Update - Just realized I just fed a troll. Moving on!
Whoa! Hold on there cowboy!
What have we told you about sweeping generalizations??!!
Not every person in India wakes up every morning to fix social issues. They wake up every morning to go to work, feed their families and you know..do what you and I do - when we turn the other way to the glaring poverty and injustice that is visible in our communities.
India, Pessimism, Chailatte... jolly good combination. Spineless, apathy, unfeeling....it is like filling the keyword quota for a job description.
As if Bill Gates is there to fix all of your ruses with India. How about letting him do what he is there to achieve, follow his progress, build upon it and do something even better by involving next generation. Or another option is, sit and critique without adding any value? There are lessons to be learnt in any venture, and this will be no different. Relying upon Bill Gates and a time span of even 10 years to solve all those problems you listed? We are not helping the man who made computers ubiquitous and helped eradicate polio in India. Besides, Bill Gates will be heard by the people in upper echelons and young generation and Aamir Khan will help tap the mass population. I wish them luck, I will be following this social initiative closely. More power to them.
Bill Gates WILL have an impact, even if it's only on a dozen people. So will the people who are inspired by him, and so do the people who have been working with the Indian people for years to make the country better.
The only people who can't fix things like this are people who throw up their hands and say that no one cares. Things can get better, despite the undermining tone of cynics like yourself saying they cannot.
Not sure what your problem is, India or Bill Gates? You seem to have a problem with both.
>>- apathy from upper/middle class towards lower classes
Why in God's name will a middle class guy, who probably is having a thousand different battles in his own life get up every day morning to work for some body poor? By now, 'the poor' need to realize its not somebody else job do their work. Chances are no one ever will, not just in India but anywhere in the world.
>>- willingness from normal citizens to live with human feces on the streets, eat in restaurants with huge garbage piles right in front
How is this any different than the western world during the Industrial revolution? So some place like the US during the great depression?
You seem to be assuming a passing state of a society as its permanent condition. There are plenty of urban/rural housing settlement/societies in India which are as neat and clean as any western city.
>>- spinelessness/cowardness from the voting public
Care to give a few examples??
>>so what if there are smart people in india?
Now that you acknowledge that there are smart people in India. I guess you better prepare for some darn hard competition coming from us.
>> they are spineless/uncompassionate/unfeeling/unprideful.
Seriously??? How is any different than people in any country in the world. Do you think voting matters or is significant even in a country like the US. How many times were the US citizens able to prevent their country from going to war? Or how many times have they been able to change their unemployment problem themselves?
You seem to have a seriously problem with India, no idea why that is so.
> Seriously??? How is any different than people in any country in the world. Do you think voting matters or is significant even in a country like the US. How many times were the US citizens able to prevent their country from going to war? Or how many times have they been able to change their unemployment problem themselves?
They managed to stop an ongoing war once (Vietnam). Other than that, how can you tell when a decision to go to war has been overturned because of civilian activity. It seems that at one point, the US was quite bent on attacking Iran, but that never happened.
>You seem to have a seriously problem with India, no idea why that is so.
This is just conjecture, but seeing as this is Hacker News, perhaps he had to work with Indian IT subcontractors at some point in his life. Without having a grander vision of the world that may easily lead to some practical racism.
Taiwan and SK also had strong dictatorships until relatively recently; we aren't really talking about democracy until the 80s. Now, dictatorships are bad, but as long as the dictators are somewhat responsible, they do convey some amount of stability and economic development on the country that might not be possible (at that time) with a more chaotic democratic system. I'm not pro dictator, and I'm sure there was a more efficient path to prosperity that involved democracy, but this is just how it worked out.
Today see China, or Singapore if you think maybe the Lee family has a bit too much power than is justified in a real democracy.
India has an English democracy. Everything in India was originally designed to support a wealthy English middle-class (if it was important directly from the UK), or to extract wealth from poor Indians so it could be exported to the UK.
I'm saying, India's institutions are overbuilt. They were originally designed to work in a far richer, and far more orderly country. There are certainly some things which are "one size fits all", but for anything which is only appropriate with a large, law abiding middle class it fails horribly in India.
This is a good point. But I would wonder: what kind of democracy/government would be appropriate for a developing country? It should somehow promote stability and development, and perhaps not focus so much on liberty and freedom. This realization makes me a bit uncomfortable as an American living in China.
Taiwan didn't clean up its pollution until it became a democracy. (I lived there for extended periods both before and after that transition.) Generalizing a bit more, dictatorship was not strictly necessary for Taiwan's progress, as we know from two lines of evidence:
1) Some countries in other parts of the world developed AS democracies, even earlier than Taiwan.
2) Taiwan has continued to develop and improve most aspects of its living standards since it became a democracy.
Dictatorships miss out on the valuable reality-checks on public policy provided by free and fair election campaigns.
> 1) Some countries in other parts of the world developed AS democracies, even earlier than Taiwan.
I don't get this point. Sure some countries developed as democracies, but effectiveness is contextual.
> 2) Taiwan has continued to develop and improve most aspects of its living standards since it became a democracy.
No one is arguing here that democracy is not eventually the best form of government, only when democracy is appropriate. Once a country is solidly middle class, I think democracy is a solid win and the people will demand it anyways.
1.) Everyone in the thread is ignoring a huge point raised by the author: this is the last biggest bubble we will ever witness in our lifetime (and possibly for many lifetimes) due to
a.) unpeg of gold standard
b.) shift from farm to factory work
c.) shift from one income to two income household
d.) machine/software advances
and many other factors has produced the greatest economic growth we have ever seen in history. However, due to
a.) unsustainable financial gambling
b.) wealth growth only in top 1%, mostly through rentier effects
c.) robots, automation and artificial intelligence resulting in jobs destruction
d.) population slowdown, shift to older demographics
the second dip in global economic depression is happening. and will induce so much deflation soon that 99% of the world population will be very very poor. for 3-4 generations.
2.) due to the lack of hygiene/lack of transportation/too many people/bad weather/trash everywhere/homeless everywhere/fecal matters on the streets/too many doctors prescribing antibiotics, resulting in super-resistant viruses, there will be a huge epidemic sooner or later that might wipe out millions of people, and nobody will be able to do anything about it because the crash in the economy.
3.) Growth in IT outsourcing is no more. Foreign investments are down big. There are better countries for companies to invest in that have better infrastructure and speaks better english.
>>Growth in IT outsourcing is no more. Foreign investments are down big. There are better countries for companies to invest in that have better infrastructure and speaks better english.
No and I thing you've got it wrong.
We are soon hitting a stage where we don't have to depend of foreign investments. Its happening, software is but just one aspect of foreign investments. There is real estate, retail sectors, education, manufacturing, automobile etc. That list can go endless.
Nearly every global company today understands if they don't come to India now, the local companies are going to eat their lunch big time and leaving all doors of making a entry later permanently shut.
Every time I see somebody good leave India I feel bad for them. They have no clue what they will miss over the next decades. With hardly any competition in a country where demands are rising so rapidly, almost anything you make people want will sell. Even if you make it badly.
Consider this with settling down in US, something like next half of your life will simply go in 'getting somewhere'. You will simply going there for your kids. And consider yourself lucky if they value your sacrifices and do something big out of it. Else there will be a situation where post 30 years your kids might want to come to India to settle there kids.
I think you overestimate how much people are willing to live in shitty conditions in exchange for business opportunities. The US may not be a boomtown but it has opportunity to live a comfortable life if you can add value. Most people would prefer quality of life + "just getting somewhere" (the American standard) over living in a dump + business opportunities.
There no 'shitty conditions'. Not by what I perceive and experience.
People who opted to stay in India to reap the benefits of the IT boom in the 90's are in something like a million times better conditions than the guys who left to the US in the 90's.
If you want to be super rich, this is the time to be in India. And it will be at least for the next half century, there is too much room to grow and there is far little genuine competition.
Business opportunities, money, being rich is not what life is all about. Clean air, clean water, good work culture, honesty and respect for other human beings is what is missing in India. There is somebody in every corner looking to con you here in India. Conditions are very pathetic. Its a rat race in the cities, with every person trying to outrun the next guy. People are aware of the money they can make and are blinded by it. All they see and respond to nowadays is money.
Based on my 2 trips to India - Mumbai and Chennai - this is either naive or dishonest.
I'll go further, and say that out of all the roughly 50 countries I visited, which include Azerbaijan, Ukraine, Iran, Iraq, Vietnam, Indonesia, Phillipines and Solomon Islands, conditions in India were The Shittiest. Sorry.
I think you are overestimating the demand for talent here. Recently Infosys announced that they are going to change the workforce ratio to 70% freshers and 30% seniors. There are very few companies which value true talent in India. You have to fight and pay bribe to get anything that has interaction with a government organisation. Broken or no roads, fly over and metro that are taking years together to complete. As far as I am aware only very few percentage of people became rich in the IT boom of 90s but most of the people who went abroad during that period are well to do today (this from random sample among my relatives and friends).
I will prefer to be "not so rich" in a country where majority is "not so rich" rather than be "super rich" in a country where majority is "super poor".
I've lived half my life as a kid in Bangalore and half in the US. All I can say is if you're willing to eat Chapati and Dal and never go out to "do" things while living in the San Francisco area, basically, if you live like an Indian, you won't have trouble "getting somewhere". It's not like rent is cheap in India, and getting your kid into a decent college is way harder.
Actually, I'm back in Bangalore now working for a startup. The work is interesting, but the pay is only $18,000 for the same product management role that netted me $60 grand just out of college in San Mateo. Sure, I face absolutely no competition, since there is very little product talent here. Doesn't mean I'm going places in terms of a lifestyle or financial security. If I live like a peasant compared to my life back in the states, I save less money. What's disheartening is that so many goods and experiences are hitting dollar prices in this city right now. (Meat, nice produce, beer, good clothes).
There are better countries for companies to invest in that have better infrastructure and speaks better english.
You might want to reword that. :)
More seriously, I am optimistic because 1) the older generation will die off and 2) almost 50% of the grad students in any top US university are from India. (This includes programs in AI and Robotics. Count me in that too.)
1.) the young generation is still corrupt and apathetic and spineless
2.) assuming your number is correct (which I doubt), 90% of those students who overpaid for a masters are staying in the US
I am curious about this. Other than the US, UK and a few Scandinavian countries, what countries do you think speak English better than India?
1) The younger generation is much much less corrupt.
2) Almost nobody pays for a masters in science and engineering. Those who do startup eventually end up doing it in India. I know a bunch of my friends running profitable startups.
Look at those rankings for outsourcing. Also, we should look outside of outsourcing: there is a reason why the top research labs of IBM, MSFT, HP, GE etc have labs in India and not in those countries. More Indians will move out of business process outsourcing and into hard core technology and research outsourcing.
You missed the biggest thing IMO -- there isn't much nationalism or national unity. I don't see Indians being particularly proud of India.
Some of the smartest people I know are from India and Pakistan. Most of the folks I know came from modest backgrounds, and none of them look back at all.
Most of the points above are hyperbolic and quite silly, to be frank. For example - "robots, automation and artificial intelligence resulting in jobs destruction" - I suppose just like the personal computer lead to "jobs destruction"?
Actually, yes. Just like advances in agricultural technology lead to job destruction in agriculture. We went from a majority of the global human population working in agriculture to a tiny minority in a few centuries. That labor was largely absorbed into industrial manufacturing. Manufacturing jobs have also been destroyed by automation (e.g., why a growing manufacturing sector in the US is not adding new net manufacturing jobs). The service sector has absorbed much of that labor, but on the low end, those jobs tend to be much more poorly paid and stable (which explains no income growth for the bottom 80% of the US population in 30+ years, despite a growing economy). Computers and automation are starting to eliminate service sector jobs as well (and not just on the low end). It isn't clear which "sector" will absorb this new labor unlocked by growing productivity, but it is clear to see how these change can create a growing economy but also growing inequality which can lead to a less pleasant society overall...
> 2.) due to the lack of hygiene/lack of transportation/too many people/bad weather/trash everywhere/homeless everywhere/fecal matters on the streets/too many doctors prescribing antibiotics, resulting in super-resistant viruses, there will be a huge epidemic sooner or later that might wipe out millions of people, and nobody will be able to do anything about it because the crash in the economy.
Haha. No. Lack of hygiene does not actually result in super resistant viruses. If at all, it results in people who a stronger to existing viruses and bacteria since they are able to live in such conditions. We rather see that tourists going to India tend to fall sick very often because they are not used to the viruses and bacteria there.
And lack of hygiene is not something new. We've had lack of hygiene for like millenia in Human Kind history, yet the human race still thrived. I'm not worried about that.
He meant that over-prescription of antibiotics will lead to resistant viruses (probably meant bacteria) not that the conditions themselves will lead to such an outcome. Not saying I agree or disagree, just clearing that up.
"India has lost the war against the toughest forms of antibiotic resistance, largely because of poor sanitation, unregulated use of antibiotics and an absence of drug resistance monitoring, according to the man who discovered a type of drug resistance in bacteria in New Delhi."
"Because India's population will surpass that of China in 2030 or so, even as India's population will get gray at a slower rate than that of China, India may in relative terms have a brighter future. As inefficient as India's democratic system is, it does not face a fundamental problem of legitimacy like China's authoritarian system very well might."
with 8.3T GDP... are you serious? Could you describe the scenario where China has an economic collapse?
If such a scenario were to happen... it'd would be pretty catastrophic the world over. GIven how tied the US and China's economies are tied, I don't think the US would allow a USSR style collapse... :\
Every single one of your pessism factors was true in 1932, and we all know how the world economy did after that.
The economic potential in genetics, robotics, nanotechnology, nuclear energy, space exporation, etc. are enormous. We just need to keep moving forward.
I'm not saying that you're wrong about the negative factors; they are all risks to a better future. I'm just saying that they can be overcome; it's been done before.
Not really hard. Just move your money to a local bank or credit union. Easy.
Edit: Not really hard to do that part either. Just do your grocery shopping at a locally owned market or farmers market instead of a nationwide chain. No need to avoid the national chains completely. Just move in that direction.
Right. I should be ashamed of myself for putting my money with a bank large enough to have a chance of getting its own way vs. the federal government when push comes to shove.
Instead, I should put my money with a small credit union with no money managers capable of getting me a decent return and so little clout when the proverbial shit hits the fan it'll be left to be roadkill.
What return? The interest rates available these days are appalling. At this URL (after being prompted for a zip code) I was able to see a 120 month CD that yields 0.9% with anything less than 42 months being 0.15% yield.
During the last meltdown we saw that the FDIC made everyone whole. Did you even hear about the NCUA bailing people out? I didn't. I tend to think that's because credit unions did OK during the crisis as most of them tend to keep their loans on their books and as a result, didn't get swept up in the diciest loans in the bubble.
As a result I would suggest that perhaps the parent is correct and that credit unions are the way to go.
Or is there some other kind of proverbial shit hitting the fan that you're referring to? In my mind if TSHTF, any money you have in the bank is gone; worthless or irretrievable. What's the scenario where it's bad enough you want/need the clout of a mega-bank but where the banking system and our government aren't both totally effed but a credit union is?
What return? The interest rates available these days are appalling.
Cripes, tell me you don't keep money in a savings account or CDs. Keep it with your investment manager. The large banks cater to the mass affluent - which includes any software developer who's worked at market for a few years and has saved their money. You put your money with them, you make sure they understand your appetite for risk, and they go to work.
I'm sure there's investment managers out there that are better than the ones at large banks, if you have that much to invest. But for the rest of us, a large organization is the way to go. They have the resources to attract good quality talent and access to the information they need to make good investment decisions. You will do so much better than 0.9% over 120 months, it's not even funny.
FDIC doesn't cover much money, I might add, and it only covers money in those might-as-well-be-zero-interest accounts where you shouldn't be keeping money in the first place.
Psychologically, I couldn't hold an ETF and forget about it. I'd be ecstatic with its performance right now, but say I was holding an S&P 500 index fund between 2007 and 2009, and it lost half it's value along with the S&P... I would be far too irritated with myself. But if I tried to time the market, I could totally see myself selling near the bottom of a bear market and then only getting up the courage to buy far, far into the next bull - also a disaster.
By letting experts handle it, I get someone who understands my risk profile and helps allocate my money across a range of investments, some risky, some quite conservative. When market conditions change, they react, not me. While I don't capture all the gains I could when the stock market shoots up 50%, I don't lose that (and sometimes still make gains) when the stock market goes south. I'm hedged somewhat against rare events, which knocks a bit off the performance of my portfolio in the good times but pays off well should there be bad times.
I looked into setting something up like this myself, but I couldn't do it with a single ETF - I would pretty much have to make it a full-time job. Far better to pay an expert to do it for me - I don't do my own amateur lawyering, so why would I do my own money management?
Have you considered just keeping some fraction of your assets in cash (CD, money market account, treasury bonds)?
If you have 50% of your money in a Treasury and 50% in S&P, then when the market loses half its value, you only lose 25% of your money. But when the market goes up, you get a smaller gain.
> I don't do my own amateur lawyering, so why would I do my own money management?
An actual lawyer will generally be much better at lawyering than someone without training. Financial professionals probably aren't going to do much better than someone without training.
And then there are rampant perverse incentives in this industry, i.e. financial professionals are too often paid when they sell you financial products you don't need, and aren't paid based on your portfolio's performance.
I've been thinking about this lately, and, at the risk of sounding like a doomsday kook, this seems to make sense to me (perhaps in a milder sense) no matter where one lives. My plan is, if I ever get over $X in my account, where X is some reasonable buffer to pay bills, etc., that I'll just buy gold with the overage[1]. Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me. Even then, all these charges and penalties and sales pitches every time I enter a bank are really turning me off.
[1] I acknowledge some logistical challenges with my plan if I become a millionaire.
I didn't mean to imply that I would expect to make money from buying gold (if that's what you mean). Even if gold prices were expected to drop, I'd still be interested in buying it as an insurance policy. No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.
It has also been claimed there is a ponzi scheme in paper gold, i.e. instruments may not actually be physically backed, so when things go pear-shaped and you ask for physical delivery, you will have to fight other investors over legal ownership. http://www.businessweek.com/news/2011-12-12/hsbc-sues-mf-glo...
Given recent banking scandals, anything is possible. Caveat emptor!
Central banks are known buyers at the highs and sellers at the lows. Part of their mandate is "financial stability", and up to and including backstopping out-of-favour assets (like, say, mortgages). I see central banks buying gold as a way to stop a precipitous decline in gold as money rotates sectors.
Then again, this theory happened before this Cyrprus thing, so who knows for sure. Guess we'll see what kind of carnage happens next week.
No matter how severe a crisis, once the dust settles, gold will always be worth something, for reasons I don't understand.
The reasons is simple: gold has specific physical characteristics which many people for a very long time have regarded as suitable for use as physical money: principally, it's durable, rare but not too rare, recognizable, and easily divisible. That widespread subjective assessment is unlikely to change.
My point is that there's nothing you can do with your money to ensure that it always has value, regardless of the magnitude of the crisis. There's always some risk. You can store your money in insured bank accounts, but we can see how well that's working out in Cyprus. You can store cash under your mattress, but high inflation will destroy its real value. You can buy gold and hoard it in your home, but there's no guarantee gold will be worth much, or that you'll even be allowed to keep it (see Executive Order 6102). You can buy land and if the state fails and thugs with bigger guns decide they want it more you're screwed. There's nothing you can do to eliminate all risk, and we're seeing now that risks we though were minimal (failures of deposit insurance schemes in the western world) aren't so minimal after all.
'fiat' metal = metal by government decree??
fiat currency is intrinsically overvalued as it is valued by decree - by the threat of legal violence if you don't use it. There are no fiat metals.
Your pessimist view is at the extreme end of the spectrum. Individual fiat currencies have eventually failed ever since they were invented. Each time a currency dies there are winners and there are losers, but it doesn't go all Mad Max - a new transactional currency is used (Zimbabwe) or they lop a few zeros off and keep going.... Well maybe the dog food eating bit of Mad Max is true for the losers whose wealth was stored in the currency that failed.
Gold has little intrinsic value (well, you can make pretty things with it), its value is what people assign to it for the purposes of trade. So it most definitely is a fiat metal. If it was something like copper, there would be some intrinsic worth, but it isn't convenient to carry around while there is only so much intrinsic demand for copper!
Gold has failed just as often as fiat currencies have. When the Spanish conquered the Americas, the natives were amused that the invaders saw value in such a useless metal, but the amount of new gold that was discovered caused significant inflation back in the old world because Spain was just sitting back, buying everything it needed with its gold, and producing little of value.
Similar things happened when Africa came online as a significant source of gold, it got to the point that gold was no longer a stable representative of value, because anybody could just mine more! So you see lots of movement away from gold throughout the 20th century to something...more stable...fiat currency believe it or not. Countries now have control over their monetary policies, for better or worse, and are not beholden to some arbitrary metal.
Stockpile the BEST fiat currency at the moment. Over 6000 years of recorded history, which has the better record, paper money or gold?
There have been limited areas and limited times where even gold has been temporarily worthless. The Venn diagram of those times/places has always been within a much larger time/place where paper money has also been useless.
This smacks of digital archiving arguments. No consumer level digital media format has ever been popular for more than a couple decades, therefore some will tell you that any digital storage is literally useless. Folks who know what they're doing just replicate/transfer into the new format every couple years. You need to do that with your fiat currency. Right now a bank account in Cyprus is looking like a pretty stupid idea. I am sure we'll be able to bracket that with times in the past / future where gold was a dumb idea... it just won't be today. Minimization of transaction/conversion cost is crucial.
Gold has some pretty serious storage costs that shouldn't be overlooked. Apparently a lot of people want this supposedly "worthless" metal. Its fairly common to see anti-gold people trying to fight both sides of the argument simultaneously, which never turns out well.
Gold standards are horrible to base your country's economy on, while you are free to invest in gold yourself, its not like there isn't lots of risk involved. Mining increases gold supplies by about 2% a year anyways (you could also invest in gold mining companies if you want to speculate).
This has nothing to do with the digital archiving argument. This has to do with whether one arbitrary store of value is more sound than another arbitrary store of value. Money has only been around for 2500 years. Before that, gold was useful because of its rarity, but we might just as well have used large rocks to store/exchange wealth (and...there was an island that did that). The mezoamericans used beads. Heck, we can even start using bitcoin, which is based on the same rarity principle of gold.
And in this case, since Cyprus was on the Euro anyways, they couldn't deprecate their currency and were stuck giving everyone a haircut. They might as well have been storing gold in those banks.
ok I get what you're saying but your use of 'fiat' to describe gold is not the right word to use. fiat means by government decree. gold is valued by people as a wealth asset - and I agree it's value only comes from the knowledge that other people will trade something in the future for it - but the mona lisa is just a bit of cloth with some paint. pretty useless yet priceless - because there are many in line would would gladly exchange their vast excess of fiat currency for it.
I'm not arguing fiat currency will disappear, it obviously won't. It's just not the correct vehicle for saving. You must not save in the same instrument of the debtors. It leads to you being wiped out when the debtors default as the credit system grows beyond the ability for it to be paid back (eg: see China's trillions of US Treasuries - those are claims that the US economy cannot and will not service).
re: Spain: It was silver that was debased not gold I think.
re: gold failed: Physical gold didn't fail. Gold backed currency failed. Governments always print more tickets to gold than they own. The last big paper gold failure was Nixon in 1974 after they overspent on the Vietnam war.
I wouldn't recommend getting into paper gold to escape a currency collapse. Physical, unambiguously owned metal is the insurance, the vehicle that will transition you through to the otherside.
> China's trillions of US Treasuries - those are claims that the US economy cannot and will not service
The biggest holder of US debt is...the US. But ok, what choice did China have? If they kept the money at home, it would have collapsed the economy, investing in US treasuries at an effective -3% was the best they could achieve and have some degree of safety. Whatever you think of the US economy, foreigners still have a lot of faith in it. Only libertarians and republicans running for office think this faith is misplaced.
Now, who gets wiped out in a US default? We do the most, actually, but maybe the Chinese and Japanese hurt a bit also. No one is expecting that to happen, and US debt levels are not particularly high compared to the rest of the world.
> Physical, unambiguously owned metal is the insurance, the vehicle that will transition you through to the otherside.
You can't take gold with you to heaven. Ah, you meant the otherside of a collapse. If the economy completely collapses, no one is producing anything of value that they can spare for trade; your metals are still worthless. The law of supply and demand remains, and you just get screwed on supply.
If you really believe in metals, however, I strongly recommend that you move to Australia if you aren't there already. They have the largest reserves, take whatever we have out of the ground now and multiply it by 10. You can just become a miner and become rich, because of course, we can eat gold can't we?
ok - won't get into US default / debt argument as we are too far apart on that. I'll just say that it is a lot more than 'no one' expecting and preparing for a failure there. It is not a mainstream view - though mainstream didn't predict the GFC either.
Yes I meant the otherside of a currency failure. They are not as rare as you imply.
If the economy collapses completely then a lot of people will die...likely me included...as I am not a farmer. So I am assuming the economy will not collapse completely. Things will muddle through. Some will fair better than others depending on their understanding of the real nature of money, trade and its history.
We can't eat gold no...but I presume most of your assets are non edible too?
PS: It wasn't me that downvoted your last comment.
If I bought land, I could develop it and make it productive, I could also invest in science to grow more food, or whatever. If we want to hedge against economic collapse, I could invest in assets that are likely to survive the collapse, or better yet, are useful in helping a recovery along. So machinery, tools, a factory, a bakery? Or just upgrade my skills a bit.
But gold just sits there and does nothing, you are at the mercy of how others value it, since it doesn't have any productive value otherwise. Just like money actually.
The fact that gold is so useless is what makes it so perfect as a sink for deferred wealth.
Savers do not infringe on anyone else. If savers decided to hoard farm land...then farm produce would go up. Bakeries...same effect. Note I'm not arguing against investment but there is a difference between investment and saving. Saving is trying to maintain purchasing power that you have earned today and want to spend in the future. Investment is the deployment of your capital at some risk in order to possibly earn a return. Your prescriptions are all investments. I'm not a skilled businessman/investor - I'm a coder that just wants to defer my purchasing power that I earned today
.
What the savers currently do is hoard currency. The thirst for currency encourages and enables large amounts of debt to be written (as debt is the largest producer of currency via bank loans) which leads to cheap credit which leads to malinvestment.
In my comment history you will see a rather long entry I reposted from ZeroHedge. It's worth a read if you want to understand this argument some more.
> The fact that gold is so useless is what makes it so perfect as a sink for deferred wealth. Savers do not infringe on anyone else. If savers decided to hoard farm land...then farm produce would go up.
True, this is also why the Chinese continue to lend to us at basically a negative interest rate. Turns out gold doesn't really work that well for sovereigns (though China is #1 or #2 in gold mining).
> What the savers currently do is hoard currency.
Or they buy treasury notes, which is a bit better on returns (but not much).
> which leads to cheap credit which leads to malinvestment.
Definitely that's what we've seen so far. In that case, we are only arguing about the validity of gold as a store of value vs. other investments (including straight currency holds). There is nothing particularly special about gold, the only difference is that mining companies can decide the rate of inflation vs. governments (but Australia...).
BitCoin is much more fair in this case as the rate of mining is basically fixed by complexity. There is not much difference between accepting someone's bitcoin vs. their gold, in either case its about trust that you can exchange the currency down the line for something else.
Diversification and multiple pots seems like the best reasonable option. At the very least, one's investment portfolio should be internationally diversified. If you were really concerned, actually holding a portion of those assets in an offshore account might make sense. Regardless, rather than trying to protect all assets, the goal would be to maximize the chances that you would always be left with at least a sufficient amount.
when credit collapses (which is what this is) then the price of things bought on credit will collapse. Real estate will not be a good store of value in the short term. Long term it is an excellent asset but don't think it will hold value though this.
Bitcoin....you have seen the volatility on it lately? And the other week the miners were all asked to rollback a recent build because the crypto broke? Bitcoin is for speculation, not wealth preservation.
> when credit collapses (which is what this is) then the price of things bought on credit will collapse. Real estate will not be a good store of value in the short term.
I agree.
> Long term it is an excellent asset but don't think it will hold value though this.
Do you expect people will stop needing roofs over their heads?
I agree that real estate seems silly. But I don't mean swapping houses. I mean buying few properties over course of your life, renting them and passing them to your children. That never was a bad strategy and fortunes of few most wealthy families come from that.
You don't care how much property costs if you never intend to sell it. You just have to find poor bloke to live there and give you better part of his pay whatever it is.
> Bitcoin....you have seen the volatility on it lately?
Sure I bought bitcoin near its peak 2 years ago just before it crashed. Guess what. Today, I'm still having a profit on them because I never sold them.
> And the other week the miners were all asked to rollback a recent build because the crypto broke?
Oh my! That surely must have cause the price to plummet! No? Huh. I guess it's not such a fragile eggshell.
> Bitcoin is for speculation, not wealth preservation.
Trading bitcoin is for speculation. Buying and holding bitcoin is wealth preservation. Bitcoin is as durable as useful p2p network. Which have pretty decent track record.
Given the young age of bitcoin then I would still suggest that buying and holding is still speculation. Good luck to you. Keep in mind though that the scale of your savings compared to others. What if Bill Gates wanted to sink some of his savings into Bitcoin? It would be a market moving event. What happens when he wants to exit?
Buying a few properties over your life at this point in time - presumably via credit is a risky proposition. People need roofs over their heads but they need food more. For an interesting perspective on property during a currency event - read Gonzalo Lira's description on Chile
>"Back in the day you'd at least get reasonable interest by keeping money in a bank, but nowadays it's really only the convenience of direct deposit and online bill pay that draws me."
Back in what day? You mean, like, 5 years ago? We're still amidst one of the worst recessions ever and rates are at all time lows. No, you don't get riskless real returns right now. But you can also borrow at exceptionally low rates. That will change in the future.
Hording physical gold outside of diversification is a bad idea. You have storage costs, pay a premium over spot when you buy it and eat a spread when you sell it. And, as another commenter said, look at its real returns; not spectacular.
Want to know what was a good buy? The stock market, 4 years ago. When everyone was screaming about the world imploding and it was at irrationally low levels. But that's just the thing: you have to be willing to zig when others are zagging.
As I said below, it would be more of an insurance policy than an investment, but I'm still willing to believe it's a bad idea for that reason as well. I don't plan on buying enough gold that it becomes a logistical challenge to store though...basically just as a buffer if things go south. Something disturbs me, especially as a hacker, knowing that the physical manifestation of a good chunk of my life's work is just bits on a bank's computer.
This does depend on where you live. In some places, mortgages are offered with "offset accounts", where your positive balance in the account offsets your outstanding debt on the mortgage, and in doing so reduces the interest accruing on the loan. This means that your excess funds effectively earn the mortgage rate of interest (and since interest avoided isn't "income", this isn't taxed as deposit interest would be either), so it's an attractive option if you have a mortgage.
This only works if you physically have the gold. Having a note stating how much gold you own, which is housed someplace beyond your reach isn't security. You are still relying on the market/bank.
And even if you did have the gold, this presents a slew of other problems; security and storage are two that come to mind.
Where else would you put your money? Keeping large sums of cash in your home is stupid and dangerous, commodities are volatile (bitcoin behaves like a commodity in this regard), real estate has high associated costs, stocks can go down as well as up.
But if everybody keeps thinking like that, in a few years time in the place of "Greece, Italy, Spain, or Ireland" you will read "Germany, France and UK".
It's just a worldwide poker game, the banks are winning and the small guys are being forced out of the table.
Why? Because we're in a global economic depression. Because the government cannot print money anymore. Because anymore printing will most likely induce hyperinflation.
(That's why there was no QE3 announced last month. That's why Germany/Finland do not want to expand EFSF from $400 billion to $2 trillion. That's why China is clamping down on lending, and will most likely earn a 0% growth next year)
And so all the debts will come due. From the $700 trillion derivatives worldwide held by the banks to the tens of trillions of debt held by the government.
Sure, there will be individual investors spreading money around willy nilly (think Dave McClure). But for most, it will be time to prepare for winter. A long 10-15 year winter.
Why? Because we're in a global economic depression. Because the government cannot print money anymore. Because anymore printing will most likely induce hyperinflation.
This is common Internet Wisdom, but there's no reason to believe it's actually true.
The TIPS spread--the spread between ordinary government bonds and inflation-protected bonds--is very low. Under 2%. The TIPS spread also tends to overestimate inflation, because the long-tail risk of inflation is higher than that of deflation. The Fed is dominated by inflation hawks with substantial political will to fight inflation and very little to implement monetary expansion. Very few economists seem to expect the risk of hyperinflation.
This kind of inflationary alarmism is infectious. It's infected our politics, skewing the GOP primaries towards severe economic ignorance. Nominal GDP is still limp. Inflation is still low. Unemployment is still high. Borrowing is still tight. The recovery is stalling. Stop. Please.
Don't know about the rest, but the german chancelor did fight all the last days _for_ the EFSF expansion and currently it looks rather like it will get through. There's been a few politicians (around 25) in the ruling coalition which were against it, but even the opposition already agreed to support it.
You shouldn't stand up for facebook and scummy Mark Zuckerberg so much. You realize he's postponing IPO again and again so he can get you guys to work late nights month after month on tasteless projects like tracking people over the internet, kind of like carrots on a stick for donkeys, right?
- apathy from upper/middle class towards lower classes
- willingness from normal citizens to live with human feces on the streets, eat in restaurants with huge garbage piles right in front
- spinelessness/cowardness from the voting public
so what if there are smart people in india? they are spineless/uncompassionate/unfeeling/unprideful.