tag:blogger.com,1999:blog-17908317.post7191533302467516327..comments2024-03-28T03:15:14.875-07:00Comments on Unenumerated: Two Malthusian scaresNick Szabohttp://www.blogger.com/profile/16820399856274245684noreply@blogger.comBlogger24125tag:blogger.com,1999:blog-17908317.post-90909585854679521932016-05-03T13:12:24.772-07:002016-05-03T13:12:24.772-07:00I suspect the monetization of gold, silver, oil an...I suspect the monetization of gold, silver, oil and the like will give way to the vast superiority of cryptocurrency, probably Bitcoin and/or Ether (Ethereum).<br /><br />I would guess that gold retains its monetary importance almost solely due to the terrible monetary policies of central banks. With the sane and rational monetary policies of cryptocurrencies, their vastly superior savings and transactional functionality over gold coins and bars as money (zero storage and transportation cost, near-instant payment clearing at any distance, etc.) will prove to be decisive over precious metals.Matthew C.noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-77596668389025039692016-03-07T10:05:34.392-08:002016-03-07T10:05:34.392-08:00Unknown: Thank you for your rich reply. I have rea...Unknown: Thank you for your rich reply. I have read over it several times, along with the original blog post, in order to digest it all.<br /><br />So regardless of the unprecedented ZIRP the bulk of the money created has been stockpiled instead of used by banks in their traditional role as FR money supply multipliers. I understand why banks may be reluctant to lend at ZIRP/NIRP but why is there no consumer demand for easy credit?<br /><br />I find I agree that many people are still wary of the global financial system and the financial PTSD has not worked itself out yet. Like Depression-era folks we are socking the bills away under the mattress, and may continue to do so for a generation.<br /><br />I also wonder if this is related to technological change, and software eating the world. ROI on tech investments can turn out to occur much faster and at a higher return, requiring considerably lower initial investment than other 20th century heavy industries.<br /><br />Demographic change, also, with the younger generation choosing (or being forced to choose in the case of educational debtors) to forgo staple purchases such as cars and houses that were considered requirements to those of my generation.<br /><br />China of course was a major factor in the commodities runup to fuel their expansion which is now cooling off, so there is a deflationary factor there.<br /><br />Even if silly Helicopter money comes to pass it may also just go under the mattress or to pay off old debt.<br /><br />Like the author mentioned, it is easy to point fingers at certain causalities, but hard to see the relative weightings of each, or any overarching megatrends.<br /><br />I gained alot from this article and discussion. Thanks to all.<br /><br />Markhttps://www.blogger.com/profile/15423095026354723940noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-11346792942718077922016-03-03T06:44:24.453-08:002016-03-03T06:44:24.453-08:00Why do drug sellers want detergent twice as much a...Why do drug sellers want detergent twice as much as cash? Vodka in the USSR breakdown was a good example. High food energy content in small package, lasts forever, divisible, common usable commodity, can't counterfeit. Zawyhttps://www.blogger.com/profile/03727573717462028189noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-55324943189947658182016-02-29T18:40:30.136-08:002016-02-29T18:40:30.136-08:00That is why I only trade the price action and tech...That is why I only trade the price action and technical patterns....they're a by-product of what people believe and how they feel- represent in real time all that is interpreted by opinions and experts on future expectations.Loving Bitcoinhttps://www.blogger.com/profile/03440989018267364695noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-56712269573197431982016-02-26T11:47:25.092-08:002016-02-26T11:47:25.092-08:00Everyone loves the cigarette example; a more recen...Everyone loves the cigarette example; a more recent one is laundry detergent. http://nymag.com/news/features/tide-detergent-drugs-2013-1/<br /><br />dWjhttps://www.blogger.com/profile/12072494989829344049noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-91057468027729651892016-02-26T03:04:42.753-08:002016-02-26T03:04:42.753-08:00In agoric A.I., the optimization of the use of lim...In agoric A.I., the optimization of the use of limited resources under constraints requires a macroscopic governing algorithm with a goal that issues a currency and its legal use to access thinking resources. These systems, still dependent on human direction, underlie global economics and governments, which retain the same character of optimization of governed limited resources via a currency representing the limited resources. <br /><br />The optimization of a path integral under similar mass-energy constraints also occurs in quantum mechanics and it retains its character all the way up to global dynamical systems over all time scales (the least action principle is more fundamental than Newtonian, Hamiltonian, and Lagrangian dynamics). Thinking machines like brains and computers controlling governed economics seem like 2 stepping stones that connect quantum and large-scale dynamics.Zawyhttps://www.blogger.com/profile/03727573717462028189noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-28907628371231379242016-02-25T09:01:12.639-08:002016-02-25T09:01:12.639-08:00Nick, if it were technologically feasible, wouldn&...Nick, if it were technologically feasible, wouldn't it be best to peg the quantity of a currency to the quantity of commodity infrastructure that falls under that currency's control? Currency quantity would represent legal access to infrastructure quantity. The legal right to infrastructure is divvied up among agents according to the governing algorithm that seeks an optimization goal such as expansion of the infrastructure, making it evolutionarily recursive. <br /><br />Our thinking machines and brains move around electrons and ions to model the consequences of moving much larger objects in the external world. Computational infrastructure (CPUs, memory, and communication channels) is a mass that required energy in its creation (like commodity production, storage, and transmission infrastructure). Computation, memory changes, and communication require energy directly (like commodity production, storage, and transmission).<br /><br />Evolution acquires more and more energy to move more mass to create more efficient cooperative/controllable computational systems to repeat the process. Commodity production infrastructure is then the phenotype for producing better brains to produce more infrastructure. <br /><br />Markets are removing oxygen atoms from metals, metalloids, and carbon which creates denser materials with stronger bonds that are replacing bones, teeth, shells, brains, and photosynthesis. Humanity "began" the path of replacing outdated biology with "machines" by its use of rocks and currency to decide how to use the rocks. DNA crystals were the previously prevailing memory system for the algorithms which gave rise to brains, which gave rise to corporations and computers.Zawyhttps://www.blogger.com/profile/03727573717462028189noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-19602735679698436222016-02-22T11:57:19.657-08:002016-02-22T11:57:19.657-08:00The problem is that when a commodity is an essenti...The problem is that when a commodity is an essential ingredient in all economic activity, then there is a definite limit to how high the price of that commodity can go. This is the case with oil, for example. As long as oil is needed as a primary energy source to drive economic activity, then the price per barrel of oil can't rise above the value of the economic activity that can be driven by that oil. This manifests as lack of demand above a certain price, and when the cost of extraction has risen above this point due to depletion, oil can no longer be extracted and we hit the real Malthusian catastrophe.Eivind Bergehttps://www.blogger.com/profile/04899250633318059069noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-87880389765953066662016-02-21T12:23:23.690-08:002016-02-21T12:23:23.690-08:00One of the best of your rare, and always excellent...One of the best of your rare, and always excellent, posts. I wish you would post more but then you post when you have something to say. Minor quibble--if you post about phosphorus, spell it right.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-15726862548251557882016-02-20T21:43:52.195-08:002016-02-20T21:43:52.195-08:00"The first two Malthusian scares were indeed ..."The first two Malthusian scares were indeed unfounded, but I am not so sure about the third one, and by that I mean the current deflationary trend. According to Gail Tverberg, deflation (the inability to keep commodity prices high enough to encourage their extraction)..."<br /><br />If prices of product X aren't high enough to encourage extraction, then extraction slows down. Then, if demand for product X remains the same or increases, the price of X will rise. I don't see the problem there.<br /><br />Of course, if the demand for X continues to fall even faster than the slowdown in extraction, the price of X will continue to fall. I don't see the problem there, either. If the demand for X continues to fall, even with falling prices for X, it can't be very important.Mark Bahnerhttp://markbahner.typepad.comnoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-87830828620952624652016-02-20T19:43:34.706-08:002016-02-20T19:43:34.706-08:00have different commodities prices become more corr...have different commodities prices become more correlated after Bretton woods?meo fiohttps://www.blogger.com/profile/11238486778178048077noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-27184232537733807752016-02-20T06:31:37.281-08:002016-02-20T06:31:37.281-08:00The first two Malthusian scares were indeed unfoun...The first two Malthusian scares were indeed unfounded, but I am not so sure about the third one, and by that I mean the current deflationary trend. According to Gail Tverberg, deflation (the inability to keep commodity prices high enough to encourage their extraction) is how peak oil manifests, right now, resulting in the imminent collapse of industrial civilization, and I don't see how this blog post or anything else debunks her ideas.Eivind Bergehttps://www.blogger.com/profile/04899250633318059069noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-27366428332766204562016-02-19T22:22:10.426-08:002016-02-19T22:22:10.426-08:00Mark,
If you are referring to hyperinflation this...Mark,<br /><br />If you are referring to hyperinflation this is a complete loss of faith in currency and is often event-based (e.g., war, major political change). Prior hyperinflations all had one common denominator: during a period of instability, spending was used as a political tool and it got out of hand. In other words, currency becomes worthless in a short period of time. Certainly this loss of faith has not happened, yet, in the U.S. or EU (China may prove to be different).<br /><br />The Fed itself can't cause hyperinflation and more importantly would not if they could. The reason is "Hyperinflation Would End The Game"<br /><br /> Hyperinflation by definition would destroy the currency and thus the banks<br /> Hyperinflation would destroy the wealthy and all their corporate bond holding<br /> Hyperinflation would destroy the Fed<br /> Hyperinflation would destroy the wealthy political class<br /><br />To understand how powerless the Fed is, one needs to understand the difference between credit and money, how much the former dwarfs the latter, and what the Fed's role is in getting banks to lend.<br /><br />If you are referring to much lower inflation rates such as the Fed (and other central banks) have targeted they tried to revive the credit markets but have essentially failed, except for student loans. Making debt slaves out of students is actually a hugely deflationary force.<br /><br />Moreover, the Fed cannot give money away, spend it, or force anyone to spend it. That is a very tough battle for the Fed with attitudes where they are. Banks do not want to lend, credit-worthy businesses do not want to borrow, and consumers are still deleveraging or saving as much as they can due to retirement uncertainties. Those are extremely deflationary forces.<br /><br />Most of the money created since The Great Recession sits as excess reserves. Even printing $50 trillion dollars tomorrow might not do anything. Indeed, if $50 trillion printed tomorrow sat as excess reserves (the most likely event), it would have the same effect as if it was buried in the ground, or not printed at all. Such is the nature of a credit-based economy, and a point that has caused hugely inaccurate inflation forecasts from many economists.<br /><br />Such massive printing might briefly cause a temporary attitude change accompanied by a brief asset bubble of some sort (especially in long-dated treasuries given banks would put some of it to that use). However, massive printing would collapse treasury rates, further destroying those on fixed income, and make it even harder for pension plans to meet assumptions. Since printing $2 trillion did not spur credit expansion, pray tell why would $50 trillion?Unknownhttps://www.blogger.com/profile/18035519494082244618noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-22518730236125173812016-02-19T11:38:01.601-08:002016-02-19T11:38:01.601-08:00A really niggling point. Hubbert actually was righ...A really niggling point. Hubbert actually was right. He was writing about conventional reservoirs.<br /><br />SJRSAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-41001059550376419952016-02-16T17:15:00.069-08:002016-02-16T17:15:00.069-08:00Mark, that is a far more complicated and obscure q...Mark, that is a far more complicated and obscure question to try to address. There are many speculative theories on the matter and I will not try to add to that noise. :-)nicknoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-42860535911269345012016-02-16T17:11:30.490-08:002016-02-16T17:11:30.490-08:00Anton & Tarkin, thanks for the corrections, fi...Anton & Tarkin, thanks for the corrections, fixed.nicknoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-67718826221826896882016-02-16T12:33:23.249-08:002016-02-16T12:33:23.249-08:00Great read!
But I have to point out that the Men...Great read! <br /><br />But I have to point out that the Menger who wrote "On the origin of money" was Carl Menger, not his son Karl, who was a mathematician. Actually I don't know why jstor reports the name in that way but it's surely wrong, you can check on wiki.Tarkinhttps://www.blogger.com/profile/16238064347498426675noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-2816584477941008802016-02-16T12:21:09.579-08:002016-02-16T12:21:09.579-08:00The wikipedia link to the London gold pool is bro...The wikipedia link to the London gold pool is broken.BurBurBurhttps://www.blogger.com/profile/11307150043424885852noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-26494204406582181722016-02-16T11:03:43.670-08:002016-02-16T11:03:43.670-08:00Lourenço, great questions.
1. During the Bretton...Lourenço, great questions. <br /><br />1. During the Bretton Woods era the Federal Reserve was run largely by Keynesian and similar economists who stimulated small (c. 3%/year) amounts of inflation, believing that was the optimal level for economic growth. This however, isn't compatible with pegging the dollar to gold, which in the long run would produce much closer to zero inflation, which they believed (and most economists still believe) would retard economic growth. This is another big reason U.S. gold reserves fell to financially unsustainable levels by 1968. The Federal Reserve was finally forced to choose between keeping the gold standard and keeping to their beliefs that some inflation is good, and they chose their beliefs (with however unintended consequences described above).<br /><br />2. Here as elsewhere diversification across many commodities reduces risks compared to holding just one commodity. Also, you are sitting on a large reservoir of oil, you have no choice but between holding and pumping the oil to sell it for fiat -- which choice will in part be governed by inflation expectations. Similarly, if you are a country planning for a geopolitically secure economic growth, you choose between stockpiling and consuming your stockpiles, in part based on inflation expectations. Finally, if a bubble for a geopolitical commodity collapses you still have underlying long-term industrial demand to fall back on, which isn't the case if gold or silver collapses. So there's a good argument when hedging e.g. your fiat-denominated government bonds to use a mix of both precious metals and industrial commodities rather than just precious metals alone.nicknoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-3679521897270162082016-02-16T10:41:05.851-08:002016-02-16T10:41:05.851-08:00Why didn't we get the inflation that was expec...Why didn't we get the inflation that was expected by so many?Markhttps://www.blogger.com/profile/15423095026354723940noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-39036272289781624742016-02-16T10:21:40.425-08:002016-02-16T10:21:40.425-08:00So... long gold?So... long gold?Tulishennoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-87522192920819370302016-02-16T09:48:21.670-08:002016-02-16T09:48:21.670-08:00Though I agree in general terms with your essay (c...Though I agree in general terms with your essay (commodities as repository of value and that Malthus' ideas of scarcity aren't held up by history) I somewhat disagree on 2 points:<br /><br />1. You state before FIAT currency the dollar had a "better" intrinsic value (better repository of value at least) shouldn't this drive inflation down when there were what you call "malthusian scares" (people "bought" and stored money raising its price relative to other goods)? Did this happen?<br /><br />2. FIAT currency is unpegged from gold. Shouldn't this make gold an even better repository of value since it's no longer affected by the forces that drive currency markets? Why the need for other, potentially more volatile commodities such as oil as a repository of value?<br /><br />- Lourenço MagalhãesAnonymoushttps://www.blogger.com/profile/03458506736796412961noreply@blogger.comtag:blogger.com,1999:blog-17908317.post-23891796146797182742016-02-16T06:39:33.299-08:002016-02-16T06:39:33.299-08:00"Due to the increased inflation expectations,..."Due to the increased inflation expectations, oil producers conserved on pumping, despite rising prices and oil consumers stockpiled despite the rising prices of funding those purchases."<br /><br />This sounds a lot like Scott Sumner's narrative of gold hoarding during the Great Depression in his recent book, <i>The Midas Paradox</i>.Handlenoreply@blogger.comtag:blogger.com,1999:blog-17908317.post-10941795477782690242016-02-16T06:32:43.089-08:002016-02-16T06:32:43.089-08:00Excellent read as always.
Small errata:
large res...Excellent read as always.<br /><br />Small errata:<br />large reservoirs of easily extracted oi, your alternative <br />should be<br />large reservoirs of easily extracted oil, your alternativeIgor Lilichttps://www.blogger.com/profile/14337200911596303635noreply@blogger.com