patrick.net

Reality says

Do you think aliens landed in the 1970's and drove up the price of chicken feed? Do you think aliens have been landing in the past decade and half driving up four prices, tomato prices, cheese prices and fuel prices? The "if's" in my earlier post were not counter-factual hypotheticals, but real observations.

No kidding. My point was that you could come up with an infinite amount of what-ifs that are not counter factual. What if a tsunami hit the pizza shop's town? What if a tornado hit?

Reality says

FED printers can not control where the money go.

Nope. And you don't need money printing to get speculation.

spydah_hh says

And more demand (driven by easy cheap money) drives up prices and erodes purchasing power.

lol--so, people get MORE money but that's eroding their purchasing power? How exactly does that work?

spydah_hh says

No speculations don't occur when interest rates are determined by the market.

Interest rates ARE determined by the market.

spydah_hh says

Speculation occurs when interest rates remain low and stay low for years and decades.

Actually investing occurs when interest rates are low.spydah_hh says

In a market where banks are responsible for their deposits meaning no FDIC, they're not so reckless on issuing debt. They won't give loans to bad business deals, they won't give loans to people who can't afford it.

Come on--this is ridiculous. The owners of the bank lose whether the depositors are made whole or not. FDIC does not insure bank owners.

tatupu70 says

Reality says

The very purpose of more money printing is raising price; it is this raising of prices that allegedly brings out more production.

Almost correct. More money(in the right hands) = more demand. More demand = more production.

So how much production was brought out during Zimbabwe's hyperinflation? More money does not mean more qualified demand: money driving input factor prices up faster than output prices would actually lead to lower production and business ceasing operation altogether. The often observed immediate effect of monetary injection is simply a statistic chimera before price inflation propagating through the system. It's a little like giving oneself an ecstasy injection; no, your body is not getting healthier because of that shot of stimulant.

tatupu70 says

Reality says

Do you think aliens landed in the 1970's and drove up the price of chicken feed? Do you think aliens have been landing in the past decade and half driving up four prices, tomato prices, cheese prices and fuel prices? The "if's" in my earlier post were not counter-factual hypotheticals, but real observations.

No kidding. My point was that you could come up with an infinite amount of what-ifs that are not counter factual. What if a tsunami hit the pizza shop's town? What if a tornado hit?

Your point was and is irrelevant, unless you are so clueless as not to recognize that I was not proposing hypothetical but summarizing the real effect of FED money printing on the ground in 1970's as well as recently as the past decade and half.

Reality says

FED printers can not control where the money go.

Nope. And you don't need money printing to get speculation.

FED money printing and promise to stop deflation by injecting inflation incentivise speculations on commodity input factors. They are called inflation hedges for a reason.

tatupu70 says

spydah_hh says

And more demand (driven by easy cheap money) drives up prices and erodes purchasing power.

lol--so, people get MORE money but that's eroding their purchasing power? How exactly does that work?

Easy: say the economy has $13trillion floating around, injecting $4T into the pockets of the banksters results in $17T money chasing $13T goods/services, making everyone who did not get the $4T poorer in purchasing power.

Reality says

So how much production was brought out during Zimbabwe's hyperinflation

Must you always resort to the ridiculous extreme case to try to make your point? I don't think there is any threat of the US resembling Zimbabwe any time soon.

Reality says

Your point was and is irrelevant, unless you are so clueless as not to recognize that I was not proposing hypothetical but summarizing the real effect of FED money printing on the ground in 1970's as well as recently as the past decade and half.

Nope-my point was apt. Are you saying the only time there was speculation in the 70s? Further, the 70s was a unique time due to demographics--not the Fed.

Reality says

FED money printing and promise to stop deflation by injecting inflation incentivise speculations on commodity input factors. They are called inflation hedges for a reason.

Inflation hedging is not speculation.

Reality says

Easy: say the economy has $13trillion floating around, injecting $4T into the pockets of the banksters results in $17T money chasing $13T goods/services, making everyone who did not get the $4T poorer in purchasing power.

He specifically said people--not banksters. And my post that he is responding to clearly states that the money must go into the right hands.

tatupu70 says

Reality says

So how much production was brought out during Zimbabwe's hyperinflation

Must you always resort to the ridiculous extreme case to try to make your point? I don't think there is any threat of the US resembling Zimbabwe any time soon.

Then you are an economic ignoramous. Here's a quick summary of what happened in the 1970's US inflation and price control episode:

http://www.cato.org/publications/commentary/remembering-nixons-wage-price-controls

No, the result is not higher production when ranchers and farmers slaughter their cattles and drown their chickens.

Reality says

Then you are an economic ignoramous. Here's a quick summary of what happened in the 1970's US inflation and price control episode:

http://www.cato.org/publications/commentary/remembering-nixons-wage-price-controls

No, the result is not higher production when ranchers and farmers slaughter their cattles and drown their chickens.

And who is arguing for price controls?? Are you arguing with yourself??

Reality says

Then you are an economic ignoramous

So, in your opinion, hyperinflation is right around the corner then?

tatupu70 says

Interest rates ARE determined by the market.

For the most part interest rates are determined by the FED, you should know this.

tatupu70 says

Actually investing occurs when interest rates are low.

Investing occurs when rate are low and high. When rates are high people save which is still an instrument of investing. When they're low and held low people tend to speculate. Which really isn't investing, normally you wouldn't invest into a company or companies that is worth billions but never made a profit, when you do this, you're speculating not investing.

tatupu70 says

Come on--this is ridiculous. The owners of the bank lose whether the depositors are made whole or not. FDIC does not insure bank owners.

FDIC insures depositors, so if depositors are insured then banks can do their fractional reserve lending like there's no tomorrow.

tatupu70 says

Reality says

Your point was and is irrelevant, unless you are so clueless as not to recognize that I was not proposing hypothetical but summarizing the real effect of FED money printing on the ground in 1970's as well as recently as the past decade and half.

Nope-my point was apt. Are you saying the only time there was speculation in the 70s? Further, the 70s was a unique time due to demographics--not the Fed.

Speculations take place all the time. The entire agro industry dependson furtures speculation to spread risk. FED money printing however makes one-way bet for higher prices more profitable. 70's was not a unique time, but it was the last time the FED emarked on massive monetary expansion (mid to late 60's to the end of 70's), before the past decade and half. It would be a mistake to think "this time is different."

Reality says

FED money printing and promise to stop deflation by injecting inflation incentivise speculations on commodity input factors. They are called inflation hedges for a reason.

Inflation hedging is not speculation.

Inflation hedging is of course speculation on inflation. Practically everything a person does with uncertain future result is a speculation, including buying a house (instead of renting and reserving the flexibility to move). FED money printing just makes certain one-way bets more profitable than they would be in the absence of FED money printing.

tatupu70 says

Reality says

Easy: say the economy has $13trillion floating around, injecting $4T into the pockets of the banksters results in $17T money chasing $13T goods/services, making everyone who did not get the $4T poorer in purchasing power.

He specifically said people--not banksters. And my post that he is responding to clearly states that the money must go into the right hands.

Are you born yesterday? Do you also believe in the dictatorial power should go into the hands of "the right people"? FED can not control where money ends up. The way the FED is set up, banksters own the game as they put together the list of candidates for the FED appointees.

tatupu70 says

Reality says

Then you are an economic ignoramous. Here's a quick summary of what happened in the 1970's US inflation and price control episode:

http://www.cato.org/publications/commentary/remembering-nixons-wage-price-controls

No, the result is not higher production when ranchers and farmers slaughter their cattles and drown their chickens.

And who is arguing for price controls?? Are you arguing with yourself??

Stagnant wages put a cap on consumer prices. The result is closing of retail businesses. Have you been hiding under a rock? Did you not read the news about massive closures of retail businesses? Is that your understanding of more money printing bringing out more production?

tatupu70 says

Reality says

Then you are an economic ignoramous

So, in your opinion, hyperinflation is right around the corner then?

Hyperinflation is a political decision to transfer wealth and purchasing power from the masses to the select few who get the new money first in a giant swoop. Whether the US political establishment resorts to hyperinflation depends on how the public will take the gradual privation.

spydah_hh says

For the most part interest rates are determined by the FED, you should know this.

Despite what your cult theory thinks, that is absolutely not the case.spydah_hh says

FDIC insures depositors, so if depositors are insured then banks can do their fractional reserve lending like there's no tomorrow.

Huh? I'm not even sure what you are arguing here.

Reality says

70's was not a unique time

Of course it was. Do you understand the effects of demographics?

Reality says

Inflation hedging is of course speculation on inflation. Practically everything a person does with uncertain future result is a speculation, including buying a house (instead of renting and reserving the flexibility to move). FED money printing just makes certain one-way bets more profitable than they would be in the absence of FED money printing.

You need a primer on the difference between investing and speculation. Hedging, by definition, is NOT speculation. Buying a house to live in is almost never speculation.

Reality says

Are you born yesterday? Do you also believe in the dictatorial power should go into the hands of "the right people"? FED can not control where money ends up. The way the FED is set up, banksters own the game as they put together the list of candidates for the FED appointees.

Again--what is your point? You really need to reread the exchange. You have completely and utterly miscomprehended it.

Reality says

Stagnant wages put a cap on consumer prices. The result is closing of retail businesses. Have you been hiding under a rock? Did you not read the news about massive closures of retail businesses? Is that your understanding of more money printing bringing out more production?

My lord. That is why I specifically said more money IN THE RIGHT HANDS. You are especially clueless this morning.

I'm glad you are finally realizing that inequality is a problem though.

Reality says

Hyperinflation is a political decision to transfer wealth and purchasing power from the masses to the select few who get the new money first in a giant swoop. Whether the US political establishment resorts to hyperinflation depends on how the public will take the gradual privation.

And your answer to my question is?

tatupu70 says

70's was not a unique time

Of course it was. Do you understand the effects of demographics?

What about demographics? We had baby boomers then, echo boomers now. Inflation is a monetary phenomenon.

tatupu70 says

Inflation hedging is of course speculation on inflation. Practically everything a person does with uncertain future result is a speculation, including buying a house (instead of renting and reserving the flexibility to move). FED money printing just makes certain one-way bets more profitable than they would be in the absence of FED money printing.

You need a primer on the difference between investing and speculation. Hedging, by definition, is NOT speculation. Buying a house to live in is almost never speculation.

LOL. You obviously do not understand how the real world of finance works. Every single protective hedge bought by a farmer requires a speculator selling the protection on the other side of the same trade! The vast majority of contracts on both sides on a commodity futures market are bought and sold by speculators. Buying house is certainly a speculation on the future stability and growth of the local economy. Buying is a speculation that the one-time purchase at a fixed price (usually translating into "fixed" installment payments) will come out ahead of paying rents on a comparable house. No one needs to buy a house to live in a house; renting punts that future uncertainty risk to others. Buying is a financial decision, a speculation on future.

tatupu70 says

Reality says

Are you born yesterday? Do you also believe in the dictatorial power should go into the hands of "the right people"? FED can not control where money ends up. The way the FED is set up, banksters own the game as they put together the list of candidates for the FED appointees.

Again--what is your point? You really need to reread the exchange. You have completely and utterly miscomprehended it.

FED has a coercive power in the fiat money: whatever it prints, you and I and everyone else has to take it as money. That coercive power guarantees that newly printed money go to the wrong hands.

tatupu70 says

Reality says

Stagnant wages put a cap on consumer prices. The result is closing of retail businesses. Have you been hiding under a rock? Did you not read the news about massive closures of retail businesses? Is that your understanding of more money printing bringing out more production?

My lord. That is why I specifically said more money IN THE RIGHT HANDS. You are especially clueless this morning.

I'm glad you are finally realizing that inequality is a problem though.

Inequality is the result of the feudal/territorial privilege regarding money printing enjoyed by the FED and their friends.

tatupu70 says

Reality says

Hyperinflation is a political decision to transfer wealth and purchasing power from the masses to the select few who get the new money first in a giant swoop. Whether the US political establishment resorts to hyperinflation depends on how the public will take the gradual privation.

And your answer to my question is?

Hyperinflation is the end of almost every fiat system ever existed in human history. When that comes about is usually dependent on how much money printing is required to feed the enforcement class in order to defend the existing regime. It's one of the last devices for regime preservation, usually leading to a smaller and smaller circle of insiders until the whole thing is overthrown or reset. It's silly to try to predict exactly when hyperinflation would arrive. Like I said, a lot depend on the cost progression/spiral of regime preservation.

Reality says

LOL. You obviously do not understand how the real world of finance works. Every single protective hedge bought by a farmer requires a speculator selling the protection on the other side of the same trade!

Nope--I get it. You clearly don't. The other side of the trade ISN'T an inflation hedge, now, is it?? Nice try. Someone hedging against inflation is NOT speculating. End of story.

Reality says

The vast majority of contracts on both sides on a commodity futures market are bought and sold by speculators.

And those speculative trades have NOTHING to do with the interst rates at the time. Or Fed printing.

Reality says

Buying is a speculation that the one-time purchase at a fixed price (usually translating into "fixed" installment payments) will come out ahead of paying rents on a comparable house.

That's not speculation. One knows the approximate rental price and the house payments. That is investing.

Reality says

FED has a coercive power in the fiat money: whatever it prints, you and I and everyone else has to take it as money. That coercive power guarantees that newly printed money go to the wrong hands.

I disagree, but it doesn't matter. It is not relevent to the discussion spydah and I were having.

Reality says

Inequality is the result of the feudal/territorial privilege regarding money printing enjoyed by the FED and their friends.

Wrong again.

How did inequality go down after WWII then? Last I checked, the Fed was around during that time period.

tatupu70 says

Nope--I get it. You clearly don't. The other side of the trade ISN'T an inflation hedge, now, is it?? Nice try. Someone hedging against inflation is NOT speculating. End of story.

Really? If a retiree allocates half his savings to gold as inflation hedge in the current environment, that's not speculation on gold? How about if he lets a hedge fund do it for him? By your logic, is anyone speculating at all? LOL.

tatupu70 says

The vast majority of contracts on both sides on a commodity futures market are bought and sold by speculators.

And those speculative trades have NOTHING to do with the interst rates at the time. Or Fed printing.

Do you not realize FED printing and artficially holding interest rates low caused the explosive rise in volume and price in the commodity futures market both in the 1970's and in the past decade and half? Do you live under a rock? or on Mars? Do everything here on hearth sound like hypothetical to you?

tatupu70 says

Reality says

Buying is a speculation that the one-time purchase at a fixed price (usually translating into "fixed" installment payments) will come out ahead of paying rents on a comparable house.

That's not speculation. One knows the approximate rental price and the house payments. That is investing.

Investing is always speculating on the future. How is that Kodak stock working out for you?

Reality says

If a retiree allocates half his savings to gold as inflation hedge in the current environment, that's not speculation on gold? How about if he lets a hedge fund do it for him? By your logic, is anyone speculating at all? LOL.

Do you understand what hedging is? It doesn't sound like it.

Reality says

Do you not realize FED printing and artficially holding interest rates low caused the explosive rise in volume and price in the commodity futures market both in the 1970's and in the past decade and half? Do you live under a rock? or on Mars? Do everything here on hearth sound like hypothetical to you?

I realize that you believe everything is caused by the Fed. And that all problems boil down to one common theme. Government bad.

Reality says

Investing is always speculating on the future. How is that Kodak stock working out for you?

OK--here is a primer on what the term speculation means wrt economics.

http://glossary.econguru.com/economic-term/speculation

There are several others, but even you should be able to see how hedging and buying a home to live in it do NOT apply.

Reality says

You are the idiot who forgot the basic philosophy of distaste for government that led to the independence of America. Government being dangerous was the most fundamental understanding among the founding fathers and their literature.

Wrong. They had no distaste for government. They were almost all successful businesmen and landowners. They were well aware of the need for government for their own protection and success. They had a distaste for government that didn't reflect the will of the people. Go look up no taxation without representation. I will say your views of history are most entertaining however.

bob2356 says

Wrong. They had no distaste for government. They were almost all successful businesmen and landowners. They were well aware of the need for government for their own protection and success. They had a distaste for government that didn't reflect the will of the people. Go look up no taxation without representation. I will say your views of history are most entertaining however.

So is that why they rejected representation when the British government offered representation? "No taxation without representation" was a convenient slogan but what they really wanted was no taxation period (or at least much less of it).

Their distaste (i.e. lack of enthusiasm) for government was clearly expressed in:

"Governments that govern the least often govern the best"

"Government is a necessary evil, but evil nonetheless"

tatupu70 says

If a retiree allocates half his savings to gold as inflation hedge in the current environment, that's not speculation on gold? How about if he lets a hedge fund do it for him? By your logic, is anyone speculating at all? LOL.

Do you understand what hedging is? It doesn't sound like it.

Of course I know. Hedging is a counter-veiling speculative position betting in the opposite direction of the main porfolio exposure. However, since everyone is exposed to inflation in everyday life, an inflation hedge is a speculation on inflation.

tatupu70 says

Do you not realize FED printing and artficially holding interest rates low caused the explosive rise in volume and price in the commodity futures market both in the 1970's and in the past decade and half? Do you live under a rock? or on Mars? Do everything here on hearth sound like hypothetical to you?

I realize that you believe everything is caused by the Fed. And that all problems boil down to one common theme. Government bad.

Do you want to stick with the specifics of the 1970's and the past decade's commodity inflation, or do you sense that you are losing the argument and therefore would prefer switching to personal attacks instead?

BTW, you have my main theme wrong. It's not that government per se is bad, but coercion is bad. I already stated numerous times that in my view there is one and only one legit role for government: keeping out an even worse version of itself. Whenever government strays away from that one role, its actions (i.e. coercions) are bad.

tatupu70 says

Investing is always speculating on the future. How is that Kodak stock working out for you?

OK--here is a primer on what the term speculation means wrt economics.

http://glossary.econguru.com/economic-term/speculation

There are several others, but even you should be able to see how hedging and buying a home to live in it do NOT apply.

Are you serious? I'm not an idiot that believes in everything that "is written." However, even by the definition cited by you above, inflation hedge is certainly a speculation: buying low now hoping to sell later at a higher price caused by inflation.

By that very definition, buying a home to live in is also speculation: how many people would buy homes if they do not hope to seller later for higher price than their own purchase price? If they truly believe price would go down during the entirety of their ownership, wouldn't they decide to rent instead? Like so many bears on this board?

Reality says

Of course I know. Hedging is a counter-veiling speculative position betting in the opposite direction of the main porfolio exposure. However, since everyone is exposed inflation in everyday life, an inflation hedge is a speculation on inflation.

Nope--you don't understand hedging at all. A hedge, by definition, is guarding ones portfolio. It's designed to reduce variability/risk, not produce gains.

It is not speculative under any scenario.
http://www.investopedia.com/terms/h/hedge.asp

tatupu70 says

Reality says

Of course I know. Hedging is a counter-veiling speculative position betting in the opposite direction of the main porfolio exposure. However, since everyone is exposed inflation in everyday life, an inflation hedge is a speculation on inflation.

Nope--you don't understand hedging at all. A hedge, by definition, is guarding ones portfolio. It's designed to reduce variability/risk, not produce gains.

It is not speculative under any scenario.

http://www.investopedia.com/terms/h/hedge.asp

What's there to "Nope" about? The very definition you cited was essentially a restatement of what I wrote above in my post.

Perhaps you fail to realize, hedging is part of most speculative strategies.

Reality says

Are you serious? I'm not an idiot that believes in everything that "is written." However, even by the definition cited by you above, inflation hedge is certainly a speculation: buying low now hoping to sell later at a higher price caused by inflation.

By that very definition, buying a home to live in is also speculation: how many people would buy homes if they do not hope to seller later for higher price than their own purchase price? If they truly believe price would go down during the entirety of their ownership, wouldn't they decide to rent instead? Like so many bears on this board?

Obviously--you don't believe a lot of what is written. You frequently make up your own definitions. I would argue about your first sentence though...

Sersiously--give it up. Buying a home is not speculation. If I'm saving $500/month owning over the life of my stay, I'd gladly sell it for no capital appreciation.

Regardless--you seem to think that any transaction that has a possiblity of loss is speculation. That is 100% incorrect.

Reality says

What's there to "Nope" about? The very definition you cited was essentially a restatement of what I wrote above in my post.

An inflation hedge is NOT speculation, that's what. Give it up already.