Economics - Monetary - Logic puzzle

[pvn]

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There will be a vast shortage of bills under $500 [img]/images/graemlins/grin.gif[/img]

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Actually, not, since there will be no demand for them.

[Lestat]

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hyperinfaltion where $500 becomes worth almost nothing is possible but it usually starts relatively slowly and the econony is devestated along the way.

Here you have a more or less instantaeneous problem when no-one is going to part with goods or labour for any amount of dollars that anyone could conceivably have access to. So if you want to buy anthing then you better have acess to something someone wants like goods, labour, gold of foreign currency.

The fed not intervening is implausible and I guess if that was the case then a lynching would take place.

chez

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In the short-term there would be no goods and labor. Who's going to show up for work? Eventually, I think things would return to revelative normalcy though. Since people would soon realize having these minting machines won't make them rich.

[chezlaw]

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hyperinfaltion where $500 becomes worth almost nothing is possible but it usually starts relatively slowly and the econony is devestated along the way.

Here you have a more or less instantaeneous problem when no-one is going to part with goods or labour for any amount of dollars that anyone could conceivably have access to. So if you want to buy anthing then you better have acess to something someone wants like goods, labour, gold of foreign currency.

The fed not intervening is implausible and I guess if that was the case then a lynching would take place.

chez

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In the short-term there would be no goods and labor. Who's going to show up for work? Eventually, I think things would return to revelative normalcy though. Since people would soon realize having these minting machines won't make them rich.

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I agree except there will be much the same amount of goods and labour, they will just be be exchanged for something other than the dollar.

The economy will be very badly hurt though (to put it mildly) because many will have lost a lot of money and there will be a lack of confidence.

You seem to be saying that all the goods will be snapped up because of the oversupply of money but no-one going to exchange any goods (not even toothpaste) for those dollars because they have no use them - they can print their own and no-one else wants them either.

chez

[mikeevans12]

1. MEGA HYPER-INFLATION: With the money supply so high the price of goods will skyrocket. This is similar to the unwise goverment solution to print more money! Businesses will go under because people will no longer need to trade thier labor, land, and capital for wages, because it would be much easier to just print money. That is the initial problems! Next, in general money will become worthless, using them as writing paper would be better than currency. The united states would shift from a monetary economy to a barter economy. Trading goods and services directly would be the new means of exchange and the allocation of resouces. Wealth creation would be more poorly distributed today, and in all actuallity be close to Latin American economies were in the 40's-70's.

In effect, the adoption of a universal (national) medium of exchange would be the first step, this does not necessarily mean money. Whether it be squid or gold, something needs to be uniform. With that business could begin again as savings and investment can return to the economy. With that the economy provides buisness the opprotunity to operate, and wealth to be created.

[Shadowrun]

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Scenario: Beginning tomorrow, everyone in the US wakes up to find he or she has a US Dollar printing machine in their home or apartment that can print $1 through $500 denominations, and, to boot, he or she has a nearly unlimited supply of authentic paper and ink to print on.

Shocked and frustrated, the federal government throws its hands up and says "Well, let's just see what happens!"

Question #1 What will go wrong? (What will the effects be?)

Question #2 Why? (What will cause the effects?)

Question #3 What ways can the problem(s) facing society and its economy end up being fixed? (Government or not)

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People if they act rationnaly in view of Adam Smith (wealth of nations) will print infinte amount of money.
The dollar is worthless people would use it as firewood.
It becomes survival of the fittest.
The medium for buisness (if any) will be through bartering.

The only way to stop it is to change currency.

P.S. But imagine you owe the government 5 million that would be nothing then.
P.S.S. thats why inflation helps people in debt, in terms of the money that was lent was worth more than what they are recieving.

At least thats what they teach me in college (Econ major).

[hmkpoker]

Dollars immediately become worthless.

Foreign currency quickly becomes adopted.

Gold goes through the roof.

[jschaud]

how would this affect current debt. For instance, if i owe 10k in credit card debt, 20k on a car note, and 100k on a house mortgage, i could eliminate those debts. since businesses would quickly stop selling TVs for a couple grand, how would the elimination of consumer debt change the world? I remember someone once saying that if you took all of the world's money and divided it up evenly, the truly rich would still end up getting it back.