Saturday, October 30, 2010

A Quick Thank You

A Quick Thank You
by Alex Merced

 I'd like to take a moment to thank all my favorite places to get liberty news and resources on the net and encourage you all to check them out.

Communities: - I spend so much time on this forum It has probably become my #1 way to be connection to the heart of the liberty movement. It's great to see how all of us since the days of the Ron Paul 2008 days have stuck at it and havn't given up the good fight. - The logical next step for the movement after the 2008 campaign had ended, this has served a sgreat source for information and local mobilization.

Youtube Channels:

ProteanView - an independant mind with insightful opinions, always nice to hear his take on the days events

LibertyInOurTime - A youtube playlist where someone is uploading every piece of audio and video from the mises institute, it's now very hard to do a political youtube search without stumbling upon the mises institute, great work.

SchiffReport - With the regular videos discussing the financial markets and the economy, this channel keeps me in tune with what going on the world and everytime I think I've learned what I could learn Peter Schiff always shows me I'm still only a student.

Other Websites:

Mises Institute - The Home of real economics and libertarian thinking on the internet, if you havn't become familiar with this site you have done yourself a great injustice.

Reason.Tv - Great videos about how to increases liberty and why government just well... doesn't work

So thank you all, hope you guys enjoy these sites.

Friday, October 22, 2010

The Money Problem

The Money Problem
by Alex Merced

 While people like me definitely see the virtue of a gold standard, even a gold standard in any of it's historical incarnations still have one fundamental problem, they are a monopoly. I can discuss how the gold standard restrains government which promotes peace and limited government, or that the problem with previous attempts at the gold standard was allowing fractional reserve banking which many see as fraud.

 Although, all of this is only a band aid on the greater problem of money traditionally being a monopoly product of a government, and like any legally protected monopoly results in drops of quality and increases in prices, in this case the increases cost being the extra labor needed to earn enough money to retain purchasing power as the currency is devalued by it's monopolistic issuer.

 Money, like any good needs to be allowed to have a market and competition. While many think you have competitions between nations, politics of government leads to a race to the bottom like you see now where every government compete to see who can provide the worst product instead of the best like when enterprise competes.

 An important aspect of developing such a market is the ability to use multiple currencies and goods as legal tender, instead of the ultimate legal control of legal tender laws which even on it's worst day force people to have some level of demand for some currency. If people could have multiple goods that they could use as legal tender, they could diversify their monetary portfolio like one diversifies their stock portfolio.

 For example, if the US dollar were to collapse owning other currencies and goods would be meaning less since they can't be legally used to tender debts. So at the end of the day, a sound money is great but would probably naturally occur in a competitive market for currency separated from politics (business issued money, not government issued).

Saturday, October 16, 2010

The Difference between Gold and Real Estate

The Difference between Gold and Real Estate
by Alex Merced

 Is there a gold bubble? This seems to be the questions that media pundits are pushing more and more now, so I thought I'd like to discuss some of the fundamental differences between Real Estate and Gold as far  as it's bubbliness (I'm making up words). Many people critique gold proponents saying that saying that gold will continue to go up is like the real estate proponents pre-bust saying real estate will always go up so here are somethings to think about.

Asset Mobility

Gold is a very mobile assets, I can have it stored and I can carry it around with me no matter where economic activity is moving people geographically. Homes on the other hand are not easily mobile, I just can't pack up my house and take it with me wherever I go. In this case if economic activity moves somewhere else geographically it's hard for me to sell it so I can pursue where growth and jobs are because others are doing the same driving down demand for my particular house. This is a problem that's non-existent with gold.


During the height of the housing bubble there was a lot of housing construction going on which increases the supply which lowers the price of any good, and despite all the inflation from the central banks these last few years the supply is still repricing itself versus the money supply. You can't manufacture gold, it can only be mined and the amount that can be mined is essentially fixed so this kind of inflation of the gold supply is not possible as it was in housing so it's relationship versus the money supply is a one sided relationship mainly changing when money supply changes since the gold supply grows slowly and stable.


Gold is fungible (one ounce of gold is generally no different than the next), which makes Gold much easier to trade in markets and base futures, Funds, and other investment vehicles on. This creates a liquidity in the gold market when combined with it's other features makes it a very appealing store of value. Houses on the other hand is a heterogeneous good, meaning every house is a unique product which must find a particular buyer which can be difficult depending on several geographical factors outside of the house itself (neighbors, local schools, local economy).

Growing Demand

More and more of countries we thought were part of the third world are becoming industrialized so the access to medical professionals like dentists are increasing and so is the demand for luxuries like jewelry both which use large amounts of gold. Not only is there a growing consumer demand, but also many central banks are beginning to purchase gold and strengthen their reserves as the US Dollar undermines it's reserve currency status which central banks will most likely hold indefinetly reducing the supply of gold effectively for other uses. Houses on the other hand have shrinking demand since there is a glut in the supply from the excessive construction during the boom, and many people rather rent or share living space till economic prospects allow people to expect the ability to maintain a bigger home.

Overall, in the future some of these factors may change, this the current state of things and as long as this is the case I'll continue hold and purchase gold and other natural resources.

Saturday, October 9, 2010

The Difference between Debt and Equity Financing

The Difference between Debt and Equity Financing
by Alex Merced

 One thing we emphasize here at LibertyIsNow is the relationship between economics and liberty, and without understanding the two neither can see progress. So today I thought I'd briefly introduce an important concept that will shape much of the debate going forward. Financing just means getting the money you need to make some purchase whether it be car, home, or to start a business. There are two types of financing, Equity and Debt financing.

Equity Financing

Equity Financing is done by selling ownership in something to get the money to buy it. For example let's say I wanted to buy a bike and didn't have all the money make the purchase I can ask my friend for the money and we agree we'll share the bike on certain days. Since we both have ownership in the bike, we both have interest in bikes well being because if the other crashes and destroys the bike we both lose our investment. This is similar to the purchase of Common and Preferred stock of companies.

Debt Financing

Debt Financing is done by borrowing the money, which means the borrower retains sole ownership of what is purchased yet has an obligation to pay the lender the original money borrowed, often with a little extra called interest (the reason they would lend it to you in the first place). In this case if I borrowed money from my friend to buy the bike, he could care less about the condition of the bike cause whether I crash the bike or not I am obligated to pay him back his principal and interest. This is similar to the purchase of bonds from a company.

Most of the world is a debt based economy, we borrow to buy cars, homes, and start businesses. This preference for debt financing is a symbol of many things culturally because people could just as easily share in ownership of cars and homes through equity financing and not have to suffer the burden of debt. This cultural characteristic also ties further importance since it ties people down much more to the value of the currency since debts don't adjust with money supply changes like asset prices do. Was this aspect of our culture something that naturally manifested or has it been pushed to extremes by policy decisions promoting lending and borrowing, something we'll be looking into over the next few posts here at LibertyIsNow.


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