Bonds!

[Eldad]

Blake, do you own a home? You could short the long bond by getting a 30 year mortgage on an owner occupied duplex. I wish I would have done that before I got married. 

[cubsfan]

24 minutes ago, rogermunibond said:

@wabuffo is precisely on to the crux of the matter.  US M2 money supply + Euro dollar market USD M2 equivalent + PBOC dollar supply + JPY dollar supply + any other bit players (SNB, BOI etc) would give us something approximating the total supply of US dollars in global circulation.

 

Not sure if such a figure can be calcuated but global M2 from the four big currency areas is something like $100+T - and US dollars are likely at least half of that if not more.

 

Despite the current administration, the ties that US dollars have with the RoW economies is only growing, not likely shrinking, even if trade shrinks.

 

Awesome post by @wabuffo - always learn a lot from him.

[Red Lion]

58 minutes ago, Eldad said:

Blake, do you own a home? You could short the long bond by getting a 30 year mortgage on an owner occupied duplex. I wish I would have done that before I got married. 

But he's worried about real estate crashing 60%. 

[Red Lion]

7 minutes ago, Ice77 said:

Average US Home prices as measured in Gold ounces (1970-2025)

 

I feel like this is a super interesting chart, and it makes sense since I think both are considered as real asset inflation hedges. Personally I think real estate makes more sense in the long term for a variety of reasons (tax advantages, hopeful cash flow if held for investment, the ability to use it for collateral for long term loans. Certainly not nearly as good as gold if you're on the run, there's insecure rule of law, unreasonable exposure to civil judgments, etc. 

 

I notice a correlation between low levels of real estate vs. gold at times when interest rates were rising /inflation and when they were falling / deflation (GFC). It feels like gold really shines during times of uncertainty, but then often posts lackluster results for long stretches of time. 

 

I know if I had a huge percent in gold I'd be looking to buy properties with it, but I've already got a bunch of properties and not much gold, since I guess I'm a house/land bug not a goldbug. 

[Marco Van Basten]

Does anyone know of an ETF that mimics performance of long term TIPs (Treasury inflation indexed securities) that also has long term options available?  Thank you.

[Cigarbutt]

On 5/19/2025 at 8:51 PM, wabuffo said:

...

It then took a decade (to 2019) of fiscal deficits to repair US domestic household (and business) balance sheets.  Then...

A picture:

Some numbers (% to US gross GDP, note: corporate left aside because of absence of significant change (%-wise) in the last few years):

Q2 2008

households 96.7

gov 35.6

 

Q4 2019

households 73.3 (-23.4 vs Q2 2008)

gov 78.4 (+42.8 vs Q2 2008)

 

now (Q4 2024)

households 67.9 (-28.8 vs Q2 2008)

gov 97.1 (+61.5 vs Q2 2008)

-----

Maybe i'm stuck in old paradigms and pre-birth nostalgia about the post WW2 era (trente glorieuses) when huge (public) debt could be inflated away especially with real GDP way above real growth of said debt and then again maybe i'm stuck in a biased framework (based on medical and legal training) where to repair meant to bring back, as much as possible and, if needed, using the notion of equivalence, to the net state things were before but i seem to see a disproprortionate (and growing imbalance) between private "strength" and public "weakness".

[wabuffo]

but i seem to see a disproportionate (and growing imbalance) between private "strength" and public "weakness".

 

I think you have to purge yourself of several incorrect paradigms:

 

1) Man's earliest economic transactions were never barter transactions. That never happened. From the beginning, they were for credit.  Money is credit. And even more importantly - money has always been created by the state.  Money is and always has been tax-based money.  This is what gives money its value.

 

2) Another problem is that the correct amount of money supply should be based on some metal whose above-ground inventory only grows 1.8% per year.  Why this must be so makes no sense.  If held to this standard, it would tend to result in a rate of deflation at least equal to the rate of economic growth minus the rate of growth of the metal supply, with occasional bouts of more severe deflation occurring with every cyclical increase in the demand for money.

 

3) That the US Treasury still operates under a fixed exchange monetary regime where government borrowing functions to protect central bank reserves and keep the government from defaulting on its legal conversion requirements (often to the shiny metal in the past or to another currency in the present).   In today's current floating exchange monetary regime, government borrowing isn't really borrowing and instead merely serves as a reserve maintenance activity (ie, removing the reserves its spending creates).

 

FWIW.

Edited May 21, 2025 by wabuffo

[Eldad]

1 hour ago, wabuffo said:

but i seem to see a disproportionate (and growing imbalance) between private "strength" and public "weakness".

 

I think you have to purge yourself of several incorrect paradigms:

 

1) Man's earliest economic transactions were never barter transactions. That never happened. From the beginning, they were for credit.  Money is credit. And even more importantly - money has always been created by the state.  Money is and always has been tax-based money.  This is what gives money its value.

 

2) Another problem is that the correct amount of money supply should be based on some metal whose above-ground inventory only grows 1.8% per year.  Why this must be so makes no sense.  If held to this standard, it would tend to result in a rate of deflation at least equal to the rate of economic growth minus the rate of growth of the metal supply, with occasional bouts of more severe deflation occurring with every cyclical increase in the demand for money.

 

3) That the US Treasury still operates under a fixed exchange monetary regime where government borrowing functions to protect central bank reserves and keep the government from defaulting on its legal conversion requirements (often to the shiny metal in the past or to another currency in the present).   In today's current floating exchange monetary regime, government borrowing isn't really borrowing and instead merely serves as a reserve maintenance activity (ie, removing the reserves its spending creates).

 

FWIW.

How can you possibly know that barter was not first? It is prehistoric and therefore not written down. Therefore you don’t know. Obviously the head of a caveman clan was not issuing currency and would take something useful for payment or trade.

 

Money was gold and silver. It did not matter whose face was on it. Early Americans used Spanish, British, French gold and silver. The Greek city states traded in hundreds of different gold and silver issues. The whole world traded in Greek drachma, Byzantine solidus, Venetian ducat, Dutch guilder, British pound, etc. not because they owed taxes to those entities but because their currency was made of gold and silver and it was readily available. It did not matter as long as it was real. I think you are confusing the relatively new phenomenon of paper money (credit) with real money. 

[wabuffo]

How can you possibly know that barter was not first? It is prehistoric and therefore not written down. Therefore you don’t know. Obviously the head of a caveman clan was not issuing currency and would take something useful for payment or trade.

 

Adam Smith made barter up in trying to describe free markets.  He had to because he missed or wanted to downplay the central element which is the role of government policy in the creation of money.

 

Anthropologists have been searching forever to find evidence of barter and it just never existed.*   No less an authority than Caroline Humphrey in her anthropological work on barter came to this conclusion. 

https://www.cambridge.org/core/books/barter-exchange-and-value/942FF724BC55EF5C2E6AF32E29616334

 

More likely a prehistoric farmer borrowed barley seed and promised to pay back the seed plus some grain to his neighbor after the harvest (ie, principal plus interest = credit).   While anthropologists haven't found barter, they've found ample written records of debts and debt collection owed to the emperors and kings.

 

*Read:

"Price of Time" by Edward Chancellor  (Chapter 1 - Babylonian Birth)

"Debt: The First 5000 Years" by David Graeber  ( Chapter 2 - The Myth of Barter)

 

Its this insidious myth of barter being replaced by gold that continues to this day and is why the Austrians get this so wrong.   Without barter, a monetary system without a central role for government in its creation cannot exist.

 

Let me ask you this:

If gold was money, why didn't ancient kings and emperors just not seize the gold mines and have all the money they could possibly need?  What was the point of extracting gold, stamping their picture on it, circulating it among their subjects -- and then demanding that those same subjects give it back again?  Seizing the mines would seem simpler, no?

 

The reason is because all monetary systems are tax-based.  The emperors and kings needed to provision their armies with food, supplies etc.  So they created tax obligations among their subjects, then paid them for the provisions with coins which they mandated as the only thing the subjects could use to extinguish their tax debts.   This gave their coins value and they began to circulate.

 

Twas ever thus.  Money has always been IOUs that circulate - the IOUs of the state/empire/kingdom/etc.

 

Bill

 

 

 

Edited May 21, 2025 by wabuffo

[Eldad]

12 minutes ago, wabuffo said:

How can you possibly know that barter was not first? It is prehistoric and therefore not written down. Therefore you don’t know. Obviously the head of a caveman clan was not issuing currency and would take something useful for payment or trade.

 

Adam Smith made barter up in trying to describe free markets.  He had to because he missed or wanted to downplay the central element which is the role of government policy.

 

Anthropologists have been searching forever to find evidence of barter and it just never existed.*   No less an authority than Caroline Humphrey in her anthropological work on barter came to this conclusion. 

https://www.cambridge.org/core/books/barter-exchange-and-value/942FF724BC55EF5C2E6AF32E29616334

 

More likely a prehistoric farmer borrowed barley seed and promised to pay back the seed plus some grain to his neighbor after the harvest (ie, principal plus interest = credit).

 

*Read:

"Price of Time" by Edward Chancellor  (Chapter 1 - Babylonian Birth)

"Debt: The First 5000 Years" by David Graeber  ( Chapter 2 - The Myth of Barter)

 

Its this insidious myth of barter being replaced by gold that continues to this day and is why the Austrians get this so wrong.

 

Let me ask you this:

If gold was money, why didn't ancient kings and emperors just not seize the gold mines and have all the money they could possibly need?  What was the point of extracting gold, stamping their picture on it, circulating it among their subjects -- and then demanding that those same subjects give it back again?  Seizing the mines would seem simpler, no?

 

The reason is because all monetary systems are tax-based.  The emperors and kings needed to provision their armies with food, supplies etc.  So they created tax obligations among their subjects, then paid them for the provisions with coins which they mandated as the only thing the subjects could use to extinguish their tax debts.   This gave their coins value and they began to circulate.

 

Twas ever thus.

 

Bill

 

 

 

Literally every ancient manuscript on earth mentions payment in livestock prior to widespread gold and silver money. There are some early examples of credit in ancient Mesopotamia but man existed for a long, long time before they even had an agricultural society. Reading Graeber’s book doesn’t get around common sense or all of the other primary sources that mention livestock  and then money.
 

They did take control of the mines. The kings face was placed on it for prestige. The reason they started requiring payment in one type or another is because they started debasing the purity of the coin. 

Edited May 21, 2025 by Eldad

[Gregmal]

They’re “soaring” again lmfao 

[wabuffo]

Literally every ancient manuscript on earth mentions payment in livestock prior to widespread gold and silver money.

 

That payment was for principal and interest, not barter.   I quote Sydney Homer and Robert Sylla (A History of Interest Rate) here:

 

"these were loans of seeds and animals.  These were loans for productive purposes.  The seeds yielded an increase.  At harvest time the seed could conveniently be returned with interest.  Some part or all of the animal's progeny could be returned with the animal"

 

The ancient Greek word for interest is "tokos" which means calf.

Our word capital comes from the latin word "caput", a head of cattle.

 

I could go on (there's lots of similar examples from ancient times) - but I'm sure you get it.   Not barter, credit.  Money is credit, its always an IOU that circulates.

 

Bill

Edited May 21, 2025 by wabuffo

[gfp]

And tally sticks and later the split tally sticks that gave us our word “Stock” that we still use

 

https://en.m.wikipedia.org/wiki/Tally_stick

[Eldad]

6 minutes ago, wabuffo said:

Literally every ancient manuscript on earth mentions payment in livestock prior to widespread gold and silver money.

 

That payment was for principal and interest, not barter.   I quote Sydney Homer and Robert Sylla (A History of Interest Rate) here:

 

"these were loans of seeds and animals.  These were loans for productive purposes.  The seeds yielded an increase.  At harvest time the seed could conveniently be returned with interest.  Some part or all of the animal's progeny could be returned with the animal"

 

The ancient Greek word for interest is "tokos" which means calf.

Our word capital comes from the latin word "caput", a head of cattle.

 

I could go on (there's lots of similar examples from ancient times) - but I'm sure you get it.   Not barter, credit.

 

Bill

So a dowry payment or a tribute payment to a warlord in livestock was a loan?
 

In the Torah when Abraham buys land with livestock he was actually entering into a debt transaction? 

 

Homer quotes values in oxen. The cow being the root of the word capital helps me, not you. 

 

Try to read something besides the NYT historian or economist  provocateur of the month. 

[Eldad]

Your argument: 

1. Money/debt was invented to pay taxes.

 

I showed through my first argument that money was invented to facilitate commerce. Hence people taking any kind of money as long as it was gold or silver or cattle/livestock. Commerce predates governments. Case closed. 
 

2. There never was barter.

 

Although a seed and a cow are sort of like a bond in that you can eat them now or use them to get more in the future, it doesn’t change the fact that people exchanged things (that were not government sponsored money) for other things. Case closed. 

[wabuffo]

I showed through my first argument that money was invented to facilitate commerce.

 

We agree on this money facilitates commerce as a blinding glimpse of the obvious - but you seem to ignore the whole who-invented-the-money part of the equation.   You make assumptions but offer no proof for your "case closed".

 

Why are records of interest being kept by Mesopotamians on clay tablets around 2000-3000 BC older than coined money (which only appeared in the eighth century, BC).

 

Seems to me coined money should've appeared first, then loans and interest record-keeping, but what do I know.

 

Bill

(never been a NY Times reader)

[Eldad]

3 hours ago, wabuffo said:

money has always been created by the state.  Money is and always has been tax-based money.  This is what gives money its value

The state created cows and camels, got it. 

[Eldad]

1 minute ago, wabuffo said:

I showed through my first argument that money was invented to facilitate commerce.

 

We agree on this money facilitates commerce as a blinding glimpse of the obvious - but you seem to ignore the whole who-invented-the-money part of the equation.   You make assumptions but offer no proof for your "case closed".

 

Why are records of interest being kept by Mesopotamians on clay tablets around 2000-3000 BC older than coined money (which only appeared in the eighth century, BC).

 

Seems to me coined money should've appeared first, then loans and interest record-keeping, but what do I know.

 

Bill

(never been a NY Times reader)

The Mesopotanian government kept track of interest or money lenders kept track of interest? 
 

Again, your original argument is money was created by the state and barter never existed. 
 

Your argument then morphed into cows are money/debt. 
 

So if I follow you: cows are money/credit and they were created by the state to pay taxes. 

[Eldad]

2 minutes ago, Eldad said:

The Mesopotanian government kept track of interest or money lenders kept track of interest? 
 

Again, your original argument is money was created by the state and barter never existed. 
 

Your argument then morphed into cows are money/debt. 
 

So if I follow you: cows are money/credit and they were created by the state to pay taxes. 

I’m sorry to get so worked up but the modern proclivity to change the meaning of words and make completely ridiculous statements to sell books really annoys me and is harmful to our having a civilization. 

[james22]

3 hours ago, wabuffo said:

but i seem to see a disproportionate (and growing imbalance) between private "strength" and public "weakness".

 

I think you have to purge yourself of several incorrect paradigms:

 

1) Man's earliest economic transactions were never barter transactions. That never happened. From the beginning, they were for credit.  Money is credit. And even more importantly - money has always been created by the state.  Money is and always has been tax-based money.  This is what gives money its value.

 

. . . debt is a moral sentiment that precedes both law and money. In that sense, it is a social universal.

 

However, methods of *reckoning debt* via units of account (which measure *price*, not “value”, as Graeber claims) had to await the invention of money, which emerged bottom-up as media of exchange in standardized commodity forms (what anthropologists have called “repeatable objects”).

 

The state only got in the business of issuing (and in some cases monopolizing) money many millennia after this process had already been underway in human societies around the world.

 

 

[Cigarbutt]

...

i wonder if, one day, bots will get involved in a constructive manner in order to de-escalate exchanges (of ideas) going in the (what appears to be) wrong direction.

In the meantime, i'll simply reproduce the following:

 

Yes, an online discussion can be viewed as a form of "barter of ideas" because it involves participants exchanging thoughts, opinions, and information with each other. This exchange, like a traditional barter, happens without the direct exchange of physical goods or services, but instead, the value is in the ideas themselves. 

 

Here's a more detailed look at why this is the case: 

 

Exchange of Information:

• Online discussions are platforms where people share knowledge, insights, and different perspectives on a particular topic. This sharing is a form of exchange, similar to how people barter goods or services.
• Learning and Growth:

  Participating in an online discussion can be a valuable learning experience for everyone involved. By listening to and reacting to others' ideas, participants can expand their understanding, refine their own thoughts, and gain new perspectives.
• Building Relationships:

  While online discussions are primarily about exchanging ideas, they can also foster a sense of community and shared interest among participants. This can lead to the formation of relationships and collaborations, which can have further benefits beyond the initial exchange of ideas.
• Diverse Perspectives:

  Online discussions can bring together people from various backgrounds and experiences, leading to a wider range of perspectives and opinions. This can help participants to challenge their own assumptions and broaden their understanding of complex issues.
• Creative Solutions:

  The exchange of ideas in an online discussion can also spark creativity and innovation. By building on each other's thoughts and brainstorming new ideas, participants can come up with innovative solutions to problems or develop new approaches to challenges.

[james22]

 

[Eldad]

6 minutes ago, james22 said:

 

Interesting. My argument that a Spanish merchant would take a Dutch coin based on its gold weight rather than what the Dutch government said it was worth seems like an easier and better way to debunk whatever this state theory of money garbage is. 
 

Adam Smith = the first trade was barter. 
 

Graeber = there was never any barter. 
 

I wonder which will be forgetten in say 5 to 10 years? 

[james22]

4 minutes ago, Eldad said:

I wonder which will be forgetten in say 5 to 10 years? 

 

Graeber who?

[wabuffo]

A YouTube Video that is basically a Bitcoin commercial, kinda surprising that they favor a commodity POV of money.

 

Wasn't expecting that.

 

Bill