Fixing the Economy

[swestrup]

The Problem:

1. Money is just Imaginary Gold.
2. Stocks are just Imaginary Money.
3. People imagine that Stocks are worth less now.

Solution:

• Stop doing that!
  

Comments

[sps.livejournal.com]

Also,

0. Gold has Imaginary Value.

It's useful for pretties, windscreens and electrical connectors. Putting it in a locked room in your basement? Not so productive!

[cloquewerk.livejournal.com]

Also,

1.1 Money isn't tied directly to gold since the Nixon Shock of '71 when the US abandoned Bretton Woods.

[lasher.livejournal.com]

I see where you a coming from... and even have pondered similar concepts about the market.

However, I did not imagine that had 169,000 in real money and now I have only 70,841. A net loss of 98,418. I did not imagine that that my money is worth less. There is less of it. And if you were to counter that it's only a "paper loss" because the value of the stock will change again. Well, that may be true for 43,488 of that "loss" since I still own the stocks associated with the original investment. But, it could still end up being at zero instead of going up in "perceived value" again.

However, 59430 is a tangible loss since I had to sell the actual stock (to preserve the last tiny bit of real money it had left) and take an actual loss when about 20 class action lawsuits were filed against the fund and its managers for purposely misleading investors in this stock as to its concentration of certain other stocks.

So, even if I followed your #3, it doesn't bring back the real money that is now gone.

Just something to ponder :)

[lasher.livejournal.com]

And I rounded numbers... which is why they don't exactly add up

Re: Fixing the Economy

[capj.livejournal.com]

The problem is due to inflation, not imagination; there is something real going on, and that is signals in the control theory sense: when the wave of credit (additional money supply) that is added by the central bank(s) in the form of low-interest loans has diffused through the economy, prices are finished being increased everywhere (the time-delay element during which the fake prosperity is felt) and people get the signal that they don't really have so much money, and start saving and selling their stocks. Panic then makes it worse, and there is a bust. This is positive (reinforcing) feedback: first people get the signal that they have ever more money, and there is a boom; the bust is self-reinforcing due to the decline in prices due to selling. A Gold standard would prevent this because its supply only increases gradually; it has to be dug out of the ground and refined; it would prevent the money supply from being arbitrarily increased by the simple (but obfuscated) process of declaring a bigger number in a spreadsheet.
An analogy to imagination would be an old boner that I pulled on a Physics test. I wrote that refraction is phenomenon due to human psychology due to the eye perceiving the light rays coming from a different direction. Quite rightly, I received a big, red "X" through the "human psychology" part. The point is that the signal has been changed in reality.
I've made a few writeups about this over on my own journal.

Apr 17 "Dilbert" Re: Fixing the Economy

[capj.livejournal.com]

http://www.dilbert.com/2009-04-17/ - I might take an aspirin and cause you all to go away...