We all did great until 2000. My wife and I were both working steadily; and she was day trading on her spare time. We thought that we would retire millionaires. The Dot Com Meltdown, 9/11, the wars in Iraq and Afghanistan, the Mortgage Bubble, and the Bailouts all cost a lot.

However, the first "Long Recession" 1873-1879 or even 1873-1896 was also America's greatest age of industrial expansion. Prices were falling, but among those prices were wages and agricultural products: factory workers and farmers organized to fight the bankers. William Jennings Bryan's "Cross of Gold" speech July 9, 1896, capped the era. And yet many of us long for that better time of glorious capitalism.

It is always easier to solve someone else's problems. If I had a Ph.D. in chemical engineering and a job at a university, and if money were at zero percent, I would be forming all kinds of companies to invest venture capital in new ideas. Maybe it is harder than it looks...

The tet-a-tet between jbrenner and CircuitGuy though seemingly off track is indeed relevant to the basic subject matter of the original post.

These 19th century banknotes, issued by independent, private banks focused several conceptual problems with "money qua money." Doty's book is about the images, the stories of America and Americans told by the vignettes. The notes themselves as monetary media underlie that.

In some ways, the history of banking parallels the history of physics and calculus. Ancient people had spears and catapults, but no good theory of motion - and none that explained both terrestrial acceleration and planetary orbits So, too, did some men of the Middle Ages borrow and lend money at interest - with some subterfuges because of Christian law - and they kept track with double-entry bookkeeping. As I said earlier, they created abstract money of account (pounds-shillings-pence) to deal with the plethora of local coinages; and yet at great fairs, cleared their books without ever touching coin. But that was not the retail banking that we think is "normal". We learned that from the National Bank Era 1863-1933: money so stable that it falsified Gresham's Conjecture. That model served us until 2000 or so.

When banks failed periodically 1817-1857, people were outraged and incensed. They demanded that the government "do something." Pharmacies could fail. Farms failed. Banks were held to a different standard. You all must know the scene from Mary Poppins where the boy wants his tuppence back and the argument starts a run on the bank. By law, a bank had to pay all demands by the end of the day or be declared bankrupt. Barbershops did not have that problem.

So, here, jbrenner and others want a passive investment that stays ahead of inflation. Even gold is not good enough because it is not "performing well." Every farmer wants a crop that will plant and harvest itself. Inflation is a serious problem. We all know that it comes from the government writing bad checks and everyone else accepting them. As an external problem, inflation is just another kind of hurricane or earthquake.

In the early 19th century when these banknotes were created, banks were engines of local credit. They created circulating media for people who needed to keep track of their incomes and expenditures. Some banks failed right away. Others failed later. A few survived for 20 years or more depending on the success of the village and the acumen of the directors. LOOK AT THE PEOPLE ON THE NOTES. khalling has asked rhetorically (The Bell Curve here in the Gulch http://www.galtsgulchonline.com/posts/ce... ) why America's greatest era of economic expansion took place with so many people of such apparently low intelligence. Let people be free and they will work miracles. That does not mean that even they will understand why. If they had, we would still have laissez faire.

Bonds are a partial store of value. Relative to inflation, you lose about 2-3% per year over the last 100 years or so with bonds. Drip. Drip. Drip. It is a leaky faucet.

I am referring to the national debt. I am completely out of personal debt, but still feel the saddle of the US government. If you work the numbers like I have in other threads, you will see that it works out to about one extra kid (including that kid's college education).

" the difference is that both parents have to work to support what one parent could 40 years ago."
I think this is completely a myth. The ave job provides the same lifestyle as a job 40 years ago. A bad thing about this is we've had so much growth in the form of return on capital, and it hasn't gone to wages. I think it's b/c of automation. I have no solution, and am not sure we should even treat it as a problem to be solved. I think this fact has the potential to drive more support for socialism, which in general is a bad.

"The size of the debt is so high that it is like having a child I didn't father as a dependent."
If you mean national debt I agree. If you mean personal debt, it's the problem of those who signed the note.

"Are you serious about corporate bonds and treasuries, CircuitGuy? I had corporate GM bonds when such bonds had a reasonable rate of return."
In this case I'm not saying to own individual bonds but rather a portfolio of them or a mutual fund that owns a diversified portfolio. Also, I'm not talking about a good rate of return in this scenario. I'm talking about storing value. So in this scenario, I would avoid high yields bonds and anything that requires me to assess broad trends. This is just for storing value.

I agree with all that stuff, though, when the goal is investing. That's my personal situation too. I'm not in a mode of storing value away somewhere. I want growth, through my businesses and things I invest in.

I am aware. However, it's seeing the catastrophe others are suffering that makes me nervous. But one advantage of getting old is that pretty much anything that can be experienced, good or bad, has been experienced and we survived. Like I said, I get nervous -- but not afraid. It's a case of been there, done that (and had that done to me).

I'm not suggesting bitcoin, but something different. There's a lot of negatives to bitcoin, but some things we can learn from it.

Bitcoins can be lost. Just, disappear. Gone, forever. Whoops. Instant deflation. Plus, bitcoins are still being "made". I think there's something in there that they'll stop "making" them at some point, but I'm not sure.

If you are not losing your nest egg, then you are doing better than most.

I have come to be relieved if I don't lose anything. So far, I've been able to keep a constant balance on my accounts, earning just enough to pay back the spending. If, however, some catastrophic expense comes down the road...I will be in deep excrement.

Gold and silver backed currency are not by default the best, but they have proven so throughout history relative to man's effort. Part of the reason for this is that Au and Ag are noble metals (referring to their resistance to corrosion). Bitcoin could be a reasonable alternative, but it has no long term track record.

No, you are quite on topic, Herb. Obama and his banker friends at Goldman Sachs have conspired to steal from all of us. For many years we were told by financial advisors to plan a nest egg such that we could live comfortably by taking 5% of that per year, with the assumption that we would make enough interest on our investments to make that possible. But none of us is making enough on our conservatives investments in the last several years to make that possible. Moreover, with this high a debt, the Federal Reserve bankers cannot raise interest rates and expect anything other than default.

Thank you for answering xthinker88's comment more thoroughly and eloquently than I could have.

Your argument "seems" logical, but the difference is that both parents have to work to support what one parent could 40 years ago. The size of the debt is so high that it is like having a child I didn't father as a dependent.

I am in a pretty enviable position. I could indefinitely survive the financial apocalypse that the last two presidents have besieged us with, but my goal is not to survive, but to thrive.

I probably have too much invested in Au at this point. It is a good investment, but might be a little overvalued right now.

Investment in companies - I stick to mutual funds like Vanguard. I really don't have the time to monitor individual stocks.

In the late 1990s, I did invest in gasoline futures and home heating oil futures. As risky as those are, I did make a killing on them. I'm not sure I have the stomach for that anymore, but I might pursue this path again.

I do have a good job and am 47. We did great financially until about 2000. A couple more years like the late 1990s, and I could have retired at age 40, but my progress toward retirement in the last fourteen years has been pretty slow.

Are you serious about corporate bonds and treasuries, CircuitGuy? I had corporate GM bonds when such bonds had a reasonable rate of return. Now the return on investment is so little as to be barely better than cash.

I have some precious metals. They did fine for awhile, but not so hot recently.

I have some invested in stocks, but right now the market looks like a bubble ready to burst.

Real estate is not a bad buy right now. It would have been better about four years ago, but I didn't really want to go into debt in order to acquire it. I guess I could have gotten a REIT.

Doesn't this confuse a fungible value token with the actual value it is a token for exchanging? It has certainly been the case that actual value existed but the fungible value tokens were inflated or otherwise debased as a fungible means of exchange.

My wife, who has been a photographer, an esthetician and a bookkeeper is now an Avon Lady. Quite successful at it. I am somewhat disabled, so any job that requires standing, or sitting at a desk for hours is not possible. Besides, I'm having so much fun writing articles, reading more than I ever had time for in the past, and being an internet gadfly that I'd hate to give it up. I am exploring things I can do while sitting at my computer, with my comforts surrounding me and my meds not far off. As to counterfeiting, the government has a monopoly on that and they outgun me. I was thinking about starting a new religion, but I'd need a young good-looking front man/woman.

"there really is no good long term store of value at this point. Everything is worthLESS."
There never is a perfect store of value. We could measure value with a basket of goods and services used by consumers and business, but it gets difficult over decades b/c technology replaces human labor and makes difficult things, like having a library of movies at home, easy.

If you do want to store value, you can easily do a conservative portfolio of short- and intermediate term corporate bonds and Treasuries. You can add a little RE, income stocks, and precious metals if you can tolerate the volatility .

The "everything is worthLess" joke is similar to where this discussion with advocates of tight monetary policy ends up. They end up arguing that the basket of goods and services I buy and everything I bill for is actually worth less than it used to be b/c things are generally going to the devil. I tell them, "10 years ago I bought a bottle of pop for $1, and it costs $1.25 in today's dollars." They say, "$1.25 in today's dollars is actually more like $0.75 in 2004 USD. You're getting less value out of that pop, and the bottler is earning less real profit." Saying *everything* has less value sounds suspiciously like some form of depression. I'm not putting those arguments in your mouth; just pointing out "everything is worthless" is a serious argument for many advocates of tight monetary policy.

One more note: I'm not an advocate for tighter or looser policy. I think the Fed Reserve has done a decent job during my adult life (past 20 years or so). I also think automation is creating so much value, that it's hard to quantify.

"Money is a rep"resentative of your stored productive time.
I agree with most of what you say except the hint that money may be a good long-term store of the productive time.
I have to work 5000 hrs to earn the value of my home or the one down the road where I lived as a kid. My parents had to work 5000 hrs to earn that much value too, but the house cost $60k instead of $250k. Because the neighborhood didn't change much in 40 years, a house turned out to store value decently. If you'd put $60k in businesses and RE actively meeting peoples' needs 40 years ago, it would easily be millions. If you'd worked 5000 hours and put the $60k under the mattress, you would have lost the vast majority of it. Money is a medium of exchange that's not completely free to its users. Most of its value is gone in 40 years if left under a mattress.

Thank you for responding. Why is everyone else raising their prices but you?

Intrinsic -> objective and extrinsic -> subjective. Point taken.

However, when you are dealing with matters of economics, you are dealing with matters of value per se. You are dealing with utility. And utility is ALWAYS going to have some subjective portion because it is an evaluation based on that person's judgement of such. That's why business negotiations take place at all: there is a meeting-of-the-minds where each decides at what point they can compromise to maximize the utility to both. Money is not immune to this phenomenon, but the variability and volatility of the utility of money is directly affected by its tie to actual backing. When backing is used, there is an independent standard erected that places a non-arbitrary value on a unit of currency that decreases the volatility and variability of the valuation of the money itself. With a fiat currency, the value of money becomes whatever the issuer says it is - a vague and variable notion!

I understand what you are trying to say in vernacular or colloquial English, but without the correct epistemology you start down a path that leads to a thicket of thorns. There lies the briar patch of bad politics and failed economics. The words _objective_ and _subjective_ allow more precision while avoiding problems.

Consider the standard US Silver Dollar 1878-1935. It contains 0.77344 troy ounces actual silver weight. At today's spot price, it contains about $15.81 in silver. But you would be hard pressed to find a coin store that will sell you one for less than $20 - and a >well worn< one that that. That is a 30% mark-up, at least. It is only because Americans love American silver dollars and are willing to pay more than the "intrinsic" i.e.. _"objective"_ value for them.

"Objective value" means "relative to all the other goods and services on the market right now." (That is what you call "intrinsic.") Subjective value includes patriotism and nostalgia and whatever else that is within the individual.

The reason that I caution against "intrinsic" and "extrinsic" versus "objective" and "subjective" is that those first two words carry a lot of philosophical baggage that led int the past and still leads today to grave errors including failed civic politics and so-called "political economy." To claim intrinsic value is to confuse the metaphysical with the man-made. Mass, energy, wavelength, velocity... those are intrinsic properties of real existents. As standard of action for people, values are objective or subjective.

Thank you, Mike. As usual, I am finding your postings informative and interesting.

Jan