Capitalism Hits the Fan (Lecture)

[aurik]

Needs to be corrected for a given starting point

[popsiclestix]

Few things I want to agree/disagree:

The US Dollar is not money, it is currency. Gold is money. Cigarette's in prison can be money. Gil in Final Fantasy games is money, if it was real-life..
Money has intrinsic value. At its core, there is some goods, whether it is stamped with a US Eagle, or wrapped by Phillip-morris, there is a base price (intrinsic) and its monetary price.
Currency is a divisible, transportable means of exchange. In the current system, our US Dollar (and all currencies) is a fiat currency. It holds no value other than our government has willed-it to be the means of paying taxes.

Back to this OP video, he has it sort of wrong. The underlining cause to the "Panic of 2008", are:

0) Glass-Stegall act repealed, allowing lending institutions to own other financial institutions. Think Citigroup.

1) A new bubble formed after the the tech bubble that busted in 2001. This was lead by the Fed.

2) When lending requirements were pressured by members of congress to make mortgages more accessible for the poor, banks started to issue sub-prime loans. These loans were then packaged together as collateralized debt obligation (CD)) and given a AAA rating by the likes of S&P, and Moody's. These were many pension funds were going towards.

3) Insurance companies and other financial institutions issued credit default swaps as an insurance in the event of a default on the CDOs. As more banks, err financial institutions took on more risk with CDOs, they purchased more CDS to hedge. As these banks pay each other payments for the CDS, bankers are making a killing.

4) Meanwhile, people were purchasing houses on little to no credit. You didn't need a job (NINA Loan) to get a loan. People were trying to flip homes for profit. People were just bidding up housing prices thinking that there was no end. Also, US manufacturing had nearly ceased, and all jobs are overseas due to rising employment costs.

5) When the bubble popped, it should have unwound and the market would discover who was taking on this ridiculous risk and exposure, but Pres, GW Bush was pressured by Obama to get TARP funds to bail out these banks and to keep the market afloat.

6) The federal reserve is continuously buying up Treasuries and filling the banks coffers with zero percent interest rate loans. The banks, realizing that the Fed is propping up another bubble goes into the last market, real assets.

So now we have a federalized car company, banks with growing coffers, banker executives making wonderful bonuses, currency war, inflation of the money supply that is causing rising prices for food and gas, underwater mortgage loans, and the list goes on and on. But don't forget, the Core CPI shows no inflation... lol....

The only hedge against all of this is real money. Gold and silver. Liberals will laugh at fiscal conservatives, but I am laughing at my silver pile just adding another 50% of value in 9 months

When QE3 is announced, get ready for the ride.

[Pirian]

Few things I want to agree/disagree:

The US Dollar is not money, it is currency. Gold is money. Cigarette's in prison can be money..[/b]

Wrong. Straight out of my old Macro Econ book - There are two types of money: Commodity Money (money that has value apart from its use as money), and Fiat Money (money that an authority (usually government) has declared as a medium of exchange).

The US Dollar IS money - Fiat money. Gold CAN BE money - Commodity money. Cigarettes in prison are DEFINITELY money - Commodity money.

Basic econ here

[Plow]

Cigarettes in prison are DEFINITELY money - Commodity money.

Not anymore since the ban really. That's not to say nobody gets cigarettes in, but not like they used to.

Stamps are money in prison now.

[Pirian]

Not anymore since the ban really. That's not to say nobody gets cigarettes in, but not like they used to.

Stamps are money in prison now.

Shit man, I'm so out of the times.

[Takedown3]

does anyone take swamp seriously on or off the boards?

[Cantih]

Not after he went Leif.

[Plow]

Shit man, I'm so out of the times.

To be honest I only know this because a friend that's in jail for a long time called yesterday and the subject of cigarettes as currency since the ban came up lol.

I watch a lot of the prison psychology documentaries so I'm always asking him about random shit.

[popsiclestix]

Wrong. Straight out of my old Macro Econ book - There are two types of money: Commodity Money (money that has value apart from its use as money), and Fiat Money (money that an authority (usually government) has declared as a medium of exchange).

The US Dollar IS money - Fiat money. Gold CAN BE money - Commodity money. Cigarettes in prison are DEFINITELY money - Commodity money.

Basic econ here

But the US Dollar has no intrinsic value. There is no difference between a 20 dollar bill and a 100 dollar bill other than some numbers (maybe there is some extra security?). Gold was money for nearly every society throughout history until 1971. Fiat currencies always fall onto their historical value, zero, over time. With all currencies being fiat, and the current currency war waged between Yuan, Yen, Euro, USD, etc, it is inevitable that we will go into a hyperinflation mode.

Edit:

Funny that stamps are money in prison. The Forever Stamps could be interpreted as another means to combat inflation, until you use it lol.

http://freakymartin.com/nitro/fishki...ura_003_30.jpg
http://www.smileosmile.com/wp-conten...d-zimbabwe.jpg


unfortunately, your econ book doesn't list that we can not pay our debts with Gold and Silver, despite what is written in the Constitution: "No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility."

[Pirian]

But the US Dollar has no intrinsic value. There is no difference between a 20 dollar bill and a 100 dollar bill other than some numbers (maybe there is some extra security?). Gold was money for nearly every society throughout history until 1971. Fiat currencies always fall onto their historical value, zero, over time. With all currencies being fiat, and the current currency war waged between Yuan, Yen, Euro, USD, etc, it is inevitable that we will go into a hyperinflation mode.

The US Dollar has no intrinsic value? Give me a break. It was created with the specific intention of value, and is recognized as such, therefore by definition, it most certainly has intrinsic value. But hey, you know what? Don't take my word for it. If you see no difference in a $20 and a $100 bill, then how about you send me all your $100's and I'll replace them with my $20 bills, ok? If they have no intrinsic value, as you say, then it's a fair trade.

Hyperinflation is what would of happened after a population explosion and there isn't enough gold/silver to back the demand for money of a growing population. In other words, hyperinflation only really happens when a government's fiat money become worthless (no demand for it) and there isn't enough commodity money to satisfy the demand of the population. Duh, fiat money always eventually falls to 0. That has much less to do with its failure as money, as it does a failure of the society that created. As long as the society is strong (despite recession, and naysayers, we are still strong) then people will still rely on that fiat money.

[Cadsuane]

AUSTRIAN ECONOMICS IS AWESOME RITE GUYZ

[Kuya]

I KNOW I LOVE IT

[Kerberoz]

Econ majors: debating semantics since 9000BC.

[Demosthenes11]

someone in my family posted this in an argument on facebook yesterday.

I laughed so. fucking. hard.

http://blog.mises.org/13753/gains-fr...e-differences/

[Ferion]

Unless I'm being wooshed, what's funny about that article?

[ronin sparthos]

The Star Wars references?

[Demosthenes11]

Unless I'm being wooshed, what's funny about that article?

working in fantasy with perfect conditions, citing god as opening doors in trading. lolibertarians

[popsiclestix]

The US Dollar has no intrinsic value? Give me a break. It was created with the specific intention of value, and is recognized as such, therefore by definition, it most certainly has intrinsic value. But hey, you know what? Don't take my word for it. If you see no difference in a $20 and a $100 bill, then how about you send me all your $100's and I'll replace them with my $20 bills, ok? If they have no intrinsic value, as you say, then it's a fair trade.

Intrinsic value is the whole value of the product. The intrinsic value of a diamond ring is the melt value of the metal and karat value of the ring. The intrinsic value of a car is the amount of recyclable steel, aluminum, plastic, and rubber it has. The intrinsic value of fiat money is the paper it is printed on. There is nothing that limits the US Government to print a 20, 50, or a 100 bill. There is nothing that limits it. There is no counterbalance.

Sure I will send you 100s for 20s when it costs 5 million dollars for a can of soda

Hyperinflation is what would of happened after a population explosion and there isn't enough gold/silver to back the demand for money of a growing population. In other words, hyperinflation only really happens when a government's fiat money become worthless (no demand for it) and there isn't enough commodity money to satisfy the demand of the population. Duh, fiat money always eventually falls to 0. That has much less to do with its failure as money, as it does a failure of the society that created. As long as the society is strong (despite recession, and naysayers, we are still strong) then people will still rely on that fiat money.

Triggers for Hyperinflation can vary a lot. When people using a currency have lost faith in it, then you will see hyperinflation. The US Dollar reigns supreme as a currency held by other banks and countries because it is used for transactions for oil. If, let's say,

Saudi Arabia declares that they are at peak oil,

China curbs its inflation by allowing its currency rate to be settled by open world markets,

OPEC nations declare that exchange for oil must be performed with gold or silver,

Quantitative Easing 3,

etc.

[Pirian]

Intrinsic value is the whole value of the product. The intrinsic value of a diamond ring is the melt value of the metal and karat value of the ring. The intrinsic value of a car is the amount of recyclable steel, aluminum, plastic, and rubber it has. The intrinsic value of fiat money is the paper it is printed on. There is nothing that limits the US Government to print a 20, 50, or a 100 bill. There is nothing that limits it. There is no counterbalance.

Sure I will send you 100s for 20s when it costs 5 million dollars for a can of soda

You, yourself, just put the limit on it - right with that last sentence that you tried to mock me with. You gave it intrinsic value because you know that at this moment you can do/get more with $100 bill than a $20 bill. That is the very definition of intrinsic, as I said last time. No, nothing limits the US Government from printing money, but the people who actually decide how much money to put into the economy do not make these decisions haphazardly. It is very, very, unlikely that they will put the US currency in a position where it will be regarded as worthless. Don't bother trying to argue this because you can't. Any evidence that you may present will be anecdotal at best, and disproved because our currency still has value.

Triggers for Hyperinflation can vary a lot. When people using a currency have lost faith in it, then you will see hyperinflation. The US Dollar reigns supreme as a currency held by other banks and countries because it is used for transactions for oil. If, let's say,

Saudi Arabia declares that they are at peak oil,

China curbs its inflation by allowing its currency rate to be settled by open world markets,

OPEC nations declare that exchange for oil must be performed with gold or silver,

Quantitative Easing 3,

etc.

You have to be kidding me. Oil is hardly the sole reason that the US currency is the main trade currency world wide. No no, it couldn't be because we have the biggest economy, that's not the reason! It must be the oil! Yes, Saudi Arabia will eventually cap out, but it will hardly be the beginning of the end for the US.

I truly cannot believe you brought China into this conversation. With how fragile their government is, they're not going to do anything that would jeopardize their own economy, and bringing the US down would crush them. Also, the US Government has been wanting China to put their currency on open market for a long time, but they haven't. There is something to that.

It's laughable that you would even consider OPEC switching to a gold/silver standard. They would lose so much money due to a shortage of gold/silver that it would be mutual destruction for them, too.

You can speak in "what if"'s all day, but at the end of the day you have no real argument. Hate it, think it's wrong, but it's the truth.

[popsiclestix]

You, yourself, just put the limit on it - right with that last sentence that you tried to mock me with. You gave it intrinsic value because you know that at this moment you can do/get more with $100 bill than a $20 bill. That is the very definition of intrinsic, as I said last time. No, nothing limits the US Government from printing money, but the people who actually decide how much money to put into the economy do not make these decisions haphazardly. It is very, very, unlikely that they will put the US currency in a position where it will be regarded as worthless. Don't bother trying to argue this because you can't. Any evidence that you may present will be anecdotal at best, and disproved because our currency still has value.

Sure, I can buy 2 Silver Maples with $100 but just the shipping and other costs with 1 $20 bill. Sad though, last year I could buy 3 Silver Maples, and 3 years ago, I would of been able to buy 5! LOL. I love that, "Don't try to disprove me because I am not wrong" argument.

You have to be kidding me. Oil is hardly the sole reason that the US currency is the main trade currency world wide. No no, it couldn't be because we have the biggest economy, that's not the reason! It must be the oil! Yes, Saudi Arabia will eventually cap out, but it will hardly be the beginning of the end for the US.

Yes, US has the largest economy. It is still the #1 economic power, but it's power is on the decline to China, this is a fact.

I truly cannot believe you brought China into this conversation. With how fragile their government is, they're not going to do anything that would jeopardize their own economy, and bringing the US down would crush them. Also, the US Government has been wanting China to put their currency on open market for a long time, but they haven't. There is something to that.

It's laughable that you would even consider OPEC switching to a gold/silver standard. They would lose so much money due to a shortage of gold/silver that it would be mutual destruction for them, too.

You can speak in "what if"'s all day, but at the end of the day you have no real argument. Hate it, think it's wrong, but it's the truth.

China is fragile to its own citizens. They can flip on a moments notice. They do like to keep civility in the country, so since their inflation is on a 6% reported (probably higher) tear, and holding higher reserves does jack shit, I would believe that they will have to allow their money to rise in strength to combat the inflation.

Well arguing is not going to win anything here, its the Internet. Especially if you simply tell me that I am wrong; nothing will win against that. Sure there are a lot of "what-ifs", but with way everything has happened, they are becoming more like "now that..".

You know its funny, I used to jest with my father on the Glenn Beck thing 2 years ago. He is a fraud for Goldline and his thoughts are simply stolen from the likes of Alex Jones, but he did speak some truths when I listened to him. He had sensationalism to his point.

There were a lot of naysayers in 2006-2007 about the housing bubble. It didn't hit me when I was asked by family members to just buy a home with a variable rate interest loan with my measly $34k job. I didn't listened to them and instead tried to find out what people are listening too. It was then I heard the likes of Marc Faber, Peter Schiff, and Ron Paul on TV and what they said made a lot of sense. Then the housing market fell through the floor.

If you think the economy is great, then go towards Pirian route. Listen to what CNBC and CNN are feeding you. The economy is doing great. Avoid Gold (was $900 @2008 now $1550), and Silver (was $20 @2008 now $45) as they are in a bubble.

If you think the economy is in bad shape, then I would recommend listening to Ron Paul, Peter Schiff, Mike Maloney, David Morgan, Kyle Bass, Damon Vickers, Max Keiser, etc. You don't have to be a conservative or a liberal to understand fundamental economics.