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Discussion Starter · #1 ·
Friend of mine posted this video on Facebook. It's Rand Paul speaking on the Senate floor against the confirmation of Janet Yellen because gold standard and hyperinflation and audit the fed and all his usual nonsense. :rofl:


One part I hadn't heard before though: he claims the dollar has lost 97% of its value in the last 100 years. That smells like bullshit to me but I can't really find too much information about that specific claim. What say you?
 

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Discussion Starter · #4 ·
I don't want to watch the video, but this guy is a ducking clown. Just an intelligent idiot.
Yeah don't bother, it's basically a greatest hits of his usual nonsense. Hyperinflation is coming and will kill us all! Things were better on the gold standard! All inflation is bad always! :noplease:

I was just curious about that "the dollar lost 97% of its value in the last 100 years" claim because it sounds like he's either fudging some numbers or leaving out some pretty important context.
 

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Yeah don't bother, it's basically a greatest hits of his usual nonsense. Hyperinflation is coming and will kill us all! Things were better on the gold standard! All inflation is bad always! :noplease:

I was just curious about that "the dollar lost 97% of its value in the last 100 years" claim because it sounds like he's either fudging some numbers or leaving out some pretty important context.
Google makes that bit seem legit, but the problem with that comparison is that the dollar was even harder to acquire when it was worth so much...
 

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Discussion Starter · #6 ·
Right, it seems like it's a statistic that sounds scary and terrible until you actually think about it. Like yeah, you can't buy apples for a nickle anymore, but as long as wages roughly keep pace with inflation then in practice, that doesn't actually matter.

Ironically, it's Rand Paul and his party that have done their damndest over the last 40 years to keep wages from growing.
 

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Yeah don't bother, it's basically a greatest hits of his usual nonsense. Hyperinflation is coming and will kill us all! Things were better on the gold standard! All inflation is bad always! :noplease:

I was just curious about that "the dollar lost 97% of its value in the last 100 years" claim because it sounds like he's either fudging some numbers or leaving out some pretty important context.
He's not far from being wrong, but he's also missed the point.

If the dollar lost 97% of its value, then one dollar today would be worth $0.03 in 1914 terms. Inflation, like any other growth rate, compounds. So, first you calculate your cumulative growth factor, which here is super easy since the denominator is one - 0.03/1.00 = 0.03. This minus 1 converts it to a cumulative growth rate, which no surprises is -97%. To convert that to an average annual inflation rate, raise that to the power of (periods per year)/(total number of periods in the observation window), which for an annual rate over 100 years is 1/100. This gives you a wealth factor of 0.96554, which one minus that gives you your average annual inflation rate, of about 3.4%. So, a less-hyperbolic way of stating the same claim is, "Over the last 100 years, the dollar has lost an average of 3.4% of its value a year." Sounds a little less sensational, no?

The real question however, is "does that matter." His argument basically assumes that you're taking that $1 bill from 1914 and stashing it under your mattress, then going out to spend it today at your corner store. A more plausible assumption though was that it was invested in either the stock market (which needs to on average provide a real return over inflation, or no one would invest and risk their capital) or in an interest bearing instrument (which pays an interest rate set by market supply and demand that is traditionally decomposed as a "real" return, an inflation component equal to the expected inflation rate over the investment period, and then various components corresponding to the various sorts of risk you're taking on - default risk if there's a chance the borrower won't pay, liquidity risk if there's no good active secondary market for you to sell your investment in, currency risk if it's denominated in a different currency, etc).

Now, Google Finance only has the S&P500 index back until Jan 18th, 1974 (presumably they're licensed for ~40 years of history), but in that time the S&P returned 1,858%, or about 7.7% a year. I don't have statistics handy, but the 10-year Treasury rate is still exceptionally low at just over 3%, and a long run average is probably closer to 5%. Of course, during periods of high expected inflation, that goes up, providing something of a natural hedge.

Meanwhile, this entire period corresponded to one where the rest of the world also floated their currencies and also experienced inflation - some lower, some higher.

So, did we lose 97% of the value of the dollar due to inflation? Yes. But during the same period the purchasing power of the dollar measured against other currencies didn't decline in kind, and if instead of hiding your money under your mattress you invested it, you probably beat inflation by an average of 2-4% a year.

So, who the fuck does he think he's lecturing, a bunch of grannies with their life savings tucked under their mattresses? :lol: Frankly, knowing that central banks have, globally, decided to accept small, stable rates of inflation, if you're not tailoring your investment approach to the fact that inflation exists, you deserve what you're getting, when it's so easy to compensate for. :lol:

***

Final thought - in a year when the Fed significantly expanded it's asset base and in turn our monetary supply, which I'm sure he's pointing to as cause for hyperinflation, the core inflation rate has fallen to 1.2%, and gold, the traditional "hedge" for inflation, lost almost 28% of its value. If Paul thinks hyperinflation is a huge risk, then he needs a hypothesis that explains these two inconvenient facts.
 

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HOLY DIVE-AH!
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I think the bigger question is-- why do people think we NEED inflation to be successful?

Why can't $1 today buy $1 worth of stuff 20 years ago or 20 years from now?

Wouldn't you be more apt to save $20 if you knew in 3 years it still had the buying power of $20, plus any interest on top of it?


Inflation hurts those with cash assets, or other fixed cash income like seniors and the poor.
Inflation rewards those in debt by making the debt be worth 'less' every year.

We, once again, are always a nation that rewards failure and punishes success.

It goes this way because our country is a failure in terms of fiscal sense. It is in the national debt's best interest to have inflation. It is the only way the interest payments on the debt is being paid.

It isn't about you. we don't count. we don't have enough money to matter. But it is us that get hurt by these policies of which are designed for self-preservation of a failed business model called the united states fiscal policy.
 

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Discussion Starter · #9 ·
Because inflation incentivizes spending and investment, which are important for a functioning economy. If there's no disincentive to just hoarding all your cash, there's less demand for goods and services, there's much less capital available for new/growing businesses, and the whole idea of the finance industry as a means to efficiently allocate capital sort of falls apart.

I mean yeah you don't want uncontrollable runaway inflation, and it's bad if wages don't keep pace with inflation, but a steady, moderate amount is good because it gives people with money a reason to put their excess cash back into the economy. That system is not really working perfectly at the moment but that's for a whole host of reasons that have nothing to do with the concept of inflation.

Also,
It is in the national debt's best interest to have inflation. It is the only way the interest payments on the debt is being paid.
This is a good thing when the interest rate is up against the lower bound as it is currently! It effectively means that the US can perpetually borrow cheap money. If we borrow half a million dollars to build a rail line or a bunch of schools and don't have to pay it back until that half a million is actually only worth $400 million (pulling numbers out of my ass, but you get the point), we made money! Inflation helps anyone holding debt, which is why you see some people advocating for slightly higher inflation to give some relief to businesses and people with mortgage/education debt right now. We can debate whether that's desirable in the long term and if we want to encourage widespread debt when we're talking about personal finances (probably not), but it's pretty clearly a benefit when we're talking about the government's finances.

If you were a business that could borrow money at near zero interest rates and knew for sure that the amount you owe will be worth a bunch less in real terms by the time you have to pay it back, you'd be an idiot not to do it.
 

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HOLY DIVE-AH!
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I don't know if it encourages spending. It certainly encourages NOT saving, though.. and frankly, not saving is the reason why there's so many social programs and what not because people have nothing the second the lose a job or get sick and have to rely on the system. the system would be significantly cheaper if people had their own safety net in place.

I also disagree that there's less capital available to businesses. If banks are flush with cash savings, they have it to lend.

It may be a good thing the government is printing money to pay its debt off, but frankly, it's bullshit. lol

you hit the point though--

We've become a nation (world?) of debt/credit instead of cash/debit. our money has followed suit.

All they have to do-- and there's no one to stop them-- is to say tomorrow that there's 3243243232432432432 more new dollars out there.

bam, debt gone, bam start over, bam, you are worthless and back to square one.

can't be done?

Ask Germany.
Ask yogslavia, Croatia, Bosnia...
ask Zimbabwe

 

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I think the bigger question is-- why do people think we NEED inflation to be successful?

Why can't $1 today buy $1 worth of stuff 20 years ago or 20 years from now?

Wouldn't you be more apt to save $20 if you knew in 3 years it still had the buying power of $20, plus any interest on top of it?

Inflation hurts those with cash assets, or other fixed cash income like seniors and the poor.
Inflation rewards those in debt by making the debt be worth 'less' every year.

We, once again, are always a nation that rewards failure and punishes success.

It goes this way because our country is a failure in terms of fiscal sense. It is in the national debt's best interest to have inflation. It is the only way the interest payments on the debt is being paid.

It isn't about you. we don't count. we don't have enough money to matter. But it is us that get hurt by these policies of which are designed for self-preservation of a failed business model called the united states fiscal policy.
None of that is actually really true, Brian. Investors are agnostic to expected inflation, because nominal expected returns contain both a real and an inflation component. If inflation drops to 0%, then nominal expected returns drop to the real expected rate of return, and their expected return in inflation-adjusted returns remains unchanged, at the real rate.

Inflation is only problematic when 1.) it's highly variable, so expected and realized inflation rarely match, and 2.) when those "successes" you refer to choose not to put the capital they have to work by investing it back in stocks or interest-bearing investments that in turn allow it to be used to further economic growth. And, frankly, by providing an incentive for people with assets to invest, it is not hard at ALL to argue that the presence of inflation is a positive for economic growth in both nominal AND real terms.
 

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Discussion Starter · #12 ·
I don't know if it encourages spending. It certainly encourages NOT saving, though.. and frankly, not saving is the reason why there's so many social programs and what not because people have nothing the second the lose a job or get sick and have to rely on the system. the system would be significantly cheaper if people had their own safety net in place.
If you're not saving the money, what are you doing with it other than spending it? :rofl:

I also disagree that there's less capital available to businesses. If banks are flush with cash savings, they have it to lend.
The other part of what I said is key: it also lowers demand because people are spending less. This means businesses are going to grow more slowly and have lower profits, which means a) they're less likely to borrow money to finance growth because it's less likely they'll be able to pay it off and b) because of a), the bank will have to charge higher interest rates.

All they have to do-- and there's no one to stop them-- is to say tomorrow that there's 3243243232432432432 more new dollars out there.

bam, debt gone, bam start over, bam, you are worthless and back to square one.

can't be done?

Ask Germany.
Ask yogslavia, Croatia, Bosnia...
ask Zimbabwe
The Fed has been doing EXACTLY this for a few years now, and yet inflation remains historically low. In fact, there are a lot of pretty smart people who think it would have been more economically beneficial if the government had used some of that magically created money to bail out underwater homeowners and people with massive educational debt and no job prospects.

The usual argument against that is "well that's a moral hazard you're rewarding debt/failure/irresponsibility" but uh...how does that same logic not apply when we give the money to Goldman Sachs? And yes, I realize that the argument in favor of the latter is that it was necessary to prop up the banking system. That's fine, but the moral hazard argument in particular doesn't hold water when we're perfectly happy to do it in other situations.
 

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HOLY DIVE-AH!
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Inflation figures might be low... yes, but the value of the dollar is significantly decreased. we had this conversation a few weeks ago. :D

The answer is to not give money to anyone! Don't reward failure. Don't punish success. and vice versa Let the human strive for what they want to do/be and let them be.

fuck GS :)
 

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Discussion Starter · #14 ·
We did, and the conclusion was that you were conflating inflation with a drop in purchasing power due to stagnant wages, which are two very different things. I don't want to turn this into yet another debate on labor policy but why is the price of labor the only thing that doesn't rise with inflation? To be clear, I'm not making my usual "but think of the little guy" argument here. :rofl: As a mathematical matter, if inflation worked the way you're saying it does, then you would expect the price of labor to rise just like everything else. If it increases the price of everything then there's no reason why jeans and iPads and pop tarts can consistently command a nominal price that maintains their value after inflation but the price of workers never does. If the price of everything BUT labor rises and is causing a loss of purchasing power, then there must be some other factor(s) at play. Otherwise you would expect the cost of labor to rise as well.

I'll agree with you on that last part at least. :rofl:
 

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Inflation figures might be low... yes, but the value of the dollar is significantly decreased. we had this conversation a few weeks ago. :D

The answer is to not give money to anyone! Don't reward failure. Don't punish success. and vice versa Let the human strive for what they want to do/be and let them be.

fuck GS :)
Inflation is the rate at which the value of the dollar decreases, dude. You're not making any sense. :)

And what do you mean, "don't give money to anyone?" I'm arguing for investment, not charity. By incentivizing people to invest rather than sit on large amounts of money not earning anything, you're encouraging continued success as opposed to resting on your laurels. It's not rewarding failure, it IS encouraging success. It does so by encouraging further investment and further economic growth. Do you understand why that is the case?
 

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Discussion Starter · #17 ·
If you take that to its logical conclusion, all property is theft. The concept of private property inherently requires that we take things that are either already there and available to everyone, or made out of these things, and give exclusive ownership of them to a single individual, which represents theft from everyone who previously had use of it before.

The only reason it's "your" property in the first place is because is because the big, bad state will violently take it from me and return it to you if I steal it it. Otherwise, might makes right and it's only yours as long as you can fight me off.

Just to head off the lol pinko commie Hulk stuff: I'm not saying abolish private property because everything belongs to the earth maaaaaannn. I'm saying that if you're going to claim that taxes or social spending are theft, then you have to apply that logic consistently. This is the most basic problem with libertarian philosophy: it wants to pretend like the world started just after the first government formed to enforce property and contract but ends just before that same government turns around and taxes the earnings from that property.
 

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HOLY DIVE-AH!
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No one owns any property under the statist model in which we live. You lease it from the city/district. Don't pay your prop taxes and watch how fast they take what is 'yours' even if you 'own' it outright.
 

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Discussion Starter · #19 ·
You missed the point. What model of private property does not involve said property initially being removed from communal use? A piece of land is available for everyone's use until someone comes along and plops a fence or a building down and claims it's theirs. Without a "statist model" to enforce that claim, there is no such thing as private property. The things that legitimizes private property are the law that says people can't just take your shit, and the cops who will arrest them if they do. In other words, the government.

Also, your property tax argument is bogus. I could just as easily argue that by skipping out on the taxes you are legally obligated to pay, you are stealing from the rest of the municipality which now has less money to fund communally beneficial shit like schools and roads and fire departments. The reason taxes are not optional is because if they were, the free rider problem would run rampant.

Besides, if you don't own the property, why can you call the cops to come and physically remove me from it if I'm squatting there against your wishes?
 
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