I cant remember the last time either of you tried to explicitly support your thesis with all of this nitpicking.

Huh? There's no net liability. There's nobody at the Fed who funnels the interest to somebody else. It's all operational cost at that point, which would exist regardless of who prints the money.


It's all the same thing. It all comes down to the government effectively not paying interest on the amount of currency outstanding.



He's implying that the taxpayers are being screwed in some way by having to pay interest to the federal reserve. They aren't. Things wouldn't be any different in that sense if the federal reserve was a federal agency.


Of course that's the point. Since outstanding fed liabilities == monetary base, monetary base disappears. That is, unless you replace the money.


I have no strong opinions about the federal reserve system, dollar or anything - my main contention has always been that questions like "what would the interest rate be on the dollar if the fed didn't intervene" are entirely meaningless.

I have no thesis here - I have no strong opinions (in terms of what I think should be done - my opinions tend to be stronger on how one should approach the issues) on any of the issues discussed here so all I'm doing is really picking apart people's thought processes for logical fallacies, hidden assumptions, factual errors and misunderstandings.

Just about the only thing in this thread (other than general cluelessness) that genuinely bothers me is people who are slightly smarter, better educated and more able than an average person blaming the average person for society's problems and having a condescending attitude.

All I've seen you do is say that if something isn't quantifiable then there's no basis for comparison. What I'm saying is that rationality and liberty (mainly) are the only logically consistent bases for any system and thus any system which hinders an individual's liberty or ability to act rationally is not a correct system. It's not about better or worse, it's about logical consistency. Is 1+1=2 better than 1+1=3? One is right and one is wrong based on logic.

Hmmmmmmmmm....while you guys are fighting .......GOLD is getting torched today.Did you ever finalise that bet Barron?

GL,
Stephen

Stephen, you should buy the dip.

Yes, we finalized the bet prior to posting any of this (if you're talking about the one with me).

I'm not concerned much with short-term moves, but this is turning into quite the drop. Any interest in laying me 2:1 that gold covers 1K with the 3 week hold sometime before the end of the second fiscal quarter of '09?

LOL...Youre the best!

yup. and i've had quite a few offers to buy part of it lol.

i honestly did not expect that type of reception but since i probably think it is closer than a lot of people (risky scenario we are in globally, dollar route might in worse case turn into panic etc.)

either way i'm happy w/ the bet

Barron

Make it 1.2k and you might have yourself a buyer

I read the terms and I thought the bet was pretty favorable for him. Then I read he wants 2:1 and I LOLed.

Hey I dunno lol. Some people seem to think this is the "gold bubble" deflating and maybe think it won't pass 1K again anytime soon. Barron has said that he thinks the 3 week hold itself is worth about 6-12 months when the bet is close (i.e. the **** does not hit the fan), and I sort of agree. Since we're 120 below 1K now, I thought someone with Stephen's view of gold might be willing to lay 2:1 on the 15-month offer.

Might as well ask lol. I'm not terribly anxious to put more money behind a bet similar to the one I already made, so maybe I am being a little stingy. It seems like some people are very bearish on metals though and I figured I'd toss that out for anyone interested.

You really cant be serious with that offer?

And oh .........if GOLD breaks $850.........will you want 4-1 that it bounces back to $900 holding for 48 hours ?

LOL

It wasn't serious in the sense that I thought you'd accept or that I was particularly interested, or I'd probably have just PM'd you. I was more trying to get a feel for how bearish you are on gold.

I assume your offer above isn't really serious, but I also don't get it. How long would I have for it to bounce back to 900? Only a 48 hour hold?

Did you mean that it will bounce back to 900 *within* 48 hours? I just don't understand what you're proposing.

JK

I actually just bought GLD for a bounce.But I still aint no BUG sir

ttyl,
Stephen

I'm glad to see so many young chaps taking my advice to heart!

You'll understand how easy economics is in no time.

Since I'm a trader before an economist, can you tell me how much gold you own at what price and where you would start to sell?

Hold 'til we're close to the Dow. Take the trading shoes off and relax. Enjoy America as we know it. Play poker or learn to sell cars to pass the time.

Are you high or something?

Can I take this to mean you dont even own any gold directly (not counting this 1 bet you have on)?

lol, I'm sober. My reply to Stephen was supposed to be a joke/ironic, so I didn't realize your question was serious.

If you were serious:

How much gold I own right now isn't really important, but I plan to keep about 50% of my long-term savings in metals for now. I'm not "trading" gold (nor do I have the technical understanding of how to do that effectively) so I don't really have a sell strategy, but I will pay attention to events as they transpire and keep listening to Peter Schiff and Jim Rogers and other people who I trust and just try to make that decision as best I can when it comes to think about selling. Timing the market isn't important to me because my interest in gold is just to protect myself from what I think is a coming collapse. If that occurs, the important thing is just that I protected myself and not when exactly I should sell. So I'm thinking more about when and what things might lead me to reconsider the idea that the dollar will collapse, and then I would leave gold ASAP because I'd no longer see any point to it, rather than thinking about when exactly I should be selling my gold.

If I'm right, I will think more and more about selling as gold price begins to approach the Dow (they met in the 1970s and the GD, I believe). I'll also look more into just the magnitude gold increased in the 70s and maybe assume something a little greater than that to give me a rough idea of how much gold historically moves at periods of turmoil. But that's all years away, right now (like I said) I'm better off just thinking about the dollar and if I should change my overall view. Ultimately I'm not too worried about when I will sell if the **** does hit the fan, because then it sort of adds more credibility to the people I trusted up to that point, and I'd give a lot of weight to their opinions on when is a good time to sell.

I own more silver right now than gold. But I am still working on my goldmoney.com account and looking into other services and whatnot and figuring out where exactly to move money, so right now most of money is still in good old USD. Basically I am not yet positioned in the way I plan to be. But I do have some metal in my physical possession that I've been ordering off of Apmex.

Economist types make the worst traders. That is all.

Also figure skaters make bad hockey players. The trick is not playing hockey if you don't know how.

What if I "intuitively" believe I can play hockey like a superstar because I watched a game once ? Should I run out and buy some skates tomorrow?

Jimbo

When have I ever even talked about trading? You confused the analogy, probably because you were so anxious to show up with a retort like this in yet another thread.

That I have an opinion about our political and economic climate and feel entitled to it even though it is different than what you believe does not mean that I think I am some sort of "superstar." Perhaps it is you who thinks a bit too highly of himself if other people aren't allowed to disagree and freely exchange ideas without being chastised.

That I ultimately disagree with experts like Barron does not mean I think I am better at this stuff than Barron. (It's not as if there are no experts on the other side who I am also listening to -- so where does that leave me, changing my opinion and my investment strategy every time someone enters or leaves the room? Just keeping my mouth shut unless I am the most adept person in the room? I'd rather just be honest and open about what I believe, and allow anyone who disagrees to be honest and open in response.)

Unlike with hockey, I unfortunately don't get the option of not playing. If there was no federal reserve and I could guarantee the purchasing power of the money I've earned, I'd stick my savings in index funds and forget about it. But alas, there is a federal reserve system and it shouldn't be rocket science that it's potentially dangerous for our money (I think even Barron is against the Fed, to the extent that he's forced to a political opinion). So considering whether one does or does not want his savings to be in USD should not be interpreted as some sort of superstar complex where I think I can beat a game I've never played before. I'm forced to play one way or the other, and I'm just doing my best to decide which path is most reasonable.

I don't even need to be confident. Even if there was an 80% chance of the dollar not collapsing, there would still be 0% reason for a passive portfolio to have mostly dollars. DUC? My view, inherently, does *NOT* require the confidence that would be required to leave my money in dollars instead. Yet, the minute you open your mouth about diversifying away from the dollar, people react like you think you're some sort of hot shot trying to be fancy. I only have to think that a dollar collapse is mildly possible for it to make little sense to hold dollars. On the other hand, one has to be *extremely* confident that the dollar is in good shape if he wants to advocate saving mostly dollars in lieu of diversification away from it.

Given that we are fighting two wars, burst a housing bubble, and now had a bank run at a major Wall Street firm, I think what requires some real arrogance would be for someone who admits he's no expert in finance to claim everything is alright and he somehow is 100% sure of it. Instead, all I ultimately think is that the chance for collapse in the near future is reasonable, especially when you consider paper money's historical track record. Since Euros and Swiss Francs and gold and wheat will not all collapse if I'm wrong, I don't need to be particularly sure about anything to feel convinced that it's a better play than passively investing in mostly dollars.

That you interpret what I'm doing so backwards and even after a couple weeks show up to make a post like this is pretty strange, and probably a good window into the type of person you are. I would assume you were just joking around and laugh, but this is at least the 3rd time you've come out of no where to make this sort of retort, and I just don't get what you're trying to accomplish nor do I see it ending, so since this was apparently worth alluding to, there's your response. Later.

thats a lot of operational cost - bloomberg terminals really are expensive, eh? anywyays i thought the government had or is still fitting the bill for some of their operations.

Further, if they put the interest into reserves they are definitely funneling it to themselves in a sense. Or if they sponsor nonsense research programs or unnecessary "operational costs" the effect is the same.


but they are...

Of course they would be. your assumption that the immense interest cost that is consistently growing by leaps, while the fed's operational costs are not growing anywhere near that rate if at all, is exactly and always going to cover just the feds operational costs that would be expensed anyways is unfounded. What the fed does in practice is also different to what they can do and what everyone is vulnerable to.

few people advocate getting rid of the fed because they hate money. the point is to replace the monetary structure

And how would things be different if they were part of the government? Do things become free? The quote is saying that because the Federal Reserve system is not part of the government, the taxpayer bears these costs. This is strictly incorrect. Whether their operations are run efficiently or not has nothing whatsoever to do with interest payments and nothing to do with the topic at hand.

And what on earth does "put the interest into reserves" mean? And who is themselves? Interest payments, for what it's worth, *reduce* the monetary base, so if the Fed kept interest payments without giving anyone anything, all dollar holders will be given a purchasing power boost. In any case, no one but the treasury has any beneficial interest in the Fed's balance sheet.

If anyone remembers the Sklansky/EMH thread where he argued how markets are approximately efficient because experts are moving prices, this discussion (and Google as well) should clarify why that simply isn't true. Most people have no problem developing strong opinions without understanding the subject matter and will invest in companies or otherwise take positions with misguided intuition backed by flawed understanding.


Once again, this is irrelevant to your "what if the fed did nothing" thought experiment. As I mentioned *way* back, what would the interest rate be in new currency Zygotira is not a question anyone's interested in. I know changing subjects is your specialty (though I don't know if this is because you don't know what is relevant to the present subject matter, if you're doing it deliberately, or if you just don't have the attention span) but almost everything you say here is irrelevant to the topic that was being discussed.