| ▲ | mothballed 2 days ago |
| On a long timescale gold is way more stable than the dollar. Dollar is nonvolatile on a long timescale in the sense the expected returns are negative and it does it reliably at usually anywhere from a return around negative 2-10%. But in terms of price stability gold would be far far far far more stable on anything but the most short-sighted of timescales. |
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| ▲ | Dylan16807 2 days ago | parent | next [-] |
| I guess. But you can fix the slow drain of inflation by using long-term treasury bonds instead of actual cash. That's pretty much a dollar and doesn't do badly. |
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| ▲ | eru 2 days ago | parent [-] | | Long-term treasury bonds are fairly volatile. That's how Silicon Valley Bank went under: their long-term bond holdings dropped in value enough to make them insolvent. | | |
| ▲ | Dylan16807 2 days ago | parent [-] | | They can swing a few percent. So can gold. Either one could make a bank insolvent. In the long term treasury bonds are not volatile, especially if you hold them to maturity. | | |
| ▲ | eru 2 days ago | parent [-] | | What does holding to maturity have to do with their current value? | | |
| ▲ | Dylan16807 2 days ago | parent [-] | | It makes the current market price irrelevant because you're still owed the same amount on the same date. | | |
| ▲ | eru 2 days ago | parent [-] | | The current market price is about what it is worth _currently_. When your deposits are denominated in _current_ dollars, and that's what your customers can demand, then it doesn't matter that your expectation of how many dollars you are going to receive in 2035 is stable. It's about what our assets are worth right now, in case you need to liquidate them to satisfy withdrawal requests. If you can contrive your deposits to be denominated in 2035 dollars, then long term treasury bonds are 'stable' in that sense. Similarly, if your deposits are denominated in grams of gold, then gold is a stable backing for those. If you have a mismatch between what you owe and what you own, then you need a thick equity cushion between your assets and fixed liabilities. | | |
| ▲ | Dylan16807 2 days ago | parent [-] | | This conversation was not about banks when the comparison came up, and when I talk about long term value I'm not talking about bank reserves. (And even if you argue a stablecoin is like a bank, it's one with an utterly massive reserve ratio.) If you're worried about short term value then you can use shorter term bonds if you want, whatever. It doesn't make a difference to the reason I brought it up in the first place, because either option is more stable than gold. | | |
| ▲ | eru 2 days ago | parent [-] | | What do you mean by long term value? The current market value is typically the best estimate we have for their long term value. No one is talking about bank reserves. I'm talking about assets. | | |
| ▲ | Dylan16807 a day ago | parent | next [-] | | > What do you mean by long term value? The current market value is typically the best estimate we have for their long term value. In situations where we still care about dollars, so no hyperinflation or total collapse of the United States, the current market value of a Treasury bond can't actually vary that much. And the amount it can reasonably vary is mostly proportional to how many years are left in the bond. By the time your bonds reach maturity, you always have more dollars than you started with. Long term you always profit. And you get to choose what length of bonds you buy, so if you want to you can guarantee your dollars increase in the medium or short term on top of the long term. > No one is talking about bank reserves. I'm talking about assets. I'm saying you're too worried about "withdrawal requests" a normal bank would see. | | |
| ▲ | eru a day ago | parent [-] | | > In situations where we still care about dollars, so no hyperinflation or total collapse of the United States, the current market value of a Treasury bond can't actually vary that much. And the amount it can reasonably vary is mostly proportional to how many years are left in the bond. Well, it was enough variance to bring Silicon Valley Bank down. > By the time your bonds reach maturity, you always have more dollars than you started with. Long term you always profit. I'd be very happy to have you as my investor in some long term bonds---with terrible below-market-but-barely-positive interest rates. > I'm saying you're too worried about "withdrawal requests" a normal bank would see. Silicon Valley Bank saw massive withdrawals, because their liabilities exceeded their assets. | | |
| ▲ | Dylan16807 a day ago | parent [-] | | Again, worrying about the long term value is an entirely different problem from worrying about your assets temporarily shrinking 10%. I was talking about the former. SVB, an example of the latter, does not affect my argument. And again, SVB could have used shorter term bonds to avoid that problem. > I'd be very happy to have you as my investor in some long term bonds---with terrible below-market-but-barely-positive interest rates. Very funny. Look, that's one feature of Treasury bonds, not the only feature. They get pretty good yields compared to gold in the long term, and you can trust them a lot. |
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| ▲ | littlestymaar 2 days ago | parent | prev [-] | | > The current market value is typically the best estimate we have for their long term value. It's not. The EMH has been empirically disproven in the 80s. | | |
| ▲ | eru a day ago | parent [-] | | Could you please link me to the evidence? Which version of the EMH has been disproven? EMH comes in multiple different strengths. The strongest version would be something comical like 'market prices are omniscient and perfectly predict future prices'. That's almost certainly wrong. Very weak versions are something like 'Don't bother actively trading on the news as a retail investor, because by the time you've heard them, the folks over at Goldman Sachs and the hedge funds and their computers will have traded on them a million times over already', and these are almost certainly true. (But even somewhat stronger versions are probably true.) | | |
| ▲ | littlestymaar a day ago | parent [-] | | See Bob Schiller's work (for which he received the econ Nobel prize in 2013). The “weak version of EMH” has nothing to do with markets being “efficient”, it's a property of random markets. Assimilating the two just Fama's motte-and-bailey fallacy. | | |
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| ▲ | kaibee 2 days ago | parent | prev [-] |
| > On a long timescale gold is way more stable than the dollar. This is a nonsense claim. How many flat screen TVs could you buy for a pound of gold over a 'long time scale'? Cancer treatments? Acres of land in midwest? Hours of a normal person's time? The fact of the matter is that you cannot actually store labor or time for later, so the amount of stuff you can get your gold is gonna vary wrt the broader economy. Economic reality on the ground is what actually determines the 'value' of your gold. And look, if you want some asset that you're pretty sure you could still trade for bread after the apocalypse or whatever, gold isn't the worst choice. And its deflationary, as the amount of gold isn't increasing at pace with the productivity of the global economy. And people like to hoard it when the future becomes less certain, because of the aforementioned 'tradeable for bread after the apocalypse', so I guess its an okay speculative hedge? |
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| ▲ | mothballed 2 days ago | parent [-] | | Non-responsive paragraph. You've attacked what could interchangeably be dollar or gold asking what it might buy or store, failing to recognize I was measuring relative stability rather than absolute stability. The dollar has lost over 95% of its value since inception of the federal reserve (at which time dollars nature changed significantly) in 1913 against some imperfect measures of CPI. That gives you a 20x difference over time, downward. Gold has not perform nearly that bad at price stability. We could go back further than that when the dollar was a lot more stable... but at that time dollar was backed by gold and there wasn't (mostly) a central bank nor gold possession bans that let them mess with the price quite in the same way they did later. | | |
| ▲ | eru 2 days ago | parent [-] | | The US always had really weird and restrictive financial regulations. Right from when the country got started. Look to Canada for a much stabler system that didn't have banking crisis all the time. See eg https://archive.is/v13TM | | |
| ▲ | littlestymaar 2 days ago | parent [-] | | Classical liberals are akin to communists in that when the practical application of their ideas fail, it's obviously because it was only a corrupted version that ended up being really put in practice. “It wasn't really Communism” and “It wasn't deregulated enough”. | | |
| ▲ | eru 2 days ago | parent [-] | | No, no, not at all. Communists can say "oh, it wasn't real communism." Classical liberalism and neoliberalism can make much stronger claims: a bit more neoliberalism (stochastically) gives you a bit more prosperity in the long run. You don't need the whole thing 100% to reap partial benefits. I say stochastically, because in the real world there's a lot of noise from other factors, of course. And in this case at hand: Canada had much lighter and more sensible regulation in this sector, and they did better. As expected. | | |
| ▲ | littlestymaar 2 days ago | parent [-] | | > a bit more neoliberalism (stochastically) gives you a bit more prosperity in the long run. You don't need the whole thing 100% to reap partial benefits. Except in practice it always fail to materialize, neoliberalism has repeatedly been tried everywhere in the western world, resulting in decline instead of prosperity. And people blame the fact that not enough regulations were removed to justify why it failed. So exactly like Communists. The reality is that the real world is too complex for simplistic ideologies to have positive effects. No matter what kind of ideology. > And in this case at hand: Canada had much lighter and more sensible regulation in this sector, and they did better. As expected. As if the only difference was regulations, and not the fact that Canada was at that point part of the British Empire It's like the commies in the 30s saying that Communism was indeed better, as the USSR had by far the highest growth among industrial nations by then. Forgetting that this growth was mostly due to the fact that Tsarist Russia was lagging far behind before that, and that catching up is always going to cause higher growth. | | |
| ▲ | eru 2 days ago | parent [-] | | > Except in practice it always fail to materialize, neoliberalism has repeatedly been tried everywhere in the western world, resulting in decline instead of prosperity. Are we living in the same world? All over the place, we see that more neoliberal places are richer than less neoliberal places. For example, Ireland is richer than Germany which is richer than Greece. > As if the only difference was regulations, and not the fact that Canada was at that point part of the British Empire You are right that there were more differences between them. Other people have done more extensive work on this, and I'm not doing it justice. The US had and has really asinine and heavy-handed financial regulation. Their bans on branch banking are really something, too. | | |
| ▲ | mothballed 2 days ago | parent | next [-] | | Singapore and Lichtenstein are probably the richest by PPP and they are what I would describe as benevolent monarchies (at least under LKY it was) that have managed to implement classic liberal market policies precisely because they have suppressed some or many components of neoliberalist representative democracy. LKY basically in a nutshell said 'you get the free market * because I fucking said so and I am smarter than all of you'. Weirdly Singaporeans were smart enough to realize LKY was a one in a million years kind of leader that actually both actually was smarter than everyone else AND was not corrupted to the point he poisoned the whole attempt. If he'd have sought out the populace to vote on his policies they would have done the same thing as most other places in asia and slowly vote more things to themselves in the name of welfare until their position as one of the freest financial markets in Asia was no longer the case. * Well not for houses, but like half of Singapore is immigrants that can be taxed to pay for the other half's houses so it works out for them. | | |
| ▲ | eru a day ago | parent [-] | | Singapore has free and fair elections that international election observers never have found fault with. LKY regularly won elections, and his party still wins elections. > * Well not for houses, but like half of Singapore is immigrants that can be taxed to pay for the other half's houses so it works out for them. The proportion of immigrants is lower than what you say, and we are not taxed more than residents. (I'm an immigrant to Singapore.) In fact, they once even gave me a 50% income tax one-off rebate just because in that year they took in more money than they needed. If I were a politician, I would have only given that one-off rebate to citizens, you know the people who can actually vote for you. |
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| ▲ | littlestymaar 2 days ago | parent | prev [-] | | > Are we living in the same world? I live in the western world. In a continent that gave ordoliberal (the German branch of the Mont Pellerin society) principles a quasi-constitutional values. And that continent has fallen behind both the government-debt pumped US and the state-driven China, down from a dominant position when the said principles were raised as supreme laws. In fact, the very country that invented railways has now been unable to operate first-world level of rail service for three decades, with the collapse happening because of Thatcher's policies. > All over the place, we see that more neoliberal places are richer than less neoliberal places. For example, Ireland is richer than Germany which is richer than Greece. Ireland is a tax haven. And half of its GDP is entirely virtual. And again China and the US (which has roughly three time as much public debts as the EU and has had much more relax monetary policies than what the EU can legally due to the Treaty of Rome and its updates) fare better than the EU. But then again I'm sure you'll say that “it's not actual liberalism”… > The US had and has really asinine and heavy-handed financial regulation. The regulations put in place in the 30s after the great depression were relaxed by Reagan, and unsurprisingly it lead to the reemergence if financial crisis after half a century of financial stability. | | |
| ▲ | eru a day ago | parent [-] | | Ireland is richer if you look at labour income, too. I agree that its GDP numbers are a bit weird. China is poorer than the EU. > The regulations put in place in the 30s after the great depression were relaxed by Reagan, and unsurprisingly it lead to the reemergence if financial crisis after half a century of financial stability. The US had inane financial regulations right from the start. And I'm not sure what you are smoking: have you heard of the Great Moderation? See https://en.wikipedia.org/wiki/Great_Moderation | | |
| ▲ | littlestymaar a day ago | parent [-] | | > China is poorer than the EU. Per capita, so far. But it used to be a third-world country and it's now the industrial superpower. > The US had inane financial regulations right from the start. “FDR didn't exist”. > And I'm not sure what you are smoking: have you heard of the Great Moderation? See https://en.wikipedia.org/wiki/Great_Moderation Dude, the “great moderation” is about inflation, business cycles and macro trends more generally, not about financial markets stability. | | |
| ▲ | eru 20 hours ago | parent [-] | | > Per capita, so far. But it used to be a third-world country and it's now the industrial superpower. They moved from dirt poor to middle income largely by strangling their economy quite as hard as the did under Mao. If they liberalised further, they could become richer. > “FDR didn't exist”. Huh? | | |
| ▲ | littlestymaar 20 hours ago | parent [-] | | > They moved from dirt poor to middle income largely by strangling their economy quite as hard as the did under Mao. They did move from durt poor to “higher life expectancies than the US” because the state made it an actual goal, with policies designed for that. > If they liberalised further, they could become richer. That's just your religious belief. But it has strictly the same factuality as “if you went to church, God would help you be happier”. > > “FDR didn't exist”. > Huh? Maybe document yourself on the massive financial regulations tightening that happened under FDR before saying it has always been the same. |
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