Thursday 5 April 2012

Spend Now for a Rainy Day

I was recently accused of not being a saver by a good friend.

Upon reflection I had to conclude that this would indeed appear to be the case to an outside observer.

You see, his definition of savings was accumulating pieces of paper or electronic digits that was is a claim on real goods, and I am not doing this.

Strictly speaking however, savings is the deferred consumption of goods (or services) that could be obtained from renumeration without resorting to loans.

As tangible physical goods go, gold is the ultimate or universal good that embodies deferred consumption. Granted that in it's acquisition one does not accumulate fiat units which hold the promise of future consumption.

Interestingly however at present I am not acquiring gold with my meagre excess and yet still consider myself a saver.

How does one reconcile my expenditure of almost every cent I earn with my conception of myself as saver? The answer is quite simple, being that the key word in my above definition of savings is 'deferred'.

Savings not utilized at some point is wasteful. More rigorously I believe that savings not consumed by myself or another of my choosing is personally wasteful. The latter being one reason why I do not accumulate currency units, as some of that consumption is usurped by others who are not of my choosing.

The second problem with fiat savings of course being that more claims exist than tangible physical goods, even taking into account the period in which such relinquishment of claims is supposed to occur in general society.

I decided to list, for myself, which expenditures I consider to be savings. Gold is obviously first and foremost, however having some glimpse of the shape of things to come, I also view my expenditure on non-perishable foods (which I am not consuming), medical supplies, weaponry, and various related items as savings. Even paying for my studies can be viewed as savings, as I am storing non-tangible knowledge for future use. :P

This then is how one can save by spending every cent you earn. Consider what those fiat claims will represent in future, and acquire them in the present with thought to use as needs may arise.

Spend now for a rainy day. :D

Peace

The Fool

35 comments:

  1. Or, you could save your cash in nickles... ; )

    Here's why: www.coinflation.com

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    Replies
    1. Nah. You can't eat nickels. :P

      If one were to choose a metal to save value in then gold would be (better at) it.

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  2. Replies
    1. Err, good point. :D
      I was thinking weapons and ammunition. I'll go change that.

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    2. I wasn't questioning your spelling.

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    3. Oh, I was just wondering about that.
      In my mind it is a tool to insure future consumption of prior purchases. You can't eat if you are dead. ^^
      Also in dire circumstances it would be a tool for acquiring foodstuffs of the running around nature (bucks for example).

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    4. You disagree? You think I should reclassify in my mind expenditure on weaponry as non-savings?

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    5. Not at all; I am simply questioning expenditure on weaponry at all.
      I have none, and nor will I be purchasing any.
      Just wanted to understand your reasoning.

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    6. If I lived in a different country, I would also reconsider weaponry. As it stands I feel it is a necessary expenditure. When this economic transition occurs, there will be serious challenges for me in that chaos. This expenditure is an attempt at surviving such a transition, which is a necessary precondition for my other savings to be of use.

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  3. Hells Bells Blondie. The man lives in SA.It s dangerous enough there as it is,especially for a white man.Come dollar collaps? What s not to understand?

    Regards
    Ozzy

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    Replies
    1. One hopes for the best, but must prepare for the worst. :)

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  4. Hi MF,
    I appreciate you apology and I am happy that you also considered to "prep" beside just "stacking".
    I'm just tired of that FOFOA folks, arent you also, being surrounded by so many idiots on that trail?
    Anyway, wish you the best,
    Bye (I spare the Greets;) AD

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    Replies
    1. Hi AD

      I like the irony in my chosen moniker.

      I do grow weary, of many things. Suffice to say that I have more appreciation for one who uses ignorance as a tool for betterment, rather than one who persists in shielding theirs. But, I understand that people differ; that most do not thrive on change and the the passage of years makes it harder to change one's ways.

      Old dog..new tricks..and all that jazz.

      Best to you as well.

      TF

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  5. Hi TF and Blondie. I also bought some weapons 2 years ago. They are primarily for hunting, and I´m really hoping I will not have to use them in any other manner... I think working on good relations with your neighbours will be more important for protection than weapons. Up here way in the north hunting is a big thing anyway so it´s actually considered more normal to have hunting weapons than not. Wouldn´t have done it if I hadn´t known what I know though...

    As for saving in electronic blips, I stopped doing that about 4 years ago and it feels great!

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  6. TF,

    I sold an anvil for R2500 I bought 10 years ago for R350. Thats about 22% compound. Was as safe in anvils as gold. A CIAA. Ok well just for that portion :)

    To me the crux of these matters is sovereignty. In a globalized world the sovereignty has fallen to the individual to attain. The reset over the next 10 to 15 years can erode many of our freedoms. There are 2 choices if you find this untenable. Opt out or walk in the footsteps of giants in this as well. Opt out isnt freedom when you start to think about it, so it leaves only one solution.

    Unfortunately the issue of self sovereignty overlaps with concepts espoused by goldbugs, environmentalists [with the emphasis on mentalist] and preppers. You notice I left out hippiedom as that has more to do with avoiding responsibilities and having a free for all and living the high life [which explains much about the hippie founders, generation boomer, leading us into the abyss] As a PGA you can then expect the goldbugs, stackers and preppers to invade your boards and cause mayhem while you seek a measured tone.

    The cornerstones of this sovereignty are dual citizenship, a personal central bank and self sufficiency. Some electronic credits in say CHF, GBP and ZAR and businesses in at least 2 countries or perhaps the internet. A network of friends who are also sovereign individuals would be great.

    I myself have been working on this for a number of years and have a number to go. However by 2018 I hope to have attained all. I wish you good luck!

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  7. This comment has been removed by the author.

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    Replies
    1. I meft a messagon DP's blog, just a link to the dictionary definition of 'intact', he clearly didn't understand what the word meant!

      Let's see what I understand. :-\

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    2. Hi Gary

      Sorry, I haven't checked on my little ole blog in ages...simply because I haven't posted anything. I didn't expect to come back to this many comments. ^^

      I don't mind discussion at all, though I am not one to pick sides. I care about the facts more than the people. Petty drama just doesn't interest me.

      Hope you are well too, and please do continue the discussion if you like.

      Sorry for my (very) late reply.

      Peace

      TF

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  8. Interesting that Blondie (and his little sidekick DP) appear AFTER I had departed don't you think?

    Who's avoiding responding to who here?

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    Replies
    1. While we're on the subject of my comments addressing you, which you choose to ignore ahead of coming here and bad-mouthing me about how I don't stand up and fight you until I think you're gone, here's another prize couple of examples.

      So, where have you been all my life?

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    2. Or there's this, right at my own blog on the post you decided to 'teach me a lesson about dictionary words'.

      So, where have you been all my life?

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  9. If one is concerned about monetary stability - as I know I am - then it just makes sense to hold a combination of physical gold and physical silver, perhaps complemented by other real assets as well. Here in the UK, our debt to GDP ratio is over 500pc, and it does not take a genius to understand that the vast majority of this debt will never be repaid except through currency debasement!

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    Replies
    1. True, though physical silver does not interest me at all, except perhaps as a barter item.

      TF

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    2. I hold both physical silver and physical gold as well. (Most of my wealth is in physical gold though.) I plan on using my physical silver during the "transitioning" stage which might include hyperinflation. However, I plan on using my physical gold after the "gold re-evaluation" stage.

      I could care less what happens to the value of my silver holdings. If silver goes way up and I can swap it for another assets, great. If it goes down and or does nothing, oh well.

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    3. That's essentially the perfect attitude imo. :)

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  10. Hi MF,

    If you want to outline the issue I'll be happy assist if I can.

    Cheers

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  11. Hi MF,

    I assume that Phil is referring to this part of your comment:
    This is not actually a problem in the current system, despite hard money advocates saying so, and me believing them for a while, based on the simplistic argument that total monetary stock is by definition less than future monetary stock due to interest due. The reality of monetary flows is more complex, and the 'lack of existence funds for repayment' argument doesn't hold water.

    And here is Phil's comment:
    Motley Fool Said: "based on the simplistic argument that total monetary stock is by definition less than future monetary stock due to interest due."

    It may be simplistic and it certainly seems straight forward to me.

    In a debt based monetary system where all new money is borrowed into existence how is it that there can be enough money to pay back the debt including interest if the money for the interest had to be borrowed into existence also?

    I am trying to understand your argument that future monetary stock will be sufficient. Perhaps you can give additional details.


    There's been a lot of reading and researching for me since we last discussed this topic. So my response may be different to what I said some time ago. I will upload this comment first to provide a reference and then comment on it.



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  12. Okay, One of the important things here is to differentiate a stock from a flow.

    Interest is paid from the existing money stock which comprises circulating currency (coins and notes), bank reserves held at the central bank, cash held by banks and deposits with banks. All of these components of the money stock are (or should be) demand driven. So they will fluctuate in both directions, increasing or decreasing as required. A currency issuer can inflate the currency by increasing the supply of circulating currency if none of the other circuits are increasing the stock.

    Interest payments are a flow. The same unit of the money stock from, say, your bank account that is used to pay interest flows to the bank account of the lender who is receiving the interest and it can then flow to, say, their landlord's bank account as part of their rent payment. This is no different to a purchase in a retail store. The payment isn't trapped in their POS terminal or Eftpos machine. The money recirculates.

    Now let's speak to the allegation that a debt based monetary system like this requires ever increasing amounts of debt in order to service interest and debt. This can occur if policy permits it or encourages it to happen but it is not automatic. In other words it isn't a design feature of the system. Let's explore one way in which the money stock is reduced automatically in this system.

    At the individual bank level, a bank borrows first and then lends. Within a banking system, comprising multiple banks, the banks lend first and then seek any reserves they require afterwards. These loans in turn create deposits. CB reserve creation, for example, is (bank) demand driven not supply driven as some think. There are papers from the Bundesbank, Fed, ECB and many other sources that confirm that this is how the system in most countries works. (It's sometimes called endogenous money or circuit theory.)

    Now let's look at the implications for the money stock of this loan and deposit circuit. The bank loan is an addition to the money stock that is removed as the loan is repaid. It's a temporary addition not a permanent addition to the money stock provided it is repaid. So there is no inherent bias toward endless expansion of the money stock in a banking system of this type if it is operating correctly just because the money was loaned into existence initially.

    As mentioned above the interest is merely a flow. So it doesn't increase the money stock. It is simply part of the money stock that is circulating via a series of transactions commencing (in this example) with the interest payment.

    Does this give you what you are looking for?

    Cheers

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    Replies
    1. Yes. Thank you.

      I could have attempted a explanation but it would not have been nearly as clearly worded as this.

      How would you like me to proceed? Do you want to make this comment yourself? Do you want me to quote you and attribute it? Or would you prefer I quote without referencing source? Or would you like me to make as if these are my words ( I do not like this option, but will concede if you insist)?

      Delete
  13. I'm happy for you to link it or quote it and mention me as the source if you wish. Giving Phil the link to "a comment at my blog that addresses your questions" might be the best way to handle it. The name is plain to see. If he wants to discuss it here direct message me and I'll be happy to continue the discussion with him.

    I don't want to repost it and raise any expectations that I can't fulfil or rub salt into old wounds. The time and distance from FOFOA's blog has been beneficial in the development of my understanding of several topics. And the blog itself seems to be going strong. So no harm done by my absence.

    Cheers

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    Replies
    1. Thank you, then I will do so. You seem to be doing well, I'm glad. :)

      Ps. Only harm is to the psyche of us left to hold the fort against the usual types of persona's. :P

      Delete
  14. Hi MF,
    “2. Yes, the flow is what matters, but the flow to and from the “saver’s stock”- Aquilus”
    Disagree. All flows matter.


    oh really? ;) starting to get it? ;)
    See, after all that time of reading and studying, I am still trying to figure out, what is the "ask" versus the "bid" price for gold? Is that an appropriate approach towards gold price discovery at all anyway? I am starting to wonder.
    You correctly notice "it is the overall total flow that matters". YES, absolutely.
    What do we know so far for sure?
    We know:
    1.) miners have to sell at a price to survive, today not really that successfully, just at the edge of survival. FOFOA gets into this super-gold-tax, I dont buy into it, that this ensures a stable high price.
    2.) scrap sellers will probably sell at any price anyway, they just want to get rid of grandmas stuff, not knowing anything of gold at all anyway.

    Let's look at (potential) buyers:
    1.) jewelry. Hell, I dont know, I am married but that is so hard to tell a womans mind. I told my wife: Gold is fine, let it have designed whatever you want, just make sure to make it heavy. But last time my wife wanted to have inox stuff IMG!!!
    2.) my personally, I buy, but not right now, I have ~50% portfolio. I dont know what exactly drives my when or what. I tend to buy always whenever I saw my chancellor ;) But I am sure that at multiples of mining costs I would not buy at all anyway.

    Looking at myself, when would I sell? THAT is the most difficult part. I calculated for me personally that when gold hits €10000, I am out with half of my holding to fulfill my file dream: Great Hans Lollik Island with all stuff needed. Yes, probably stupid, but why not having dreams in these boring socialist times.

    So I think to round it up, the overall flow with the resulting price is really really hard to grasp, if I could not realy determine the price for myself.
    Greets, AD

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    Replies
    1. Hi AD

      Your english seems to have deteriorated since last we spoke.

      I do agree with the supertax stuff. It's simple tribal economics. Mass low hanging fruit free profits. Keep for the state or give away?

      As to selling, I would also sell some when the dust has settled. But I am small fry, my few ounces won't make much difference.

      What is of import is that those who produce lots have a store of value. At todays price, gold doesn't work. At a higher price it does.

      Determining what that price is is impossible though. It will be determined by the whole of the human race, in their actions. It is a super-collective 'decision'. And so it is not predictable exactly. We can say it must be an order of magnitude higher than today though, even though accurate assessment is impossible.

      Peace

      TF

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    2. Hi MF,
      (sorry for my english, it was late as you can see and some glasses of wine had also passed...;)

      Let's say you are a miner. Now you have (suddenly) a higher corporate/gain tax, what would you do? Jep, I raise my bonus/salery up to a point, so that the company does not make any profits to tax any longer. Now what? You might react by putting a fixed fee on every ton of gold I extract? Hmmmm, what if I can not get that fee from the free market place? I'll would not dig a single ounce out of the ground, but would rather move to your neighbour country...... see, it's not that easy to tax (which does not mean, that it is impossible, just saying).
      But I see maybe another development: Okay, look at your country. Some monkeys might just nationalize the mines. What would happen than? What is your take? IMHO, chaos&corruption and in the end they wouldnt take a single ounce out of the ground either, no more low hanging fruits for anybody, sounds familiar?

      And what I simply can not get: if even you as a gold "expert" can not tell your personal individual "fair price" of gold, why do you expect that suddenly everybody else would be buying continuiously regardless of the price? But buying also always involves selling: If somebody is buying regardless of price, what is the other side doing? Selling regardless of price? See the paradox situation of golds pricing?

      Greets, AD

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