Jump to content
House Price Crash Forum

Fiat System Collapsing?


Starcrossed
 Share

Recommended Posts

and hot chicks dig it.

No one should underestimate the importance of this. I'm completely serious, almost everything men do is designed to attract the best possible mate, the same is true for women. Men demonstrate there 'fitness' through power, which is expressed in physical form by houses, cars, gifts of gold etc. Man will always want to get the best women, women will always want to get the best man. We cannot escape our fundamental biological drivers no matter how 'civilised' we become.

You will always be able to swap gold for land, food, labour and if necessary soldiers because there will always be men who want the gold to impress that 'hot chick'.

Link to comment
Share on other sites

Mark G - Given that governments in the past have shown their willingness to kill their citizens, I regard mismanagement of currency a rather minor shortcoming!

Govts have shown ability to lock people up without trial, confiscate all your property etc. etc. Of course they are a necessary evil.

As for financial sector - you would be surprised (I was) how old some of that stuff is. UK bond market dates back to 1694, and annuities (pensions) have an extremely long history. The railways/ canals in UK were financed by stock market - and yes, they did care very very much about yields! Read Jane Austen - her characters are often discussing financial matters. Or Vanity Fair, or Dickens "Our Mutual Friend".

Mutual funds were a Victorian invention - and the Dutch had a thriving options market in the 17th C. The Japanese in Osaka also had a pretty sophisticated financial market dating back 100's of years.

However, it was only for the rich/ middle classes. The bulk of the population lived hand to mouth, and tended to die before stopping work. I would say the expansion of financial sector is because we got richer, not because we got rid of gold standard

Not sure that gold has retained its value. Never seen a time series of gold going back that far - though maybe possible to extrapolate from the English time series on prices (that go back to about 1200 or so) Of course you run into hedonism problems - many goods weren't available back then - so we are probably stuck with looking at how many bushels of wheat a ounce of gold would have bought in 1205 vs 2005...

There was also the "great inflation" of 16th-17th C, when the massive influx of gold from S America into the bullion starved Europe caused a rerating (downwards) of the value of gold versus other goods & assets.

Link to comment
Share on other sites

Mark G - Given that governments in the past have shown their willingness to kill their citizens, I regard mismanagement of currency a rather minor shortcoming!

Mismanagement of currencies affects everyone, particularly the poor and elderly. Few governments have destroyed as many lives by murder as they have by rampant inflation.

I would say the expansion of financial sector is because we got richer, not because we got rid of gold standard

A while ago I read an article looking at long-term performance of pension funds. They basically worked out that if you'd stuck $20 in a pension fund in the 1950s, that today you would, in real terms, get back about $20.

In other words, all those people working to 'invest' your money to get the best yields for fifty years achieved _absolutely nothing_ other than to maintain the value against inflation.

Why would we need those people if we had hard money and long-term price deflation, as we did for centuries before fiat currency was imposed?

Link to comment
Share on other sites

Yes, but those governments have been pretty spectacular. Mao's China, Stalin's Russia, the Kaiser deciding to start WW1, Hitler's Germany, the Spanish rule in S America, the great Bengal famine under the British, the condoning of the slave trade, Pol Pot in Cambodia. Not to mention "legitimate" wars, which also have a nasty effect on poor & elderly.

Have you got an example of this utopia of centuries of hard money & price deflation? I can only really think of UK from 1815-1914. France in the same period had 2-3 revolutions, USA a civil war. Actually, maybe Sweden/Norway in the same period, but not up to speed with Scandinavian history

Don't underestimate the achievement of keeping 50 years of real value of savings constant and not destroyed. If you took any random period of 50 years in most places in the world, I don't think the chance of that would be that high...

Link to comment
Share on other sites

Every fiat currency that's lasted a few decades has lost most of its value

EVERY fiat currency? What about the pound, the Swiss franc, Canadian dollar, NZ dollar, etc etc etc?

almost everything men do is designed to attract the best possible mate, the same is true for women. Men demonstrate there 'fitness' through power, which is expressed in physical form by houses, cars, gifts of gold etc.

I'm not sure a woman attracted to you by your ability to provide gold bars would fit my definition of "the best possible mate". Where I'm from these women are known as "gold-diggers", for fairly obvious reasons.

Man will always want to get the best women, women will always want to get the best man.

Define 'best'.

You will always be able to swap gold for land, food, labour and if necessary soldiers because there will always be men who want the gold to impress that 'hot chick'.

That being the case, it's surprising how few people's salaries are paid in gold, isn't it?

Link to comment
Share on other sites

What about the pound, the Swiss franc, Canadian dollar, NZ dollar, etc etc etc?

They've... tada... wait for it... all lost most of their value over the last century.

Have you got an example of this utopia of centuries of hard money & price deflation?

Why do people keep pretending that I'm saying things I never said? Where did I claim that gold-based money created a utopia?

Oh, I didn't, did I? All I said was that it maintained the value of people's savings without requiring a bloated 'financial services' industry to do so.

Don't underestimate the achievement of keeping 50 years of real value of savings constant and not destroyed.

Uh, hello? It's only an 'achievement' because it's fighting against the best desires of governments to destroy their currency through deliberate inflation.

It wouldn't be any 'achievement' with hard currency, because you'd just hide it under your mattress or in a hole in your garden. Why do you want to create an entire vast industry designed to fight against the ravages of inflation, when we could just use essentially inflation-proof money? What's the point?

Link to comment
Share on other sites

How does the importance of oil to our (global) economy relate to our fiat currencies?

I genuinely don't know the answers to this, but are our currencies essentially now backed by 'black gold' instead of 'gold gold'? Or am I talking out of my bum?

When peak oil occurs do people expect currencies to go back on to a gold standard?

Link to comment
Share on other sites

All this talk of Fiat money and buying gold. I just get worried that so many people are telling me to buy gold, they are only just outnumbered by those telling me to buy property.

I just wish it was easier to diversify and more legal.

I'd just buy those things that are always in demand and so always valuable:

Petrol, Drugs, Beer, Fags and toilet paper.

I think i'm going to buy £5,000 of toilet paper. I'm just concerned all this fiat money that loses it's value might damage there value, this paper's worthless what can I do with it....Hand it over here, I'm off to the loo.

Being serious I can't see the global system collapsing as we can always produce enough to feed/clothe and house everyone. If it turns really bad we'll just get deflation and a 20 year depression, kondieff winter type scenerio.

Link to comment
Share on other sites

Guest magnoliawalls
Being serious I can't see the global system collapsing as we can always produce enough to feed/clothe and house everyone. If it turns really bad we'll just get deflation and a 20 year depression, kondieff winter type scenerio.

Do you mean Kondratieff winter? I don't know very much about that - does it really predict a 20 year depression starting about now? :o

If it happens it will surely be the first Kondratieff winter (depression) under the fiat system. It is argued that the fiat system tends to exagerate the business cycle, this would imply that if the Kondratieff theory is correct we could be due the mother of all busts.

we can always produce enough to feed/clothe and house everyone

What is technically feasible and what actually happens are two very different things. There have been numerous famines for example, and I can't even think of one that was caused by an absolute lack of food as opposed to distribution issues.

Besides, there are limits to how much we can produce. Issues of water/energy scarcity, salination, soil depletion etc are taking their toll on agriculture in many regions. If agricultural subsidies are scrapped, production of many agricultural commodities in the developed world will not be feasible. At the very least this will increase our exposure to currency and oil price fluctionations; in a Kondratieff winter, who knows?

Link to comment
Share on other sites

Mark G - true, you said

"we had hard money and long-term price deflation, as we did for centuries before fiat currency was imposed?"

I just can only think of one period of almost a century that this was true (1815-1914) in one country (the UK) Maybe Japan during the Tokugawa period (they had a currency based, ISTR, on the standard amount of rice a person needed a year)

Where/ when else?

It is an acheivement because it is rare. If 2-3% real return was so easy, the entire world would be millionaires by now. But destruction of capital happens with disturbing frequency - the nice thing about modern financial markets is that you can now hedge away the risk of all eggs in one basket, relatively cheaply.

Looking at my parents, and their parents financial history.

One set of grandparents lost everything (including pension savings, as the university my grandfather worked at was taken over by the Communists, and they didn't feel obliged to pay) in Shanghai. Had to start again anew in 1947

Other set of grandparents - cobblers shop was bankrupted by mismanagement while grandfather was at war. Came back to pretty much nothing.

My parents, in similar situation (given 72 hours to leave Uganda, got out with only suitcases) only lost physical possessions. Evil financial markets meant most of their savings were not able to be grabbed by the Ugandan govt (as they were in offshore funds) Note any gold in this case would have been lost - my mother lost her jewellry at the airport - but they did let her keep wedding ring

Fail to see how gold currencies would have helped any of them against the idiocy of governments. Both grandfathers died young due to privations/ injuries sustained in WW2. Which was started by jackass govts. At least faced by a jackass govt in Uganda, my parents were able to have diversified away the risk of working there, by not having their savings there.

In the 1930's there was basically no way for a middle class person working privately to spread risks - now there is a plethora of well diversified funds to invest in

Link to comment
Share on other sites

Do you mean Kondratieff winter?  I don't know very much about that - does it really predict a 20 year depression starting about now?  :o

Basically you can make money in a recession but not in a depression (like a kondieff winter). Note that Japan has had a very long recession verging on a depression.

Recession = Growth falls, unemployment rises, companies go bust, interest rates go down. Particulary consumer confidence falls. At the bottom everyone has paid off a lot of debt, companies that survive are lean and managing to make a profit in the bad times, everything to do with investment is cheap.

So at the bottom you buy. Check stock markets or property over a 30 year period. It falls in a recession but then picks up again. So you sell at the top, wait with the cash for 2-5 years and then bu up everything cheap at the bottom. It's a great way to make money. Big big returns.

Depression/Kondieff winter = Exactly same as a recession except investors and consumers also lose confidence. The markets go down, and down, and down. there is no bounce back. Even when things start to recover it's very very slow.

Best to think of it this way.... Everything loses money property, shares, gold, oil, everything.

A couple of pointers for a Kondieff situation that might sounds true:

The financial industry is massive, large numbers of people are involved in making money from money. the richest jobs and most skilled people manipulate money rather than produce anything. - Think about the city, what do these people who get paid so much actually produce?

A full blown credit boom. Credit is cheap, plentiful and can be gained even by those who preivously would be viewed as too risky. Lenders ignore risk instead competing to lend more money to yet more people. - I can lend 10x my annual salary if I wished just by going round all the lenders, I can get 10 years worth of future earnings today.

A Kondieff winter would be very very bad. It would bring suffering, famine, poverty and almost certainly war (whether economic or military).

As for Fiat money heightening the effect, don't worry. The trillions that has been lent out will need to be repaid. It would be impossible to inflate our way out so we end up with deflation. So your cash (if your a STR) is safe but you'll have nothing to invest it in (expect 0% interest rates) and not feel safe spending it either (You'll be too worried about the future)

Link to comment
Share on other sites

Guest magnoliawalls
Depression/Kondieff winter = Exactly same as a recession except investors and consumers also lose confidence. The markets go down, and down, and down. there is no bounce back. Even when things start to recover it's very very slow.

Andrew - thank you for the explanation.

When the property bubble bursts, the confidence of investors and consumers will be hard hit. Perhaps we should anticipate a possible deflationary meltdown.

Link to comment
Share on other sites

Guest consa
Andrew - thank you for the explanation.

When the property bubble bursts, the confidence of investors and consumers will be hard hit.  Perhaps we should anticipate a possible deflationary meltdown.

OR WORSE!! :)

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
 Share

  • Recently Browsing   0 members

    • No registered users viewing this page.




×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.