A GOLD HUCKSTER GETS SMELTED. ALL THAT GLITTERS DOESN'T YIELD PROFITS IN THESE TIMES.

On Friday, July 24, 2015, a popular blogger cut and pasted a story from Bloomberg about hedge funds betting on a decline in gold prices, a first for hedgers.

In the Disqus comments, a comment by a guy named Doug Eberhardt caught my eye. That Doug Eberhardt seems to be the same Doug Eberhardt who writes gold and silver blog and who has written a book.

So in the comments, Doug claimed this:

Gold maintains its purchasing power over time. Silver too. Speaking of real rate of return, how about 51 years ago and how a quarter could buy you a gallon of gas and today that same quarter exchanged for the "scrip of the day" can still buy you a gallon of gas in most states except the left coast (up until a few weeks ago) at $2.65. Meanwhile a 1965 quarter can buy you 25 cents worth of gas today. 

Not one to believe anyone's boldface claims and already knowing that against many things, gold has lost buying power, I decided to look up Doug's claim about gasoline. The facts easily refute Doug's claim.

According to the DOE, the average price of a gallon of gasoline in the USA in both 1964 and 1965 was 30¢. At face value, a 1932-64 Washington quarter has been quoted to sell at $2.6566 (the quoted price on July 25 , 2015).

So in either 1964 or 1965, at face value, it would take 1.2 quarters to buy a gallon of gasoline.

Today, in all other states, except Washington, Nevada, Hawaii, Alaska and California, you could buy more gasoline with that same coin first sold to coin collectors than you could with that coin at face value in 1965. However, in Washington, Nevada, Hawaii, Alaska and California, every 1932-1964 quarter lost buying power with respect to a gallon of gasoline purchase. 

It never dawned on Doug that rather than any 1932-64 quarter keeping its buying power, oil production and refining become more efficient since 1965 thus letting sellers accept lower winning bids.

All should note there are storage, discovery and transaction costs associated with holding coins, finding buyers and transferring property as well as possession of the coins for today's legal tender. So the net gain anyone gets for selling gold or silver spot will be less than the spot price times quantity. It is this net gain that counts.

Also, if everyone rushed to sell his collection of 1932-64 quarters, the price for those quarters would fall. That said, nothing would preclude anyone from melting his coins, illegally of course, extracting the silver and selling that silver spot. As well, there are costs associated with smelting that would reduce the net gain upon sell.

After I presented Doug the facts, Doug accused me of being a nitpicker. Ironically, by his doing so, Doug revealed himself as one doing nitpicking. What Doug believes is nitpicking is what I call  prudent businessman reckoning.

After which, Doug engaged in a bit of ad hominem by writing, "Smack, if you knew anything about this industry, people don't rush out to sell their 90% silver quarters and dimes, they hoard them."

Of course, I never made any claims about what anyone actually does. However,  if people hoard their silver quarters and dimes, as Doug claims they do, what is the point of holding silver coins at all? Doing so is like hoarding a 1980s VHS porn collection or a collection of 1960s TOPPS baseball cards.

Doug then asked as if he believed he had something, "Did they [hoarders] rush out and sell them when silver as $49.50 an ounce in 2011? No."

Of course, stupidly, anyone who hoarded, lost out. Being paper rich is useless.

Like Bitcoin collectors, Doug seems to miss why anyone buys collectibles. If anyone sold his silver-laden coins at the top in 2011, he would have bought cash or other bank credit denominated in dollars. At day's end, collectibles are worthless until sold and what people want when they sell their collectibles is cash or other bank credit denominated in dollars.

Of course, Doug's beloved hoarders could spend their silver-laden coins for everyday products right now. However, they could only get 25¢ of buying power for each quarter, regardless of silver content.

Doug's livelihood seems to be tied into price appreciation for gold and silver. In the comments, Doug made this boldface claim: Gold maintains its purchasing power over time. Silver too.

Yet, I have shown many cases where Doug's claim is quite false. You can see proof in charts that Doug's claim is false: 

• FOLLOW THE YELLOW BRICK ROAD INTO THE LAND OF FOOL'S GOLD
• MORE FOOL'S GOLD FOOLERY. GOLD VS COMMODITIES
• AFTER THE GOLD RUSH. YELLOW BRICK ROAD FINAL DESTINATION. FOOL'S GOLD VS THE S&P 500

So, after being showed facts vs his mere claims, seemingly agitated, Doug began a campaign of bragging and more ad hominem  — "Smack, I'll put my reputation on the line of understanding this market better than you or anyone else...... Congress ... asked me to testify before them in 2010." Further, Doug accused me of committed the fallacy of the strawman argument.

Comparing gold and the S&P 500 isn't a strawman. Doug doesn't seem to understand what the strawman fallacy is.

Doug's position is this: "[G]old and silver hold their purchasing power over time."

My refutation of his position is direct: Against many things, gold has lost buying power. For my argument to have been a strawman, I would needed to have argued something like this:

You say, gold and silver hold their purchasing power over time. But I say, so what! FDR banned gold ownership with Executive Order 6102. You could buy gold today and have the government take it tomorrow.

Doug made this boldface claim: "Gold maintains its purchasing power over time. Silver too."  For his claim to be true, there could be no instances where gold and silver lose purchasing power against other commodities, other products and other vehicles of speculation.

The S&P 500 is one such vehicle of speculation. Gold has done poorly against the S&P 500.

As anyone can buy a share of the S&P 500, for your claim to be true, someone with gold would have needed at least to buy the same number of shares of the S&P 500 today as he could have done so many years ago.

From Q3 1976 to Q3 2011, True Gold grew at less than 1% a year, coming in at a scant 0.5% a year for a total of 19.6%, from $87.11 to $104.18. In the same period, True S&P 500 grew almost 4 times as fast, albeit at 1.8% a year for a total of 95%, from $78.12 to $152.33.

All can enjoy the facts right here on Bizarro Theater: IS THERE EVER REASON TO BUY GOLD?

As anyone can buy a share of the S&P 500, for Doug's claim to be true, someone with gold would have needed at least to buy the same number of shares of the S&P 500 today as he could have done so many years ago.

The exact opposite has happened. It has taken ever fewer shares of the S&P 500 to buy the same weight of gold. Said another way, it has taken ever more gold to buy one share of the S&P 500. In short, gold has lost buying power to the S&P 500 as it has to many things.

Against many uniform contract commodities, gold has lost buying power. Such comparisons are valid. Since demonetization, against many things, gold has lost its buying power.

If Doug believes his claim, he doesn't understand the reality of commerce. If Doug doesn't believe his claim but says it to get others to buy from him, Doug uses questionable business practices. 

Gold and silver have been demonetized. The price of gold, the price for silver as well as anything else conforms to the one, true, infrangible law that governs all of commerce, the Law of Prices.

The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer sets the price. Unlike man-made law, this law is inescapable.

Back in 2014, I showed readers of Bizarro Theater the future of gold. If you have not done so, you should read this: LOSING ITS LUSTER. THE SECRET FUTURE OF GOLD REVEALED.

Under the current state of the economy, bank credit and interest rates, the time to buy gold long has long gone. There are no drivers to buy gold. None.

Doug's livelihood seems to be tied into price appreciation for gold and silver. Doug said, "All my company sells are bullion coins as opposed to all other gold dealers," which seems that Doug is in the business of selling rounds. Selling gold rounds is a business predicated on finding buyers who believe people like Doug and who hope for a rise in the price of gold.

The worst bit are all the gold and silver hucksters preying upon gullible who suffer from end times delusions and thus feel compelled to become preppers for a future. It never dawns on them that if there would be worldwide financial collapse and reversion to money — coined metal by weight and fineness — even a small weight of gold and silver would make anyone rich.

Under total collapse, there won't be credit. Without credit, there won't be massive edifices of capital. Without capital there won't be products or wages.

It will take little gold to buy much of the few things that can be had.

UPDATE:

Today, 7/28/2015. a day after I wrote the above work, Doug couldn't resist himself. At the end of debate, one day ago, Doug wrote:

"I'll give you the last word and ignore you as you have your own agenda."

Doug lashed out recklessly, engaging in ad hominem. Some of Doug's gems were these:

• "You wouldn't make a good attorney."
• "I have now classified you as a troll who sits in their underwear at his computer and has nothing better to do with their time."
• "Next you used a strawman to make a point in bringing up the S&P 500 and not sticking with the 'issue.'"
• "#troll"

It seems Doug has stewed on everything I've written and having become enraged, Doug had to lash out it what seems to be little more than a childish tantrum. 

And yet, Doug Eberhardt wants adults to enter into purchases and sales with him by selling them gold or silver and buying from them their cash or bank credits. Doug's behavior should give anyone pause before considering entering into contract with him to buy gold or silver from him.

Doug still does not seem understand the fallacy of the strawman argument. Idiotically, Doug claimed "gold and silver hold their purchasing power over time". Whether or not Doug believes that to be true or Doug says such a phrase to wheedle others into buying gold and silver from Doug lacks relevancy.

It is not a strawman argument to compare things directly to which anyone would have lost their purchasing power had they bought gold and silver. It's a direct counterclaim. Producing a factual direct counterclaim so refutes your false claim, easily. 

One of those things is the S&P 500. Anyone can buy a share the S&P 500. The S&P 500 is one of those factual direct counterclaims.

I gave Doug a perfect example of what would be a strawman argument:

Doug's premise: You say, gold and silver hold their purchasing power over time.

Strawman: But I say, so what! FDR banned gold ownership with Executive Order 6102.

Knocked down strawman: You could buy gold today and have the government take it tomorrow. 

Ironically, Doug Eberhardt of buygoldandsilversafely.com's (that is the site Doug who commented put into the Disqus comments) argument against me is an example of the strawman fallacy. To wit:

After Doug Eberhardt said all should buy gold and silver because "gold and silver hold their purchasing power over time," Smack MacDougal showed factual instances where gold and silver lost purchasing power against other things.

Doug Eberhardt responded by implying that he was surprised that Smack hates anyone speculating on gold and silver so much that he wants them to become bankrupt by losing out on going long gold and silver. 

Doug Eberhardt of buygoldandsilversafely.com ought to prove to the world that he can time the market for gold and silver, exactly. His publicly-accessible writing on his blog alludes to Doug having such skill. However, Doug's publicly-accessible writing on his blog seems to be a whole bunch of gibberish masquerading as experience.

In True Dollars™, which is what counts, gold and silver will be going down for years, not months, but for years to come. There are no drivers for gold, none.

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WORK NEVER CREATES VALUE. WORK CREATES PROPERTY.

Recently, noted anti-banking blogger, Charles Hugh Smith wrote in The Changing Nature of Middle Class Work, "If we ask, what is work?, the conventional answer is tasks that somebody will pay us to do. This is true, but it doesn't address why someone is willing to pay us. The answer is to create value."

Charles Hugh Smith and all those like him perpetuate fallacy. The fallacy that work creates value is a variant of David Ricardo's labor causes value theory, which Karl Marx built upon his entire theory. 

As I show in BUT I SPENT 150 HOURS HANDCRAFTING THAT OIL ON CANVAS! OR THE LABORER'S SILLY THEORY OF VALUE, labor has nothing to do with prices. Prices get set by winning bidders. 

All prices adhere to the one and only true law of trade, the Law of Price — the winning bids of purchase and sale in the face of what is on offer sets the price. Prices get set by winning bidders who possess the means — these days legal tender cash or credit — in the face of what is on offer.

If no one bids for anything made, no matter how skillfully done, it's worthless. If bids are below cost, oh well. That is an signal that most everyone in a society of property deem the work worthless and a waste of resources. 

The entirety of trade, or commerce, or real economics ties up with two words — property and profit. Without profit from effort, anyone would lack buying power to buy anything else. Without property, no one can trade. 

Though most think of property as things possessed, property always has meant the right of ownership and never the thing owned. Only when property gets created, can trade arise between two persons. 

The name for property put to making stuff is called capital. The name for property put to purchase and sale for cash and credit is wealth. 

Work is expressed skills through time. Work becomes the wealth of the laborer when traded away in a purchase and sale. Why someone pays for work is to gain property in that work. 

Cash and credit in the form of wages becomes the wealth of the employer when traded away in a purchase and sale for wealth of the worker, which is her work.

In a purchase and sale, work is what the laborer sells and wages in the form of cash or credit is what the laborer buys. 

Until an employer gains property in the effort of an employee, which we call work, the employer cannot do anything with that work. Taking possession of something without having property in something is called theft. 

Work of a laborer is no different than computer chips made by robots in a factory. Both are components of a larger product. 

The manufacturer of smartphones with computer chips does so in quest to trade away at profit, property in smartphones for property in cash or credit.

Value does not mean usefulness. Value is a ratio. Value is the ratio of one thing for another. The ratio of exchange, that is, the rate of exchange, or said as the exchange rate, is the value. 

When one two things in a purchase and sale is cash or credit denominated in cash, value gets called by the word price. Value is the quantity of what is acquired in a purchase in sale over cash or credit denominated in cash given up in that purchase and sale.  

So, 6 oranges for $1 is the value, written as 6 oranges / $1. 6 oranges together is a trade quantity. $1 is a trade quantity. 

Stuff doesn't have value. Stuff makes value. Value is a ratio of one thing for another in actual trade. Value arises from valuation. Always, value is a ratio expressed as one thing traded for another. 

Value arises solely in the moment of trade. When one of two things in trade is cash or credit, we give the word value another name. We call it price.  

Value results from reciprocal desire to gain property from whatever causes in the minds of those involved in the trade. 

To someone, she might sell $8 and buy a hamburger and a milkshake. To someone else, he might sell $8 for a six-pack of beer.  

Even though their subjective desires differ with respect to the same sum of cash, $8, any outside observer can observe objectively value in either transaction, one burger and shake for $8 as well as one six-pack of beer for $8. 

There is no other cause for price (value) than the quest to gain control of property. No one can realize profit gains without property owing to being among a society of property. No one can derive the usefulness of goods before possessing those goods.

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FALLACY FRAUGHT FORBES TRIES TO STOKE FEARS OF HYPERINFLATION

Over at Forbes, in an article intended to stoke fears of hyperinflation, writer Mike Patton who touts himself as an ex-wire house worker and an investment adviser,  pens a piece fraught with fallacy. Patton's work is typical of many, having its basis on shop worn fallacies that never cease in causing mischief in the minds of many.

"Inflation may be defined as a general rise in prices" ~ Mike Patton

Anyone who claims that to be the true meaning of inflation would be wrong. 

In the fiduciary monetary system of centralized bank notes, inflation is merely the growth of the circulating media — cash, which is evidence of past deposits circulating in perpetuity and bank credit in the form of checkable deposits.

The damaging effect of inflation becomes revealed when the growth of credit outstrips the growth of output owing to credit being priced too cheap. 

The residential realty bubble of the 2000s is classic inflation. When enough became incapable of servicing their debt owed on credit extended, widespread bankruptcy erupted and inflation stopped. 

Writers from at least since 1810 through the early 1920s understood well what inflation means:

• Reflections on the abundance of paper in circulation, and the scarcity of specie; Francis, Sir Philip; J. Ridgway, 1810
• Currency inflation: how it has been produced and how it may profitably be reduced. Letters to the Hon. B.H. Bristow, secretary of the Treasury; Carey, Henry Charles; Collins, printer, 1874
• The principles of currency, and the error of “inflation”: an abstract of the Oxford lectures, applicable to financial questions in the United States; Price, Bonamy; H.L. Hinton & co., 1875
• Currency inflation and public debts: an historical sketch; Seligman, Edwin Robert Anderson; Equitable Trust Company of New York, 1921

"Why does the Fed want inflation? Because inflation is a signal of a growing economy." ~ Mike Patton

All prices conform to the one, true infrangible law of trade, the Law of Prices. The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer sets the price.

During times of excess credit, which is inflation, prices of the same assets get evaluated ever higher precisely because bidders have more buying power in the form of credit.

Contrary to Patton's claim, inflation is not a signal of a growing economy and thus Fed Res central bankers do not seek inflation based on that false belief.

As credit is another product, the same as cars and food, Fed Res bankers seek to inhibit the dollar from increasing in buying power relative to output. If output rises faster than cash in circulation, cash would buy more goods, more services, and more credit. As merchants of credit, bankers would earn less buying power.

"[W]hen the Fed expands the money supply, money is more plentiful..." ~ Mike Patton

Money is coined metal by weight and fineness. The Romans said so. It's their word. Even the U.S. Constitution supports that concept. 

Thus, it is impossible for Federal Reserve bankers to increase the amount of money in circulation. No money circulates goods, services or credit.

Today, Americans have cash. Specifically, Americans have legal tender cash. So too do Canadians have legal tender cash, the Brits, all those of the Eurozone, the Japanese, and so on. 

Cash arises as an artifact of banking. Money, if it existed, could exist irrespective of banking or of politicians and government agency.

Legal tender cash is centralized bank notes circulating in perpetuity. Seemingly, legal tender cash does the work of money, but never is cash actual money. 

Legal tender means Congress has decreed Fed Res banknotes as the only acceptable payment for debts owed to Congress. Whether legal tender or not, cash is denominated bank notes circulating as evidence of deposits. Deposits are bank credits.  

Federal Reserve bankers can strive to only increase deposits, cash or a combination thereof through re-discounting and through debt monetization of government bonds, buying bonds outright through conjured checking account credits.

"[W]hen the Fed reduces bank reserve requirements ... banks have more money to lend." ~ Mike Patton

Not only do bankers not lend money since money doesn't exist, but even in the days of money, bankers never lent money.

A bank is a firm that seeks profit through the business of selling its own credit. Through banking, bankers exchange their credit for the credit of others. Thus, a banker is a trader who buys cash and debt by selling bank credits. 

Bankers transmutes property into a form, which can get traded. Bankers facilitate the trade of merchant credit for bank credit, the trade of cash for bank credit and the trade of property in future profit for bank credit by holding lien against extant property.

Banking stands as the medium of exchange by making credit negotiable from one holder to another so that credit might work the same as money once did and as cash does now. Thus, a bank is a refinery for credit.

As a refiner of credit, bankers transmute credit, bankers transmuting property into credit through coining less merchantable property into more merchantable property, which is credit of general acceptability. In so doing, bankers engage in alchemy earning metaphorical gold when bankers earn profit through transmuting property into credit.

Bankers don't lend their own capital. Rather, bankers transmute the credit of depositors. In so doing, the guaranty of bankers upon this transmuted credit lets depositors trade upon this guaranty.

Bankers facilitate trade for wanted goods through bank checks.

"Another consequence of a significant expansion in the money supply is the devaluation of the currency." ~ Mike Patton

It's impossible to devalue currency. Currency means bearer negotiability. Bearer negotiability means the property (right of ownership) goes with possession. No need exists to prove title. 

Currency doesn't mean cash. The word currency isn't a synonym for the word cash. 

Anyone either has an instrument of currency or that one does not. Cash has currency. When you buy milk at the Quik-E-Mart with cash, you don't first prove to the cashier that you own the cash. The cashier readily takes your cash and lets you walk out the store with the milk.

"In essence, when there is a substantial increase in the supply of an item, including currencies, its value declines." ~ Mike Patton

Nothing has value. To claim the value of something declines is to fall for the fallacy of intrinsic value. Value is not a quality, an aspect of a thing residing absolutely within it.

It takes two things to make a value. Value results from the expression of a ratio of importance between two commodities in exchange. When one of two things in a purchase and sale is cash or credit denominated in cash, we give value another name. We call it price.

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THE UNREALITY OF SAVINGS, INCOME INEQUALITY AND ECONOMICS

Recently, I came across an interesting piece about academic Michael Pettis, which exposed Pettis' false beliefs about savings and income inequality. Pettis spews gobbly-gook. There is no such thing as savings. There is no such thing as income inequality.

Savings is mere rhetoric. People don't put savings in a savings bank or any other kind of bank. Depositors buy bank credits and sell cash, other bank credits or debt in property trades each known as a purchase and sale. 

In a purchase and sale, selling cash or perhaps other bank credits and buying an interest-bearing account, a bank customer becomes a capitalist who buys a share of future bank profits, which gets called interest. It's mere deceptive rhetoric to call such a capitalist "a saver" or one "who has savings" even when the bank customer capitalist is a wage earner. 

Depositors get deposits as evidence of their right of action against bankers when in a purchase and sale, selling their cash, other bank credits or debt. Bankers become owners of said cash, bank credits from other bankers and debt bought in a purchase and sale from depositors. 

Bankers and other capitalists deal in property with confidence in forthcoming profits, transmuting property that lacks saleability into property that does, enabling the adventurer-entrepreneur to transmute property as capital of production into property as wealth for trade. 

There is no such thing as "savings." There is only profit and loss. 

People work to get profits. People don't work and produce to make savings. To believe that people work for savings rather than profits is to reject reality. 

Anyone produces property in hopes of the gain of profit in a purchase and sale. Property always means the right of ownership and never what is owned. 

People trade property in stuff because before people can enjoy stuff, they must own it. People pursue profits to buy chattel, services and rights of action. Without profits there can be no purchase of another thing. Cash and bank credits are means to ends. 
  
Profits provide buying power because people seek buying power to buy the things they want from the surpluses they produce owing to efficiency. Otherwise, people would live at bare subsistence content to make little of a few things they need to survive. Under such a state, trade would not exist, nor would credit.  

People trade their property in chattel, services and rights of action (credit). People don't trade biens (goods) as the Physiocrats called them nor do they trade utilities as the Mill from Bentham utilitarians called them. 

Pettis errs again when he claims income inquality exists and is causal for anything. Income inquality does not exist and thus cannot be causal.

In THERE IS NO SUCH THING AS INCOME INEQUALITY, I use Robert Downey, Jr., to reveal that truth. If someone earns more than another, that is so because those paying for the one earning more pay higher bids than those who pay others less. 

Comparing the wages between a brain surgeon and a fast-food drive-thru cashier is deceptive, false comparison.

In both BUT IT IS FOR INEQUALITY! AT WHAT POINT DO PEOPLE STOP EXPONENTIALLY DOUBLING DOWN ON STUPIDITY?, and SPREADING WEALTH, INCOME INEQUALITY AND OTHER MANURE, I reveal crony politics keeps people poor through minimun wage and welfare subsidy and how it is impossible to spread wealth. 

Whether as individuals or in tandem for a firm, people work to get profits. And to get those profits, people work to make property in surplus. 

In trade, all get governed by infrangible, inescapable law of trade, the Law of Prices. All get constrained by the Axiom of Profit. The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer set the price. The Axiom of Profit holds the sum of sales must at least equal the cost of production, otherwise the producer goes to run.

For workers, profit gets measured by the difference of wages less living expenses. For firms, profits gets measured by the difference of sales less outlays. For a given productivity of property made at surplus, if living expenses and outlays rise faster than wages and outlays, profit falls.

If living expenses rise above wages, workers live at loss. If outlays rise above sales, firms operate at loss. 

Prices have been rising owing to reckless cash accretion and reckless cash accretion has arisen owing to quantitative easing. 

Since cash are bank credits circulating in perpetuity, with cash anyone only can pay taxes, buy goods or buy bank credits. Residual bank credits become reserve against more bank credits traded in a purchase and sale. 

When bank credits grow faster than output, prices rise. Individuals caught in such a profit squeeze cannot buy vacations in the Bahamas, music lessons, dinners eaten at upscale restaurants, tailored suits and so on.

In YOU LIVE AT THE MERCY OF A CLOWN-CAR DRIVEN BY MEN AND WOMEN OF THE FEDERAL RESERVE, I reveal how those at the Federal Reserve continue to err because they believe in economics rather than trade. 

Pettis is quite wrong when he babbles that there can be excess thrift as well as insufficient thrift. That is akin to saying there can be degrees of prosperity. 

Pettis fails to understand what thrift means, conflating thrift with savings. In THE WEALTHY PEOPLE EFFECT AND WHAT IT TRULY SHOULD MEAN TO YOU, I explain the word thrift as a Middle English word from about 1300 meaning "thriving, prosperity" and comes from the Old Norse meaning the same. 

In prosperity, anyone who wants to work can find work. Profit abounds. Wages increase faster than living expenses. Sales increase faster than outlays. The creation of property grows at an increasing rate.

Pettis errs again when he quotes Eccles who spews silliness about distribution. 

The whole mythology of production and distribution comes from the Physiocrats and their effort to support false claims that only farmers and the land produces while all other classes are unproductive and thus should be the ones upon whom taxes should be borne.

It's no wonder why Pettis doesn't get reality. Pettis parrots much of what gets taught by academicians and their economics mythology. Academia economics mythology fails to comport to reality. 

Academia economics, regardless of neoclassical school, fails to deal with the phenomena of trade — property and profits. Instead, academia economics focuses upon utility and scarcity, both of which have nothing to do with commerce, which is also called trade.

Trade, which is the purchase and sale of property as wealth made from property put to production, which is capital, to produce property in surplus, is the only reality. 

Here are three more must-reads on Bizarro Theater to help you disabuse yourselves from the unreality of economics and income inequality:

1. GREEDY CAPITALIST COMPLAINS ABOUT UNEMPLOYMENT INSURANCE EXPENSE AND QUITS HIS BUSINESS
2. WILE E. COYOTE, CAMPGROUND BUSINESSMAN SUPER GENIUS
3. LIVING IN THE AGE OF IDIOCRACY

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BUT I SPENT 150 HOURS HANDCRAFTING THAT OIL ON CANVAS! OR THE LABORER'S SILLY THEORY OF VALUE.

The story shown in the picture below is typical of most who, though, constrained by reality, fail to see reality. Thus, they suffer. Their faces emote their anguish much like the old woman painted by the Dutch master, Rembrandt.

Though the story is touching, it's fallacy. The fallacy is Ricardo's labor causes value theory, which foolish socialists like Marx took up. The fallacy was put to bed more than 160 years ago.

Labor has nothing to do with prices. Prices get set by winning bidders. 

Take two people. One can spend one million dollars buying equipment and mining rights to mine for gold and after all that effort only find an ounce of gold. Another could find gold while walking spending exactly nothing. 

Is the ounce of gold worth a million because that is what the miner paid, what it cost him to get? No!

Right now, both the miner and the finder could get $1242.80 (as of 2014.Jan.30) for selling that ounce and that much alone. Why? The price gets set by winning bidders against all gold on offer for sale right now.

The miner put in time, effort, dedication, smarts, training, and much more. The finder put in nothing.

Or say someone has inherited purported fine-crafted gold jewelry from a dear lost relative and melted that jewelry down to support a meth habit, the gold in that jewelry would fetch at the same rate of all gold, $1242.80 an ounce. Once again, no outlay was made for that gold coming into the methhead's possession as property.

All prices adhere to the one and only true law of trade, the Law of Price — the winning bids of purchase and sale in the face of what is on offer sets the price. Prices get set by winning bidders who possess the means — these days legal tender cash or credit — in the face of what is on offer.

If no one bids for anything made, no matter how skillfully done, it's worthless. If bids are below cost, oh well. That is an signal that most everyone in a society of property deem the work worthless and a waste of resources. The artist should find other work.

Labor is the poor man's capital. The expression of skills through time, which is called work, is a product.  Labor is the outlay to turn something into property and nothing more. Only things of property can be bought and sold in purchase and sale for cash or credit.

Trade is predicated on property and profits and not effort and skill. Anyone must gain property, which is the right of ownership and never the thing owned, before enjoying or possessing a thing. If anyone fails to buy something to gain property in it, but instead takes it, that is called stealing. 

Anyone can buy stuff because that one has produced profit (earnings) in past and has been rewarded or others expect another shall produce profit in future, which we call confidence, and thus give credit to another. 

Profit arises because of property others want to possess under the constraint of the great Axiom of Profit —  the sum of sales must at least equal the cost of production, otherwise the producer goes to ruin. And of course, the sum of sales arises from the quantity of things sold times price. And price gets set by winning bidders of purchase and sale in the face of what is on offer.

So the whole trick of producing property in pursuit of profits is to produce what others want, to be in service to others. And that is what being in society of property is all about,  the only society in which strangers can live, even when government has grown to take control of that society and has distorted all relationships of man with man in society of property.

If labor were what caused price, then why can Apple earn a premium on iPhones relative to all other touch screen phones? Why aren't Apple execs accepting bids ( charging ) for what it cost them to get the phones made? 

If labor set prices because cost were to be the cause of price, then why does anyone go out of business? Labor has nothing to with price. Prices get set by winning bidders who must first gain property in something before they can use it.

No one works at a loss (Wages - Living Expenses or Sales - Outlay) unless politicians swoop in and subsidize that one with Section 8, SNAP and the like. When politicians give  workers welfare to subsidize their living, in effect, politicians subsidize firms that can pay wages precisely because of welfare given to workers (see: GREEDY CAPITALIST COMPLAINS ABOUT UNEMPLOYMENT INSURANCE EXPENSE AND QUITS HIS BUSINESS and Wile E. Coyote, Campground Businessman Super Genius).

Any worker gets paid to produce. His or her wage arises against the lack of willingness of another slightly better and smarter, who absent what she or he is doing, could bid lower than the worker being more efficient at living or could bid higher than the worker being able to produce more in any time span.

All the same, prices get set by those willing to cough up the cash or credit to buy. Sellers must accept those bids to get sales. Would-be sellers can refuse those bids and earn nothing. They can hold back inventory in hopes of future bidders bidding up prices.

People fail to appreciate the role of marketers and those in advertising who help to present products to those who most willingly can appreciate how a product can fit within their lives.

Marketers are quite like commodities speculators in the respect of pushing prices along to keep prices high enough so that manufacturers, be that automated or hand-crafted, can live to make another day, and yet against each other, low enough so that many can enjoy the fruits of others.

It's too bad that many perceive, wrongly, that marketers are "middlemen" who are little more than tricksters and knaves. Marketers keep people in business.

The successful stick to their knitting as it were and hire marketers to get them the best price possible. The reward for doing so is a share of the increase.

To savages, a Rembrandt likely would be worthless compared to spears. The savage wouldn't know he could sell the Rembrandt to someone who would esteem it and buy thousands of spears.

Yet, where art gets esteemed by others, it is the winning bidder who sets the price for a Rembrandt as nothing in trade ever can violate the Law of Price, the same as nothing can violate the Laws of Thermodynamics or the Law of Gravity. So even a one-off like a famous artwork sells, not because of purported scarcity, but because someone else has property (right of ownership) in it.

The price of a Rembrandt arises not because it is rare (scarce), but because of rivalry of bidders, only one of whom can win with the highest bid precisely because that one has the most cash or credit, which he is willing to sell in a purchase and sale, to buy a Rembrandt. 

Egghead Ph.D. academicians, who call themselves economists, long ago realized the error of Ricardo. Rightly, they came to see that labor is not the source of value (price). Yet, the next round of economists decided to commit their own fallacy and from which they base their entire myth of economics, that of scarcity and utility cause value (price). See my work WHY IS THE ECONOMY SO HORRIBLE? BECAUSE ACADEMIA ECONOMICS IS FAKE to discover in less than 3 minutes, why economics is bogus, a myth, a b.s. story.

Utility as a source of price (value) is quite false as it imbues into things intrinsic value. Scarcity as a source of price also is quite false. 

The earth is awash in water, but men are successful sellers of bottled water right next to giant lakes and rivers. Why can do they do so? Bottling creates property. 

Many would believe that a Rembrandt is worth much because he is dead and thus can not make any more. So any Rembrandt is a one-off. Yet, millions have watched and learn to paint from Bob Ross, each creating their own one-offs. Each one being unique makes each one scarce. Each Joe Blow also is a one-off. 

Yet, no one trawls garage sales bidding outrageous sums for the one-offs of the Joe Blows of our world. 

And so, because economists believe from false premises, their conclusions are false, necessarily so, even when remaining logically consistent from false premises to false conclusions. It doesn't matter if that neoclassical school is the Keynesian school or the Austrian school. 

There is no escaping reality. Anyone can only deny reality. 

Enjoy some Rembrandt!

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