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Thinking in terms of gold is less arbitrary than thinking in dollars because gold is anchored in physical reality, whereas the dollar is anchored in political decree. When you choose to measure your wealth in a unit just because you want to trade for it later, you are prioritising the convenience of a transaction over the integrity of the measurement.
Measurement requires a constant. If you measure a table with a rubber band, the "length" of the table changes depending on how hard you pull the band. The US dollar is that rubber band. Its supply and value are subject to the whims of central bankers, interest rate policies, and the shifting needs of government deficit spending. Gold, however, is a physical element with a high stock-to-flow ratio. Its total supply grows at a very slow, predictable rate that no person can speed up by decree. Measuring in gold allows you to see the real change in an asset's value, independent of the currency’s volatility.
Gold's value is anchored by the arbitrage of mining. If the value of gold rises significantly, it becomes profitable to mine more, which eventually brings the value back into equilibrium with the cost of production. This creates a feedback loop rooted in physics, economics and labour. The dollar has no such anchor; the cost to "produce" a trillion dollars is the same as the cost to produce one dollar: a few keystrokes. Using a unit that costs nothing to create to measure things that require real work is an arbitrary standard.
Thinking in terms of gold is less arbitrary than thinking in dollars because gold is anchored in physical reality, whereas the dollar is anchored in political decree. When you choose to measure your wealth in a unit just because you want to trade for it later, you are prioritising the convenience of a transaction over the integrity of the measurement.
Measurement requires a constant. If you measure a table with a rubber band, the "length" of the table changes depending on how hard you pull the band. The US dollar is that rubber band. Its supply and value are subject to the whims of central bankers, interest rate policies, and the shifting needs of government deficit spending. Gold, however, is a physical element with a high stock-to-flow ratio. Its total supply grows at a very slow, predictable rate that no person can speed up by decree. Measuring in gold allows you to see the real change in an asset's value, independent of the currency’s volatility.
Gold's value is anchored by the arbitrage of mining. If the value of gold rises significantly, it becomes profitable to mine more, which eventually brings the value back into equilibrium with the cost of production. This creates a feedback loop rooted in physics and labor. The dollar has no such anchor; the cost to "produce" a trillion dollars is the same as the cost to produce one dollar: a few keystrokes. Using a unit that costs nothing to create to measure things that require real work is an arbitrary standard.
It is important to buy assets for significantly less than you think they are worth. The cheaper you buy something, the more margin you have for things to go worse than anticipated.
According to Austrian economics, all value is subjective. How can we then know what an asset is intrinsically worth?
Dollar-Cost Averaging
Dollar-cost averaging (DCA) is when you invest a fixed amount on a regular basis regardless of market developments.
This practice can work well long term for assets that reflect the value of the entire stock market (or a big part of it).
Long term, we can expect the stock market as a whole to gain value. So if you invest part of your income every month, say, then your position will grow in the long run.
In the meantime, you get to reduce risk by not investing all your money at once. You also get to react to developments that affect the stock market and can decide to interrupt your investment schedule. But I personally like ‘boring’ investment strategies, meaning strategies that are automated and reliable.
I think it would be arbitrary to measure the value in any unit that you aren’t hoping to trade your asset for.
For example, if you eventually want to get gold in exchange for your asset, measure the number of ounces your asset is worth and sell at an opportune time.
If you want to get dollars, measure your asset in dollars. Etc.
I don’t see how it matters for his argument. The value of anything fluctuates.
But gold isn’t fiat. The government can’t create more gold out of thin air.
Wiener’s critique of the dollar applies to gold, too. Both fluctuate. I see no rational preference for gold following from his argument.
Emoji reactions (#2159) are implemented as of ea482fb.
Wiener says the dollar can go up or down in value (usually down; prices usually rise).
He suggests that, due to this volatility, measuring the value of something in dollars is like measuring the width of a physical object using a rubber band. He implies that this measurement is unreliable and arbitrary because you can ‘stretch’ it just like a rubber band.
He concludes that we should measure the value of something in ounces of gold instead.
Am I understanding Wiener correctly?
Funny you bring this up the day gold makes its biggest single-day USD move in history 👀
Measuring the stock market in fiat is more arbitrary than measuring it in gold.
A short video relating to that:
https://youtu.be/AGNvdN1Lw9A?si=b5vO7kx_pTRgEgrZ
Some added colour:
https://x.com/philippilk/status/2016089604588290348?s=46
Apparently, stocks have fallen since the dot-com bubble when measured in gold instead of dollars: https://x.com/elerianm/status/1976237139185574170
Some comments suggest measuring stocks in gold is arbitrary, others say this development is simply due to inflation.
Are they right or is this development a deeper sign that the economy is in trouble?
Drugs are a net negative for society.
(This branch of the conversation has been moved to #4137)
The purpose of the law isn’t to minimise negatives and maximise positives. The purpose of the law is to uphold the rights of people.
This is speculation, see #4106. If it really becomes an issue, I can retire the feature or improve it.
I plan to go piecemeal by starting with reactions to ideas as a whole, then maybe to paragraphs/block-level elements down the line.
Would this work better as a criticism of #4058? That way, the relationship between these ideas might be clearer, and there’d be the possibility of a criticism chain.
Related to #4062, making any part of the drug trade illegal just gives gangs and cartels a leg up over law-abiding citizens.
But that way, you pretty much ensure that only scumbags sell drugs. And they definitely don’t care about their customers.
Getting someone hooked on an addictive substance to get repeat business is predatory. It’s not an honest way to do business. Even if consuming drugs was legal, maybe the selling of drugs should still be illegal.