A hard currency standard is the key to world peace

[Hakurei Reimu]

If the government is expected to constrain the supply of money in such a way that energy prices never rise above a certain point, then that's a hard control on inflation right there.

You forget that, while the currency may not inflate with respect to electricity, at least on paper, other goods are free to vary with respect to electricity. So, no. No "hard control on inflation."

Why did I say, "at least on paper?" Because the practical value of a joulebuck will always vary with respect to the electricity its based on. Purchasing, after all, is based on differences in value. A merchant sells a doohicky for 50¢ because to him, the doohicky is worth less than 50¢, and a customer buys that same doohicky for 50¢ because to him, the doohicky is worth more than 50¢. Same exact doohicky, two different worths.

It also more or less fulfills my original purpose, which is to precisely measure inflation so that it becomes difficult for the feds to paper over their mistakes.

Once again, the mistake here is thinking that inflation is a function of only the currency.

It's better than a gold standard, because you can delay and delay and delay the return of somebody's gold and lie about your reserves all you want,

I'm sure that it was written in law somewhere that the feds must deliver the promised gold within X days. At least, when they were doing that sort of thing.

but if there isn't enough electricity to justify the money supply/level of economic activity, then everybody will know once they get the next electricity bill.

Nonsense. The average joe would pay their electrical bills using their credit card or bank account, which does not intersect in any way with currency, so the average joe would not notice anything amiss. Or are you still maintaining this false equivalence between currency and money?

The supply of electricity and the efficiency of usage are also much better indicators of productivity and industrial capacity than the gold supply.

I don't believe anyone has ever used the gold supply as indicators of productivity. They would instead measure the quantity of goods... well, produced.

And actually, if the money supply were pegged to the energy supply, there'd be a LOT less fluctuation of nominal prices. The money supply would contract by like 30% instead of expanding by like 500%. The "sacrifices" Carter asked for would be quantified.

Now that's an assertion without proof.

If you'll notice, the "boom" and "bust" periods correspond perfectly to rises and falls in the "real" price of energy. Food for thought.

[ Image ]

You must be joking. "Perfectly"? Are we looking at the same graph? This correlation is weak at best.

[zarus tathra]

Inflation-adjusted price of electricity is falling all throughout the "boom periods" and stagnant or rising through the "depressions." So actually, the correlation is as real as  anything gets in finance.

Once again, the mistake here is thinking that inflation is a function of only the currency.

Yes, it's also a function of how often money is changing hands. When there is a deficiency of energy growth, then economic activity should slow down in order to adjust. This illusory Potemkin Village bullshit is killing us as a country.

[Hakurei Reimu]

Inflation-adjusted price of electricity is falling all throughout the "boom periods" and stagnant or rising through the "depressions." So actually, the correlation is as real as  anything gets in finance.

Then how come the graphs cross? At best your correlation is poor. There are many factors that would suffer in a downturned economy, and the energy sector is one of them.

Once again, the mistake here is thinking that inflation is a function of only the currency.

Yes, it's also a function of how often money is changing hands. When there is a deficiency of energy growth, then economic activity should slow down in order to adjust. This illusory Potemkin Village bullshit is killing us as a country.

So when we have a deficiency in energy growth, your solution is to slow down the very activity that would build the energy sector to acceptable levels? You do know that an infrastructure does not build itself, right? It takes money and the serious commitment of resources to build infrastructure. If anything, that is what's killing us — the spending of our resources for prestige projects instead of building the invisible support structure that makes it all work.

[zarus tathra]

That last pic is nominal price vs inflation-adjusted, dumbass. If you had a NYSE/S&P 500 graph right next to the inflation-adjusted price, you'd have one going up while the other goes down, and vice versa.

[Hakurei Reimu]

Correlation is not causation, even if what you said was true. It could easily be the opposite: that a reduction of economic activity cause the nominal price of electricity to go up, because the same facilities must be maintained for the increased output that is underutilized.

[zarus tathra]

What? Why would a slowdown in economic activity (and a reduction in demand) cause kwh prices to rise? Why would an increase in activity cause nominal prices to fall? You're just being a troll.

[Hakurei Reimu]

What? Why would a slowdown in economic activity (and a reduction in demand) cause kwh prices to rise? Why would an increase in activity cause nominal prices to fall?

Because you have to generate electrical power in proportion to the amount of energy that might be used, not the portion of energy that is used. The rest is wasted. Electrical power is not like coal that can sit around in a hopper for a while until you actually use it, it has to be used in the moment it is created. So the power company has to pay for the fuel that it uses, but cannot charge for kwh that were not actually used by the end user, so the prices have to rise for each kwh to pay for it.

You're just being a troll.

Pot, kettle, black, because I look at your graph and notice that what you have put up is the nominal price of electricity vs the real price of electricity. As such, it doesn't show anything at all.

[zarus tathra]

Because you have to generate electrical power in proportion to the amount of energy that might be used, not the portion of energy that is used. The rest is wasted. Electrical power is not like coal that can sit around in a hopper for a while until you actually use it, it has to be used in the moment it is created. So the power company has to pay for the fuel that it uses, but cannot charge for kwh that were not actually used by the end user, so the prices have to rise for each kwh to pay for it.

That would be the case if the free market were one ginormous charity, which it isn't. It sounds like the opposite of supply and demand. Also, 1968-1979 were years containing the Vietnam War when it was at its worst. How would mobilizing for endless war decrease demand for electricity?

edit: dumbass.

In reality, the market for electrical energy, which I will simply refer to as the market for power from here on, is perhaps the closest to a textbook example of a supply and demand diagram as we will see in any market. That is, the supply curves and demand curves are very much observable, and the intersection of the two, which sets the price, is not a result of trial-and-error and bargaining between consumer and seller, but is, in fact, the result of a complicated mathematical operation based upon costs and demand curves that are specified in rather exacting detail by the suppliers and demanders.

So much for that theory.

Pot, kettle, black, because I look at your graph and notice that what you have put up is the nominal price of electricity vs the real price of electricity. As such, it doesn't show anything at all.

Ummm I wasn't pretending anything, I just kind of figured that the "boom" years and "bust" years were widely agreed on. I sometimes assume too much prior knowledge on the part of people I talk to, sorry.

[Hakurei Reimu]

Because you have to generate electrical power in proportion to the amount of energy that might be used, not the portion of energy that is used. The rest is wasted. Electrical power is not like coal that can sit around in a hopper for a while until you actually use it, it has to be used in the moment it is created. So the power company has to pay for the fuel that it uses, but cannot charge for kwh that were not actually used by the end user, so the prices have to rise for each kwh to pay for it.

That would be the case if the free market were one ginormous charity, which it isn't. It sounds like the opposite of supply and demand. Also, 1968-1979 were years containing the Vietnam War when it was at its worst. How would mobilizing for endless war decrease demand for electricity?

If demand goes down like in a depression, the power plants already built won't simply disappear into thin air. They would need to be maintained, and fueled in case the demand comes back. The supply of electricity is pretty inelastic; it takes years of planning and construction to build a power plant, so if demand goes up and your power plants can't cope, then you have a shortage and price goes up. If demand goes way down, then to maintain backup supply you have to fuel and maintain the plants and that is a cost that you have to pay with some way, so you pay with it with increased cost per kwh sold. Dumbass.

edit: dumbass.

In reality, the market for electrical energy, which I will simply refer to as the market for power from here on, is perhaps the closest to a textbook example of a supply and demand diagram as we will see in any market. That is, the supply curves and demand curves are very much observable, and the intersection of the two, which sets the price, is not a result of trial-and-error and bargaining between consumer and seller, but is, in fact, the result of a complicated mathematical operation based upon costs and demand curves that are specified in rather exacting detail by the suppliers and demanders.

So much for that theory.

Nothing here contradicts what I have said. Remember that when available supply is already pretty much in synch with demand, you can treat any fluctuation of supply and demand curve very simply in this manner. However, when the supply is way out of whack with the demand, this analysis breaks down. Unless you believe that increased demand will instantly result in power plants popping up out of nowhere, and decreased demand will cause those power plants to sink into the aether, the relationship between supply and demand will not be so simple in extreme cases.

Ummm I wasn't pretending anything, I just kind of figured that the "boom" years and "bust" years were widely agreed on. I sometimes assume too much prior knowledge on the part of people I talk to, sorry.

You would do best to put these kinds of things side by side. Nobody's an encyclopedia. Besides, a correlation is a mathematical relationship, and its best to have the numbers on your side.

[zarus tathra]

I just don't know of any businesses that work anything like that.

And this link says that increased energy prices can easily be explained by increasing fuel costs, which, strangely enough, does nothing to contradict common sense.

Electricity rates have been rising throughout the country, not only in restructured states. These increases are largely a result of rising costs for the fuel used by generators to produce electricity. In fact, fossil fuel costs have increased over 150 percent since 1999. Fuel costs are rising due to global demand for fossil fuels, the impact of supply interruptions from the hurricanes in 2005, and insufficient domestic production. The push for cleaner, more reliable and efficient power plants drive costs higher as well. Despite this pressure, if one takes into account price increases over the same time-frame in other consumer goods like food, housing and health care, electricity price increases are mostly modest by comparison. In addition, wholesale prices actually declined last year in some regions.

Electricity rates are not rising because of the competition brought about in those states that restructured electricity. Many of the states that introduced retail competition incorporated rate freezes that kept rates unchanged for a period of years even as the input costs for generating electricity increased dramatically. These artificial price freezes are not sustainable in the face of these economic realities, particularly when they have been in effect for many years.

Make no mistake - retail customers in states that do not allow customer choice have experienced higher rates as well - often in the form of an automatic increase on their bill. In these states, steady increases over a number of years have been passed through to consumers. These regular, smaller price hikes can add up to dramatic changes in price over time. Recent reports by several state utility commissions document that prices in competitive markets are lower than what would have been the case in a rate-regulated environment had those states not restructured.

[zarus tathra]

According to this book the Bank of England ended up crowding out private investment and lending by financing wars and other rash government projects. Britain's industrial revolution was proceeding quite nicely until they came along.

[Hakurei Reimu]

Whatever, zarus. I do not claim that governments can do no wrong. Citing where governments have done wrong will avail you not.

[zarus tathra]

I'm not "citing where governments have gone wrong." I'm citing "government projects crowd out private investment and slow the rate of economic growth and constrain the supply of credit," which that book demonstrates by analzying ~100 years of bank records from the 1700's.

[Jmpty]

Remember Enron?

[Hakurei Reimu]

I'm not "citing where governments have gone wrong." I'm citing "government projects crowd out private investment and slow the rate of economic growth and constrain the supply of credit," which that book demonstrates by analzying ~100 years of bank records from the 1700's.

And why is this necessarily a bad thing? Weren't you yourself saying a few pages back that unrestrained growth can't be sustained forever?