>>>Coby, I think Brad Pitt wouldn't be lonely. -g- <<<
Got to tell you, Mike, m'dear, I don't go for pretty boys, too femme for me. I prefer dominant men.<leer>
As long as I have your attention, are you familiar with a lefty economist, name of Paul Krugman? I have been reading a collection of his short, popular essays, collected in "The Accidental Theorist." I hate to admit that I am persuaded by his arguments re: currency speculation [if a country pegs its currency to an external locus, whether dollar or gold or deutchmark, unless it is able to maintain that peg, it is fair game]. He says that is why the US doesn't keep dollar fixed, it costs too much, and doesn't serve much purpose.
He attempts to debunk gold bugs, as well. This passage bothers me. "The United States abandoned its policy of stabilizing gold prices back in 1971. Since then the price of gold has increased roughly tenfold, while consumer prices have increased about 250 percent. If we had tried to keep the price of gold from rising, this would have required a massive decline in the prices of practically everything else, deflation on a mass scale not seen since the Depression. This doesn't sound like a particularly good idea."
I disagree, deflation sounds like a great idea, but I don't own much in the way of property, other than cash, which probably wouldn't suffer from deflation. On the other hand, if true, then real prices today, pegged to gold, should actually be much lower than nominal prices, right? And if so, doesn't that mean that the stock market isn't as inflated as we think? He quotes Jude Wanniski to show how wrong Wanniski is, but is he? Wanniski says, "First, let us get our accounting unit squared away. To measure anything in the floating paper dollar will get us nowhere. We must convert all wealth to the measure employed by manking for 6,000 years, i.e., ounces of gold. On this measure, the Dow Jones industrial average of 6,000 today is only 60 percent of the DJIA of thirty years ago, when it hit 1,000. Back then, gold was $35 an ounce. Today it is $380 plus. This is another way of saying that in the last 30 years, the people who owned America have lost 40 percent of their wealth held in the form of equity."
I am not qualified to pass judgment on the validity of either argument, but I did find useful the reminder that a dollar's worth of Dow today is different from a dollar's worth of Down ten, twenty, thirty, sixty years ago. To emphasize, I was pumping gas today, premium for the Land Rover, sigh, it was $1.199/gallon but I noted that 36.5 cents was tax, so, as we all know it was cheaper, adjusted for inflation, than it has been in my lifetime, and I am over the hump.
Point being, how do you know that the market prices are inflated? Do you measure in nominal dollars, or adjusted dollars?
Yours, CobaltBlue |
