Ron Paul and the Dollar.
 

I've read that he wants to push for a hard currency, abolish the IRS, and get rid of the dollar as a fiat money.

This sounds like a sudden change coming from a M.D.
Anything sudden is going to have a drastic effect, for better or worse and I may be wrong but one of the worst things for a currency is inconsistency, or instability.

Are there any reports analyzing these changes and the effects they would have on the American economy more in depth?

Re: Ron Paul and the Dollar.
 

There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

Yen, Yuan, Euro, Loonie, Australian dollar, Pound Sterling, .... lots of other central bank backed currencies.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

[/ QUOTE ]

No, this is a bunch of nonsense. What's the worst case scenario if the demand for money is greater than the supply? The value of money goes up? Oh noez!!!

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]
why?

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

[/ QUOTE ]

No, this is a bunch of nonsense. What's the worst case scenario if the demand for money is greater than the supply? The value of money goes up? Oh noez!!!

[/ QUOTE ]

Oh noez!!! another self proclaimed Alan Greenspan.

If people don't have money to spend they stop buying goods, wages go down, unemployment goes up, and the economy slows. This is economics 101, moron.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

[/ QUOTE ]

No, this is a bunch of nonsense. What's the worst case scenario if the demand for money is greater than the supply? The value of money goes up? Oh noez!!!

[/ QUOTE ]

Oh noez!!! another self proclaimed Alan Greenspan.

If people don't have money to spend they stop buying goods, wages go down, unemployment goes up, and the economy slows. This is economics 101, moron.

[/ QUOTE ]

I've never taken economics 101 so maybe you can help me understand. Why wouldn't they simply be able to buy more with the money they already have?

If I own some land, and demand for land goes up, I don't suddenly have less land... the land I already possess is more valuable. I really don't get what you're trying to say. How is a backed currency any different from land? In fact, a backed currency could theoretically be backed by land.

Please help me, because I don't get it.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

[/ QUOTE ]

No, this is a bunch of nonsense. What's the worst case scenario if the demand for money is greater than the supply? The value of money goes up? Oh noez!!!

[/ QUOTE ]

Oh noez!!! another self proclaimed Alan Greenspan.

If people don't have money to spend they stop buying goods, wages go down, unemployment goes up, and the economy slows. This is economics 101, moron.

[/ QUOTE ]

When in doubt, call the other guy a moron instead of presenting an argument. Maybe when your sister gets into Harvard or Yale, she can explain you how to form arguments.

Re: Ron Paul and the Dollar.
 

The currency issue is a lot bigger than most people realize. The world cannot continue to finance our debt indefinitely. The US has run a trade (and government spending) deficit for many years in a row. At some point our creditors are going to want to be paid back ending the credit bubble we are in now.

[ QUOTE ]

Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

[/ QUOTE ]

This is not true. While the economy has exploded since that time, a lot of the gains are due to inflation, and are not real. My generation is expected to earn less than my parents (baby boomer) in real terms.

More of the gains have come from borrowing money, like the trade deficit that continues every year. If I give you a new credit card with a high limit each year, you are going to be able to buy a lot of stuff. At some point however, you are going to have trouble making those minimum payments. Then the credit cards are going to stop coming in the mail. When that happens, the assets you thought you had are going to have to go back to the bank.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
The currency issue is a lot bigger than most people realize. The world cannot continue to finance our debt indefinitely. The US has run a trade (and government spending) deficit for many years in a row. At some point our creditors are going to want to be paid back ending the credit bubble we are in now.

[ QUOTE ]

Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

[/ QUOTE ]

This is not true. While the economy has exploded since that time, a lot of the gains are due to inflation, and are not real. My generation is expected to earn less than my parents (baby boomer) in real terms.

More of the gains have come from borrowing money, like the trade deficit that continues every year. If I give you a new credit card with a high limit each year, you are going to be able to buy a lot of stuff. At some point however, you are going to have trouble making those minimum payments. Then the credit cards are going to stop coming in the mail. When that happens, the assets you thought you had are going to have to go back to the bank.

[/ QUOTE ]

People who devoted their lives to economics, and are a hell of a lot more intelligent than you or I made the decision to change and understand the consequences and benefits of it.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
The currency issue is a lot bigger than most people realize. The world cannot continue to finance our debt indefinitely. The US has run a trade (and government spending) deficit for many years in a row. At some point our creditors are going to want to be paid back ending the credit bubble we are in now.

[ QUOTE ]

Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

[/ QUOTE ]

This is not true. While the economy has exploded since that time, a lot of the gains are due to inflation, and are not real. My generation is expected to earn less than my parents (baby boomer) in real terms.

More of the gains have come from borrowing money, like the trade deficit that continues every year. If I give you a new credit card with a high limit each year, you are going to be able to buy a lot of stuff. At some point however, you are going to have trouble making those minimum payments. Then the credit cards are going to stop coming in the mail. When that happens, the assets you thought you had are going to have to go back to the bank.

[/ QUOTE ]

People who devoted their lives to economics, and are a hell of a lot more intelligent than you or I made the decision to change and understand the consequences and benefits of it.

[/ QUOTE ]

Wooly,
would you walk into a car dealership and say "tell me what car to buy, and how much I should pay for it" and then take their advice. Aren't their incentives a little different from yours?

Here\'s a Link to the UCLA Paper
 

Re: Ron Paul and the Dollar.
 

I can't understand why you would say the incentives are different. The economists within the government would like to ensure a prosperous government, people, and nation using tools that minimize inflation and mimic actual GDP growth.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
I can't understand why you would say the incentives are different. The economists within the government would like to ensure a prosperous government, people, and nation using tools that minimize inflation and mimic actual GDP growth.

[/ QUOTE ]

No, the economists within the government want a way to tax you without your noticing. They want more of your money to spend on things they want. But they can't tax you too much or you might get mad, really mad. So they figured out a way and a time to get around the Constitution and create fiat money.

Fiat money is money that is not backed by anything. The legal tender laws make a crime not to accept it. Fiat money is nothing but paper. If the gov't wants more money all they have to do is print more. When they print more there are more dollars floating around for the same amount of goods. This means the value of your dollar has decreased. Then the price of things goes up because it takes more dollars to buy them because the dollar is worth less. That is a way of taxing you.

If you get 100 this month and can buy x number of goods and make the same 100 next month and now can only buy x-y number of goods you are worse off.

I would suggest that you do some reading on this subject. Go to Mises.org. If you don't feel like reading here is a video: http://video.google.com/videoplay?do...10540567002553

The federal reserve is a cartel of private persons that no one knows (not even the president) and with the help of Congress they control the money supply. In this manner, the rich are able to take trillions of dollars from the poor. (Collectively of course).

If our creditors ever decide that they don't like taking worthless dollars anymore (and they are making moves in that direction) then this whole house of cards can come falling down. See the definition of hyper-inflation.

Do not trust those in power. They are there because they like power, not you.

BTW - the word inflation has been hijacked. It really means monetary inflation that leads to price inflation but they have substituted price inflation as a way to say it is something they can't control. Monetary inflation is just how much extra printing the gov't has done. It is easy to control that. Don't print.

Ron Paul wants to take away the govt's ability to tax you in this manner. Goods and services should get cheaper every year and they would if the feds would stop interfering. Money would be spent where it would do the most good and the country would prosper. The rich at the top wouldn't have as much though. In a way it is a wealth transfer, from the people who are robbing you back to the ones who are being robbed.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
The federal reserve is a cartel of private persons that no one knows (not even the president) and with the help of Congress they control the money supply.

[/ QUOTE ]

Is this really true, that not even the President of the USA knows who the Federal Reserve board members are? If so that strikes me as rather bizarre and somewhat worrisome.

[ QUOTE ]
BTW - the word inflation has been hijacked. It really means monetary inflation that leads to price inflation but they have substituted price inflation as a way to say it is something they can't control. Monetary inflation is just how much extra printing the gov't has done. It is easy to control that. Don't print.

Ron Paul wants to take away the govt's ability to tax you in this manner. Goods and services should get cheaper every year and they would if the feds would stop interfering.

[/ QUOTE ]

I am guessing the reason things would get cheaper every year is due to more efficiency and competition? If there is no upwards artificial inflationary pressure (printing money), that would make sense. An interesting perspective that had never occurred to me. Hopefully someone with more background than I have can confirm, deny or further explain the forces at work as described in this post.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
I am guessing the reason things would get cheaper every year is due to more efficiency and competition? If there is no upwards artificial inflationary pressure (printing money), that would make sense. An interesting perspective that had never occurred to me. Hopefully someone with more background than I have can confirm, deny or further explain the forces at work as described in this post.

[/ QUOTE ]

Sounds like you have it. Things get cheaper because people get better at producing them. A few goods, maybe oil, might get more expensive because oil gets more expensive to produce, not cheaper, but generally things should go down in price as workers get more productive.

Of course, at least in a perfectly rational economic world, wages would also go down, so most people wouldn't see much effect on their purchasing power.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

[/ QUOTE ]

No, this is a bunch of nonsense. What's the worst case scenario if the demand for money is greater than the supply? The value of money goes up? Oh noez!!!

[/ QUOTE ]

Wrong. Recession and/or deflation are the worst case scenarios.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
I can't understand why you would say the incentives are different. The economists within the government would like to ensure a prosperous government, people, and nation using tools that minimize inflation and mimic actual GDP growth.

[/ QUOTE ]

Two things- look at the history of the federal reserve, the people who pushed for its creation were private, wealthy bankers like JP Morgan, or otherwise Powerful industrialists, like Rockefeller. Do you think having people whose lifestyles are very different from the average person write the rules (these after all were the types of guys who got appointed as reserve chairmen) is going to end up with a fair system that doesn't benefit one group over another?

2 Politicians live in very limited time frames, their immediate goals are almost always to get reelected. There are very good reasons to believe that politicians would favor immediate growth over long term growth even if the long term growth would be better for their constituents.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
The currency issue is a lot bigger than most people realize. The world cannot continue to finance our debt indefinitely. The US has run a trade (and government spending) deficit for many years in a row. At some point our creditors are going to want to be paid back ending the credit bubble we are in now.

[ QUOTE ]

Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

[/ QUOTE ]

This is not true. While the economy has exploded since that time, a lot of the gains are due to inflation, and are not real. My generation is expected to earn less than my parents (baby boomer) in real terms.

More of the gains have come from borrowing money, like the trade deficit that continues every year. If I give you a new credit card with a high limit each year, you are going to be able to buy a lot of stuff. At some point however, you are going to have trouble making those minimum payments. Then the credit cards are going to stop coming in the mail. When that happens, the assets you thought you had are going to have to go back to the bank.

[/ QUOTE ]

People who devoted their lives to economics, and are a hell of a lot more intelligent than you or I made the decision to change and understand the consequences and benefits of it.

[/ QUOTE ]
You're assuming that the guys that made these decisions have you're interests in mind. Not to mention it's nothing but a naked appeal to authority.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

Bump for copernicus.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
I am guessing the reason things would get cheaper every year is due to more efficiency and competition? If there is no upwards artificial inflationary pressure (printing money), that would make sense. An interesting perspective that had never occurred to me. Hopefully someone with more background than I have can confirm, deny or further explain the forces at work as described in this post.

[/ QUOTE ]

Sounds like you have it. Things get cheaper because people get better at producing them. A few goods, maybe oil, might get more expensive because oil gets more expensive to produce, not cheaper, but generally things should go down in price as workers get more productive.

Of course, at least in a perfectly rational economic world, wages would also go down, so most people wouldn't see much effect on their purchasing power.

[/ QUOTE ]

But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
There are plenty of economic analyses that show that as long as there are sufficient reserves of whatever is backing the currency, there is ultimately no effect on the economy of "fiat money". If there are insufficient reserves to accomodate economic growth a hard currency is a disaster. Eg staying on the gold standard would have held back the economic growth that has occurred since it was abandoned.

The best non technical analysis is probably "There Is No Such Thing As Fiat Currency" , from the UCLA economics department, but I havent been able to track it down online.

[/ QUOTE ]

So, what's the "whatever" that's "backing the currency"?

[/ QUOTE ]

So Ron Paul could possibly be a disaster to the economy?

...and to the question asked, our word.

[/ QUOTE ]

No, this is a bunch of nonsense. What's the worst case scenario if the demand for money is greater than the supply? The value of money goes up? Oh noez!!!

[/ QUOTE ]

Oh noez!!! another self proclaimed Alan Greenspan.

If people don't have money to spend they stop buying goods, wages go down, unemployment goes up, and the economy slows. This is economics 101, moron.

[/ QUOTE ]

Whoever said anything about people not having money to spend? What does that have to do with anything? People would still have money to spend.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
People who devoted their lives to economics, and are a hell of a lot more intelligent than you or I made the decision to change and understand the consequences and benefits of it.

[/ QUOTE ]

No, politicians made the change.

Re: Ron Paul and the Dollar.
 

Here is another good video about the Federal Reserve. It has a few shortcomings I won't go into now, but it gives a good general explanation.


http://video.google.com/videoplay?do...39329002339531

Re: Ron Paul and the Dollar.
 

[ QUOTE ]


But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

[/ QUOTE ]

That would be true if you held a significant portion of your purchasing power in assets whose return isn't indexed to the price level (basically cash, small bank accounts, and fixed-rate bonds). But I would bet that for most people, their cash holdings are dwarfed by either investments or current wages/salary.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]


But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

[/ QUOTE ]

That would be true if you held a significant portion of your purchasing power in assets whose return isn't indexed to the price level (basically cash, small bank accounts, and fixed-rate bonds). But I would bet that for most people, their cash holdings are dwarfed by either investments or current wages/salary.

[/ QUOTE ]

It depends on age. If you want to maintain close to your pre-retirement lifestyle and retire at 65 you need about 7 years of current wages saved or invested, and most people have 40% or more of that in the form of fixed income investements. 3 to 4 years of pay is a pretty significant cash holding.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
If people don't have money to spend they stop buying goods, wages go down, unemployment goes up, and the economy slows. This is economics 101, moron.

[/ QUOTE ]
You seem to forget that the money itself is a good that people have preferences for.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]


But your savings would be worth more in a few years rather than less. So you would see a great deal of effect on purchasing and retiring power.

[/ QUOTE ]

That would be true if you held a significant portion of your purchasing power in assets whose return isn't indexed to the price level (basically cash, small bank accounts, and fixed-rate bonds). But I would bet that for most people, their cash holdings are dwarfed by either investments or current wages/salary.

[/ QUOTE ]

Well, yeah, in the current environment, where cash is constantly being devalued by inflation, of course most thinking people don't leave all their wealth in cash under the matress.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
I am guessing the reason things would get cheaper every year is due to more efficiency and competition? If there is no upwards artificial inflationary pressure (printing money), that would make sense. An interesting perspective that had never occurred to me. Hopefully someone with more background than I have can confirm, deny or further explain the forces at work as described in this post.

[/ QUOTE ]

Sounds like you have it. Things get cheaper because people get better at producing them. A few goods, maybe oil, might get more expensive because oil gets more expensive to produce, not cheaper, but generally things should go down in price as workers get more productive.

Of course, at least in a perfectly rational economic world, wages would also go down, so most people wouldn't see much effect on their purchasing power.

[/ QUOTE ]

Why would wage prices fall as fast as the prices of consumer goods?

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
Why would wage prices fall as fast as the prices of consumer goods?


[/ QUOTE ]

It would be cool if someone could expand on this. From what little I've read on the austrian explanation of deflation it seems that wages drop slower than the price of consumer goods. This would mean that an individuals purchasing power increases in times of deflation, but the decrease in wages brings out all the usual suspects and makes sure that the government prevents deflationary periods from continuing.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
Why would wage prices fall as fast as the prices of consumer goods?


[/ QUOTE ]

It would be cool if someone could expand on this. From what little I've read on the austrian explanation of deflation it seems that wages drop slower than the price of consumer goods. This would mean that an individuals purchasing power increases in times of deflation, but the decrease in wages brings out all the usual suspects and makes sure that the government prevents deflationary periods from continuing.

[/ QUOTE ]

I was going to expound on this, but I've come to realize that no one ever reads my long-winded deductive economic analyses, so someone else can do it [img]/images/graemlins/wink.gif[/img]

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I am guessing the reason things would get cheaper every year is due to more efficiency and competition? If there is no upwards artificial inflationary pressure (printing money), that would make sense. An interesting perspective that had never occurred to me. Hopefully someone with more background than I have can confirm, deny or further explain the forces at work as described in this post.

[/ QUOTE ]

Sounds like you have it. Things get cheaper because people get better at producing them. A few goods, maybe oil, might get more expensive because oil gets more expensive to produce, not cheaper, but generally things should go down in price as workers get more productive.

Of course, at least in a perfectly rational economic world, wages would also go down, so most people wouldn't see much effect on their purchasing power.

[/ QUOTE ]

Why would wage prices fall as fast as the prices of consumer goods?

[/ QUOTE ]

I think they actually would not, but they "should." If gold currency becomes 2% more valuable over the course of a year, why would you not lower each worker's wage by 2%, unless he's become more productive. Likewise, if fiat currency drops by 2%, your workers insist on a 2% raise.

I think it's likely that workers will resist these adjustments for irrational reasons ("I ain't taking no damn pay cut! I'm doing the same work I was before!") which will make some workers better off, but should lead to the same kind of overall badness as a price-fixing cartel or an increase in the minimum wage.

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I am guessing the reason things would get cheaper every year is due to more efficiency and competition? If there is no upwards artificial inflationary pressure (printing money), that would make sense. An interesting perspective that had never occurred to me. Hopefully someone with more background than I have can confirm, deny or further explain the forces at work as described in this post.

[/ QUOTE ]

Sounds like you have it. Things get cheaper because people get better at producing them. A few goods, maybe oil, might get more expensive because oil gets more expensive to produce, not cheaper, but generally things should go down in price as workers get more productive.

Of course, at least in a perfectly rational economic world, wages would also go down, so most people wouldn't see much effect on their purchasing power.

[/ QUOTE ]

Why would wage prices fall as fast as the prices of consumer goods?

[/ QUOTE ]

I think they actually would not, but they "should." If gold currency becomes 2% more valuable over the course of a year, why would you not lower each worker's wage by 2%, unless he's become more productive.

[/ QUOTE ]

And how did the currency become more valuable if not through productivity gains?

Re: Ron Paul and the Dollar.
 

[ QUOTE ]
I think they actually would not, but they "should." If gold currency becomes 2% more valuable over the course of a year, why would you not lower each worker's wage by 2%, unless he's become more productive. Likewise, if fiat currency drops by 2%, your workers insist on a 2% raise.

[/ QUOTE ]

There's a very big difference between the "deflation" of gold over time and the inflation of fiat dollars. The "deflation" is just reflective of market innovation. It is not causal of anything. Fiat monetary expansion, on the other hand, is.

For example, Big Widgits employs one hundred worker, and produces one hundred widgits per week (which is what the market demands). One of the engineers figures out a way to make widgits for 50% less. The owner of Big Widgits starts producing more widgits for less money and makes bigger profits. The purchasing power of the gold standard currency goes up.

At no point is it implied or necessary to pay the workers less. The business must still compete for workers, and cannot do that by paying them less rather than more.

If you think that this implies that employee pay will constitute an increasing percentage of business expenses over time, you are correct. Over a hundred years ago, most workers had their own trades, yet were less efficient and less wealthy than the business hierarchies of today. Big businesses today survive (and survive well) on profit margins that would be far too low in the nineteenth century.

Re: Ron Paul and the Dollar.
 

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I think they actually would not, but they "should." If gold currency becomes 2% more valuable over the course of a year, why would you not lower each worker's wage by 2%, unless he's become more productive. Likewise, if fiat currency drops by 2%, your workers insist on a 2% raise.

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There's a very big difference between the "deflation" of gold over time and the inflation of fiat dollars. The "deflation" is just reflective of market innovation. It is not causal of anything. Fiat monetary expansion, on the other hand, is.

For example, Big Widgits employs one hundred worker, and produces one hundred widgits per week (which is what the market demands). One of the engineers figures out a way to make widgits for 50% less. The owner of Big Widgits starts producing more widgits for less money and makes bigger profits. The purchasing power of the gold standard currency goes up.

At no point is it implied or necessary to pay the workers less. The business must still compete for workers, and cannot do that by paying them less rather than more.

If you think that this implies that employee pay will constitute an increasing percentage of business expenses over time, you are correct. Over a hundred years ago, most workers had their own trades, yet were less efficient and less wealthy than the business hierarchies of today. Big businesses today survive (and survive well) on profit margins that would be far too low in the nineteenth century.

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Big Widgets might not decrease their wages here, because their worker productivity went up the same amount as deflation. But if General Motors will cut their wages over the same period. Their real wages stay the same, which means they have to fork over fewer dollars.

This is also the case if the value of the currency increases for reasons other than productive innovations. Say the population increases by 5% without changing the GDP/capita. Five percent more transactions will have to happen, which means that the value of gold will probably have to increase, which means wages will have to go down.

Re: Ron Paul and the Dollar.
 

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People who devoted their lives to economics, and are a hell of a lot more intelligent than you or I made the decision to change and understand the consequences and benefits of it.

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No, politicians made the change.

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