Financial Collapse and Energy - Something Other than a NINJA Problem

http://www.theoildrum.com/node/5431

by ph0rque • 17 years ago

12 16 17 years ago

Retric4• 17 years ago

Compleatly ignores inflation and defaults.

gibsonf16• 17 years ago

I think one of the major points of the article is that you can only actually have inflation if you disconnect money from the gold standard. Life would be much better if we had a gold standard, no doubt.

krakensden• 17 years ago

I don't know why you would believe that. The supply of gold in the world is not fixed, you can always dig up more (for a pathological case, see aluminum), and occasionally large chunks disappear (the Hunt brothers).

At least with paper money, its value is usually your own fault.

Xichekolas3• 17 years ago

Actually it's quite easy to have inflation with a gold standard. As soon as you dig up a single ounce of new gold, you have inflated the money supply a little.

So instead of having the central bank control your inflation rate, it is controlled by the gold mining companies of the world. That may not necessarily be worse depending on how much you trust the central bank, but it's hardly better.

Of course, if we didn't want our money supply to be determined by gold miners, we could pick another arbitrary commodity like oil or coal. I'd go with coal, since we have a lot of that. But then again, once you have the power to dig up more, you have the power to inflate your own currency again. Might as well skip the digging (and all the environmental abuse that entails) and just adjust the supply on paper like we currently do.

This is treated really well here: http://www.optimist123.com/optimist/2007/05/sound_money_ver....

This article points out (rather obliquely) that ideally you'd want to grow money at the same rate that GDP grows (assuming constant velocity of money).

That is really hard to do obviously. If you rely on the gold standard, you have to attempt to add gold to the world supply at a specific rate. I'm no miner, but I'd imagine production levels are hardly constant from year to year. (Not to mention that, due to geology, we'd have to rely on other countries to do so, notably Russia and South Africa.) If you rely on fiat money, you thankfully don't have to actually produce anything to increase the supply, but you do have to spend a lot of time deliberating over how much to do so.

Deflation would be really bad in a debt driven economy like we have, since it increases the burden of debt-holders, so central banks err on the side of moderate inflation. If they could get it perfect, that would be awesome, but so far they can't so they choose the lesser of two evils.

midnightmonster• 17 years ago

The story Gail tells about currency rings true at first, but I don't buy that the link between energy/time/labor and trading value was ever so strong. Even starting with the bartering chair maker and farmer, if the farmer can get a chair for a basket of eggs, he won't give two baskets of eggs for a similar chair to the other chair maker in town just because chair maker B is slow and takes 12 hours to make a chair. Even if there were no fast chair maker around, he may still decide he's better off sitting on the floor or on a stump than paying two baskets of eggs.

The real relevance of time/effort value is this: farmer doesn't pay 1 basket of eggs (6 hours work) for a chair b/c the carpenter spent 6 hours on the chair, he pays 6 hours of work b/c he couldn't have built a nice chair in 6 of his own hours (and there's nothing else he wants/needs more at the moment that he could get with 1 basket).

Commerce has never required anyone to believe (though some may have believed) that a chair was worth a basket of eggs in carbon footprint or in the eyes of God, only that the chair is worth the eggs to me, the farmer.

triplefox• 17 years ago

Also see: http://www.ascentofhumanity.com/chapter4-10.php

Financial Collapse and Energy - Something Other than a NINJA Problem

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