Links 1/6/08 « naked capitalism

Tuesday, January 6, 2009

Links 1/6/08

Playing golf can ‘damage hearing’ BBC

Milky Way faster and heavier than thought Cosmos

A Moment Of Tooth Washington Post

Clutching at historians FT Alphaville (hat tip reader Don)

The Winds of Protectionism Are Gaining Strength Michael Panzner

The End of the Financial World as We Know It Michael Lewis and David Einhorn, New York Times. Apologies for failing to link to this yesterday, still very much worth reading if you haven’t already.

There is only one alternative to the dollar David Hale, Financial Times. For the record, my Japanese buddies (who among them control a huge amount of investment funds) argue that this is rubbish, the amount of gold is too small for it to serve as a meaningful money alternative.

Who is Raghuram Rajan? Ed Harrison

Media Blamed For Making Economic Crisis Worse Michael Shedlock. I would very much like to read the phrasing of the question, since survey results are notoriously sensitive to how a question is framed (and I’ve been on the receiving end of some clearly-intended-to-lead-the-respondent surveys).

Stimulus Package to Include Cram-Downs: Report Housing Wire. This is a big deal, and likely to be contested.

US will emerge as undisputed top dog in 2009 Ambrose Evans-Pritchard, Telegraph. For him, this is almost cheerful. But his optimism for the US rests in part on his conviction that the euro “will die a slow death.”

The China Not-Investing Corporation Brad Setser

Antidote du jour:

21 Comments:

ecf says:

January 6, 2009 at 5:42 am

Re: “There is only one alternative to the dollar David Hale, Financial Times. For the record, my Japanese buddies (who among them control a huge amount of investment funds) argue that this is rubbish, the amount of gold is too small for it to serve as a meaningful money alternative.”

This comment reveals a fundamental misunderstanding of how a currency could be pegged to gold, that is unfortunately all too prevalent. It does not require 100% gold backing. Please read the writings of Nathan Lewis, for example, a briefing:

http://www.nakedcapitalism.com/2009/01/links-1608.html

It worked in England until the authorities forgot how it worked.

If this is so much rubbish consider this. Would you be better off having put away in a money box one ounce of gold in 1965 or $35 bills? If floating currencies have been so successful, why have they lost 95% of their former value, which is an unprecedented depreciation for modern industrial societies?

ecf says:

January 6, 2009 at 5:50 am

My apologies – wrong link. See Nathan Lewis here:
http://www.newworldeconomics.com/archives/2008/112309.html

tnjen says:

January 6, 2009 at 5:56 am

Yves, you mentioned that you’d like to know how the question was phrased in regards to the claim that “77% or Americans blame media for making the economic crisis worse” and I believe I’ve located it.

The posting you linked to provides a source here. The survey question is easily missed because the author of the first post uses a block quote from the source but doesn’t indicate that a paragraph has been snipped out of the middle of the block quote they’re using. That snipped portion contained the survey question. When you go to their source it’s very difficult to spot the excised quote.

At any rate, here is the survey question they used:

“Do you think the financial press is making the economic crisis worse by projecting fear into people’s minds?”

I find this to be a very leading question.

Tim says:

January 6, 2009 at 8:00 am

Maybe I’m misunderstanding something, but doesn’t “the amount of gold is too small for it to serve as a meaningful money alternative” just mean that the price of gold is too low?

Just make the gold bricks smaller.

Can someone explain why “the amount of gold is too small for it to serve as a meaningful money alternative” is a legitimate argument? Sure, maybe this makes sense if he is talking about scrapping fiat money totally, but otherwise, I don’t see the issue.

Anonymous says:

January 6, 2009 at 8:17 am

It’s abundant things that make for sorry currencies. Fiat paper, for instance. Modern electronic solutions could allow for vaulted gold to be used as a currency; GoldMoney is an excellent demonstration of this.

Anonymous says:

January 6, 2009 at 8:34 am

Worked it out a few years ago, back-of-the-envelope, if you take world 2005 GDP, divide into the number of ounces of gold ever mined, you wind up with a figure of about $13K an ounce.

Anonymous says:

January 6, 2009 at 8:47 am

@8:17 Nice try, just put up a shingle next time. Good luck on that thing too, as humans like the textile feel of their money, especially after all the credit card debit ready to blow up.

skippy

Andrew Bissell says:

January 6, 2009 at 9:03 am

@ 8:47

I could care less whether anyone sends a cent to GoldMoney. It happens to be a very good example of how a gold currency could be made workable.

Or, you know, you could just attack it for being a privately-owned business.

S says:

January 6, 2009 at 10:33 am

Note that Blomberg is running stories about South Korean and Japan trying to create 950K and 2.2M green jobs over the next few years. Can you say race to the bottom.

Timo says:

January 6, 2009 at 12:42 pm

So everybody else should scrap their fiat currencies just because Americans gorged on their reserve currency status like fat pigs and let their country descent into another 3rd world banana state with de facto plutocracy rule?

Not that any other previous empire were any better. Failure percentage of empires still stands at perfect 100.

Tying monetary base to output of gold mines in modern society does not offer any benefits. It is even lousy way to restrict government spending because government can always confiscate private gold possessions like in the 1930’s.

Of course if you believe in some American settler-pioneer fantasy of 1830’s in which you go to a saloon and pay for a beer with pieces of gold, well try to hop on the next bus to Mars.

Maybe there you can start all over and WITHOUT those pesky Native Indians! But I’d bet AIR and WATER are going to be even more precious there than gold.

Moopheus says:

January 6, 2009 at 1:08 pm

No goldbug has ever convinced me that having a gold standard (or any other kind of “convertability”) is any less arbitrary than a fiat money. The official peg is arbitrary and set by government will (fiat), and can be changed or dropped to suit the government’s needs. Admittedly, in historical practice, that didn’t happen with great frequency. People make a big noise about what “backs” the currency, but, really, it doesn’t matter. If whoever controls the money supply wants to be irresponsible with it, nothing on Earth will stop them.

Moopheus says:

January 6, 2009 at 1:45 pm

” everybody else should scrap their fiat currencies “

No, it occurs to me that there’s a benefit–we peg the dollar at some huge value, say $5000 to the ounce of gold. This would cause the dollar, and our debt, to be hugely devalued immediately relative to other currencies. Of course, we’d never be able to import another thing ever, but so what.

Richard Smith says:

January 6, 2009 at 2:10 pm

The fight-o-meter aka ‘Recent Comments’ is bust.

Anonymous says:

January 6, 2009 at 2:23 pm

If ever the need for transparency, gold and silver would give it. Yes the authorities could mess with the value, but there would at least be some visable benchmark, and therefore a reason for the masses to make them more responsible.

JustinTheSkeptic

wintermute says:

January 6, 2009 at 4:31 pm

Bundle gold, silver,platinum (et. al) into a metals “basket” (not unlike the weighted components of the dollar index) and there will be plenty of backing for a hard currency.

One reason gold convertability had such a hard time in the 1800’s was lack of proper long-distance communications. In our digital age we can make this work now.

Anonymous says:

January 6, 2009 at 5:07 pm

Yes the authorities could mess with the value, but there would at least be some visable benchmark, and therefore a reason for the masses to make them more responsible.

I guess we have a choice between Announcements from Authority re: “visible benchmarks”:

“Comrade citizens! Look at this pile of otherwise completely useless gold!”

vs.

“We proudly inaugurate this brand spanking new suspension bridge, linking two communities like a pair of hands! Both form _and_ function are beautiful, are they not?”

Timo says:

January 6, 2009 at 5:33 pm

Any lack of democracy cannot be bought back even with piles of gold…

john bougearel says:

January 6, 2009 at 8:41 pm

Henny-Penny says something must be done, because the sky-is-falling on the ditching of the gold standard and Bretton Woods.

And I believe Henny because at this rate, all governments with keynesian and monetarist policies stacked on top of trade deficit policies are at risk of defaulting.

Anonymous says:

January 6, 2009 at 10:06 pm

@Andrew Bissell,

I see it as just one more attempt to introduce complexity in an already overly complicated system.

Faster, harder, bigger exponential failure in ever increasingly shorter time frames. I liken it to the fly, used for their short life cycle in order to view genetic out comes. We are introducing this shorter time line in our our activity’s via better tools/efficiency on a incressing scale and as far as I can see its not working out so well for the human race.

Remember the Universe makes the rules not the other way around. We befoul that which gives us life for momentary/monetary gratification on a one life time scale. If we are the fly and the scientist is watching, I would bet he is scratching his head right now. To what end is this behaver productive in regards to its species continuation/evolution.

Exponential out comes with human activity’s is getting on the high end of scale and I believe all here understand that simple mathematical out come. Thats the Universe at work, try and bend its rules and suffer.

Other than that hope you are well Andrew.

Skippy

Anonymous says:

January 6, 2009 at 11:03 pm

Looks like Lewis and Einhorn (now there’s a combination) read NC and closely…I saw a lot in the article that came across in comments here.

Anonymous says:

January 6, 2009 at 11:07 pm

Someone earlier in this thread posited a value of $13K per oz of gold based on GDP figures…

Might I humbly suggest that by the time this is all over, GDP will have proven to be a bubble like everything else.

There are lots of trades that would not contribute to GDP in a truly free market. Market commentators, who serve masters that rely on more and more resources coming under the control of Money would have you believe that nobody will be able eat or find shelter without those green pieces of paper.

We need to take Money out of the equation for the basic needs of life. This could be socialism, anarchy, punitive taxation under a capitalist regime, whatever.

If people stopped using unearned wealth to purchase beads and whiskey, you’d be looking at a very different economy with much more self-reliance, and energy and materials efficiency on the individual scale.

30 kilotonnes of gold above ground translates to 5 grams of gold for everyone on earth. Most of them would not need it if they were self-sufficient.

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