[colanderman]

You're always free to buy gold with your money, if you think that's a better store of value. I don't think the government cares.

(Personally I invest in productive assets and bettering my standard of living, but to each their own.)

[coconutrandom]

https://en.wikipedia.org/wiki/Executive_Order_6102

"..forbade the hoarding 'of gold or silver coin or bullion or currency', under penalty of $10,000 and/or up to five to ten years imprisonment. The main rationale behind the order was actually to remove the constraint on the Federal Reserve which prevented it from increasing the money supply during the depression"

https://en.wikipedia.org/wiki/The_Gold_(Control)_Act,_1968

"Desai finally introduced the Gold Control Act, on 24 August 1968, which prohibited citizens from owning gold in the form of bars and coins. All existing holding of gold coins and bars had to be converted to jewellery and declared to the authorities. Goldsmiths were not allowed to own more than 100 gms of gold."

[verylittlemeat]

I don't quite see your point both of those pieces of legislation were repealed 3+ decades ago.

[nkurz]

Presumably he's pointing out that colanderman's use of "always" in the phrase "always free to buy gold" is suspect. A better word might be "currently". Currently, one can buy gold freely in most countries. In the 1930's this was not the case in the US. As recently as the 1960's this was not the case in India. Investors in gold should probably be aware of these precedents.

[freejulian]

As I said, if you're wealthy, you buy real estate to park your wealth. If you're poor, you just watch your savings wither away. Heck of a system you're supporting.

[colanderman]

Poor people don't have savings.

(If they do, it's in a 401k, which is a productive asset and not tied to the whims of fiat currency.)

Poor people have debt. (Actually, I think most people in the US have net debt. (EDIT: Actually it's 20%; 30% if you're a minority [1].)) Inflation is good if you have net debt. It means the principal of your debt decreases in real terms each year.

I keep bringing up gold because this whole thread is about metal-backed currencies. Poor people can – and do – buy gold just as easily as rich people can. Pawn shops are rife with the stuff. The problem isn't that they must "watch their savings wither". It's that they don't have savings; they have debt.

[1] https://www.marketwatch.com/story/one-in-five-american-house...

[ianai]

Let’s also not forget the tie between inflation and GDP. It’s pretty hard to grow an economy if you literally have to dig new currency out of a mine and certify its quality before adding it to the economy. There are very real deflationary pressures from the mere machinations of such a currency.

[skookumchuck]

The way free banking works is money is created to match the increase in asset value. There is no net inflation, but the money supply rises in concert with the value in the economy. The amount of metal does not need to increase.

[ianai]

That’s only one possible situation and not the overall preference. Small amounts of inflation, 1-3%, offer some helpful benefits. They offer companies a way to decrease wages otherwise held constant but not tracking decreases in output or marginal value (though I’d argue that’s not a great thing nor common - but is necessary to clear markets). They also act as a tax on holding currency. That’s helpful to the economy at large-you can literally lose 1-3% of your cash per annum or you can spend 1-3% of your holdings on goods/services you otherwise wouldn’t employ. There’s also a wealth transfer mechanism at play, in aggregate of such things. Further, there is a connection between money supply and gdp growth. Your money supply has to expand for the economy to expand.

Contrast that with the impacts of deflation: If you know you’ll be able to buy more tomorrow with the same money, you’ll often choose to wait.

Because companies see fewer revenue for the same goods/services they have to cut costs - unemployment balloons.

Fewer people employed decreases demand overall. Leading to still more layoffs.

The deflationary forces spiral the economy lower and lower.

Any debt a person holds becomes dramatically more difficult to pay as their income decreases.

And all because the money supply remained constant or decreased in circulation.

[skookumchuck]

> The deflationary forces spiral the economy lower and lower.

With free banking, there won't be net deflation either, as the market forces on the creation/destruction of money prevent it.

As pretty strong evidence, there was no net deflation or inflation in the US dollar from 1800 to 1914, while the economy grew from subsistence farming to superpower.

To argue that this cannot work, one must explain that.

[freejulian]

> Poor people don't have savings.

What sort of nonsense is that? A lot of people don't have savings, sure, but there's also a lot of working class individuals who are financially responsible enough to save.

> If they do, it's in a 401k

Exactly my point -- the only way to save money is to risk handing it over to a corporation and crossing your fingers. Never mind that the general advice is not to invest money you plan on needing within the next 6 years.

> Inflation is good if you have net debt.

Not when the interest rate on your debt is higher than the rate of inflation.

You've done a sad job making any case at all for inflation.

[colanderman]

> [inflation is not good] when the interest rate on your debt is higher than the rate of inflation.

Yes, it's still good. It still decreases the real value of your principal. Deflation does the opposite.

[nwatson]

It's real good to be heavily in debt when inflation increases beyond expectations.

There were many government employees in Brazil who'd bought real estate in Brasília (the country's new-ish capital) with significant mortgages at reasonable fixed or quasi-fixed interest rates before the inflationary 1980's. After many years of 100% or 600% inflation in the 1980's, were left paying the equivalent of US$50 per month mortgage for awesome apartments.

[skookumchuck]

If you've studied interest rates on loans, the interest rate charged is X+Y, where X is the "real" interest rate, and Y is the inflation rate.

I.e. people who loan money are not stupid, and you're not getting any bargain because of inflation.

[saalweachter]

Which loans are you getting?

My mortgages are all using a fixed repayment plan, where the interest rate, payments, and repayment duration are fixed on day one. If the inflation rate doubled or halved next year, my loan terms won't change and I'd end up repaying less or more money, relatively.

[ianai]

Real estate is not the clear asset you assume it to be. RE gets taxed regardless of whether it produces revenue or not. Ie simply holding RE is costly. Further, RE values rely on externalities and (if the land is improved with buildings) maintence and repair costs. It’s also highly illiquid.