08 March 2011

On Hoarding

Hoarding: a crutch word used by Marxists who refuse to acknowledge a free market exists without their dictatorial wishes.

I have been hearing lots of "hoarding" talk lately.  Actually, much longer than that.  I don't mean the acceptable, descriptive compulsive hoarding that actually describes a behavior that may or may not be bad.  No, I am talking about the "hoarding" usage flying around whenever the price of anything goes up.  Wikipedia has a perfectly fine description of economic hoarding:
In economics, hoarding is the practice of buying up and holding resources so that they can be sold to customers for profit.

Followed by a perfectly fine descriptions of possible causes:
Hoarding behavior may be a common response to fear, whether fear of imminent society-wide danger or simple fear of a shortage of some good. Civil unrest or natural disaster may lead people to collect foodstuffs, water, gasoline, and other essentials which they believe, rightly or wrongly, will soon be in short supply.

Economically speaking, hoarding occurs due to individuals obtaining and holding assets thought to be undervalued and build up reserves of it in hopes to profit or save money later. Examples include times when price controls were in effect as in the case of Germany after World War 2, communist countries, or after natural disasters when goods are in such short supply that consumers stockpile (this is sometimes compounded by anti-price gouging laws which prevent the supply and demand curves from functioning). In these cases the hoarding disappears after the price controls are removed.

 This is one of the rare cases where I will endorse the Wikipedia treatment of a topic.  Unfortunately, the common usage lately veers quite a distance from what is quoted above.  The clanging Leftist/Marxist banshees of the internet have defined "hoarding" through usage as "you are not selling at a price I like" (see above, the communist countries) and it is frequently used in conversations involving gold or silver.  Unshockingly, these caterwauls increase with the frequency of gold and silver investment advertisements on radio and television.

Here is a bit of free investment advice: if you hear commercials about a great investment, it is not a great investment.

Mind you, these people who use "hoarding" as a pejorative are probably the same people who would advocate your death if you tried to tell them what to sell a pepper and salt shaker set for in a yard sale, but they have no problem demanding that gold sell for $25 per ounce.  Yes, you read that right.

One of the popular scripts (even if they will not admit to, or know that they are using a script) is "gold (or another commodity) is at a high price due to hoarding." Followed by a few illogical leaps and concluding with: "It is just like the tulip bubble, they were trading so high one was worth a whole farm, then the bubble burst."

Interestingly enough, "hoarding" does not adequately explain the tulip bulb bubble.  That was a supply and demand "problem" where tulip bulbs became more popular than the suppliers could keep up with.  At the date of this writing, we have a quite different "problem" with refined oil products.  There is no supply shortage at all, in spite of the unrest in North Africa and the Arabian Peninsula.  Unlike the USA and parts north, those countries do not discourage oil production.  If the rest of the places on earth that have oil reserves actually encouraged oil production and refining, the price would be lower and more stable.  Additionally, oil is hard to "hoard" once it is removed from its natural container of rock.

What amazes me about every single person who tosses the "hoarding" accusation is that they are so passionate about the high price of something that they don't have a use for.  If you are in the electronics or jewelry industry, you do have uses for gold and silver.  The complainers are never manufacturers of products that use gold or silver, they are people who want to buy some cheap and wait until it is valuable, i.e., they want to engage in precisely the same behavior that they are carping about.

So, what are they really complaining about?  They are complaining about a perceived behavior that they do not like in others, but it is perfectly fine for them: buying and holding assets.  In other words, they are authoritarians and hypocrites.

The "solutions" for getting someone to sell their property "soon" are: offering a consideration that they will accept, stealing it or having the government steal it from them.  That is a pretty short list and covers all the bases.  The next time you hear someone complain about "hoarding" just ask them what they propose as a solution.

Additionally, if they attempt to use as evidence that a price of something (usually tulip bulbs) was high once and cheap now ask them if they really, truly believe that the highest price anything attained is supposed the be the only price until Sol becomes a Red Giant, or are fluctuating prices more the natural order of things?  Salt is no longer used as money either.  Any complaints about that?  Mayor Bloomberg, take down your hand.

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1 comment:

  1. At the time of the Tulip Bubble, short-selling was outlawed. Many argue that shorting is necessary to drive down the price of an overvalued security.