Posted on 12/09/2010 10:57:02 AM PST by speciallybland
OK, what does your stock broker charge you for a transaction?
Nothing.
I see. Do you use an online stock broker?
Did you ever find your source for this claim?
patience first let us finish this one:
OK so far you claim that you have the same purchasing power with a stock that increase at the same rate as the inflation rate.
I've been trading stocks for over thirty years and know such is fallacy but you know it as well as I do. Even a novice stock buyer knows there are fess involved.
So when we use your example of an Oil stock increasing from $40.00 to $40.40 and then you claim you can convert it to dollars without incurring a fee we know you are being far from truthful. Stock Broker Fees, SEC fees, and of course the ever popular capital gains taxes.
Think we have proved beyond doubt your premise is not valid.
Infact to get the same increase in buying power to stay with inflaion you need a goodly amount above the increase in inflation depending on your tax bracket and the stock price.
now on to Par. Understand starting valuation is a standard (for issuance of a bond) here is the link to show such (its been 20 plus years since I took that particular class) there are instances wherein these can be different.
http://www.investorwords.com/3611/par_value.html
Then as I explained before, they repackage such and they change the underlying value. Allowing banks to lend on something that has no increased value other than accounting tricks. They did it with Subprime loans they do it with all sorts of other financial insturments. Then add in credit defulat swaps, mark to market accounting and know that again banks can lend money based on these things (Stocks of Corporations that invest in and use both) and the FED just allows it.
My claim is only that there are assets valued in dollars that do not lose value at the same rate as inflation. If you have 1% inflation, we agree that every dollar you own loses 1% in purchasing power, as per your example. I showed you a simple example where a dollar valued asset would keep its value.
I can come up with examples that actually gain in buying power, but why bother? You already admitted the point.
now on to Par.
Par has nothing to do with valuing a security for purposes of calculating bank capital or loanable cash.
If a bond is worth $900, it doesn't matter if par was $1000, $10,000 or $1,000,000.
Then as I explained before, they repackage such and they change the underlying value.
Your original claim was "Corporate bonds are valued at 1000 per while Municpals are valued at 5000 per and Federal are valued at 10,000 per"
I thought you were claiming a municipal bond allows 5 times the loans as a corporate bond of the same value? If that's not your point, I'm not sure what it is.
Ummm OK except that is not what you claimed at all and we both know it. You claimed:
"My share is valued in dollars and still buys the same tank of gas therefore, by your own example, suffered no loss."
It doesn't, in fact your share valued at $40.40 has costs and tax implications associated with it and to purchase the same amount of goods (ergo a tank of gas) as U.S. legal tender it must transfer ownership which triggers those associated costs and taxes and thus you end up with less money in which to buy your tank of gas.
"I can come up with examples that actually gain in buying power..."
I am sure you can being now that you have been proved wrong on your first example but then by doing such you further destroy your claim of "purchasing power is not reduced by inflation" on assets other than cash. Because if your claim was true then you wouldn't end up with less money when you converted to legal tender.
So the bottom line is for any stock or bond asset to acheive parity with inflation it must increae in value greater that the rate of inflation or suffer loss of principal when converted to legal tender.
As far as PAR goes it is a term with differing values and you asked for a definition and a link.
Par is also a term that denotes present value which can be (and usually is) different then starting value. My point was and still is that the FED allows such instruments to be repackaged and sold and thus by doing so they change the underlying PAR value of the instrument (be it Stocks, Bonds, Mortgages etc.) This is the shell game no one pays attention to.
Its like allowing the Casinos to put a "2" in front of the "5" on a 5 Dollar Chip and repackaging it into a 25 Dollar chip. No more actual physical Cash is in the Casino at the time of the repackaging but the chips are supposedly worth more.
Ummm OK except that is not what you claimed at all and we both know it.
Ummm, it is what I claimed. Then I gave a simple example using your example (tank of gas) showing an investment that exactly mirrored yours.
I am sure you can being now that you have been proved wrong on your first example
My example proved your claim from post #85 was incorrect. I didn't want to pile on. You already admitted your error.
I am sure you can being now that you have been proved wrong on your first example but then by doing such you further destroy your claim of "purchasing power is not reduced by inflation" on assets other than cash.
Where did I make that claim?
As far as PAR goes it is a term with differing values and you asked for a definition and a link.
I want to know where you got the idea that banks can somehow multiply their loans based on a different par number, even if the actual value of the 3 types of bonds is identical.
My point was and still is that the FED allows such instruments to be repackaged and sold
Banks don't hold reserves against loans they sell, so that has nothing to do with your claim.
The dog who chases cars finally catches one. Now what?
More shrimp earmarks!
Oh please, Ron Paul wants to go back to the gold standard. He’s an idiot.
From post 85: " any asset that is valued in Dollars suffers the same loss..."
What is so hard to understand about this toddster, You have indeed agreed with the premise that any asset loses the same 1% inflation per dollar, this is a true statement.
Where did I make that claim?
Right here in Post 125: "My share purchases exactly a tank of gas, no matter what the rate of inflation."
If your share does this then explain how you go about it. First you must convert your share to legal tender and as soon as you do you most pay fees to the SEC your broker and of course Uncle Sam wants his due on Capital gains. So now your share of 40.40 has at least lost 7 or more bucks trading in your share.
So lets us review first you claimed I said Assets won't increase in value, I never claimed such I claimed (and proved beyond a shadow of a doubt)n all of the dollars he mentioned would suffer the same loss in inflation. He was trying to minimize the loss on inflation by pulling out a large part of the assets.
Next you claim that your investment will not lose purchasing power and be able to purchase the same tank of gas which as we both know isn't close to being true.
Ahhh we did this once but we can do it again. Its within the BANK THAT BOUGHT IT wherein the magic happens. (You are confusing individual banks with the banking system).
"I want to know where you got the idea that banks can somehow multiply their loans based on a different par number, even if the actual value of the 3 types of bonds is identical."
Hmmm I see you are having a problem with a definition you requested (to explain PAR) and the issue of values getting changed by repackaging such as happens in CDOs and other magic tricks.
No. Wrong.
When inflation is 1%, every dollar loses 1%. Not every dollar asset loses 1%, as you originally claimed in post #85.
further destroy your claim of "purchasing power is not reduced by inflation" on assets other than cash.
Where did I make that claim?
Right here in Post 125: "My share purchases exactly a tank of gas, no matter what the rate of inflation."
So I never said "purchasing power is not reduced by inflation"? Thanks.
If your share does this then explain how you go about it
I don't have to go about it. My example merely shows your original claim was incorrect.
You're not sticking with your claim, "Trying to separate out CASH from REAL assets in attempt to show less of a monetary loss is not only mildly amusing it would give any CPA worth his salt a severe case of the giggles being that any asset that is valued in Dollars suffers the same loss, are you?
Uncle Sam wants his due on Capital gains. So now your share of 40.40 has at least lost 7 or more bucks trading in your share.
OMG! The share that I bought for $40 and sold for $40.40 is losing $7? You've got more math problems than I thought.
you claimed I said Assets won't increase in value
No, I showed that you said all assets priced in dollars lose the same amount as the inflation rate.
all of the dollars he mentioned would suffer the same loss in inflation.
Yes, we agree all dollars lose the same, not all dollar priced assets.
So a bank that buys a corporate for $1000 can loan less than a bank that bought a Muni for $1000. The bank that bought the Muni can loan less than a bank that bought a T-Bill for $1000? And that has what to do with a CDO?
I see you are having a problem with a definition you requested
I have no problem with the real definition of PAR. I've never seen it used and you still haven't explained how it changes the amount a bank can loan.
and the issue of values getting changed by repackaging such as happens in CDOs and other magic tricks.
Values don't get changed by repackaging.
A market price of $200000 on a single mortgage is equivalent to a market price of $200000 on a slice of a packaged mortgage. They both allow an equivalent level of lending.
Ahh you said you could purchase the same amount of gas with an asset that increased at the same rate of inflation (1%) well your tank of gas example was 40.40 and you share price is 40.40.
So show us how you convert your share into legal tender to purchase the tank of gas.
Scotttrade charges 7 bucks to do such (which is about the cheapest broker fee going) and that doesn't include the SEC fee.
I hope Ron Paul succeeds. It will be good for our country. The Fed is corrupt as hell.
Are you kidding me??? How can you say that? I am trying to figure out where that statement came from. Please elaborate.
You said every dollar priced asset dropped at the same rate as inflation. Drop that claim yet?
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