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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (44989)	11/7/2005 9:48:53 PM
From: mishedlo	Read Replies (1) \| Respond to of 110194

The Education Gap globaleconomicanalysis.blogspot.com Mish

To: Elroy Jetson who wrote (44989)	11/8/2005 4:10:18 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

Darffot believes that the interest rate, which banks offer on savings in a Monetarist economy, makes up for the losses resulting from chronic currency devaluation. it does, as long as the interest rate exceeds the inflation rate (your "chronic currency devaluation" rate inverted). the only problem is, in a taxable acct, taxation of the interest. however, govts have shown that they will also tax anything else that gains in value without paying interest, such as gold. btw, in your above characterization of my position, i would make the qualification that i do not believe this interest rate necessarily totally "makes up" for real devaluation (when you consider losses to taxes, as well as inaccuracy of measured inflation, etc.). i believe it sometimes more than makes up for it (as in the 1980s and into the 1990s) and other times doesn't begin to (as during the 1% FF rate period recently). however, taken over long periods of time (like a century), it is pretty clear that the US government has maintained a slightly positive real interest rate (0.5%), and COMPLETELY IGNORING this reality (as Ron Paul and other gold hypesters do) is ridiculous. I would prefer a Capitalist economy where the value of the currency is stable and lower nominal interest rates. i would prefer a country not run by an ugly feces-slinging chimpanzee, but you play the hand you're dealt -g-. i'm not trying to say fiat currencies are "best" or the only way to do things, but i wouldn't invest in gold based on a moralistic idea that gold is what governments "should" use for currency.