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deflation; some questions
Tweet Topic Started: Nov 12 2008, 06:11 AM (557 Views)
Mr Gray Nov 13 2008, 02:35 PM Post #31
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eelbor
Nov 13 2008, 12:56 PM
So, if the piece of tourmaline rough I paid roughly $40 dollars for and sawing a few bits of it off and polishing a few windows in it making it wortha few hundred is not creating wealth, I am lost here.

Where did the new value come from?
Ok, you buy it for $40 and now it is "worth" $200. Where is that $200 going to come from? Just give me a hypothetical if you want.
Posted Image
The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism.
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eelbor Nov 13 2008, 03:21 PM Post #32
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Nov 13 2008, 02:35 PM
eelbor
Nov 13 2008, 12:56 PM
So, if the piece of tourmaline rough I paid roughly $40 dollars for and sawing a few bits of it off and polishing a few windows in it making it wortha few hundred is not creating wealth, I am lost here.

Where did the new value come from?
Ok, you buy it for $40 and now it is "worth" $200. Where is that $200 going to come from? Just give me a hypothetical if you want.
Define wealth for me. It is a just rock, but scarcity gives it an inherent value. The value is added by the craftsmanship, and the rarity. The amount of wealth in the world increases, it is not static. You do not seriously think that a Rembrandt is only "worth" the cost of the paint do you? If it is worth more than the cost of the paint and there is a 'fixed' amount of wealth as you suggest, then everything else on the planet is now worth less.
Posted Image

"Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed


Meat is Murder. Sweet, delicious murder.
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Mr Gray Nov 13 2008, 03:31 PM Post #33
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Nov 13 2008, 03:21 PM
aaronk2727
Nov 13 2008, 02:35 PM
eelbor
Nov 13 2008, 12:56 PM
So, if the piece of tourmaline rough I paid roughly $40 dollars for and sawing a few bits of it off and polishing a few windows in it making it wortha few hundred is not creating wealth, I am lost here.

Where did the new value come from?
Ok, you buy it for $40 and now it is "worth" $200. Where is that $200 going to come from? Just give me a hypothetical if you want.
Define wealth for me. It is a just rock, but scarcity gives it an inherent value. The value is added by the craftsmanship, and the rarity. The amount of wealth in the world increases, it is not static. You do not seriously think that a Rembrandt is only "worth" the cost of the paint do you? If it is worth more than the cost of the paint and there is a 'fixed' amount of wealth as you suggest, then everything else on the planet is now worth less.
it is only "worth" what someone will pay for it. If your rocks fetch you $200 after you fix them up, that $200 has to be transferred away from someone or something else.....anything else is a physical impossibility.

When you bought them for $40, you increased someone else's "cash wealth" by $40 cash, decreased his "capital wealth" by $40, and did the inverse to yourself. When you sell it for $200, you increase your "cash wealth" by $200, decrease your 'capital wealth" by $40, therfore increasing your personal net wealth by $160. That $160 is offset in the market by the decrease of the thousands or millions (or whatever) rocks out there in the market that just decreased in value because you increased supply. Example: if there are only 100 other rocks out there like yours, and you made $160 on yours when you fixed them up, everybody else's rocks decreased by $1.60 because of your increased supply.

It's really a lot more simple that you guys are making it out to be.
Edited by Mr Gray, Nov 13 2008, 03:35 PM.
Posted Image
The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism.
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HoosierLars Nov 13 2008, 03:52 PM Post #34
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aaronk2727
Nov 13 2008, 03:31 PM
eelbor
Nov 13 2008, 03:21 PM
aaronk2727
Nov 13 2008, 02:35 PM
eelbor
Nov 13 2008, 12:56 PM
So, if the piece of tourmaline rough I paid roughly $40 dollars for and sawing a few bits of it off and polishing a few windows in it making it wortha few hundred is not creating wealth, I am lost here.

Where did the new value come from?
Ok, you buy it for $40 and now it is "worth" $200. Where is that $200 going to come from? Just give me a hypothetical if you want.
Define wealth for me. It is a just rock, but scarcity gives it an inherent value. The value is added by the craftsmanship, and the rarity. The amount of wealth in the world increases, it is not static. You do not seriously think that a Rembrandt is only "worth" the cost of the paint do you? If it is worth more than the cost of the paint and there is a 'fixed' amount of wealth as you suggest, then everything else on the planet is now worth less.
it is only "worth" what someone will pay for it. If your rocks fetch you $200 after you fix them up, that $200 has to be transferred away from someone or something else.....anything else is a physical impossibility.

When you bought them for $40, you increased someone else's "cash wealth" by $40 cash, decreased his "capital wealth" by $40, and did the inverse to yourself. When you sell it for $200, you increase your "cash wealth" by $200, decrease your 'capital wealth" by $40, therfore increasing your personal net wealth by $160. That $160 is offset in the market by the decrease of the thousands or millions (or whatever) rocks out there in the market that just decreased in value because you increased supply. Example: if there are only 100 other rocks out there like yours, and you made $160 on yours when you fixed them up, everybody else's rocks decreased by $1.60 because of your increased supply.

It's really a lot more simple that you guys are making it out to be.
Wow Aaron, with all due respect, that is some pretty fucked up logic and reasoning.
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eelbor Nov 13 2008, 03:58 PM Post #35
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Nov 13 2008, 03:31 PM
eelbor
Nov 13 2008, 03:21 PM
aaronk2727
Nov 13 2008, 02:35 PM
eelbor
Nov 13 2008, 12:56 PM
So, if the piece of tourmaline rough I paid roughly $40 dollars for and sawing a few bits of it off and polishing a few windows in it making it wortha few hundred is not creating wealth, I am lost here.

Where did the new value come from?
Ok, you buy it for $40 and now it is "worth" $200. Where is that $200 going to come from? Just give me a hypothetical if you want.
Define wealth for me. It is a just rock, but scarcity gives it an inherent value. The value is added by the craftsmanship, and the rarity. The amount of wealth in the world increases, it is not static. You do not seriously think that a Rembrandt is only "worth" the cost of the paint do you? If it is worth more than the cost of the paint and there is a 'fixed' amount of wealth as you suggest, then everything else on the planet is now worth less.
it is only "worth" what someone will pay for it. If your rocks fetch you $200 after you fix them up, that $200 has to be transferred away from someone or something else.....anything else is a physical impossibility.
You have a rather Marxist view for a conservative. So the rich are getting richer by stealing from the workers, because obviously there is only a fixed amount of wealth in the world? Tell me this, if there is a fixed amount of wealth why are the poor in rich countries getting less poor and at the same time the poor in poor countries are getting less poor? The wealth has to come from somewhere. If as you claim there is only X amount of wealth in the world, what happens when you drop a nuke on New York City? Is there still as much wealth there, or has it been destroyed? If wealth cannot be created, it cannot be destroyed. If it is a fixed amount, did everything else on the planet just became worth more? In my opinion, there is somewhat of a balance between wealth being created and wealth being destroyed. We grow crops, we bake bread, we eat bread, etc...

Ideas add to wealth also. If you find a cheaper way to get aluminum out of the ground and processed and share it with the world the price of aluminum will drop. If wealth were fixed the price should remain the same, there is only so much aluminum on the planet. Or is it now Aluminum is not worth as much, so boiled fish gut sauce from Thailand is now worth more. Why would the Fish gut sauce be worth more, because you found a cheaper way to mine and smelt aluminum?

The fixed amount of wealth fallacy is as old as the come.
Posted Image

"Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed


Meat is Murder. Sweet, delicious murder.
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Mr Gray Nov 13 2008, 04:01 PM Post #36
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Nov 13 2008, 03:52 PM
aaronk2727
Nov 13 2008, 03:31 PM
eelbor
Nov 13 2008, 03:21 PM
aaronk2727
Nov 13 2008, 02:35 PM
eelbor
Nov 13 2008, 12:56 PM
So, if the piece of tourmaline rough I paid roughly $40 dollars for and sawing a few bits of it off and polishing a few windows in it making it wortha few hundred is not creating wealth, I am lost here.

Where did the new value come from?
Ok, you buy it for $40 and now it is "worth" $200. Where is that $200 going to come from? Just give me a hypothetical if you want.
Define wealth for me. It is a just rock, but scarcity gives it an inherent value. The value is added by the craftsmanship, and the rarity. The amount of wealth in the world increases, it is not static. You do not seriously think that a Rembrandt is only "worth" the cost of the paint do you? If it is worth more than the cost of the paint and there is a 'fixed' amount of wealth as you suggest, then everything else on the planet is now worth less.
it is only "worth" what someone will pay for it. If your rocks fetch you $200 after you fix them up, that $200 has to be transferred away from someone or something else.....anything else is a physical impossibility.

When you bought them for $40, you increased someone else's "cash wealth" by $40 cash, decreased his "capital wealth" by $40, and did the inverse to yourself. When you sell it for $200, you increase your "cash wealth" by $200, decrease your 'capital wealth" by $40, therfore increasing your personal net wealth by $160. That $160 is offset in the market by the decrease of the thousands or millions (or whatever) rocks out there in the market that just decreased in value because you increased supply. Example: if there are only 100 other rocks out there like yours, and you made $160 on yours when you fixed them up, everybody else's rocks decreased by $1.60 because of your increased supply.

It's really a lot more simple that you guys are making it out to be.
Wow Aaron, with all due respect, that is some pretty fucked up logic and reasoning.
please lars.....show me the error
Posted Image
The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism.
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Mr Gray Nov 13 2008, 04:08 PM Post #37
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Nov 13 2008, 03:58 PM
If as you claim there is only X amount of wealth in the world, what happens when you drop a nuke on New York City? Is there still as much wealth there, or has it been destroyed? If wealth cannot be created, it cannot be destroyed. If it is a fixed amount, did everything else on the planet just became worth more?
BINGO. I'll address your other questions in a bit, but this hits at the heart of my explanation.

Yes, if NY gets nuked, everything else goes up in value. If the currency (dollar bills...etc) gets burnt up in the explosion, everybody else's dollar bills become worth a little bit more. When the reserve replaces those bills by printing more, the value returns to the original. Also, other real estate immidiately becomes more value, but in this case it doesn't affect everyone's real estate, mostly likely just those in relatively short geographic proximity to those that were nuked. All of a sudden office space and apartments in Jersey go up in value, because supply for their area has just been cut. Labor goes up in value in that area as well, because the supply of available labor has just been decreased.

The "wealth" wasn't destroyed, it was transferred. Does that make sense?
Posted Image
The body knows what fighters don't: how to protect itself. A neck can only twist so far. Twist it just a hair more and the body says, "Hey, I'll take it from here because you obviously don't know what you're doing... Lie down now, rest, and we'll talk about this when you regain your senses." It's called the knockout mechanism.
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eelbor Nov 13 2008, 04:12 PM Post #38
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Nov 13 2008, 04:08 PM
eelbor
Nov 13 2008, 03:58 PM
If as you claim there is only X amount of wealth in the world, what happens when you drop a nuke on New York City? Is there still as much wealth there, or has it been destroyed? If wealth cannot be created, it cannot be destroyed. If it is a fixed amount, did everything else on the planet just became worth more?
BINGO. I'll address your other questions in a bit, but this hits at the heart of my explanation.

Yes, if NY gets nuked, everything else goes up in value. If the currency (dollar bills...etc) gets burnt up in the explosion, everybody else's dollar bills become worth a little bit more. When the reserve replaces those bills by printing more, the value returns to the original. Also, other real estate immidiately becomes more value, but in this case it doesn't affect everyone's real estate, mostly likely just those in relatively short geographic proximity to those that were nuked. All of a sudden office space and apartments in Jersey go up in value, because supply for their area has just been cut. Labor goes up in value in that area as well, because the supply of available labor has just been decreased.

The "wealth" wasn't destroyed, it was transferred. Does that make sense?
Dude, you are a borderline communist/socialist. How can you believe in capitalism with such erroneous thinking?
Posted Image

"Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed


Meat is Murder. Sweet, delicious murder.
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HoosierLars Nov 13 2008, 04:16 PM Post #39
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aaronk2727
Nov 13 2008, 03:31 PM
eelbor
Nov 13 2008, 03:21 PM
aaronk2727
Nov 13 2008, 02:35 PM
eelbor
Nov 13 2008, 12:56 PM
So, if the piece of tourmaline rough I paid roughly $40 dollars for and sawing a few bits of it off and polishing a few windows in it making it wortha few hundred is not creating wealth, I am lost here.

Where did the new value come from?
Ok, you buy it for $40 and now it is "worth" $200. Where is that $200 going to come from? Just give me a hypothetical if you want.
Define wealth for me. It is a just rock, but scarcity gives it an inherent value. The value is added by the craftsmanship, and the rarity. The amount of wealth in the world increases, it is not static. You do not seriously think that a Rembrandt is only "worth" the cost of the paint do you? If it is worth more than the cost of the paint and there is a 'fixed' amount of wealth as you suggest, then everything else on the planet is now worth less.
it is only "worth" what someone will pay for it. If your rocks fetch you $200 after you fix them up, that $200 has to be transferred away from someone or something else.....anything else is a physical impossibility.

When you bought them for $40, you increased someone else's "cash wealth" by $40 cash, decreased his "capital wealth" by $40, and did the inverse to yourself. When you sell it for $200, you increase your "cash wealth" by $200, decrease your 'capital wealth" by $40, therfore increasing your personal net wealth by $160. That $160 is offset in the market by the decrease of the thousands or millions (or whatever) rocks out there in the market that just decreased in value because you increased supply. Example: if there are only 100 other rocks out there like yours, and you made $160 on yours when you fixed them up, everybody else's rocks decreased by $1.60 because of your increased supply.

It's really a lot more simple that you guys are making it out to be.
Wow Aaron, with all due respect, that is some pretty fucked up logic and reasoning.
please lars.....show me the error
It looks like I agree with Eel, and think he made some very good points. I think you have somehow gotten hung up on paper money, and that has damaged your understanding of wealth. I'll leave it for the others here to help figure out this impasse. Maybe oldSchool or Brum can shed some light.
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HoosierLars Nov 13 2008, 04:16 PM Post #40
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Nov 13 2008, 04:08 PM
eelbor
Nov 13 2008, 03:58 PM
If as you claim there is only X amount of wealth in the world, what happens when you drop a nuke on New York City? Is there still as much wealth there, or has it been destroyed? If wealth cannot be created, it cannot be destroyed. If it is a fixed amount, did everything else on the planet just became worth more?
BINGO. I'll address your other questions in a bit, but this hits at the heart of my explanation.

Yes, if NY gets nuked, everything else goes up in value. If the currency (dollar bills...etc) gets burnt up in the explosion, everybody else's dollar bills become worth a little bit more. When the reserve replaces those bills by printing more, the value returns to the original. Also, other real estate immidiately becomes more value, but in this case it doesn't affect everyone's real estate, mostly likely just those in relatively short geographic proximity to those that were nuked. All of a sudden office space and apartments in Jersey go up in value, because supply for their area has just been cut. Labor goes up in value in that area as well, because the supply of available labor has just been decreased.

The "wealth" wasn't destroyed, it was transferred. Does that make sense?
Dude, you are a borderline communist/socialist. How can you believe in capitalism with such erroneous thinking?
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eelbor Nov 13 2008, 04:18 PM Post #41
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Old School, I see you lurking there. Care to weigh in?
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"Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed


Meat is Murder. Sweet, delicious murder.
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eelbor Nov 13 2008, 04:28 PM Post #42
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I will have one more go at this. If all of mankind were to die tomorrow, would there be any wealth left? There are no longer any buyers or sellers. You can assume for the moment there are no known aliens.
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"Liberal, shmiberal. That should be a new word. Shmiberal: one who is assumed liberal, just because he's a professional whiner in the newspaper. If you'll read the subtext for many of those old strips, you'll find the heart of an old-fashioned Libertarian. And I'd be a Libertarian, if they weren't all a bunch of tax-dodging professional whiners." - Berkeley Breathed


Meat is Murder. Sweet, delicious murder.
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Old_School Nov 13 2008, 04:32 PM Post #43
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Nov 13 2008, 04:18 PM
Old School, I see you lurking there. Care to weigh in?
I'm most definitely lurking. Unfortunately, I'm working on a project that has to be finished by 5:30, so I don't have time to weigh in. My lurking status generally consists of me working on the project and while occasionally checking back in here. I'll be back later tonight to add my two cents.
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HoosierLars Nov 13 2008, 05:20 PM Post #44
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I will have one more go at this. If all of mankind were to die tomorrow, would there be any wealth left? There are no longer any buyers or sellers. You can assume for the moment there are no known aliens.
Ok, I'll try some more too...

In an earlier post, I stated that wealth is increased as more gold is mined from the earth. I also stated that Intel increases global wealth when it turns some sand into a Pentium chip. Aaron, you banged your head when I raised these examples. Why?

Most of gold's perceived value comes from the fact it's pretty and is good for jewelry. This reminds me of Eel's Rembrandt example where something has great value due to its rarity and perceived value.
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yawnzzz Nov 13 2008, 06:57 PM Post #45
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Aaron, I'll give you a better example in my profession. Since I deal in software development, the logic in my mind never had a tangible value to it. After writing a program, a business is now able to increase their productivity. All of their employees that had to manage their business practices now can be used to create their product. Their costs haven't changed, but yet more product is being produced. How is that not a growth in wealth?
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