22 Mar 2013

The Real Tragedy

Economics, Tyler Cowen 22 Comments

The sadistic von Pepe sends me this Tyler Cowen post:

NGDP in Cyprus

It seems to be falling:

Luscious strawberries – €3.50 a box on Monday – are now €1.45. The prices of other perishables have also plummeted. “People are buying only what they needed.”

No one knows how telephone, water and electricity bills paid monthly on instructions to banks will be settled. No one knows when and if they will be paid their salaries.

In related news, my 8-year-old asked me if we could watch YouTube videos about the formation of black holes. Did you know that when two neutron stars merge, NGDP is precisely zero? Think about it.

22 Responses to “The Real Tragedy”

  1. Silas Barta says:

    Not only that, hourly NGDP is positively correlated with local solar time. Central bankers are going to have to start working after hours to hit those targets!

    • Tel says:

      Bitcoin could be ready to take off.

      Seems like the European banks are determined to give it the base start possible.

      • Tel says:

        Stupid keyboard! s/base/best/

      • guest says:

        Bitcoins aren’t money, people. All you’re doing is guessing at their value.

        Use commodity money, instead.

        • Major_Freedom says:

          One has to make uncertain expectations of value with commodity money as well.

          • guest says:

            No they don’t. The value of commodities comes from its subjective utility.

            If you know that someone derives utility from a commodity, then you know you can trade with him in terms of that commodity. Nothing uncertain about that.

            The values people assign to bitcoins are completely arbitrary. I can do that with anything, so why wouldn’t I choose to trade the dirt under my feet for something (which I, myself, will not accept)? And why wouldn’t someone else accept it as money, if we can just arbitrarily assign value to things.

            • guest says:

              Edit: “The value of money comes from …”

              • guest says:

                Sigh. Ignore that last edit.

                Sorry Bob Murphy.

        • Tel says:

          Money is whatever people decide is money… you get to have your part in the decision, the people of Cyprus who are being robbed at gunpoint get to have their part in the decision, and so do a lot of other people (like the Russian mafia for example).

          The answer does not need to be unique. Commodities of course will always be valuable, and thus always be a type of “money” in someone’s hands. However, different people have different needs, some people may feel that their needs are better served by privacy, deniability, ease of storage, ease of transport and protection against tampering — bitcoin offers those forms of utility. Commodity money does not.

          • Matt Tanous says:

            “some people may feel that their needs are better served by privacy, deniability, ease of storage, ease of transport and protection against tampering — bitcoin offers those forms of utility. Commodity money does not.”

            Commodity money has all those advantages, as well. Perhaps not to the same degree, but they do exist. These reasons are the same reason that many people use cash instead of debit/credit still.

            • guest says:

              Money is whatever people decide is money…

              Yes, and no.

              People can decide amongst themselves which commodity best functions as money, but since the function of money is to store value in terms of that which will be bought later, ONLY commodities will suffice as the money.

              The purpose of trading isn’t to trade for its own sake, or to increase the velocity of trade, but to profit.

              Money makes trading easier because it greatly enables double coincidences of wants, but the trade in money terms must still fulfill wants.

              Money can only do that if it represents the subjective values of individuals. And only something that has utility as a non money can represent those values.

              Arbitrarily deciding that bitcoins (or paper) is worth x amount of goods and services doesn’t allow people to determine profit and loss.

              As we see with our paper money standard, people will choose to pursue projects that seem profitable in terms of paper money; and yet that doesn’t mean that those projects are profitable.

              The reason commodity money works is because someone has already subjectively found utility in it as a non money.

              Tom Woods explains the origin of money in the following video:

              Smashing Myths and Restoring Sound Money | Thomas E. Woods, Jr.

        • Silas Barta says:

          Whatever your hedge, the thing is, you have to move your money into that hedge BEFORE governments do horrible things like raiding your “safe” bank deposits.

          So, plan out whether and how much of your savings should be in gold, bitcoins, etc *now* — because when the confiscation starts to happen, it will be too late — both to get your money out, and to buy gold/bitcoins at any reasonable price.

  2. skylien says:

    And who would have thought that a benevolent democratically elected leader would do something like that:

    “Cypriot president ‘warned his friends to move money abroad’ before financial crisis hit (= before he told the banks to freeze deposits of his voters (and non voters of course)!)”

    In brackets is my addition.


  3. Major_Freedom says:

    Oh the horror of paying lower prices in a context of lower incomes……..while the government confiscated cash from people’s bank accounts.


  4. von Pepe says:

    So, does NGDP going to zero cause the two neutron starts to merge?

  5. MG says:

    Very interesting.

    I am sure you could find more than one Keynsian who would argue that if either or both of the governments of the two neutron stars were spending money as they were merging into a the oblivion of a black hole, there is an identity that could “prove” that the black hole’s GDP was increasing (or at least, that GDP growth was leww negative — in the short-term — than it would have been).

    I am almost sure that a monetarist would also have encouraged the stars’ central banks to prink as much money on the way down as possible.

    And would Bob would have bet that all that liquidity on the way down was going to result in hyperinflation in the parallelel universe into which the black hole would emerge as a white hole.

  6. Tel says:

    Strawberries are pretty easy to grow at home by the way. The common commercial varieties are designed to look big and red, pack well and taste of nothing. If you find some older “heirloom” varieties they are smaller, don’t last well on the shelf, but taste a lot nicer. Some people say you can’t keep growing strawberries from runners because they genetically degrade somehow — that’s total crap, strawberries from runners are perfectly fine.

    • Major_Freedom says:

      “and taste of nothing”

      Holy crap is that ever true.

      I go the grocery store, see a basket of beautiful bright red and large strawberries, pick them up, take them home, cut them up, they’re all white on the inside, taste like mildly sweet tofu, and are hard like honeydew melon.

      Never again. I go to those roadside vendors in the countryside now for my strawberries.

      • The Existential Christian says:

        Yup. I had only ever had strawberries from the grocery store until I bought some at a farmers market one day. It was like a chorus of angels when i popped the first one in my mouth.

        I’m curious if they gas strawberries just like tomatoes…

      • Ken B says:

        I picked them for a summer job once. Never again will I pick them, but you are right about getting them at the field, or at a farmers market. Commercial blackberries are generally pretty good though.

      • Matt Tanous says:

        If you’re lucky, the strawberries grown in California and shipped out to supermarkets in parts of the West are often the very same as are sold at the roadside vendors there. Best strawberries I’ve had in my life, bar none.

        • Dan says:

          Yeah, I live in Los Angeles and I can’t relate to people saying they get tasteless strawberries from the store.

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