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Please bear with this brain fart - hoarding causes intertemporal mismatches?

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Wheylous posted on Fri, Dec 2 2011 7:33 PM

 

For this post, assume some stable money system with negligible inflationary fluctuation.

I'm going off the idea that Smiling Dave posted here a bit ago about money earned being a certificate of production. It shows that you've produced and you are now "entitled" (so to speak) to some other good in return. The market gives you a "promise" (of course, there is no insurance) for what it deems is an equivalent amount of other people's labor.

This is all well and good when the money earned is spent soon thereafter. There is a general match between the labor you put in and the labor that you took out because the money transaction occurred at a similar time in the market near-equilibrium.

However, if you keep your money for 20 years, technological advancements push down prices (think of computers, for example). Hence, you can buy goods which are much more useful 20 years from now than they are right now. In this way, you took your production of 20 years ago which was equivalent to some amount of money the market deemed and spent it in the future, when the production structure is quite different.

Does this create an intertemporal value mismatch? Or am I unwittingly applying a variant of the labor theory of value here? It appears that you if you cut the middle man of money out, if you had spent X in the past, you would have gotten say 3 units of a good, but in the future you get 5 units. Hence, people who spend at different times are receiving different compensation for their labor. Is the previous statement an objective value fallacy?

Upon second thought, the market should fix this problem naturally, as it clearly says that P amount of money today is worth Q goods, already taking into account people's money stores and people's production. Or no?

 

I'm confused.

 

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I am trying to imagine what is supposed to match. The 5 units are only worth 3 dollars in the future because at the time you remove them from the market (increasing scarcity) there are more units relative to dollars than there were when you exchanged labor for the dollars. You are still buying the same amount of labor with the same amount of dollars, on the human end.
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bbnet replied on Sat, Dec 3 2011 12:11 PM

So it is 1991 and I have $2000 to buy a pretty nice AMD386/66mhz  pc but I decide to do without a pc for the next 20 years and put the $2000 under my mattress.

Twenty years later I pull out the $2000 and go buy a pretty nice AMD quad core Phenom running at 3.0 ghz.

This new pc is over 100 times more powerful than the one I could have bought 20 years ago with the same cash.

Has there been a intertemporal value mismatch? I think not since I had to suffer for 20 years without a pc which 'paid' for the increased power of the computer I just bought.

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Bert replied on Sat, Dec 3 2011 12:26 PM

I see what you are getting at, but in your example are you trying to find a problem in the situation?  It only seems the better that in time you get more for the same amount of value.  Let's say (going off bbnet's example) you have 2,000 saved for a computer, but you decide to wait 2-3 years, and in that time build up more money towards a computer, and the rate of technology grows so fast you acquire a better computer for the same or of lesser value.

The other way to look at it is being that money is some certificate that "entitles" you to some good or service, and at the time you've worked hard for what you did, but in time (let's say some years pass) the labor you did can be done more effeciently for a better price, should you feel like you've been undercut?  Essentially you did harder work for a cheaper price, but that was during that time.  Does it matter?  This seems to go into the LTV though, because it does not consider the subjective value that it really doesn't matter what it was worth, but only it's worth now.

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bbnet replied on Sat, Dec 3 2011 1:37 PM

Likewise it could result in a positive or negative value displacement depending on the individual.

If this was Larry Page, there may have been a negative displacement of value.

If this was someone who thought they could do quality video production on a 386/66, there might have been a positive displacement of value.

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Frankly who the f*** cares. It's not anyone's business what other people do with their own property. If it does cause some "intertemporal mismatch" what should be done about it? Confiscation to fix some imaginary problem thought up by bureacratic busybodies?

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z1235 replied on Sat, Dec 3 2011 2:46 PM

Wheylous:
Does this create an intertemporal value mismatch?

In addition to the other good answers here, I'd mention this...  At any moment in time the "value" of whatever assets you hold (cash, house, car, sheep, cows, horses, land, stocks, bonds, etc) is determined by the dynamically changing subjective valuations of all other market agents. There is absolutely no guarantee (by whom?) that the market which seems to be offering 3 sheep for your cow today would still be around next month (much less 20 years down the road). On the contrary, you should expect that humans act and prices change. 

"Intertemporal value mismatch" is a defining characteristic of markets and life, in general. 

 

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