"The nice thing about USA Today's article title:"Dow above 14,000: Market peak or new leg up" is it's revealed uncertainty about the future condition of the stock market- is it a peak { suggesting a decline from here}, or is it the start of some large move upwards?

This particular articles implied uncertainty about future conditions in the stock market is a good thing... ."
Click to view link

Regards, onebornfree.

David

I thank you for taking the time to consider my comments, and also for your extensive replies.

I will begin by agreeing that I believe we are speaking different languages. For instance, I suggest that each of the shopkeeper and customer is receiving more in value than he is giving; you disagree, and then write a few paragraphs on how each is receiving more value than he is giving. The value is not quantifiable - all very subjective, personal benefits - but value nonetheless, and not measurable. For example:

'The shopkeeper in all likelihood only sees the candy bar as an inventory item.'

So receiving the dollar was more valuable to the shopkeeper that keeping an 'inventory item.'

'The customer sees it as a way to assuage his momentary hunger.'

So assuaging his hunger was more valuable to the customer than was the dollar.

There is value gained here for each of the two - more value is received than given.

Another example of our difference in language: '…even though in itself [the dollar] has no value.'

Please, give me all of your dollars (pounds, in your case) as they have no value. I will pay the postage.

Currency has value; electronic digits in a bank account have value - I will agree, not as much value as might be found in a market-derived money and banking system, but value nonetheless. If these did not, the shopkeeper would not accept these for something he owns (the candy bar) that has value. Every day people are selling real goods for these electronic digits. Are they all dupes? Or do they find value in having the digits?

Even after stating that the dollar has no value you go on to list some aspects of the value of a dollar: 'It serves to bring consummation for both of their desires and enables them to serve one another in the way that is important to each of them. The dollar in other words is the facilitator of an economic exchange and without the dollar the exchange would not take place.'

This has value! How much? Can't be quantified.

You seem focused on equating the transaction price with value - only that which is measureable is to be included in the equation of 'value'. If it is not measureable, it cannot be included in the equation, so it must not have value. Therefore, all value is measureable.

This is faulty reasoning, from an economic standpoint, and is one reason why macro-economics is quackery. Hayek said as much in his Nobel acceptance speech. Quoting Hayek:

'This brings me to the crucial issue. Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable.'

Click to view link

To move on: 'The benefit accruing to society as a whole however by using gold as the currency would be immense.' You have no argument from me on this, although I suggest a fully free market in money, credit, banking and currency would be the most valuable.

'The value is equal for each party to a transaction otherwise the transaction would not take place.'

This is just plain wrong. Why would anyone go through the trouble of doing any economic activity if this was true? You are describing a break-even world, where everyone struggles and no one gets ahead. In a free-market transaction, both parties feel they are better off if they conclude the transaction, else why do it? Read this link, for furtherance of not only my views, but of two others (Faustino Ballvé and Gary North):

Click to view link

I will highly recommend the article by North, which is linked in the above post.

'The assumption is however that the parties have agreed to the exchange and therefore the value of the exchange represented by the number of units of value involved must by definition be equal for each party. This provides us with an objective measure of monetary value.'

You are stuck on the accounting, like a macro-economist. Read Hayek again. Many terribly important aspects of the economy and of any economic transaction cannot be measured. There is value in these un-measurable things. You list some of these, while all the while claiming there is no value to these un-measurable benefits you list.

'So in a monetary system the rule may be that honest weights and measures are essential for the stable functioning of an economy and must be enforced.'

I would say this slightly differently - that money and credit should be subject to free-market discipline.

'It can be asserted axiomatically that every single creation has value no matter how obscure it may be to us. This is objective or intrinsic value.

If it is so objective, why do different people place a different price on the same object?

In any case, I thank you for your time. I think we have each said our view enough times.

@Bionic Mosquito

(Continued from below. Read the comment below first.)

As to whether it is necessary to measure the productivity of an economy I agree that is a moot point. Personally I believe it is much more important to observe faithfully the Law of Honest Weights and measures and in setting a standard for these and enforcing it the role of the government in the economy may come to an end. It rarely does. I should have said that ONE role of the unit of measure of value is to measure the productivity of an economy.

We agree on the question of price discovery and I hope I have made that clear in everything I have written here. The reliability of the unit of measure of value is I believe of importance to the wider society but also to the individual transactions for the reasons I have stated... that it changes the moral behaviour of the society and the individuals involved. This may not be readily obvious but when given some thought it does become clear. In other respects the trustworthiness of the unit of measure of value provides a store of value for the individual and in each individual transaction as a medium of exchange it ensures stability of prices subject only to seasonal variations and other economic factors such as supply and demand.

Finally, in writing everything I have written I have not made any assumptions about what you believe apart from what you have written, to the best of my understanding, which may indeed be faulty. What I have done is try to clarify my own understanding of these things for you, for myself and for anyone else that may be reading this. In other words I may have used your statements and questions as a launching pad but then expatiated on the topic as thoughts came to me with no particular reference to the original statement or question. It has been a worthwhile exercise for me and I hope it has been as helpful for you.

@Bionic Mosquito

Thanks for going to such lengths to explain your point of view. As I said at one point I believe we are talking different languages in many respects. I still believe that to be true. I have not assumed that you are an advocate of fiat currencies. i know you are not. As I said before you are an Austrian economist albeit a layman as you pointed out and as such think that free markets and sound money are essential attributes of a healthy economy. On this at least we agree.

My concern has been to bring to light my own intuitions and conclusions as far as possible based upon my own reading and contemplations of these questions over many years. i haven't thought about them for some time so it has been something of a struggle, both to understand what you are saying and what I want to say. You have placed some weight on the question you posed so I'll answer that.

"A shopkeeper sells a candy bar to a customer for $1. It is clear that the shopkeeper values the $1 more than he does the candy bar, while the customer valuesw the candy bar more than the $1. If not, why would either make the transaction?

My question to you: how much more?"

The shopkeeper in all likelihood only sees the candy bar as an inventory item. The customer sees it as a way to assuage his momentary hunger. The value of the dollar is no greater to the customer at that point than to the shopkeeper and as I have said represents the thing which is of importance to them. The very fact that they reach agreement by doing the transaction indicates that both of their needs are being satisfied and the dollar changing hands represents that fact. The dollar has no more significance than that to either of them.

The value of the dollar to the customer is the degree of his desire for the candy plus the possession of the means to purchase the thing that will assuage it. The value of the dollar to the shopkeeper is the disappearance of another inventory item from his shelves plus the satisfying ring of the cash register that signals to him the continuing existence of his business and thereby his ability to continue paying his bills and supporting his family.

The dollar in other words is transparent and a mere convenience for both of them representing only those things which matter to them. In this sense, paradoxically, it contains all the value of the transaction for both the shopkeeper and the customer even though in itself it has no value. It serves to bring consummation for both of their desires and enables them to serve one another in the way that is important to each of them. The dollar in other words is the facilitator of an economic exchange and without the dollar the exchange would not take place. Its value can therefore best be imagined by its absence just as water is more valuable to a thirsty man when he is wandering in the desert. Did this answer the question? Somehow I doubt it. It does however bring into view perhaps other considerations.

Would the situation differ if the dollar were some specific weight of gold? I imagine that in that case the candy would probably cost a copper penny as it did in 1913, the relationship would remain the same between the shopkeeper and the customer but the importance of the penny would likely be greater to both parties leading perhaps to greater discipline of the desires of the customer and a more deferential attitude of the shopkeeper towards his customer. The benefit accruing to society as a whole however by using gold as the currency would be immense. The use of paper or digital currency can enable the same exchanges but introduces other problems which can overwhelm a society and destroy its moral fabric as has happened over the past one hundred years. This happens because such a monetary system is, as I have stipulated before, unstable, deceptive and immoral inasmuch as it breaks the Law of Honest Weights and Measures.

The unit of measure of the economic activity taking place in any society measures the value of that activity. The value is equal for each party to a transaction otherwise the transaction would not take place. This may be disputed by either party after the fact as often happens but this would be a case for the courts rather than the economist. The assumption is however that the parties have agreed to the exchange and therefore the value of the exchange represented by the number of units of value involved must by definition be equal for each party. This provides us with an objective measure of monetary value.

Rules are not quantitative but they may stipulate measures which are such. So in a monetary system the rule may be that honest weights and measures are essential for the stable functioning of an economy and must be enforced. What the actual weights and measures are can be defined by different societies. At this point it may help if I state what my conclusions thus far are with regard to what I mean by objective and subjective value in generaL. I have mentioned above what I mean by monetary value but this is founded upon the intrinsic value of every thing exchanged in an economy.

The entire world consists of animal vegetable and mineral creations. It can be asserted axiomatically that every single creation has value no matter how obscure it may be to us. This is objective or intrinsic value. Unless this objective value were present then the thing would have no economic value.

As humanity interacts with nature in an economic sense then the natural creations can enter the human economy and be used for many purposes. As these natural creations are acted upon by human beings in order to prepare them for their use and as the products of these actions are exchanged within the human economy they acquire value for each participant in the economy. This is subjective value. As noted above when these subjective values are the objects of exchanges then the result is an objective measure of value expressed in the unit of measure of value of the particular society.

On the evidence of history we know that natural creations have entered the human economy and been transformed by humans for their own purposes at different times and places and that this process can be likened to a voyage of discovery. Different things have been valued at different times for different reasons. Some have come and gone, others have remained and found more uses or different uses, while others fallen out of use for the present and yet others remain to be discovered.

This is the ongoing process of the life of an economy and as such it is self evident that at different times and in different places the subjective monetary values of the economic goods manufactured or otherwise created by humans from the natural creations will vary as will the objective monetary values aggregated from them. In order to measure these changes in value it is necessary for any society to adopt a unit of measure of value that has a constant intrinsic value and which can be given an additional extrinsic value such as weight that will fix its utility as a unit of measure of value to the greatest extent possible.

History has taught us that this unit of measure of value is some defined weight of the mineral gold and as an adjunct some defined weight of the mineral silver. The relative value of these units of measures of value with each other will vary by the action of other economic factors such as supply and demand so it is important not to link them arbitrarily in any way. Otherwise they have proven to be as stable as any other possible unit of measure of value and are therefore trustworthy unless debauched especially by governments to meet their need for money.

(To be continued)

DB, thank you for your patience with this conversation….

DR: One unit of measure of monetary value is the dollar. In order to actually measure value the unit of measure must possess value.

BM: Value cannot be measured, unless you have a solution to the problem I posed earlier. As no one on earth has solved this problem (most economists won't even admit it is a problem; if they did, they would have to admit that macro-economics is quackery), I don't suspect you will.

BTW, in the problem I offered, replace $1 with 1 gram of gold. I will suggest that the answer to my question is no more easily obtainable using gold than using a fiat currency.

DR: Whether economics is a physical science or not it is a field of knowledge that follows rules and requires that these rules be consistent otherwise such knowledge it would be of no practical use.

BM: Economics has rules, just don't expect that they will be as quantitative as you might like.

DR: One of these rules is surely the definition of the means used to measure the productivity of an economy.

BM: whether the productivity of an economy can be measured or not is not terribly important to the two people in the shop transacting for the candy bar. The thing which you want to measure is not measureable - unless you have solved the question that I posed earlier.

DR: [Measuring the productivity of the economy] is the role of the unit of measure of value, the unit of account.

BM: are you suggesting that the reason a unit of measure (or account) was developed was to satisfy the macro-economist's desire to measure the economy? I will suggest you are mistaken. I asked before, I will ask again: go to a shop and ask the shopkeeper 'How much?' while holding up a candy bar. He would have no way to respond without stating it in some unit of measure or account.

Additionally, economic calculation for the entrepreneur is not possible without utilizing a unit of measure (or account). Not a trivial need, I will suggest, and a far more pressing need than that of 'measuring the productivity of the economy.'

DR: To use a unit of measure that has no value and one which is created by a central authority….

BM: I have suspected from the beginning of this dialogue that you are struggling mightily with the words I have typed because you believe that I am an advocate of fiat over gold or free market derived money. This statement confirms my suspicion. You are incorrect in this assumption.

DR: …would ensure that the value of the goods and services being measured could not be measured with confidence…

BM: There is no need to measure with confidence. There is a need to have free market price discovery. This means free market in product and free market in money and credit (but I repeat myself).

DR: If nothing has intrinsic value then the notion of value has no meaning.

BM: Wrong on two counts: 1) if nothing has intrinsic value then the notion of *intrinsic value* has no meaning, 2) the notion of value *does* have meaning, it just isn't quantifiable - unless you are the first in the world to solve the problem I posed earlier (in dollars, pounds, gold grams, or whatever).

DR: If gold has intrinsic properties that make it valuable that means it has intrinsic value.

BM: No, it means it has intrinsic properties that make it valuable. Value, like beauty, is in the eye of the beholder.

DR: While it is true that the value of anything may be subjective it does not exclude the fact that when an exchange takes place there are two parties to the exchange and each has agreed subjectively on the value of the good or service being exchanged. This creates an objective value for that good or service that is fixed at the time of the transaction.

BM: It does not create an objective value; it creates an objective price for that specific transaction. Go back to the question I asked earlier. Do you disagree with the premise that the shopkeeper values the dollar more than he does the candy bar, and the customer values the candy bar more than he does the dollar? If so, please explain why they make the trade.

DR: We must not on that account [the failure to faithfully observe the Law of Honest Weights and Measures] adopt this as the standard by which we determine what a monetary system should be.

BM: another example of your faulty assumption regarding my views of today's monetary system as opposed to gold or a free money system.

Interesting debate. Value vs measurement.

It took about 35 oz of gold to buy a median priced car in the 50's. Today it takes about 21 oz to buy a median priced car. However, today's median priced car offers much more convenience and technology than the one from 1965.

Gold has been historically stable when priced in bread or a fine suit of clothes. For the last 2,000 years, you could exchange 1 oz of gold for about 335 loaves of bread, or one custom, tailored suit.

You cannot say the same for paper script. It is always cheapened through inflationary printing / digits.

Neither one can be good yardsticks when they are being manipulated from above. With central banks the world over competing to cheapen their currencies by flooding the banks with millions and trillions more units, while at the same time holding the lid on gold and silver through naked short sales, both are going to float.

David, I will give a more thorough reply to your comments laþer. In the meantime...

A shopkeeper sells a candy bar to a customer for $1. It is clear that the shopkeeper values the $1 more than he does the candy bar, while the customer valuesw the candy bar more than the $1. If not, why would either make the transaction?

My question to you: how much more? When you can answer this objectively, for every transaction on earth, I will believe that value can be measured. In the meantime, I suggest that economic statistics measure transactions, not value.

@Bionic Mosquito

I have been thinking about this question and will try to make clear the conclusions I have come to thus far which is not always as simple as we would wish.

"A yardstick used to measure economic goods cannot be consistent over time; economics is not a physical science"

One unit of measure of weight is the ounce. In order to actually measure weight the unit of measure must possess weight.

One unit of measure of length is the yard from which we have the word yardstick. In order to actually measure length the unit of measure must possess length.

One unit of measure of volume is the pint. In order to actually measure volume the unit of measure must possess volume.

One unit of measure of monetary value is the dollar. In order to actually measure value the unit of measure must possess value.

This latter definition makes clear that to separate the unit of measure from the unit of value in the case of monetary value as you have done is perhaps a useful abstraction in the first instance but cannot be sustained since the thing being measured is monetary value and the unit of measure must have monetary value and is therefore a unit of value just as an ounce is a unit of weight.

Whether economics is a physical science or not it is a field of knowledge that follows rules and requires that these rules be consistent otherwise such knowledge it would be of no practical use. One of these rules is surely the definition of the means used to measure the productivity of an economy. This is the role of the unit of measure of value, the unit of account. To use a unit of measure that has no value and one which is created by a central authority would ensure that the value of the goods and services being measured could not be measured with confidence and would leave the market price discovery mechanism open to manipulation by those who control the issuance of the unit of measure of value. This is the condition that exists today.

"Nothing has intrinsic value, not even gold. Gold has intrinsic properties that make it valuable, but the value is imputed by each individual consumer, and is subjective."

If nothing has intrinsic value then the notion of value has no meaning. If gold has intrinsic properties that make it valuable that means it has intrinsic value. While it is true that the value of anything may be subjective it does not exclude the fact that when an exchange takes place there are two parties to the exchange and each has agreed subjectively on the value of the good or service being exchanged. This creates an objective value for that good or service that is fixed at the time of the transaction. (In the mouths of two or three witnesses a matter is established.) Most exchanges take place with reference to other exchanges occurring both at the same time and historically. These are all objective values used by the market to arrive at any price at any time.

When these transactions are multiplied by thousands or millions then the value of any commodity can be established over time provided that the unit of measure of value itself is valuable and trustworthy. This process establishes a general sense of the value of any particular good or service that is then held to be standard by any given society. Once a value has been established the actual price of any commodity, good or service may vary within narrow parameters based upon other factors but the value will be constant since price and value are not necessarily identical. This is the point at which we disagree and I can understand why given the history of our monetary system.

This history has demonstrated that it is impossible for human beings to faithfully observe the Law of Honest Weights and Measures just as they are unable to faithfully observe the other tenets of the Law. This lawlessness has given rise to the monetary system we have today which is deceptive and unreliable. We must not on that account adopt this as the standard by which we determine what a monetary system should be.

A yardstick used to measure economic goods cannot be consistent over time; economics is not a physical science.

Nothing has intrinsic value, not even gold. Gold has intrinsic properties that make it valuable, but the value is imputed by each individual consumer, and is subjective.

I have fallen victim to no trick. You believe value is objective. You are mistaken.

@Bionic Mosquito

"You continue to mix up measurement and value. If you inderstood the difference of these two, you would not propose the exchange that you suggest, recognizing it to be not applicable or responsive to my point. "

Let us just say we speak different languages. For me it is impossible to measure anything with a yardstick that cannot be defined objectively and which is consistent over time. That yardstick is by definition a unit of measure. I thought that was the point you were making. It appears that I was wrong.

The unit of measure in the case of the dollar is then used to measure the value of goods and services in the economy. The present Federal Reserve dollar does not meet the requirements of a unit of measure and is therefore incapable of measuring value.

In order to measure the value of goods and services in an economy, in addition to meeting the requirements of a unit of measure the dollar, or any other unit of account, must have an intrinsic value of its own. It is impossible to have an exchange in the market if one of the things being exchanged has no intrinsic value. In the case of the Federal Reserve dollar it uses the force of law to compel acceptance and borrows or steals the value of the thing being bought. It is this transference of value that confers value on the dollar in the mind of the user and constitutes the confidence trick I mentioned.

It appears that this mode of thought is alien to you. It is therefore unlikely that we shall come to any meeting of minds since we do not as I say speak the same language. What you are proposing suggests to me that you have fallen victim to the confidence trick, as have the "elves" at the DB apparently.

It is possible that you have excluded the importance of time in your thinking. The unit of measure must be objectively constant over time. Leaving aside any consideration of value, a specific weight of gold or silver meets this requirement. The Federal Reserve dollar demonstrably does not.

Not buying it. Buying more gold and sleeping like a baby.

1) I can do the same in pounds. Don't let this stop you.

2) You continue to mix up measurement and value. If you inderstood the difference of these two, you would not propose the exchange that you suggest, recognizing it to be not applicable or responsive to my point.

3) Don't concern yourself with my misapprehension. It has served me quite well over the years.

Reply from The Daily Bell

We appreciate BM's "misapprehensions."

@Bionic Mosquito

Of course I live in the UK and so have no dollars with which to take you up on your generous offer. Additionally of course believing as I do I do not keep my pounds in any storage facility exchanging them as quickly as I can for something of more enduring value i.e. silver, the metal at one time used to make the dollar a meaningful yardstick of value.

If I had been in a position to take you up on your offer I would naturally have wished to exchange any current dollars I had for the dollars that consist of a specific amount of silver. I believe these dollars still exist and I would have been happy to exchange my current dollars for these silver dollars on the basis you suggested. Alternately there are many silver dimes circulating I believe in the US and since ten dimes make a dollar and since a dollar is after all a dollar I would have been willing to exchange my current dollars for say 90c in silver dimes thereby providing you with a profit of 10c on each dollar exchanged.

However as I say this is not possible and in any case I would be loathe to take advantage of your misapprehension in this way.

DR: …you would see why I said that the dollar is not an objectively verifiable unit of measure….Therefore it is demonstrably false to say a dollar is always a dollar….why I said that the dollar is not an objectively verifiable unit of measure.

BM: I would say you are confusing units of measure and units of value, but I have said that too many times already. So I will do it your way: Do you have dollars, that when you look at them, do not measure up to other dollars? You are not able to objectively verify that the dollar you are looking at is, in fact, a dollar?

DR: Significantly when Wilson's government was elected in 1964 they inherited a deficit of £800 MILLION. Today the government deficit is running at about £130 BILLION net of any bailout money to the banks. This is a one hundred and sixtyfold increase. Just like the dollar the pound is not a reliable unit of measure.

BM: I take it from the sum of your statements in this and other posts that a) you believe there are many dollars that are not equal to other dollars (despite the labeling being identical), and b) the inequality is biased toward, if not completely in the direction of these unequal dollars measuring up to something less than a dollar.

DR: Surrender acknowledged.

BM: You are correct. I was wrong. As a token of my appreciation for your having taught me a valuable lesson, I will make you the following offer - all the while acknowledging that my offer can never fully repay the illumination you have provided:

I will relieve you of every dollar you own that you believe does not equal a dollar; every dollar that does not 'measure up' to the other dollars (and as you suggest, equals something less than a dollar). Pull them all out of your wallet. Go to the bank and withdraw them. Gather them from your friends and family if you like. Get your neighbors to join in - I am so happy to have learned this from you that I really want to show my appreciation.

Tell me how unequal you think these are - the ones you have deemed unequal. Place a dollar value on these unequal, less-than-dollar dollars. Do they only measure 70 cents? 80 cents? You tell me what you think - how much less than a full dollar do these defective dollars actually measure. I will take your word for it, no questions asked.

I will then buy these defective dollars from you at a price equal distance between your lower measurement and the face value, resulting in profit for you. Don't worry - even if you have dollars that only measure 5 cents, I will accept these as part of the deal.

I offer a 100% satisfaction guarantee: If you are not satisfied with any of the replacement dollars I send, I will continue to replace the dollars you deem defective until you have been satisfied that all of the dollars I have offered are, in fact, dollars - fully equal dollars, each one measuring exactly one dollar.

For clarity and by way of example, if you send me a total of 10,000 dollars that you say measures only 8,000 dollars (in total) send the 10,000 dollars to me and I will send you 9,000 dollars in return - half the difference; a 1,000 profit for you. If you don't like any portion of the 9,000 dollars I sent to you, return these, and I will replace the defective dollars until you are satisfied.

I place no upper limit on the amount of defective dollars you send - my only condition is that these measure short, not long. But since this is the implication of your statements - that they measure short - this should place no hindrance to achieving your complete satisfaction.

No, no, no - please, don't thank me. It is the least I can do after all the work you have done to shed light on this topic.

I await your reply.

"DR: "A dollar is always a dollar." False.

BM: I give up."

Surrender acknowledged. To be fair I was using your own definition to assess your statement. If you had read the entire piece I wrote you would see why I said that the dollar is not an objectively verifiable unit of measure. Therefore it is demonstrably false to say a dollar is always a dollar. This is the very essence of the problems we face with our current monetary system. It is not a minor irritation.

I recall in 1967 the then Prime Minister of the UK, Harold Wilson, made a similar statement about the British pound. This was following a devaluation of the pound and he said: "This does not mean that the pound in your pocket has been devalued". Then as now that was a lie and it was prior to 1971. The opposition leader at the time, Edward Heath, went on television to attack Wilson's move and made one of those patently deceptive assertions beloved of politicians. He said that the Labour party had failed in one of the government's foremost duties - to safeguard the value of the nation's money!

Significantly when Wilson's government was elected in 1964 they inherited a deficit of £800 MILLION. Today the government deficit is running at about £130 BILLION net of any bailout money to the banks. This is a one hundred and sixtyfold increase. Just like the dollar the pound is not a reliable unit of measure.

The government spends a great deal of time and energy covering up the deceptive nature of our monetary system because they know that it depends entirely upon public confidence. In other words the entire system is a confidence trick. The central bankers, their satellite banks and the government are the tricksters and the public are the marks.

DR: "A dollar is always a dollar." False.

BM: I give up.

What If Money Didn't Matter?

What If Money Didn't Matter is an inspirational video narrated by Allan Watts that should make you think about what you really want to do with your life. If money were no object how would you choose to live your life and how would you spend your time? I am a firm believer that if you are really passionate about something you can make a life doing whatever it is you are passionate about. I admire those that have taken the road less traveled to do what they enjoy like Richard of London.


Click to view link

"A unit of measure is always exactly what it is - this is completely objective."

I think this is a useful distinction and is the meaning of the Law of Honest Weights and Measures. The examples you have given touch on the very essence of the problems we face with our monetary system.

"A gallon (of gasoline) is always a gallon (of gasoline)." True, if you mean EITHER the the US gallon or the Imperial gallon which are different measures of volume. (Parenthesis added.)

"An ounce (of gold) is always an ounce (of gold). True, if you mean specifically the Troy ounce which is the traditional measure of weight used for gold. It is 31.1034768 grams. (Parenthesis added.)

"A dollar is always a dollar." False. i assume you mean a fiat US dollar. The fiat dollar, like all fiat currencies is something of an abstraction. Whereas the gallon is a measure of volume and the ounce or gram are measures of weight and can be objectively verified the dollar is a measure of nothing at all. It simply exists like a number that can be used to perform many functions but is tethered to nothing concrete. This is indeed why fiat currencies break the Law of Honest Weights and Measures and are extremely deceptive. They give the impression of being a unit of measure but they represent no objectively verifiable quantity of anything.

The dollar was defined as 371,25 grains (24.1 grams) of pure silver by the 1792 Coinage Act but went through changes during its life as a monetary unit. The problem in my opinion was that the government tried to establish a bimetallic standard using gold and silver and this is self evidently impossible. It is simply another attempt to fix prices and that never works. In any event as long as the dollar could be defined as some specific weight (of silver) it could indeed be said to be a unit of measure inasmuch as it represented a specific weight (of silver).

The current fiat dollar cannot be said to be a unit of measure although it does pretend to be such and is used as a unit of account in the US monetary system. As such it measures the value of the multitude of goods ad services traded in the US economy as the legal tender medium of exchange. This is only possible by the application of force i.e. legal compulsion. The law is used to break the Law.

How this abstract unit of measure of nothing is used to measure the value of everything in the US economy is also a kind of sleight of mind. The value of the dollar is in fact the value of the thing it is valuing. In spite of the fact that in every transaction we expect the thing being exchanged to have some intrinsic value, when we use dollars to purchase any good or service we are actually valuing the dollars used by reference to the thing being purchased rather than any intrinsic value in the dollar itself.

This is particularly evident in real estate transactions when a bank issues an amount of dollars that come into existence as a promise to pay nothing in exchange for a mortgage against real property that is owned by someone other than the purchaser. The only value in the entire transaction rests in the property being purchased which is owned by neither the bank nor the person buying it. The same manoeuvre is used in the field of mergers and acquisitions to buy up entire companies and load the target company down with the debt used to buy it. This is effectively how money is created in a modern economy so it is not surprising we have problems.

Pragmatically one can make an argument for the convenience of using this kind of monetary system but it is inherently unstable because it is founded on a lie and must inevitably fail. It is therefore defrauding everyone using it in some way except of course those who are doing the defrauding. Most people believe their dollars have some intrinsic value and they therefore use them as a store of value. At some point in time this will result in their losing everything because their government has led them to believe that their money is worth something and has tried to reinforce this belief by legislating that their money IS worth something. However the Law is greater than even the most powerful government and will bring judgement to bear upon those who break it.

BM:
"It is irrelevant to measure the Dow over a six year period in units of gold (during a time of unbacked-currency) for the purpose of measuring wealth, which is what David seemed to imply in his first post. "

You are wrong. But, I don't care. Normally, I care to explain, to help, to show why something is or isn't. Not to you. You've said things that to me, place you exactly where my enemies camp out.

Instead of this rant, why don't I simply show where you're wrong, if it is so obvious to me? The rant explains why. Because, then you'd understand.

So, there it is, you win, my friend. I will not post a way of how to show that gold is the only way to measure the dow in the six year period since 2007 for the purpose of measuring wealth. I'll just leave it hanging, for the folks who do understand to simply laughter their ass off reading your naivete.

With interest-rates so low and real inflation higher than official claims (and w/incomes diminished by higher taxes)... is it any surprise people have been willing to disregard risk and chase stocks higher?