Bitcoins and gold standard dollars -- was Re: Anyone want to make a housecall?

S. Dale Morrey sdalemorrey at gmail.com
Sun Jun 2 21:10:22 MDT 2013


No it's not internally inconsistent or contradictory.  You just missed my
point.

Cash serves (in my mind) a specific purpose.  It's sole purpose is to
facilitate exchange between parties, for instance I can pay taxes with it
and buy gas for my car, groceries to feed my family etc.  It doesn't matter
if that cash is dollars, euros or clamshells if I can spend it directly
then it's cash.  However it's the spending that gives it value.  Holding
onto it forever does nothing but cost money.

If it pays interest it doesn't meet the definition, it falls more into
longer term storage of purchasing power even if the length of storage is 1
month or 1 year.  Savings accounts and Certificates of Deposit, which bear
interest above inflation fall into this category.  Checking accounts are
essentially cash.

If you want a different way of thinking about it.  Cash (including cash
held in checking and savings at 0% interest) can almost be thought of as a
negative interest asset if held longer term because over time you lose
purchasing power.  Depreciation, demurrage, inflation and negative interest
are all essentially the same thing in my mind.  Assets which are subject to
this are not suitable for holding long term if your goal is to maintain or
exceed purchasing power parity.

Things which maintain or exceed purchasing power parity over the long term
are things that are relatively neutral such as precious metals. For
instance 1oz of silver still buys the same amount groceries as it always
has, with the exception of some bubbles.  Stocks are also (assuming it's a
good company paying dividends) in the long term investment category because
they enable you to maintain parity through the payment of dividends which
can be further invested.  Admittedly you need to convert these assets to
cash in order to obtain their purchasing power however the fact remains you
have stored purchasing power without charging or paying interest.  Note
that I am not advocating a return to gold or silver or any other specie, or
even barter.

I'm saying the goal of this game we call an economy, seems to be to
maintain or exceed purchasing power and you cannot do that with cash or
cash like assets, not in the long run.

Keep cash on hand for immediate needs.  Have a mix of slightly less liquid
assets that can beat inflation for medium term needs (new car, home repairs
etc).  Invest in more illiquid assets for the longer term.  Contrary to
popular belief, it doesn't pull cash out circulation for you to do that.
The cash you trade for your (insert investment here), is used by whoever
you traded with and circulates.

However parking a ton of money in your bank account at 0% interest is just
giving your bank a 0% loan.  At the same time they're charging you between
4 & 20%+ on your credit cards, car loans, home loans etc.  If you want a
safe place to put your money where it will appreciate or at least maintain
parity over the long run, then buy stock in the bank. :)

But yes cash is a binary.  The merchant either accepts it or they don't.
It doesn't matter how many Euros you have in your wallet.  You aren't
spending it at the Walmart down the road.  You also aren't able to spend
silver ingots, gold bars, stocks, bonds or CDs, and you aren't trading your
chickens for a flat screen TV there either.  Therefore those items are not
cash, just assets that can be converted to cash with differing degrees of
difficulty.


On Sun, Jun 2, 2013 at 9:22 PM, Stuart Jansen <sjansen at buscaluz.org> wrote:

> On Sun, 2013-06-02 at 19:53 -0600, Stuart Jansen wrote:
> > On Sun, 2013-06-02 at 17:37 -0500, S. Dale Morrey wrote:
> > > Please elaborate.  I'm very interested.  I like knowing where I am
> wrong.
> > > It makes me smarter. I'm a bit like a Pakled in that regard.
> > > http://www.imdb.com/title/tt0708768/quotes
> > > :)
> >
> > Unless you're a technology company, putting your money is a soft yellow
> > mineral isn't much different than putting it under a mattress. Gold is
> > more volatile, but both approaches are equally useless for a "free
> > flowing" economy.
>
> I should clarify: By technology company I mean using the gold to make
> something useful like communication satellites, not jewelry or bars in a
> vault.
>
> It seems strange to me to group stocks and gold in the same category
> while arbitrarily excluding "currency". What does that even mean?
> Printed bills? Saving accounts? Where do money market funds fit in your
> binary classification? How about certificates of deposit? Bonds?
>
> I read your message multiple times trying to understand your point.
> Finally I decided the problem was you were trying to present an
> incoherent philosophy (meaning: self contradictory).
>
> Most wealth is a fiction, but it's a multidimensional fiction. I think
> you're trying to oversimplify.
>
>
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