Simply by the figure cited earlier (Put another way, it would take $110,582.14 of today’s money to buy what $5,000 would have bought in 1913.), and the fact that 8084450.96/110 582.14 = 73.1081073, we still see massive real gains over that period of time. Taxes complicate the equation of course, but obviously you aren’t going to loose all of such an enormous gain to taxes.Deduct inflation from your 8% return, if you can find a reliable CPI index. Now pay taxes on your nominal return of 8%. Will you have any return on your investment?
All goods have their value placed upon them by market forces- gold has no more intrinsic value then a 20 dollars bill.All currencies are fiat money. One fiat currency can increase in value relative to other fiat currencies. No fiat currency has intrinsic value. All fiat currencies are pure fiction and will become worthless.
The facts are simple gold increased and decreased in value during free market trading since the gold stanard was removed. Gold fell from a 1980 peak for 26 years. That is a fact, gold lost value for 26 years. People who purchased gold at the 1980 peak had to wait until 2006 to sell at the price they paid and that is not inflation adjust. Gold buyers lost value In january 1980 gold peaked near $850/ounce by July 1982 it had LOST VALUE to $300/ounce. That is not storing value.What was 20+ years ago? The answer: Bretton Woods. In 1971 when we went off the gold standard gold was no longer used as currency, it was actually made illegal to use as currency.
In order for your argument, that gold is not stable, to be valid, you must refute me in a setting where government interference did not restrict the use of gold as money.
My argument. Gold is stable when used as a currency strictly when government does not intervene.
Let’s suppose that inflation is at its historic average of 3.3% per year since 1913. Many economists think there is strong evidence that the CPI overstates inflation, so I think we can agree that is a reasonable figure to work with. As for taxes, let’s look at a couple of scenarios. First, assume that we pay a 40% tax rate at the end of 96 years. In inflation adjusted terms in this case, the $5,000 grows to an inflation adjusted value of $215,000 over the 96 years. Clearly, we didn’t lose ground in this case. On the other hand, suppose we paid 40% in taxes each and every year on our investment earnings (dividends and capital gains). Here paying the taxes each year leads to a smaller gain to an inflation adjusted value of $20,000. Once again, the value of our wealth went up, not down in inflation adjusted dollars. The real value is probably somewhere between the two because we always defer capital gains taxes until they are realized, but we do pay taxes on dividends.Deduct inflation from your 8% return, if you can find a reliable CPI index. Now pay taxes on your nominal return of 8%. Will you have any return on your investment?
I would love to see the source of your data on this one. Surely you would not be so foolish as to make a generalization like this based on anecdotal evidence. So please give us the citation of a refereed journal article which establishes this claim. Somehow I imagine your answer is going to be along the lines of: “all the Ph.D economists I know are lousy investors so it must be true for all economists.” But if you have a credible source of evidence, I would love to see it.Economists with doctorates make terrible investors. They are too busy working with their economic models to know what is going on in the real world.
Yes, his sales dropping would matter and he should experience a reduction in pay. If he continues to get that amount of money, yet doesn’t perform to his past level which merited the pay, then your company becomes less efficient and thereby easier for competitors to beat.So if he makes 100k that has to be the “*value he contributes”? *And if his pay is raised to $250k then he contributes $250k?? What if sales drop, and profits drop would that matter?
If $0.01 has fantastic buying power, then he would be able to meet most of his basic needs with that amount. I’m pretty sure the catechism doesn’t object.His working for a $0.01 does mean that $0.01 has “fantastic buying power” and would be opposed to the written catechism
I’ve never argued that the US dollar wasn’t valuable as money, so I don’t see what you’re getting at.And that makes it exactly equal to the US dollar which is “universally accepted medium of exchange (which it is), then it has intrinsic value as money” .
Keynes was an excellent investor if I remember correctly although he did lose some of his money in currency speculation. But I cannot image economists being good short-term speculators who are able to discern the meaning of “noise” of daily movements of markets in real time with the tools of technical analysis and gauging market sentiment. It requires a different skill set that is devoid of rational mathematical analysis, but something more that requires human intuition. But I do believe, unlike some popular economics such as Eugene Fama and Burton Malkiel promulgating and efficient market, that it is possible for one to predict price movements using technical analysis.I would love to see the source of your data on this one. Surely you would not be so foolish as to make a generalization like this based on anecdotal evidence. So please give us the citation of a refereed journal article which establishes this claim. Somehow I imagine your answer is going to be along the lines of: “all the Ph.D economists I know are lousy investors so it must be true for all economists.” But if you have a credible source of evidence, I would love to see it.
The claim could be true, but we economists like to verify things before we make claims.
… that whole time had government interference, they were off the gold standard, it was illegal to use gold as currency. Like, i agree with you and the chart, gold was wack, but not because of any free market aspect. it was because gold was not being used as currency, with major government regulations.The facts are simple gold increased and decreased in value during free market trading since the gold stanard was removed. Gold fell from a 1980 peak for 26 years. That is a fact, gold lost value for 26 years. People who purchased gold at the 1980 peak had to wait until 2006 to sell at the price they paid and that is not inflation adjust. Gold buyers lost value In january 1980 gold peaked near $850/ounce by July 1982 it had LOST VALUE to $300/ounce. That is not storing value.
want to do some research? kitco.com/charts/historicalgold.html
his sales? How do you separate the sales of the boss?Yes, his sales dropping would matter and he should experience a reduction in pay. If he continues to get that amount of money, yet doesn’t perform to his past level which merited the pay, then your company becomes less efficient and thereby easier for competitors to beat.
need to create a fantasy land to justify $0.01 ?**If **$0.01 has fantastic buying power,
Only in the newly created fantasy landthen he would be able to meet most of his basic needs with that amount. I’m pretty sure the catechism doesn’t object.
$0.00 opportunity cost exist because the person knows no alternative and that is one of the prime reasons a minimum wage is successful. I never placed the $0.01 wage in fantasy landYou’re trying to frame a scenario in which a person has $0.00 opportunity cost, which would make $0.01 a good wage, but then criticize the wage because it wouldn’t be worth much in the real world.
My posts are consistent $0.01 is horrible wage and inconsistent with the catechism. It would seem you attempted to defend it and then needed a fantasy land condition to justify that defense.You need to be consistent.
I’ve never argued that the US dollar wasn’t valuable as money, so I don’t see what you’re getting at.
“intrinsic value” as a quality that makes something of practical use.You claim that gold has no “intrinsic value”, at least as currency, but you seem to define “intrinsic value” as a quality that makes something of practical use. Having a form of currency that is widely acceptable is very practical as it facilitates all sorts of economic activity that generally raises the quality of life for all. So, gold does have “intrinsic value”.
Do not go into business. Business is about making decisions without all of the data. Perfection is the enemy of good enough. The wrong decision at the right time is more important and better than making the right decision at the wrong time.I would love to see the source of your data on this one. Surely you would not be so foolish as to make a generalization like this based on anecdotal evidence. So please give us the citation of a refereed journal article which establishes this claim. Somehow I imagine your answer is going to be along the lines of: “all the Ph.D economists I know are lousy investors so it must be true for all economists.” But if you have a credible source of evidence, I would love to see it.
The claim could be true, but we economists like to verify things before we make claims.
Clearly, you don’t have the authority to tell someone whether or not they ought to go into business. While one needs to make decisions without perfect data, one has to be smart enough to recognize the difference between good data and bad data. Thinking the lottery is a good investment because two of my neighbors hit the jackpot is making decisions based on bad data, and would be quite imprudent. To generalize from a bad data source is no different from prejudice. Now, if you want to be prejudiced against economists with doctorates that is your prerogative, but if you want to make generalizations about them it really ought to be on the basis of good information.Do not go into business. Business is about making decisions without all of the data. Perfection is the enemy of good enough.
True, some people get lucky. Even though playing the lottery is a bad decision from an expected value point of view, some people do win the jackpot.The wrong decision at the right time is more important and better than making the right decision at the wrong time.
If you ever go to college, you will learn some critical thinking skills, and one of those critical thinking skills is to know that generalizing from anecdotal evidence is a very bad idea. Also, in most colleges of business the economists are a minority of the faculty. The accounting, management and marketing professors are assuredly not economists. Of course, they accuse us economists of being arrogant.My source is a friend, a doctorate in economics, who made that comment. He also told me the entire college of business cannot retire because they lost so much money in the market. He also told me that he is at a loss as what to do in investing. I told him to convert some of his government money into real money!
Actually we don’t assume that credentials equal competence. True, in order to get a job you need a credential, a doctorate from a decent school, but that in and of itself is not enough to land a job at a university. At my university, 95% of resumes that I receive never get a phone call expressing interest in their application. Competence is very important.Government is interested in credentials. Private business is interested in competence. Universities run by the government assume that credentials equals competence. Credentials and competence are not the same. Additionally, schooling is not the same as education.
I have also worked for plenty of those touchy feel management type deans who couldn’t add and subtract. The soft skills are important, but if there is nothing behind them, profits won’t be good.The primary skills in business are qualitative skills like decision making and judgment. One credit manager told me something that I will never forget. He told me that a business is like a family. You teach the boys to be aggressive (salesmen), and you teach the girls to be cautious (credit managers). The trick is to walk the tightrope in between the two extremes. If credit policy is too strict, you lose business. If the credit policy is too loose, you lose your accounts receivable (bad debts). As Kenny Rogers sang, “you got to know when to hold them, and when to fold them.”
Business decisions are still an art form, not a science. Accounting, finance and statistics are tools; however, using these tools without some insight is a sure way to bankruptcy!
I divide people into two different types. First, there are “engineer types (technical experts).” These guys can “plug and chug.” They understand a quantitative process. Second, there are the “touch and feel” types. They understand the qualitative stuff like marketing and management.
The first graduate course that I took was statistics. (It took me 5 ½ hours to complete an exam). The engineers would have the answer before I could find the keys on my calculator. However, the engineers struggled in management class. I laughed.
Clearly there are people who are too heavy on one side or another, but if you can’t understand data, like some of my upper administrators that I deal with, you are likely to make decisions that cost you money in the long run.Good luck in your endeavors in the field of investing.
Keynes did quite well in investing, especially relative to the market as a whole:Keynes was an excellent investor if I remember correctly although he did lose some of his money in currency speculation. But I cannot image economists being good short-term speculators who are able to discern the meaning of “noise” of daily movements of markets in real time with the tools of technical analysis and gauging market sentiment. It requires a different skill set that is devoid of rational mathematical analysis, but something more that requires human intuition. But I do believe, unlike some popular economics such as Eugene Fama and Burton Malkiel promulgating and efficient market, that it is possible for one to predict price movements using technical analysis.
People who want to do something find a way to do it. Those who do not want to do something find an excuse. The first mistake that universities make is in the hiring process. They hire people in similar positions from other universities. They need fresh people from the real business world. The second mistake that they make is pretending that credentials equals competence. It does not. The only way to improve public education is to make it private. The government has a monopoly on education. There are two bad consequences of a monopoly. Costs go up and services go down. Additionally, government-run schools breed arrogance and inflexibility.Clearly, you don’t have the authority to tell someone whether or not they ought to go into business. While one needs to make decisions without perfect data, one has to be smart enough to recognize the difference between good data and bad data. Thinking the lottery is a good investment because two of my neighbors hit the jackpot is making decisions based on bad data, and would be quite imprudent. To generalize from a bad data source is no different from prejudice. Now, if you want to be prejudiced against economists with doctorates that is your prerogative, but if you want to make generalizations about them it really ought to be on the basis of good information.
True, some people get lucky. Even though playing the lottery is a bad decision from an expected value point of view, some people do win the jackpot.
If you ever go to college, you will learn some critical thinking skills, and one of those critical thinking skills is to know that generalizing from anecdotal evidence is a very bad idea. Also, in most colleges of business the economists are a minority of the faculty. The accounting, management and marketing professors are assuredly not economists. Of course, they accuse us economists of being arrogant.
Actually we don’t assume that credentials equal competence. True, in order to get a job you need a credential, a doctorate from a decent school, but that in and of itself is not enough to land a job at a university. At my university, 95% of resumes that I receive never get a phone call expressing interest in their application. Competence is very important.
I have also worked for plenty of those touchy feel management type deans who couldn’t add and subtract. The soft skills are important, but if there is nothing behind them, profits won’t be good.
Clearly there are people who are too heavy on one side or another, but if you can’t understand data, like some of my upper administrators that I deal with, you are likely to make decisions that cost you money in the long run.
I am struggling to follow you, I did work in the College of Business department of Economics, and probably did more statistic than was healthy ( most statistics were outside of economics). I do have a degree in Economics. Is there a question you have on either subject?I see a problem…
Actually, in the case of higher education, the government doesn’t have a monopoly. Government schools compete against private schools. There is somewhat of an advantage for the public schools because of lower tuition, but there is still competition in the market. Also, if you think that higher education does not need Ph.Ds and instead needs people with business experience there is nothing stopping you from starting your own university.People who want to do something find a way to do it. Those who do not want to do something find an excuse. The first mistake that universities make is in the hiring process. They hire people in similar positions from other universities. They need fresh people from the real business world. The second mistake that they make is pretending that credentials equals competence. It does not. The only way to improve public education is to make it private. The government has a monopoly on education. There are two bad consequences of a monopoly. Costs go up and services go down. Additionally, government-run schools breed arrogance and inflexibility.
When you work in government, you always make sure that there is no money left in your department’s accounts. When there was money left in the Department of Economics, the department head would tell me to hit the road and spend some money! It did not matter that I had no work to do. I would camp out for a week in a motel watching T.V.
Leisure Learning at the university was foolish enough to try to save up enough money to buy a new computer lab. The money suddenly disappeared without any explanation. When pressed for an explanation, the university said that they made a “mistake.” However, the money was never returned. Leisure Learning at the university is now wiser. They buy a computer lab one computer at a time.
The same is true at the state level. We voters foolishly voted to increase our license fees for hunting, dedicating the money to wildlife preservation. The state said that the money was in a separate account and could not be used for other state function. That was a lie! The governor took the money when the state had a “financial crisis.” I will never vote for another tax again.
There is no doubt that government can be inefficient. But even some large private firms can be inefficient and bureaucratic as well. When firms become larger the goal of the individual units can differ from the goal of the firm as a whole and that can create problems.I like the idea of continuous improvement. I always think of business as a process. Companies are in the business of eliminating bottlenecks. Government is in the business of creating bottlenecks. However, I never use one measure of performance or one measure of anything.
As the manager of a department, I have to use both quantitative and qualitative measures of performance.Assume that you will be the manager of a department. What is your opinion about performance? What are your feelings? Do you like a performance measure, or do you dislike it? Why? What are your feelings about this? Does all this sound like a quantitative measure of performance? All decisions end up as qualitative guesses.
Who says that quantitative analysis has to be boring?I always receive some criticism concerning my qualitative approach on decision-making, as if it isn’t really a business report. After all, I have an MBA, whatever that means? I am not on the Board of Directors of Wal Mart. I talk to independent retailers who have better things to do than trying to understand a dry, boring business report. The deepest problems always dwell between the two ears of a businessperson. Poor perceptions and bad habits make for poor performance and lack of execution.
I guess private businesses must be stupid, because as an economist with a doctorate I could make much more money in the private sector. Why would they be willing to pay us that much money if we really produce nothing of value? That of course, doesn’t mean I am underpaid as a professor, I freely went into and stay in the university.P.S. The reason that we have economists with doctorates is to make the weathermen look good!