Man gets life in prison
for killing wife in dispute
over christmas tree lights.
Inspired by my recent reading of The Invisible Hook, an economic analysis of piracy, I have decided I should take economics more seriously than I have up to now. I have some questions that seem to be of a basic economic nature that I would like to understand. I confess I have long regarded economics as the “dismal science” and likened it to witchcraft, but I have decided to try to be more objective about it.
My first question has to do with gold. Every day I notice we are being beseeched to buy gold. Gold is said to be a wonderful hedge against inflation, just seems to increase in value forever, and should be part of everyone’s portfolio. I don’t really have what you might consider a portfolio but nonetheless I think about buying gold (I don’t have any money to buy gold either, but that doesn’t keep me from thinking about it). I don’t know what the price of gold is at the moment but I believe I heard somewhere that it is now well above a thousand dollars an ounce. That is truly expensive for gold as it used to be worth for a long time somewhere in the vicinity of 35 dollars an ounce. I do not understand how gold could be worth so much, and I would certainly not buy it at its current price. One of my questions has to do with the gold standard that we long ago abandoned. You know, it used to be the case that a dollar was backed up by a dollar’s worth of gold. There are some, like Ron Paul, I believe, who think we should go back to the gold standard. But given the amount of dollars we have printed since we went off the gold standard, is there enough gold in the world to back them up? I somehow doubt it, so I don’t think we could go back to the gold standard even if we wished to do so. Another question about gold that troubles me has to do with its intrinsic worth. I once knew an Economic Anthropologist who knew about such things and I asked him one day why gold was worth anything. He explained that unlike paper dollars and such, gold had an intrinsic value in that it could be used for practical things, like gold fillings in your teeth, gold watches, and other forms of jewelry. I guess it may have certain industrial uses beyond that but I don’t know what they are or how important they are. However, I do know that gold is no longer used to fill teeth, nor is it used to make handsome gold pocket watches or gold watch fobs, or such things. And as it is now so expensive I doubt that most people can buy the jewelry that it is used to make. I have concluded that the price of gold is mostly determined by the hype those who sell it use to get us to buy it. And as I know that historically the price goes up and down, sometimes dramatically, I would not advise anyone to buy it at the current prices. For those who buy and sell it, it doesn’t matter what the going price is, as long as they know enough to get in and out before the suckers. But, then, what do I know, I’m not an economist.
Another economic question that has been troubling me has to do with unemployment. It seems that unemployment has slowed considerably in recent weeks, leading some to conclude that the worst of it is over. But I do not understand why this is so. That is, it seems to me there must be a finite number of jobs in the United States. That means to me there are only so many jobs that can be lost. As jobs have been lost month after month for a long time, does that not mean that the number of jobs lost has to diminish simply because there are not that many jobs left than can be lost? If this is so, does it mean that the job market will necessarily pick up? I think it might, and I hope it might, but I cannot see why the slowing of the loss of jobs indicates that. Of course if we have arrived at the point where no more jobs can possibly be lost, and we are all still alive, I guess employment would have to go up as it cannot go down any further. But why could it not just stay where it is forever? I trust you appreciate my confusion here.
If my above (primitive) economic analysis of jobs makes any sense, how about applying it to mortgages as well? That is, like jobs, there must be a finite number of mortgages that can fail. As they have been failing at an alarming rate for a long time, could it not be the case that mortgage failures would necessarily have to slow down or even stop? And if this happens, can it be taken as a positive sign that the mortgage crisis is over? I wouldn’t think so, but, again, what do I know?
I would like to think that a crash course in economics might help me understand what is happening with respect to employment, mortgages, and even gold. But as I know already that for any given question you can find two equally respectable economists who will completely disagree, would it really be helpful? I would almost surely fail at economics because I do not believe people act rationally in the first place, and at the moment I see nothing coming out of Congress or anywhere else that would cause me to change my mind.
Economics is extremely useful as a form of employment for economists.
John Kenneth Galbraith
Deer are much, much smarter than you think.