Archive for the 'Economics' Category

Persistently low interest rates

Tuesday, January 3rd, 2012

Interest rates have been at historic lows for a long time. That is just a bare fact. Why?

My Assumptions:
I think that the value of money is represented by interested rates. So when interest rates are high money is worth a lot and when interest rates are low money is not worth very much.

Based on my assumptions money is worth very little right now. This is a hard idea for me to process because in my mind money and value have always been tightly integrated, the measure of value has always been in money.

So back to basics…

Money is:
1) A way to trade over time, I give you a dollar for a burger now and you use that dollar for gas next week. We traded a burger for gas.
2) A way to store wealth. I get a dollar for a burger today and I store the wealth from that burger for a week until I need some gas.
3) A way to get stuff done. I have an idea for a new invention and I take a million dollars to buy material and help and I make my new invention.

Money is still good for trading over time. Money is still a way to store wealth. Is money still a way to get stuff done?

I have been wondering about this for quite some time now. For most of my life if you have come to me and here is a million dollars do something productive with it and I would have had an instant answer. There was a time where you could get in your car and find a town without a pizza shop and open a pizza shop. You could find a town without a vet and open a vet. You could find a town without a video game arcade and open an arcade. You get the point, finding a way to use a million dollars to do something productive was easy. Today, I don’t think it’s clear how to take a million dollars and do something productive with it.

I think what persistently low interest rates shows is the declining worth of money because money can’t really be used to get anything done anymore.

I hear that corporations are sitting on billions of dollars and I think this is another indication that it’s hard to use money to do anything right now. They can’t find a town to build a pizza shop in, they can’t find a place to put a arcade… all they can do is sit on it.

So assuming that all of what I have written is true, what does it mean? Well…

I think it means that the things that society needs can be achieved without money. It used to be that if society needed oranges in Maine then the only way to get it there was by some company to take some money and build a system to make it happen. Today an individual in Maine can trade a lobster for an orange from Florida with the web.

It’s weird… money is critical to our society right now, but is it going to stay that way? Are we starting to see a societal shift where money is going away and what would that be like? I honestly can’t imagine a society without money, I just can’t picture it in my brain. How would I get gas in my car without money? It’s like I can see where this is going, but I can’t imagine how we will get there. It’s like a wave and it’s going to be an interesting ride.

Another attempt to explain how stupid the money crisis is.

Friday, December 9th, 2011

OK imagine you are in a village on an island.  Now imagine everyone fishes and gets water every day. Now imagine that on the beach there are sand dollars.  Now imagine that these sand dollars are hardened and they never break.  Now imagine the average person finds one sand dollar a week.

OK so sand dollars are really neat so you could trade a sand dollar for an extra fish.  Maybe one day you don’t feel well so you don’t go fish and you don’t get water.  You can trade your sand dollar for fish and water.  Maybe one day you get a lot of extra fish so you can trade your extra fish for sand dollars.

Let’s say you get good at making spears.  What if you a fish costs one sand dollar, and a spear costs 10 sand dollars.  Maybe it makes sense to make spears trade them for sands dollars and then buy some fish and water with your sand dollars.

So everything is going great everyone is trading sand dollars for stuff.  You make your spears and you get your food, water, clothes and whatever else.

Now image 100,000,000,000,000,000,000,000 sand dollars fall out of the sky.  OMG life as we know it is OVER, the sand dollars value is worthless.

No, let’s take a look at this, there are still plenty of fish being caught, still plenty of water, still plenty of spears… there as much of the necessities of life after the sand dollar event as before the sand dollar event.

The only time this becomes a real problem is if someone starts hoarding.

Energy Economic Cycle…

Wednesday, November 16th, 2011

I heard this guy talking about how economic cycles used to run based on interest rates.  The rates go up the economy slows down the rates go down.  Energy is the new interest rates when energy prices go up the economy slows down and when energy prices go down the economy picks up.

I think that guy was right.

Today’s market crash…

Wednesday, November 9th, 2011

Today a lot of people came to the conclusion that Italy’s going to default on their loans.  Apparently, Italy is the 3rd most indebted country in the world (after the US and Japan).

Then the market crashed.  A lot of people have their opinions about why and since this is my blog I will share mine.

OK the drop in stock price is just an increase in dollar strength.  The Euro looks like it’s on the verge of collapse so the dollar is going to be a lot stronger and will buy  more stuff including stocks.

That’s what I think.

Message to future people…

Wednesday, September 7th, 2011

I remember reading about the government’s crazy behavior in 1929. In the 1930′s people were starving and farmers were letting fruit rot in the fields and people were begging to work. Farmers were able to pay workers starvation wages, but because people were so broke the people couldn’t buy the food, so the food was left to rot. There wasn’t any money around, the farmers were broke and the people were broke.

The point is that money makes the gears turn. The lack of money caused the system to grind to a halt. Now giving money to the farmers would be pointless because they would still have no reason to harvest and deliver food. It was so stupid, to not flood the market with money. I always wondered why they would be so stupid.

I think our situation is exactly the same,not only that, but Japan went through this whole thing just in the last 15 years and they did all of the same stupid things.

So here is why we are pushing ourselves into a long miserable depression? Because we are demanding it. We are demanding that the government quit spending. We don’t have any money to spend so we don’t want the government to spend either.

Is a weaker dollar and indication that American leaders are failing.

Saturday, August 6th, 2011

I was thinking that money represents the ability for the money possessor to direct the economy. So if a guy in the US has $10,000,000 then he can try to build something cool. If the currency gets weaker then it makes it easier for rich guys in foreign countries to build something cool.

So imagine a rich American has $10,000,000 and he has a great idea. Then he decided to hire some people and build it. Imagine a rich American has $5,000,000 Euros and he has a great idea too, and he wants to hire people to build it. Now, if the dollar gets weaker then suddenly the French guy has more buying power to hire people to get build his vision.

Consequences of high gas prices.

Saturday, July 23rd, 2011

I think that the USA will be a lot better off if gas prices go up. We are too wasteful now. I think we would buy a lot less gas if the prices go way up ($10+ gallon).

First of all I believe that 20% of the jobs in America can be done from home. So if gas goes to $10+ a gallon they will all work from home instead of driving to work every day.

Second, I bet 25% of all driving is leisure. At $10+ a gallon I bet that number drops to 5%.

Third, the vehicles on the road are way too big and way too heavy. They will all get smaller and lighter and that would be very nice.

So for me, I would probably end up driving to work about once every two weeks and I would probably drive some kind of scooter or ride a bus into work.

Fourth, I think 50% of of fuel is consumed moving things from a centralized location. I think things will be created closer to home and shipped from closer. So more of my neighbors will have productive work.

So I welcome $10+ gas.


Friday, July 22nd, 2011

I like to write about this subject.

I think we are going to see… drum roll…. both.

I think anything that is imported from any country that doesn’t have its currency tied to the dollar will inflate. I think anything that is domestic and will deflate.

I have a feeling most programmers in the US will be working for foreign companies.

Stupid Debt Ceiling

Wednesday, July 13th, 2011

I believe that money has one main purpose in our system. It’s purpose is to encourage people to work and consume and that’s it. It’s like in monopoly, the game doesn’t go bad because their’s too much money, it goes bad because someone gets all of the land.

I just can’t understand why people don’t understand that the debt is just a number in a computer, it doesn’t mean anything as long as people are being productive.

This crisis is stupid.

Society shifts from debt based to commodity based…

Thursday, July 7th, 2011

I heard a theory. Every so many years people shift from valuing debt (paper) to valuing stuff and then back again. Some people believe we are heading back to valuing stuff.

Interesting idea.