Absolutely not! Even if we went with the gold standard, you still have an increase in money supply with every ounce that is taken out of the ground. Technological advances in mining has allowed us to mine gold at a profit at $10 worth of gold per ton whereas during the Klondike gold rush it was profitable at $90 a ton. Just like gold, money supply must be dynamic.
Sorry about the History Channel, I made a slight mistake, the increase was not 1000%, it was much greater at 1000 times.
And again, I don't have a problem with 5 cent bread as long as wages are adjusted accordingly. If a journeyman mechanic makes $1.50 an hour, keep all the prices low.
And it clear you take the view of the Austrian School of Economics. You should really look at their view of what drives future investment into capital goods. It is basically risk to invest for future gains. Why would anyone invest into the future when they can sell that item for more today and it will be sold for less in the future. Furthermore the Austrian School came to light in the 1930's and Germany's inflation where the wheelbarrow was used to transport useless marks. They had no real concept of the future technological growth we are seeing today.
What a computer sells for has nothing to do with productivity gain, but low cost systems can now be applied across the board. You have computer driven tractors that plow, plant, fertilize and harvest crops to maximize yields and quality. That is an example of the productivity gains we did not see in the 70's.
In 1900, a loaf of bread cost 5 cents. According to the History Channel, since then productivity has grown over 1000 percent. If the money supply was held constant, that same loaf of bread would cost a fraction of a cent. With prices falling like that, there would be no incentive for future investments in productivity, why invest in the future when the prices would be less? Even the champion of free market economics, Von Hyeck realized this.
The other problem, with falling prices and higher productivity, wage rates should fall accordingly. Remember, money is nothing more than a medium of exchange and the baker is really paid in loaves of bread that he produces and trades for other goods and services. So as the price of bread falls, his wages should fall as well. But that is not going to happen and the supply of the medium of exchange must be adjusted accordingly.
You have to ask yourself, with our debt many times greater than it was in the 70's, why are we not seeing the double digit inflation today? The answer is clear, according to Moore's Law, the capacity and speed of the computer chip doubles every 18 months leading to huge gains in productivity. In the 70's there was an energy crisis and we have found all the oil there was, yet today technological gains has greatly increased the supply of oil.
Going back to the 50's, a journeyman mechanic made $1.50 an hour. Today that same job pays $25 an hour, that $1 candy bar really cost you less. It is unreasonable to expect to be paid $25 an hour and still buy a candy bar for a nickel.
Yeah, but the lion's share of the debt is owed to the Federal Reserve, so it is like the government paying the government. Or if the government doesn't pay the Fed, they simply do a journal entry and issue a new bond.
You have to keep in mind that the money supply must increase with the increases in productivity. We must have some level of inflation in order to keep advances in productivity moving forward. Even with the gold standard, you will see increase in the gold supply every year, just look at Todd Hoffman, he went from a couple hundred ounces to 3,000 ounces last year on Gold Rush.
As I see it, it is time to pay down the debt by increasing the money supply to get us back to an inflation level of 4%.
On housing the problem is I have a fica score over 800, 50% down and I can't get a loan to build a spec home. Without the supply, the price of homes will continue to go up and fewer people will be working without a good construction base.
I thought CLF was going towards DR pellets and letting companies like Nucor to convert them to DRI because of the logistics involved with transporting DRI pellets. If they are looking to produce DRI pellets, they must have an idea how to get them to the mill at a reasonable cost.
The Gov is meeting with mining leaders, I am sure the topic of concern is the mine shutdowns plus CLF announced that Northshore will start up again.
And steel production is up week over week, yet slightly down year over year for the same period. With imports trending down, we should start to see US production picking up in the near future. I really want to see prices for seaborne iron ore go up, US iron ore will pay the bills, the profit off Asia Pacific will pay down the debt. CLF needs to get their debt down to the $1 billion range where US iron ore alone can service the debt and generate a good profit.
LG has been cutting cost since he got in, a move up in iron ore like this is huge. He has trimmed iron ore cost by $20 a ton which makes this move to over $60 be like iron ore selling for over $80 a couple years ago.
Yeah, but the money they lent required Essar to continue to produce steel. Could be they are close to running out of ore and the monitor sees an end to this game. Unlike CLF that lent the CCAA themselves, Essar is just going further in the hole.
To finance the CCAA they are relying on cash from continuing operations, I think they are just running out of money. Ernst and Young most like said they are not running for free just like CLF won't ship ore without payment.
This is all very interesting, thanks for the news. Personally I think CLF should concentrate on producing iron ore pellets, not steel as most steel companies prefer not to buy their iron ore from their competitors. My opinion is that CLF needs to expand into the DR and DRI market as that is where the real margins are.