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Old 12-07-2008, 10:43 PM
 
Location: Seattle, WA
209 posts, read 583,944 times
Reputation: 87

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Quote:
Originally Posted by taurus430 View Post
It seems like a catch 22. If we spend, it's good for the economy but could be bad for us.
If we save, it's bad for the economy, and might be good for us.
Saving is good for anyone. This is a false question.
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Old 12-08-2008, 12:05 AM
 
Location: Los Angeles Area
3,306 posts, read 4,138,708 times
Reputation: 592
Quote:
Originally Posted by sterlinggirl View Post
You could peg the value of currency to whatever unit of energy you want: HP, KWH, Kcals, or BTUs, it does the same thing. Its a measure of the potential for work.
So you are going to "peg" the currency to some unit of energy, lets say $1 = 1 killowatt hour. What does this achieve exactly? Its completely arbitrary and will result in massive inflation. New technologies would greatly reduce the production it takes to generate a killowatt hour, hence the dollar would have to likewise decline in value resulting in uncontrollable inflation.

Quote:
Originally Posted by sterlinggirl View Post
Another benefit would be changing the cost of energy to a constant instead of a variable.
I don't get it. How would this change the cost of energy to a constant? The amount of production it takes to generate energy can change relative to other products regardless of any peg. So in what sense would it be constant? It wouldn't.

Seriously, using stones would work better.
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Old 12-08-2008, 01:19 AM
 
3,459 posts, read 5,768,376 times
Reputation: 6677
Quote:
Originally Posted by Humanoid View Post
So you are going to "peg" the currency to some unit of energy, lets say $1 = 1 killowatt hour. What does this achieve exactly? Its completely arbitrary and will result in massive inflation. New technologies would greatly reduce the production it takes to generate a killowatt hour, hence the dollar would have to likewise decline in value resulting in uncontrollable inflation.
Using stones or dollars or gold is completely arbitrary....what's your point there? What's the real value of gold, other than the cost to mine and refine it? When you take the arbitrary PM speculation out, you can find the value by asking how many barrels of oil it takes to make an ounce of gold.

If we peg the dollar to gold, are we going to see massive inflation because new technologies will greatly reduce the expense of producing an ounce of gold? You seem to be assuming that new technologies will make energy nearly free and limitless. Everything I've seen seems to indicate that its going to keep being more difficult. We've already picked most of the low hanging fruit in our quest for cheap oil.

Quote:
I don't get it. How would this change the cost of energy to a constant? The amount of production it takes to generate energy can change relative to other products regardless of any peg. So in what sense would it be constant? It wouldn't.

Seriously, using stones would work better.
If energy=currency, the relationship is constant. You seem to be stuck on electricity, and it may help for you to think in BTUs instead of KWHs. A gallon of fuel contains a relatively fixed number of BTUs, which will boil a certain amount of water, which will produce a certain number of Watts, etc, etc. They're all tied together.

If you want more money, you either find a way to make energy or conserve energy. People were all about saving energy this summer, but now that energy is artificially cheap we don't have a reason to do it any more. Low oil prices are also shutting down drilling rigs, so you can be sure that we'll start hearing about shortages again as soon as the economy picks up. With currency pegged to energy, you could invest in energy production or efficiency without any doubts about whether prices will stay high enough to make it worthwhile.

With a peg to energy, if we consume less, we will use less energy, and there will be an energy surplus. Since energy=money, surplus energy=surplus money. When we have more money, we use it to buy things, which will burn up the excess energy which is really money. When we're low on energy, we'll also be low on money, so we won't be spending, which will allow the energy supplies to build up again.

Last edited by sterlinggirl; 12-08-2008 at 01:42 AM..
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Old 12-08-2008, 03:02 AM
 
Location: Los Angeles Area
3,306 posts, read 4,138,708 times
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Quote:
Originally Posted by sterlinggirl View Post
Using stones or dollars or gold is completely arbitrary....what's your point there?
Just that its arbitrary, so why use some odd thing like "energy" which isn't even tangible.

Quote:
Originally Posted by sterlinggirl View Post
If we peg the dollar to gold, are we going to see massive inflation because new technologies will greatly reduce the expense of producing an ounce of gold?
The answer to this is an obvious yes.... just look at history.

Quote:
Originally Posted by sterlinggirl View Post
You seem to be assuming that new technologies will make energy nearly free and limitless. Everything I've seen seems to indicate that its going to keep being more difficult. We've already picked most of the low hanging fruit in our quest for cheap oil.
Keep being more difficult? E=mc^2......for our purposes energy is limitless.

Quote:
Originally Posted by sterlinggirl View Post
If energy=currency, the relationship is constant. You seem to be stuck on electricity, and it may help for you to think in BTUs instead of KWHs. A gallon of fuel contains a relatively fixed number of BTUs, which will boil a certain amount of water, which will produce a certain number of Watts, etc, etc. They're all tied together.
The relationship between the currency and energy is constant, but the relationship between energy and the currency and all other things is not constant. If energy becomes easier to generate than the dollar will be devalued (because the energy will be devalued).

Quote:
Originally Posted by sterlinggirl View Post
People were all about saving energy this summer, but now that energy is artificially cheap we don't have a reason to do it any more.
Yes, when oil is not the price you think it should be its "artificially cheap"...gotta love the way people think about these things.

Quote:
Originally Posted by sterlinggirl View Post
Low oil prices are also shutting down drilling rigs, so you can be sure that we'll start hearing about shortages again as soon as the economy picks up. With currency pegged to energy, you could invest in energy production or efficiency without any doubts about whether prices will stay high enough to make it worthwhile.
Umm....huh? Again, you are completely ignoring the fact that the relationship between energy and all other goods is not constant. The fact that its relationship to the dollar remains constant matters very little if everything else costs more dollars. Pegging the dollar to "energy" solves absolutely nothing. You may as well peg it to skittles. At least they are colorful and taste good.
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Old 12-08-2008, 04:07 AM
 
12,867 posts, read 14,871,134 times
Reputation: 4459
Quote:
Originally Posted by BankREO View Post
Saving is good for anyone. This is a false question.
absolutely! saving is really just spending in another form. if you put your money in a bank or market that capital becomes available to be put to good use, as long as the system is not broken. when the government steps in and guarantees that there is no risk that is when you have a problem. that is another reason why bailouts are not good for the economy.
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Old 12-08-2008, 04:17 AM
 
Location: western East Roman Empire
9,314 posts, read 14,219,947 times
Reputation: 10018
Quote:
Originally Posted by Humanoid View Post

The answer to this is an obvious yes.... just look at history.



the relationship between energy and all other goods is not constant. The fact that its relationship to the dollar remains constant matters very little if everything else costs more dollars. Pegging the dollar to "energy" solves absolutely nothing. You may as well peg it to skittles.
To a significant extent, the success of the Roman Empire depended on how efficiently they could transport food and war materiel to frontier areas, while keeping the soldiers satisfied. Part of this equation was debasing the coinage so that, at least in nominal terms, the soldiers received more coins (they installed more mints near areas with large concentrations of soldiers), but not necessarily more food and war materiel. Increases in food production at border areas helped, but they were increasingly in intemperate zones, unlike the Mediterranean core.

One argument attempting to explain the current crisis in the US is that manipulation of the money supply has led to gross misallocations of resources, even as the cost of energy has increased: if we had a better - or perhaps more realistic - money supply system, we would not have suffered these gross distortions.

As is often the case in life, either/or propositions are misleading. For example, it is not a question of either spending or saving, but a question of a well balanced, stable mix.

In a similar way, the basis of the monetary system is not as important as the quality and the mindset of the people running it. As Machiavelli wrote, even good institutions can be ruined by corrupt men.
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Old 12-08-2008, 09:31 AM
 
20,594 posts, read 19,257,030 times
Reputation: 8204
Quote:
Originally Posted by sterlinggirl View Post
Using stones or dollars or gold is completely arbitrary....what's your point there? What's the real value of gold, other than the cost to mine and refine it? When you take the arbitrary PM speculation out, you can find the value by asking how many barrels of oil it takes to make an ounce of gold.
Hi sterlinggirl,

I am kind of stunned at reading something out of the communist manifesto.



Quote:
If we peg the dollar to gold, are we going to see massive inflation because new technologies will greatly reduce the expense of producing an ounce of gold? You seem to be assuming that new technologies will make energy nearly free and limitless. Everything I've seen seems to indicate that its going to keep being more difficult. We've already picked most of the low hanging fruit in our quest for cheap oil.
This is a huge risk, like it or not.

Quote:
If energy=currency, the relationship is constant. You seem to be stuck on electricity, and it may help for you to think in BTUs instead of KWHs. A gallon of fuel contains a relatively fixed number of BTUs, which will boil a certain amount of water, which will produce a certain number of Watts, etc, etc. They're all tied together.

If you want more money, you either find a way to make energy or conserve energy. People were all about saving energy this summer, but now that energy is artificially cheap we don't have a reason to do it any more. Low oil prices are also shutting down drilling rigs, so you can be sure that we'll start hearing about shortages again as soon as the economy picks up. With currency pegged to energy, you could invest in energy production or efficiency without any doubts about whether prices will stay high enough to make it worthwhile.
So now we will over produce energy for no reason? Its expensive and destructive to make energy. Why not make it moon rocks and waste even more resources for something that will be a blip on a computer anyway? What could go wrong? Have a look at India. No need to rob a bank, just a van with a big capacitor will do.

Quote:
With a peg to energy, if we consume less, we will use less energy, and there will be an energy surplus. Since energy=money, surplus energy=surplus money. When we have more money, we use it to buy things, which will burn up the excess energy which is really money. When we're low on energy, we'll also be low on money, so we won't be spending, which will allow the energy supplies to build up again.
Why not peg a dollar to much more than energy? The easy way is simply to accept it as a tax. That creates demand for the money. This would prevent over production and hoarding. Look what oil speculation did to us. This again ignores the problem. Fiat currency is not the main problem. Thanks Ron. Fractional reserve currency and commercial credit is the main problem.
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Old 12-08-2008, 11:45 AM
 
Location: Chino, CA
1,458 posts, read 3,275,796 times
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Quote:
Originally Posted by bale002 View Post
One argument attempting to explain the current crisis in the US is that manipulation of the money supply has led to gross misallocations of resources, even as the cost of energy has increased: if we had a better - or perhaps more realistic - money supply system, we would not have suffered these gross distortions.
I'm not totally sure that we totally misallocated resources. I don't think housing per say is bad... and the building of mass amounts of housing for the people isn't totally bad.

Basic human needs requires: Food, water, shelter (physiological needs). Safety, community, belonging could come along with the formation of neighborhoods. Food and water are consumables and spoils or evaporates... housing is something that "should" last decades.
MASLOW'S HIERARCHY OF NEEDS

So, generally speaking, housing isn't a total loss of production resources and energy. I mean, if you look at survivor, shelter is one of the first things that needs to be built. At least during the boom we didn't build a bazillion amusement parks or things of that nature.

The problem during the boom was that as more units were built or put up, housing actually increased in prices instead of decrease (because of artificial demand). Now that things are normalizing, housing prices are reflecting supply and incomes. IMO, this is actually good as more people are able to be supplied with our basic human needs which should help out society. And this supply/surplus should last us a few years therefore we can concentrate our current resources on other issues.

Savings is good to a point. If everybody saves, the banks would be over capitalized and interest rates would dip to nothing. Someone has to take out a loan, borrow, or spend. The USA like I showed before has grown and become a global super power not because of savings, but because consumption drives innovation and production. As long as it is "sustainable" consumption our economy can still be majorily fueld by consumption (we produce for our own consumption... what's wrong with that? it's the leakage from our negative net exports that's hurting US). I believe Japan's over saving was actually one of the causes that prolonged their decade long recession in the 90s.

-chuck22b

Last edited by chuck22b; 12-08-2008 at 11:54 AM..
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Old 12-08-2008, 11:59 AM
 
Location: western East Roman Empire
9,314 posts, read 14,219,947 times
Reputation: 10018
Quote:
Originally Posted by chuck22b View Post
I'm not totally sure that we totally misallocated resources. I don't think housing per say is bad... and the building of mass amounts of housing for the people isn't totally bad.

Basic human needs requires: Food, water, shelter (physiological needs). Safety, community, belonging could come along with the formation of neighborhoods. Food and water are consumables and spoils or evaporates... housing is something that "should" last decades.
MASLOW'S HIERARCHY OF NEEDS

So, generally speaking, housing isn't a total loss of production resources and energy. I mean, if you look at survivor, shelter is one of the first things that needs to be built. At least during the boom we didn't build a bazillion amusement parks or things of that nature.

The problem during the boom was that as more units were built or put up, housing actually increased in prices instead of decrease (because of artificial demand). Now that things are normalizing, housing prices are reflecting supply and incomes. IMO, this is actually good as more people are able to be supplied with our basic human needs which should help out society. And this supply/surplus should last us a few years therefore we can concentrate our current resources on other issues.

Savings is good to a point. If everybody saves, the banks would be over capitalized and interest rates would dip to nothing. Someone has to take out a loan, borrow, or spend. The USA like I showed before has grown and become a global super power not because of savings, but because consumption drives innovation and production. As long as it is "sustainable" consumption our economy can still be majorily fueld by consumption (we produce for our own consumption... what's wrong with that?) I believe Japan's over saving was actually one of the causes that prolonged their decade long recession in the 90s.

-chuck22b
You get it towards the end: no need to dwell on extremes, it is not an either/or good/bad, all/nothing issue,for those trapped in two-dimensional thinking, the question is achieving a reasonable, sustainable balance in the allocation of resources.

The US financed too many houses for too many people who cannot afford the too many of the types of houses built. To be sure, some of those will wind up being multi-person dwellings, zoning laws will change to accommodate them. Others, like in SW Florida, for example, are rotting from mildew.
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Old 12-08-2008, 12:23 PM
 
Location: Chino, CA
1,458 posts, read 3,275,796 times
Reputation: 557
Quote:
Originally Posted by bale002 View Post
You get it towards the end: no need to dwell on extremes, it is not an either/or good/bad, all/nothing issue,for those trapped in two-dimensional thinking, the question is achieving a reasonable, sustainable balance in the allocation of resources.

The US financed too many houses for too many people who cannot afford the too many of the types of houses built. To be sure, some of those will wind up being multi-person dwellings, zoning laws will change to accommodate them. Others, like in SW Florida, for example, are rotting from mildew.
I agree with you bale002, that housing isn't the best allocation of energy and resources... but, all I'm pointing out is that it was better than building or producing something that was purely consumables (glut of food for instance) or short-term assets. Many people were fortunate to get shelter and homes during the 90s bust that probably would of never gotten homes before or those homes would of never been built.

Developments and housing require a certain level of commitment, up-front costs, planning, zoning, and infrastructure. If it wasn't for housing booms, more than likely it would take decades or not even happen before Private Developers get incentivized to build. Housing would probably be denser, more spotty (as a few are built at a time) and relatively more expensive but more stable (developers would wait until it is most "practical" to build - and there would be fewer builders).

Essentially, those who bought during the boom are subsidizing those that are going to be buying or bought during the busts as they funded the infrastructure and initial funding required to get things started... after all, there is an "equilibrium" price and those who paid higher are funding those who pay lower than that equilibrium.

Maybe housing and RE market was designed this way? I'm not sure... but it takes a lot of up-front money to get these projects going... without booms, I'm not sure if developers/builders would be as willing to invest. Just like it takes cataclismic events for our government to get incentivized to "invest" in infrastructure, safety, etc.

-chuck22b

Last edited by chuck22b; 12-08-2008 at 12:33 PM..
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