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overtheedge
Member since May 2012
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The Virtue of Hoarding

- George F. Smith - Barbarous Relic

Excellent article.

Two major reasons why hoarding is verbotten that were missed in the article.
1. When the velocity of money slows, the tax revenue stream drastically declines.
Every transaction provides for a government skim. Half as many transactions, half as much skim.
That skim gets recycled into more transactions providing for more skim.
Simplified example:
$100 profit and the tax rate is 20%. After just 4 transactions, almost 60% of the money has been skimmed off by taxes.
1. -$20 = $80
2. -$16 = $64
3. -$12.80 = $51.20
4. -$10.24 = $40.96 remaining after just 4 transactions.
Keep this in mind the next time you see a graph of the decline in the velocity of money.

2. Increased hoarding results in reduced consumer loans due to better money management practices.
Banks are notorious for borrowing short and lending long. Consumer loans are the bridge between short and long.
Any reduction in consumer short lending, which tends to go long, and reserves or the lack thereof becomes a serious problem for the banks.

Let me present my evidence as to why the hoarding problem is solely about confidence in the fiat money.
Nowadays many of the so-called hoarders buy gold and silver.

Every month, Bob throws a beach party and $1500 or more goes for eats, treats and drinks.
That money gets cycled through the system.

Every month, Bill buys a Gold Buffalo and stashes it under his house.
That money gets cycled through the system as well.

In both cases, the money was spent and contributed to the velocity of money.
Once it left Bob and Bill's hands, they had no control over where it went.
Gone is gone. The only difference is what each has to show for the expenditure.

So what is the problem with so-called hoarding of PMs?
For fiat to work, confidence is paramount.
Hoarding of PMs is absolute proof in the owner's lack of confidence.
Therefore the PM owners MUST be demonized as hoarders to maintain confidence in fiat and punish the PM owners as an example of what WILL befall you if you should be so careless as to buy PMs. There is every possibility that Bill will talk with members of his family and infect them with that lack of confidence. If you wish to reduce the possibility of an epidemic of no confidence, target the infection's vector.
Oh Bill, if you had just had a beach party like Bob, you wouldn't have this problem.

Commented 3623 days ago

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Beginning of the headline :Most people would admit to hoarding money only with a tinge of guilt, because to be a hoarder carries with it the suggestion of being a miser — a Scrooge. And yet, every participant in an economy based on indirect exchange holds some amount of money and can be said to be hoarding it, that is, declining to spend it. Hoarding is a strategy for achieving personal goals or for dealing with economic uncertainty... Read More

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