaps fearing for the viability of the bank itself and its ability to provide Gold for the quantity of funds in account.

4. And as it begins innocently enough, it ends innocently enough, too. The availability for the common man to get a loan serves as an undeniably equalizing force in society. It allows a poor person with time and energy to participate in the economy on par with a man who has his own capital. Through the credit obtained from the banks' pool of deposits, a borrower is able to gain possession of land, buildings, tools, raw materials, or other goods and facilities with which to become a farmer, manufacturer, or merchant--using the profits from his time, energy and know-how to earn a living for himself and to compensate his lenders for their extension of credit. The poorer and more wretched a man might be, the more he might wish for the presence of a bank of low standards willing to extend credit to the likes of him.

5. No longer do we hold our greatest portions in real forms that transcends the peaks and valleys of fiat money value ,,,, a variable fiat money system that our "changeable nature" demands. No, we option to ignore the true purpose of this paper money system and cast the entirety of our resources into it. Never stopping to understand that this money is but an "economic need" "to process a trade". Not an "economic product" and therefore wealth itself.

5. Money is a present good as well as the medium of exchange. As the medium of exchange it can be traded directly for other present goods. The fact that our civilization has progressed from the days of the horse and buggy and before to the present day is not related to the changing value of money but, rather, the degree to which our laws and institutions promote the division of labor.

6. the purpose of money is to allow the exchanges that market participants desire in the most efficient way.

7. For now, accept on faith that new money is created (as a simple ledger entry at a bank) through the process of borrowing. A loan creates new money, and banks collectively may create money far in excess of what they hold on deposit. As a contract, the loan is quite real, but the dollar is not. A dollar is an undefined concept--an undefined unit of measurement for value, so to speak. You can see how such an arrangement favors those in a position to name their price.

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Rasta
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Re: Moneyness by FOFOA

Post by Rasta » 01 Mar 2012, 10:11

Great summary Malcolm!
Eventually there will be an awakening, a balancing of the scales and a bill to be paid, and for that I hold gold - Jim Sinclair

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Re: Moneyness by FOFOA

Post by Malcolm » 24 Mar 2012, 13:54

"Money is" quotes from Armstrong's "Anatomy of a Debt Crisis" (March 18, 2012):

"...the value of money is in itself a commodity. It rises and falls against all things tangible effectively no different than the price of a common stock of a corporation....

...money itself is not like a ruler [etched] in metal or wood. Money is more akin to a rubber band even when it may be gold or silver. This is the very essence of our primary confusion because of the presumption that money is somehow a constant value. The way we measure the economy is we presume falsely that money is a constant. The truth of this misconception becomes simply that money is like everything else – subject to the whims of supply and demand. There is no constant in that respect and money as we have fixed it within our mind is printed on a rubber-band and is really very elastic.

...money is itself a language in our mind...

Caesar realized that money is not a constant. Neither are assets. The only constant is time. By evaluating all property and loans to a fixed point in time pre-war, he discovered the real constant."

Let me elaborate on Armstrong's "money is itself a language in our mind". Armstrong uses Einstein to illustrate this notion. Again, quoting Armstrong:

"[Einstein] was told that people thought in words. He replied: “I rarely think in words at all. A thought comes and I may try to express it in words afterwards … I have no doubt that our thinking goes on for the most part without the use of signs and, furthermore, largely unconsciously.”

Most people assume that they think only in words. But they are wrong. People assumed that Einstein was just a genius, and did not listen to what he was saying. He visualized relationships and that leads to concepts. The concepts flow so fast, there is no time to even bother to form words. The comprehension suddenly appears, and then you try to rationalize the idea in words.

We all actually think this way. We learn by visual and sound in a much deeper way than in reading just a book. This much has been proven in studies and it is why I believe education must be changed reestablishing apprenticeships.

I find it difficult to try to explain visual concepts in words. What I am trying to provide is an explanation of the economy so that you can visualize the real solution, because it is a dynamic relationship between everything with no real constant. We are at a tremendous disadvantage because we have grown up thinking in a flat linear world that does not exist. We see the assets rise and fall as measured in money, but we do not take it to the next level. The reason this is true, is because money is itself a language in our mind. Just as Einstein was confronted by the question does he think in word, we also limit ourselves by thinking in money, against which we measure gains, losses, winners and losers, and government only thinks in how much money it can take from the people."

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Indiana Jones
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Re: Moneyness by FOFOA

Post by Indiana Jones » 24 Mar 2012, 15:43

money is itself a language in our mind

This is so true.

Great summary and conclusion Malcolm!
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Re: Moneyness by FOFOA

Post by Malcolm » 18 May 2012, 06:41

I came across this and found it interesting.
http://market-ticker.org/akcs-www?post=206055

I won't debate the Tickerguy argument, but the formulas suggested a 'money is' statement

Tickerguy argument:

GDP = Con + I + G + (x - i), where
"Con" is consumption,
"I" is investment,
"G" is government spending
(x - i) is net exports.

GDP = ((M + Cre) * V), where
"M" = money (earned output from personal production),
"Cre" = credit (a promise to produce tomorrow) and
"V" = Velocity (number of times the "M" or "Cre" turns over.)

W > M where
W = retained income
M = retained income you can immediately dispose of

Cre = Loaned money which is secured or unsecured
secured loans liquify wealth (wealth used as collateral is now unavailable for conversion into money)
unsecured loans liquify your reputation wealth

Solving for M:
1. ((M + Cre) * V) = Con + I + G + (x - i)
2. ((M + Cre) = (Con + I + G + (x - i)) / V
3. M = (Con + I + G + (x - i) )/ V - Cre

Thus, in English, the Tickerguy is saying:

Money (retained income a group of people can immediately dispose of) can be calculated by summing the group's Consumption, Investment, Government spending and the difference between their export and imports. If this quantity is divided by the velocity of money and the total unsecured and unsecured credit subtracted, you have calculated 'disposable retained income'.

The Tickerguy uses this to make the following argument:

What happens is GDP declines: GDP(1) > GDP(2)

Assume M and V are effectively constant, so only Cre can change. Keynsians recommend expanding Cre to increase GDP. Since they increase Cre with unsecured loans (no wealth is liquified), the increase in Cre decreases M (buying power of a unit of M dereases). Therefore you have no impact on GDP.

Example demonstrating utility of formulas:

In 1921 the US had an extremely sharp deflationary recession. Rather than "prime the pump" The Fed (which existed at the time) raised interest rates, thereby constricting "Cre" and the government balanced the budget, thereby removing the excess "Cre" emission it was involved in. A boom followed.

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