Oil Problems comin' round the mountain

[NeilUnreal]

Money has no existence independent of consensus reality. Where goes the consensus, goes the money.

-Neil

[Jorge]

We do seem to agree on economics.

I always agree with truth.

I would point you to an analysis I did of 600+ years of economic data. Back when the only money was gold and silver, there was no inflation. Effectively the barter of a quantity of silver bought a fixed (or almost fixed) quantity of a product. http://home.entouch.net/dmd/oilecon.htm

Correct! One cannot 'inflate' something whose quantity cannot be increased by simply
adding more printing presses. History shows that fiat currencies / monies have ALWAYS
succumbed to devaluation.

The ISP has been having problems for the past couple of weeks.

There isn't enough gold in the world for the world to work on the gold standard. So paper money was invented to allow more growth but it brought with it inflation. That being said, the fact remains that real things don't inflate, paper money inflates. Below is a chart since 2002 of the DOW divided by the price of an energy mutual fund which has its dividends re-invested. Note that in 2002 it took 500 shares to buy the DOW. Now it is about 160 shares. I am not going to identify the fund because it doesn't matter, all energy funds show this kind of performance.

People don't know it but inflation is already eating away at their savings. If you have savings of 3 x the DOW, your ability over the past 10 years to buy a barrel of oil has dropped precipitously. The second picture shows that.

In 1998 you could buy 100 barrels of oil with the price of the S&P. A perfectly diversified portfolio would behave as the S&P and today, your investment can only buy about 18 barrels of oil. Let's hear it for inflation--hidden so the stupid politicians of all stripes can get re-elected.

As to the feathers about to hit, I heard the economic officials briefed Obama on the coming commercial credit problems http://www.foxbusiness.com/story/mar...l-real-estate/

Back to the future, again

Very good, gr -- I knew there had to be some redeeming qualities.

Seriously, ask 100 people what 'inflation' means and 99 of them (if not 100) will say,
"it means that things cost more" ... "prices are higher". Very few will give the correct
answer, "the purchasing power of the currency is lower and, hence, it takes more of
that currency to buy the same item."

Yes, the net effect is that "things cost more" but it is critically important to understand WHY
they cost more. At the rate that Obama and his mob are going, they'll have buried the
purchasing power of the dollar so deep that, unlike a vampire, the dollar will never come
out of its grave.

Along with this is the fact that this represents yet another tax -- an inflationary tax -- that
results from today's dollar buying less then yesterday's. By the government's devaluation
of the currency, this tax slowly but surely steals from us our earned ability to purchase.

Thanks for the links!

Jorge

[Augustine2004]

No, there's enough gold. We don't need paper money. We just need good education and willpower.

It doesn't really make a difference if we have 10,000 grams of gold per person or 1 gram per person or 0.01 gram per person. Things can be priced accordingly. In the first case, something might cost say 10 grams. In the second case, 0.001 grams, and so on. The economics in any case is essentially still the same, though some details may differ, such as procedures to verify the quality of the money.

[grmorton]

Money has no existence independent of consensus reality. Where goes the consensus, goes the money.

-Neil

Yeah, I have a few confederate dollars laying around. Anyone want some Biafran money? Or how about 100 trillion dollars Zimbabwean? That is my hand in the picture

[grmorton]

I [

Very good, gr -- I knew there had to be some redeeming qualities.

I know much better than that.

Seriously, ask 100 people what 'inflation' means and 99 of them (if not 100) will say,
"it means that things cost more" ... "prices are higher". Very few will give the correct
answer, "the purchasing power of the currency is lower and, hence, it takes more of
that currency to buy the same item."

Yes, the net effect is that "things cost more" but it is critically important to understand WHY
they cost more. At the rate that Obama and his mob are going, they'll have buried the
purchasing power of the dollar so deep that, unlike a vampire, the dollar will never come
out of its grave.

Along with this is the fact that this represents yet another tax -- an inflationary tax -- that
results from today's dollar buying less then yesterday's. By the government's devaluation
of the currency, this tax slowly but surely steals from us our earned ability to purchase.

Thanks for the links!

Jorge

The best definition of wealth I ever heard is that wealth is choices. With wealth, one can hop a plane tomorrow morning and have dinner in Paris tomorrow night. George Washington didn't have that choice. We can have medical care that George Washington only dreamed of--everyone is wealthier than ole George.

[grmorton]

No, there's enough gold. We don't need paper money. We just need good education and willpower.

It doesn't really make a difference if we have 10,000 grams of gold per person or 1 gram per person or 0.01 gram per person. Things can be priced accordingly. In the first case, something might cost say 10 grams. In the second case, 0.001 grams, and so on. The economics in any case is essentially still the same, though some details may differ, such as procedures to verify the quality of the money.

Of course it does. If one wants .001 g of gold to buy something with, one needs to keep track of coins only three 100th of a centimeter. (assuming I did my math correctly.). such small coins would be lost quite easily. Besides that, using gold requires constant assaying to be sure that one isn't getting ripped off by gold covered lead.

[Augustine2004]

Of course it does. If one wants .001 g of gold to buy something with, one needs to keep track of coins only three 100th of a centimeter. (assuming I did my math correctly.). such small coins would be lost quite easily. Besides that, using gold requires constant assaying to be sure that one isn't getting ripped off by gold covered lead.

Even today, gold used as money is usually kept in vaults by warehousing businesses (commonly called banks). They issue gold certificates, letters of credit, and maybe someday gold-backed credit cards and debit cards. Also, online gold-money businesses such as e-gold (I've not checked to see if it's still in business). If transfer of gold quantities become desired, it would be uneconomic except in large quantities. Think well-armed armored trucks

[grmorton]

Even today, gold used as money is usually kept in vaults by warehousing businesses (commonly called banks). They issue gold certificates, letters of credit, and maybe someday gold-backed credit cards and debit cards. Also, online gold-money businesses such as e-gold (I've not checked to see if it's still in business). If transfer of gold quantities become desired, it would be uneconomic except in large quantities. Think well-armed armored trucks

Augustine, buy gold if you want, but it is the lamest of dreams that the world will go back on the gold standard.

[Dr.GH]

Re: Gold as money

The best fun read on this is "Making Money" by Terry Pratchett.

[grmorton]

Re: Gold as money

The best fun read on this is "Making Money" by Terry Pratchett.

I will look for that book. To show the problem I see with the falling dollar I put the S&P in terms of Australian dollars. If I did things right, it looks to me that the US stock market is flat in those terms. Yippee--we have all been fooled into thinking we have made money.

[Augustine2004]

Augustine, buy gold if you want, but it is the lamest of dreams that the world will go back on the gold standard.

Please explain this news tidbit from Agora Financial 5 Minute Forecast (2009 10 20):

Another feather in gold’s cap: For the first time, a major global exchange will accept gold as collateral. The CME Group, the world’s largest derivitives exchange operator, will take physical gold for things like margin requirements -- an industry first.

[grmorton]

Please explain this news tidbit from Agora Financial 5 Minute Forecast (2009 10 20):

Why do I need to explain it?

[Augustine2004]

Why do I need to explain it?

Glenn, this is not a recommendation. I have not used the services of the firm whose website the following link is for http://goldmoney.com/why-goldmoney.html My linking to the site is in part a response to your question. Note in particular the ‘goldgram’ program.

Convertibility to gold and other forms of physical (not 'paper') money may increase http://www.lewrockwell.com/rozeff/rozeff317.html

[grmorton]

I thought I would point out that oil jumped $3 today. Largey because of the dollar's fall. Until the Fed raises interest rates, which will kill the growth, oil will continue to climb in price. That being said, it is helping to bring about some additional drilling now.

[Augustine2004]

I thought I would point out that oil jumped $3 today. Largey because of the dollar's fall. Until the Fed raises interest rates, which will kill the growth, oil will continue to climb in price. That being said, it is helping to bring about some additional drilling now.

Readers should be cautioned that phrases like 'kill the growth' are rather misleading. Economies can and have grown with high interest rates. Indeed, growth often leads to high interest rates, which do NOT necessarily kill growth but are indicators of good economic health.

The current interest rate levels are rather likely to be suboptimal. What growth does occur (if any) is not sustainable and the economy will continue to be unhealthy (boom-bust).