Solution to the Debt Ceiling Impasse

[ekemon]

Re: Solution to the Debt Ceiling Impasse

Great thanks for the suggestion.

Offshoring of our production facilities as well as engineering has destroyed much of Americas industrial base. We need to be more like Germany making high quality goods rather than 40-50 percent financial products and 10-25 percent military goods (or whatever the true numbers are).

BTW C1ue said 5% was too little and 20% too much for a national sales and corporate tax rate.

[ekemon]

Re: Solution to the Debt Ceiling Impasse

Regarding C1ue's objection #5 Martin Armstrong agrees with C1ue that all the gold would disappear. Perhaps there is another way to tie the dollar value to gold without losing all the gold held by the US Military for the Treasury.

http://www.martinarmstrong.org/files...07-13-2011.pdf

[c1ue]

Re: Solution to the Debt Ceiling Impasse

Perhaps there is another way to tie the dollar value to gold without losing all the gold held by the US Military for the Treasury.

http://www.martinarmstrong.org/files...07-13-2011.pdf

Despite his fixation on cycles, Armstrong is completely correct in his understanding of what money is and what a gold standard would mean.

The real people who stand to benefit from a gold standard would be the ultra-wealthy now. Hardening dollars into gold would allow those ultra wealthy to literally own almost all the money in the United States - or whatever country adopts said gold standard - because these people already own most of the liquid assets including cash.

While it is true that a gold standard makes money printing difficult (not impossible. there is still fraud and fractional reserve lending), it conversely makes those who have gold/money even more disproportionately wealthy. This didn't matter that much when almost everyone in the US was a subsistence farmer, but it matters a very great deal today.

So while the libertarian ideologues rail about the discipline inherent in a gold standard - because 'savers' are being stolen from via currency devaluation/inflation, victory in that battle would very much result in defeat in the economic war.

If you think it is hard to borrow money now, consider how much more difficult when the money to be borrowed is literally irreplaceable. And then consider the secondary effects: bankruptcy would not be an acceptable way to discharge unserviceable debt when the money borrowed is 'hard'. Credit cards? ATM machines? Airplane and bus tickets? all are forms of float as well.

[astonas]

Re: Solution to the Debt Ceiling Impasse

This may be slightly off topic, but I noticed something in the article you linked to that made me stop and think a bit.

Despite his fixation on cycles, Armstrong is completely correct in his understanding of what money is and what a gold standard would mean.

I was reading the article, and came across this line:

If a loaf of bread was 25 cents in 1937 and it is $2 today, the real comparison as to whether that is cheap or expensive cannot be determined by merely looking at the nominal price trends of bread. We have to correlate bread against everything else to understand if it was raised in VALUE terms in excess of the general decline in the purchasing power of the currency (inflation). What if the common wage in 1937 was 50 cents an hour and today it is $10. Bread would have taken half an hourly wage to buy in 1937 yet today it is just 12 minutes, or a 40% reduction in real price.

It reminded me that we have an awful lot of charts on iTulip that relate various currencies to one another, to gold, or to economic conditions. I wonder if anyone has posted some of the most central charts that relate to the iTulip thesis using the median annual wage as the base against which inflation is normalized, rather than a set of goods. This turns the question around: rather than telling how much in goods the average person can buy over time (inflation), it asks what time-based services the a person can purchase in one year, using savings from previous years.

So the question relating to gold as a store of value becomes: If I can today spend 1 hour to buy X amount of gold, can I at a later time buy the an hour of the same service and skill from someone else for that same amount of gold?

It strikes me that when it comes to the mood of the country, the economy, the standard of living of the people, and a lot of questions that determine national psychology, what really matters is: "Am I better off now than I used to be?" And while that RELATES to the question of how much one can buy, for a lot of people it really MEANS means something more like: how many hours do I need to work, vs. how many hours can I spend with my family, or spend having fun, or developing myself in some way?

(If you wanted to factor in the fact that happiness is relative in society, rather than related to absolute asset value, another way of phrasing this might be "Do I have more "time" saved now than my wife's best friend's husband?" )

But seriously, is there a chart, for example, of how well gold stores value as measured by the time it takes to earn that gold? Time is, after all the one commodity that one can never buy more of. This is part, though not all, of why people are willing to spend exorbitant sums on "the best health care money can buy."

I'm sure I'm not the first to think of this rather basic idea, but I'm having trouble finding the graphs that I think are relevant. Just a few of the graphs that might be interesting:

Gold value vs. time, measured in time it takes to earn that. (assume the U.S. as a base here)

Relative currency valuations based on time it takes to earn them in the home country.

Number of hours it takes to earn a fixed, arbitrary, fraction of the stock market.

Same for the bond market.

National Debt, Financial Sector Debt, and Consumer Debt, measured in number of median-wage hours per capita.

Anyone know where to look for things like this? SOMEONE must have done this already, I'm not that original. The latter set of curves might be particularly telling in evaluating whether our current situation will end with a bang or a whimper, particularly if data goes back to include previous periods of great socioeconomic unrest. If the first graphs go back far enough, we could even draw comparisons with other countries that have experienced violent unrest, and see how close or how far we are from those ratios.

Thanks in advance!

[shiny!]

Re: Solution to the Debt Ceiling Impasse

In order to obtain the right answers, one has to ask the right questions. These are GREAT questions!

This may be slightly off topic, but I noticed something in the article you linked to that made me stop and think a bit.

I was reading the article, and came across this line:

It reminded me that we have an awful lot of charts on iTulip that relate various currencies to one another, to gold, or to economic conditions. I wonder if anyone has posted some of the most central charts that relate to the iTulip thesis using the median annual wage as the base against which inflation is normalized, rather than a set of goods. This turns the question around: rather than telling how much in goods the average person can buy over time (inflation), it asks what time-based services the a person can purchase in one year, using savings from previous years.

So the question relating to gold as a store of value becomes: If I can today spend 1 hour to buy X amount of gold, can I at a later time buy the an hour of the same service and skill from someone else for that same amount of gold?

It strikes me that when it comes to the mood of the country, the economy, the standard of living of the people, and a lot of questions that determine national psychology, what really matters is: "Am I better off now than I used to be?" And while that RELATES to the question of how much one can buy, for a lot of people it really MEANS means something more like: how many hours do I need to work, vs. how many hours can I spend with my family, or spend having fun, or developing myself in some way?

(If you wanted to factor in the fact that happiness is relative in society, rather than related to absolute asset value, another way of phrasing this might be "Do I have more "time" saved now than my wife's best friend's husband?" )

But seriously, is there a chart, for example, of how well gold stores value as measured by the time it takes to earn that gold? Time is, after all the one commodity that one can never buy more of. This is part, though not all, of why people are willing to spend exorbitant sums on "the best health care money can buy."

I'm sure I'm not the first to think of this rather basic idea, but I'm having trouble finding the graphs that I think are relevant. Just a few of the graphs that might be interesting:

Gold value vs. time, measured in time it takes to earn that. (assume the U.S. as a base here)

Relative currency valuations based on time it takes to earn them in the home country.

Number of hours it takes to earn a fixed, arbitrary, fraction of the stock market.

Same for the bond market.

National Debt, Financial Sector Debt, and Consumer Debt, measured in number of median-wage hours per capita.

Anyone know where to look for things like this? SOMEONE must have done this already, I'm not that original. The latter set of curves might be particularly telling in evaluating whether our current situation will end with a bang or a whimper, particularly if data goes back to include previous periods of great socioeconomic unrest. If the first graphs go back far enough, we could even draw comparisons with other countries that have experienced violent unrest, and see how close or how far we are from those ratios.

Thanks in advance!

[c1ue]

Re: Solution to the Debt Ceiling Impasse

It reminded me that we have an awful lot of charts on iTulip that relate various currencies to one another, to gold, or to economic conditions. I wonder if anyone has posted some of the most central charts that relate to the iTulip thesis using the median annual wage as the base against which inflation is normalized, rather than a set of goods. This turns the question around: rather than telling how much in goods the average person can buy over time (inflation), it asks what time-based services the a person can purchase in one year, using savings from previous years.

So the question relating to gold as a store of value becomes: If I can today spend 1 hour to buy X amount of gold, can I at a later time buy the an hour of the same service and skill from someone else for that same amount of gold?

I haven't seen that specific analysis, but it would not be difficult to do.

Get the price data - CPI, bart, shadowstats,etc etc.

Plot on Excel sheet vs. historical minimum wage, or per capita income/2000 hours, etc etc.

I have no idea how useful this would be though - because historical comparisons must be adjusted for relative productivity increases.

The bread example - as an example - wheat growing, harvesting, processing; bread making, distribution etc have all undergone dramatic changes due to mechanization.

[astonas]

Re: Solution to the Debt Ceiling Impasse

I have no idea how useful this would be though - because historical comparisons must be adjusted for relative productivity increases.

The idea here is precisely NOT to account for productivity. To instead use time as the basis for evaluating gold and currency values, rather than the goods produced. If you are concerned that it will not included the improved quality of life, I will certainly agree. My thought is to consider the question from the perspective of "quantity of life" (in hours worked), rather than "quality of life".

I'm not certain if the results will be interesting either, but I am curious about the result.

Get the price data - CPI, bart, shadowstats,etc etc.

I'll look into shadowstats and check with bart about the data sources, though. Thanks for the recommendations.

[aaron]

Re: Solution to the Debt Ceiling Impasse

I found http://pricedingold.com/ to be useful as well.

[ekemon]

Re: Solution to the Debt Ceiling Impasse

Looks like variations on one of the ideas posted is catching on:

Herman Cain has his 999 plan:
Business Flat Tax – 9%
Gross income less all investments, all purchases from other businesses and all dividends paid to shareholders.
Empowerment Zones will offer additional deductions for payroll employed in the zone.
Individual Flat Tax – 9%.
Gross income less charitable deductions.
Empowerment Zones will offer additional deductions for those living and/or working in the zone.
National Sales Tax – 9%.
This gets the Fair Tax off the sidelines and into the game.

Source: http://www.hermancain.com/999plan

Matt Taibbi calls for a 0.1% on stocks and bonds and a 0.01% tax on derivatives transactions

2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about. It would also deter the endless chase for instant profits through computerized insider-trading schemes like High Frequency Trading, and force Wall Street to go back to the job it's supposed to be doing, i.e., making sober investments in job-creating businesses and watching them grow.

Source: http://www.rollingstone.com/politics...sters-20111012