QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: FermionQuoteMost of the people that are losing their homes wouldn't (and shouldn't) have had those homes in the first place.Humanity generates enough wealth to house the whole planet many times over.Not true. Humanity does not create wealth, humans do. A distinction without a difference.QuoteOnly a fraction of humans generate enough wealth to house the whole planet many times over.Not true. Equating those who expropriate it with those who generate it is false. Even the unemployed contribute to that expropriated wealth by keeping wages down.QuoteThat they don't to share that wealth with people who aren't creating wealth could be viewed as selfish or it could be viewed as avoiding parasites.Exactly. That's why we need to end the expropriation of wealth by those who do not create it (capitalists) from those who do (which means, by the second law of thermodynamics, those who do the work).

QuoteOriginally posted by: Traden4Alpha What are the properties of a "real asset"? And if a "real asset" can lose 99% of its value due to leveraged animal spirits then was it really real? In my Critique of Austrian Economics I write:"Lachmann writes, 'Neo-Ricardian thought appears to be unable to cope with the problem of capital resources which can undergo considerable changes in value while retaining their physical form' (1986, p. 234). Actually, mainstream economists also appear unable to cope with this problem. Any mention of waste automatically gets one shunted off to the growth theorists who happily report back that the physical accumulation of capital is always up, up, up (unless it is getting bombed during wartime) and thus has nothing to do with business cycles. Like the Neo-Ricardians, they are looking at costs of production, not subjective value."The Austrians give lip service to the concept of subjective value but, the reality is, Menger and Mises were the only ones who actually believed in it. And they are both dead. As far as I know, I am the only extant economist of any school who truly believes in subjective value. Modern Austrian do not, as evidenced by this exchange that I had with Robert Murphy: Murphy: “The consumer’s good is always the 1st order, regardless of how far back we push the analysis, even if we go back to axes carved by prehistoric men.”Aguilar: “The perspective that we want is from right now, at time zero, looking forward into the future. Thus, the Distribution of Wealth over the Capital Structure is defined from zero to positive infinity.”Also, see my paper, Gold Does Not Have Intrinsic Value.

I agree that gold does not have intrinsic value. Even though the precious metal has certainly retained its value throughout history, I would assert that historical stability is no proof against future loss of value. (Actually, what I believe is a bit more nuanced then that. The longer that gold retains it's value, then the more likely it will be to retain its value and the more severe the loss if gold ever does lose its luster.)To me nothing encapsulates the fragility of asset prices better than do computers. I've got an old laptop from 1996 that once retailed for $6,000 -- it was a really nice machine in its time. I bought for $20 on eBay a several years ago to enable me to run some old applications that don't run on modern machines. As a productive asset, the machine retains its physical form and 100% of the computational capacities that it had when it left the factory. Yet this asset's current "value" may well be negative because local environmental regulations imply that I would have to pay to have it disposed (I'd wager the Neo-Ricardians can't handle assets that become liabilities, either).The laptop example says something important about gold. That old laptop lost it's value due to substitution and changes in demand. Newer computers have literally 100-300 times more processing power and capacity than that old laptop (even if they boot slower than that old laptop). Computer usage has also changed to encompass new applications (e.g., video and broadband internet) that the old laptop can't handle. So, what would be the value of gold if someone discovered another substance that outperforms gold as a store of value? What would happen if demand changed because culture and fashion turned against the ostentatious display of gold jewelry? Yes, gold serves a purpose, but demand for that purpose and substitutions for gold can surely change gold's value. Old gold could easily become like that old laptop.P.S. Hayek doesn't go far enough with his five stages. If mining is volatile, then mining equipment makers are even more volatile.

QuoteOriginally posted by: Traden4AlphaI agree that gold does not have intrinsic value. Even though the precious metal has certainly retained its value throughout history, I would assert that historical stability is no proof against future loss of value. (Actually, what I believe is a bit more nuanced then that. The longer that gold retains it's value, then the more likely it will be to retain its value and the more severe the loss if gold ever does lose its luster.)To me nothing encapsulates the fragility of asset prices better than do computers. I've got an old laptop from 1996 that once retailed for $6,000 -- it was a really nice machine in its time. I bought for $20 on eBay a several years ago to enable me to run some old applications that don't run on modern machines. As a productive asset, the machine retains its physical form and 100% of the computational capacities that it had when it left the factory. Yet this asset's current "value" may well be negative because local environmental regulations imply that I would have to pay to have it disposed (I'd wager the Neo-Ricardians can't handle assets that become liabilities, either).The laptop example says something important about gold. That old laptop lost it's value due to substitution and changes in demand. Newer computers have literally 100-300 times more processing power and capacity than that old laptop (even if they boot slower than that old laptop). Computer usage has also changed to encompass new applications (e.g., video and broadband internet) that the old laptop can't handle. So, what would be the value of gold if someone discovered another substance that outperforms gold as a store of value? What would happen if demand changed because culture and fashion turned against the ostentatious display of gold jewelry? Yes, gold serves a purpose, but demand for that purpose and substitutions for gold can surely change gold's value. Old gold could easily become like that old laptop.P.S. Hayek doesn't go far enough with his five stages. If mining is volatile, then mining equipment makers are even more volatile.This is a really nice analysis!Can the value and stability of Gold be a behavioral/perception bias? Ancient Africans traded precious metals for clothes, textiles and stuff like that. Precious metals had not intrinsic value for them at the time...Gold has an obvious link with luxury products and demand for those products are always high, even in recessions. Rich people always have money to buy luxury products... But the link between currencies, inflation and gold might be a behavioral bias. Nonetheless, this linkage has worked pretty well in a historical basis.

QuoteOriginally posted by: Traden4Alpha Hayek doesn't go far enough with his five stages. If mining is volatile, then mining equipment makers are even more volatile.See my Comparison of Garrison's and Aguilar's Capital Structure for a graphical comparison of the Austrian and Axiomatic capital structures.Read the first four sections of my Critique of Austrian Economics for a complete description of the Distribution of Wealth over the Capital Structure (DWCS), which I introduced in 2004.

QuoteOriginally posted by: GroznyQuoteOriginally posted by: Traden4Alpha Hayek doesn't go far enough with his five stages. If mining is volatile, then mining equipment makers are even more volatile.See my Comparison of Garrison's and Aguilar's Capital Structure for a graphical comparison of the Austrian and Axiomatic capital structures.Read the first four sections of my Critique of Austrian Economics for a complete description of the Distribution of Wealth over the Capital Structure (DWCS), which I introduced in 2004.Hmmm.... I think I prefer Garrison's model although I don't see how either model says much about "capital structure" as I understand it (i.e., the capital structure of an entity as strategic mixture of debt, equity, and options of various risk specifications and durations)I have no problems with the dual meaning of Garrison's triangle, but I find the triangle inadequate in three regards. First, it fails to distinguish between consumptive and productive goods -- the sale of 1 kilowatt-hour of electricity is very different from the sale of a 1 kilowatt generator in terms of effects on wealth and income (and the volatility structure of the segments). Second, Garrison's triangle fails to elucidate the crucial contra-flow of money from consumer-to-mine (and the loop from each triangle segment back to consumers). This money flow plays a major role in who's wealthy and who's not. Third, the triangle mis-represents the cardinality of constituents such as the fan-out in the tiers of a supply chain -- a single automaker might have 100 major suppliers and each of those suppliers might have dozens of component suppliers. The slimmer segments of the triangle actually contain greater numbers of companies.

QuoteOriginally posted by: Traden4AlphaHmmm.... I think I prefer Garrison's model although I don't see how either model says much about "capital structure" as I understand it (i.e., the capital structure of an entity as strategic mixture of debt, equity, and options of various risk specifications and durations)QuoteOriginally posted by: Grozny Read the first four sections of my Critique of Austrian Economics for a complete description of the Distribution of Wealth over the Capital Structure (DWCS), which I introduced in 2004.Read my Critique, Traden4Alpha. You are not even close to touching on the important difference between my DWCS and Hayek's triangle.

Here are some quotes from Soddy on the nature of money (- the link given by navanit) - see attached document, which is in rich text format and zipped.Soddy is a wordy writer and it's hard to condense the quotes, but you do feel the glow of a real intellect and it would be glorious to see him unleashed in these modern times with all we know and all we face. What would he have made of derivatives I wonder?I think I would have liked him as he really puts the boot in about as much as is possible for a gentleman of that era - this was a long time before Ken Tynan said "fuck" on the telly, or Billy Connolly appeared on Parkinson, the Alternative comedians, Edinburgh Fringe "art" shows bringing S&M to middle class old ladies, etc ... he really goes for the throats of historians, politicians, marxists, goldbugs, but most of all ... bankers. He hates those guys. It's no wonder they didn't give it : "hey freddy, respect for the Nobel, what's this theory of yours then, and how can we help implement it?"Soddy's detailed arguments are quite hard to follow, and there are much easier to decipher descriptions of the "scam of banking" out there (- "what do you mean the money in my deposit account is not actually there?!"); basically, they operate a shell game where the real payoff is the interest on money that doesn't actually exist or if it does, isn't even their money anyway. In the long term this creates an unpayable debt due to compound interest, which is a millstone for all our necks, and an instrument of control for banker-dom.Grozny - you may like to read Soddy for yourself; I am sure you in particular would get something from him. I have noted your axioms (- do they describe how things really are, or how they should be?); to me they do not look strong enough to prove anything interesting - have you derived any powerful theorems? Or have you done any computer simulations of markets/economies; it is the dynamics and the stability diagram which is really important here. If you could show some results which prove, e.g. "if we set up the economy in such-and-such a way, then we can ensure steady growth until finite limits set in, at which time the economy reaches equilibrium in a critically damped manner, and we never have any bubbles, crashes, overshoots ..." - publish a few papers in the right places and maybe people will take notice. Knowing the rules of chess does not make you a chess player. Economics must be a practical science, or should that be art?Traden4Alpha re : my comment about Public Works some time ago (- playing catch-up with the conversation here) - my supplementary was this: right now there are lists going around of "countries in danger of bankruptcy" and Britain is somewhere near the top - if we're going bust anyway, rather than giving the bankers a blank cheque and the blood of the first born for the next three generations, why not spend it on a massive public works programme. If, in the end, we go bust, but have excellent railways, roads, fibre-optic broadband everywhere, a modernised electricity grid that can handle micro-generation and renewables ... we might just have the ability to "work off our debts".To give a local example: Edinburgh being Scotland's main economic hub and Fife it's dormitory, and the fact that the 1960s era road bridge across the Forth is a piece-of-shit with its wires snapping daily, the case for a new bridge is a real no-brainer. The Scottish Government asked for 1 billion from the Treasury and was told to feck-off; they then asked to be allowed to borrow the money against their own future budgets and again were told where to go; the problem here is a lot to do with Westminster v Holyrood and Labour not wanting to give the SNP any potential propaganda victories, but, surely common sense should prevail - the case for it is obvious and will have positive economic impact, it will pay for itself. A public works programme should also be of great interest to all you Flatlanders - any of you living within the Thames Estuary-Aldershot-the Wash triangle should be thinking about flood defences, or if not, then Houseboat Futures.If I drink enough wine later on I shall share with you all a thought experiment about an economy without money. LOL.

QuoteOriginally posted by: GroznyQuoteOriginally posted by: Traden4AlphaHmmm.... I think I prefer Garrison's model although I don't see how either model says much about "capital structure" as I understand it (i.e., the capital structure of an entity as strategic mixture of debt, equity, and options of various risk specifications and durations)QuoteOriginally posted by: Grozny Read the first four sections of my Critique of Austrian Economics for a complete description of the Distribution of Wealth over the Capital Structure (DWCS), which I introduced in 2004.Read my Critique, Traden4Alpha. You are not even close to touching on the important difference between my DWCS and Hayek's triangle.A few comments:First, which-axis-means-what of the Hayek et al triangle shouldn't bother an axiomatic person. But one problem I have with the Hayek's triangle (and I suspect that it applies to your DWCS) is that it is deceptively smooth -- an economist's deductive view of an economy rather than an inductive view of a real production structure. In real product supply chains, some stages have higher or lower returns due to competitive factors, supply/demand imbalances, or multi-industry substitution effects.Second, in a non-equilibrium economy, long-duration production is much riskier than short-duration production. By the time the product is completed, it might be obsolete, overstocked due to economic fluctuations, or found to contain a serious flaw (e.g., contain a substance that was declared dangerous/illegal AFTER the company commenced production). As such, one might expect a higher cost of money for enterprises that take these risks. One of the business trends of recent decades has been a move to lean manufacturing which emphasizes the minimization of stocks relative to flow. Some plants, such as those of Toyota operate with as little as 8 hours of raw materials.Third, although I would agree that valuation is with respect to the future, I also see three significant exceptions to this. First, real humans in real markets don't behave that way. For many types of goods, especially consumer goods, the historical cost of the materials is a crucial determinant of willingness to pay. Cost is taken as both a signal for value and as potential means for displaying wealth (e.g., gold jewelry, mink coats, granite countertops, etc.). With respect to axiom 1, real people often prefer the item with higher costs (within some budgetary constraint). Second, historical cost looms large in the behavior of investors in the form of loss aversion. Investors are extremely reluctant to sell at a loss (i.e., "lock-in the loss"), regardless of the future outlook of the investment. Although this behavior is considered irrational in a world of perfect information, it may be optimal behavior for a mere mortal. Third, the date-of-manufacture does matter for a wide range of goods and includes at least four prevailing patterns in v = f(t): 1) df/dt > 0 (e.g. wine, collectible coins, antiques); 2) df/dt < 0 (e.g., cars, computers, newspapers, fashion apparel); 3) f(t>tmax) = 0 (e.g., foods and pharmaceuticals with expiration dates); 4) d^2f/dt^2 < 0 (e.g, optimally aged products such a white wines, cheeses, house plants).More later if I have time.

QuoteOriginally posted by: Traden4Alpha More later if I have time.Not like your usual technique of looking at the pictures and wiping your ass with the pages that have words on them?Perhaps you could actually read my Critique of Austrian Economics, at least the first four sections where I introduce the Distribution of Wealth over the Capital Structure, before pontificating on an image you saw?As discussed in Section II, Hayek was unclear whether his structure of production represents a yearly flow of goods or a distribution of wealth. Mises and Rothbard, like Hayek, seem to mean one and also the other. Skousen is at least consistent but, unfortunately, he is consistently wrong. He definitely means the amount of goods flowing by every year. This author’s work (1999) is about stock, not supply.As discussed in Section III, Hayek’s triangle is printed sideways and backwards. The former problem can be corrected by rotating the graph but the latter problem is more fundamental. Hayek is speaking from the perspective of the owner of the final product looking back on his costs of production. He is speaking from Marx’s perspective. The perspective that we want is from right now, at time zero, looking forward into the future.As discussed in Section IV, there must be some temporal measure or the Austrian’s incessant references to “lengthening the period of production” would not mean anything at all. Their theory of business cycles depends on credit expansions lengthening the period of production and on the inevitable contraction shortening it. It is impossible to talk about something being lengthened or shortened unless one knows how to measure it.But this is Lazy Dog's thread regarding Soddy, so go comment at my new thread, Serious Problems with Austrian Economics. I don't like people hijacking my threads, and I don't want to do that to Lazy Dog.