Which currency system do you think is best?

[tomdemaine]

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Try again, since inflation isn't only caused by the government.

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Yes it is.

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Ok, this is fun.

No it isn't.

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What other things cause inflation?

[xorbie]

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Try again, since inflation isn't only caused by the government.

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Yes it is.

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Ok, this is fun.

No it isn't.

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What other things cause inflation?

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Anything that increases the money supply? If I print money in my basement, that causes inflation. Obviously this is negligible now, since the govt prints a lot more, but in an AC type scenario, one could see how this might change...

[DcifrThs]

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but keeping the money supply 100% fixed does restrain economic growth.

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It restrains some particular parties' growth for sure.

Whether it does so for the aggregate is another matter that would require more than bare assertion.

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i've supplied far more than bare assertion. please do likewise and prove how a fixed money supply does not restrain growth at all.

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But even if it does, this is really not of much concern for those who value freedom and do not "worship the almighty dollar" (as ACists are routinely accused of doing).

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i have no idea what you're point is. can you rephrase this into a clear sentence?

thanks,
Barron

[adios]

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But even if it does, this is really not of much concern for those who value freedom and do not "worship the almighty dollar" (as ACists are routinely accused of doing).

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i have no idea what you're point is. can you rephrase this into a clear sentence?


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Hope pvn doesn't mind me jumping in here and I don't necessarily agree with pvn (don't necessarily disagree either). Let me try to clear it up for you as the meaning seems crystal clear to me. Some people value freedom more than they value economic growth. A fiat currency is a limitation on freedom so even if we need a fiat currency for economic growth, that doesn't trump the limitation on freedom.

[DcifrThs]

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you're thinking as if the current account is in isolation.

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I was referring to the sytem we have today, so how can I be talking about it being in isolation? Help me here, please.

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well that is the source of our disconnect i think b/c the thread has to do with an optimal currency system. i'm was not solely talking about the system that we have today, just overall relations that would exist based off of my understanding of economics.

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any deficit in the current account is *necessarily* offset by a surplus in the capital account. that is how the balance of payments works.

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Certainly. But if Mattel pays China x for a product and sells it to Americans for x4, x goes to China everytime Mattel buys the product, depleting America's money supply. Unless, we have a trade surplus, or our exports equal inports. No?

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no. china then turns around and purchses US assets. this injects cash back into the US.

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any net goods flowing in (dollars flowing out) is offset by net currency flowing in (borrowing from the rest of the world).

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If you have to borrow to produce, that's more expensive than having the working capital available. Even if you can make more by investing your capital in something else and borrow, at a cheaper rate to produce, you still need the capital.
So isn't what you say above more expensive than keeping out dollars at home by preventing a trade deficit?

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yes, but only marginally so. it doesn't lock out those dollars as you implied earlier (i.e. a trade deficit only introduces cost to gaining the exact same level of money. it doesn't prevent all that money from coming back in)

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this has no impact on the internally created money supply in terms of total dollars in the system assuming no other country can create dollars.

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Ok. We are not talking about the same thing, since all other countries can create more dollars.

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right. i should have talked more about the cost of said increase via other countries rather than assuming it away. i mentioned this directly above.

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what it WOULD do imo would be to further restrict growth since goods that would be required for production of other goods/services would now have to be imported (if money supply was fixed) rather than produced domestically via borrowing and production.

this last part is a very simplified view but i believe is close enough as to capture the essence of the issue.

EDIT: more accurately, i think the whole world would suffer in relative terms and the CA deficit would naturally be reduced...that that isn't necessarily a good thing. if money supply is fixed, consumption would fall overall. a reduction in consumption would hurt imports as well as domestic spending. so we'd grow less (relative to a marginally increasing money supply) AND the rest of the world would grow less as we import less from them as well.

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Are you not saying that the dollar, if on a gold standard, would eventually have so much value, compared to the economy and population, that you would have to break down the penney into fifths, or even tenths?

I can see how that would not be good for productivity, as one would become wealthy by keeping their money in their mattress.

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well that [breakinga penny into fifths] would be extreme, but yes, over a long time frame, deflation increases the value of the dollar, reduces borrowing, reduces spending and reduces productivity.

that is one point i've been trying to make for a long time in this thread but have kept coming up against a clear headwind in terms of the misunderstanding of why money supply being 100% fixed artificially restrains growth (just as releasing tons of money into an economy artificially increases growth). in fact, as a result of the paranthetical there, i'm very surprised that the notion that a fixed money supply restrains growth has been so hard to grasp.

Barron

[DcifrThs]

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But even if it does, this is really not of much concern for those who value freedom and do not "worship the almighty dollar" (as ACists are routinely accused of doing).

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i have no idea what you're point is. can you rephrase this into a clear sentence?


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Hope pvn doesn't mind me jumping in here and I don't necessarily agree with pvn (don't necessarily disagree either). Let me try to clear it up for you as the meaning seems crystal clear to me. Some people value freedom more than they value economic growth. A fiat currency is a limitation on freedom so even if we need a fiat currency for economic growth, that doesn't trump the limitation on freedom.

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ok, so that argument narrows the choice down to 1, 2, or 3 right? (assumingi remembered the choices correctly).

now we only have to deal with how would the free market chosen monetary system a) come into play, and b) work.

i'm not clear as to the specifics there. i agree with zygote that i have not given the market/people enough credit in terms of shifting from one sscenario/system to another.

but can you (or anybody) explain to me how a free market system would be instituted from where we are today and how it would work.

what would prevent an organization or institution from altering the free market system?

additionally, the gold standard (assuming it is as phrased in zygote's OP) would be managed by the govt. this also reduces "freedom" does it not?

further, in having a gold standard, would there still be fractional reserve banking? i.e. would banks be able to loan more money out than they have on deposit? if so then this isn't a fixed money supply so i'm assuming that the gold standrad and the free market examples imply a 100% reserve banking system as well...i just want to be clear on that. is that the case?

thanks,
Barron

[natedogg]

The one that doesn't require coercion.

natedogg

[DcifrThs]

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But even if it does, this is really not of much concern for those who value freedom and do not "worship the almighty dollar" (as ACists are routinely accused of doing).

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i have no idea what you're point is. can you rephrase this into a clear sentence?


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Hope pvn doesn't mind me jumping in here and I don't necessarily agree with pvn (don't necessarily disagree either). Let me try to clear it up for you as the meaning seems crystal clear to me. Some people value freedom more than they value economic growth. A fiat currency is a limitation on freedom so even if we need a fiat currency for economic growth, that doesn't trump the limitation on freedom.

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also, a flexible money supply isn't necessarily a fiat currency. increased supplies of gold would increase the money supply. EDIT: distribution of gold also could imply a flexible money supply. so whoever controls the supply and/or the storage distribution fo gold controls the change in the money supply

so as long as gold production increased by the difference between the growth rate and the productivity growth rate, the money supply is not fixed.

my question is then who controls gold production (or maintenance/storage)? whoever controls gold supply thus controls the money supply.

does that not also restrict freedoms even though it is in absolutely no way a fiat currency system?

Barron

[natedogg]

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Some people value freedom more than they value economic growth.

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What's really sad is that this is a novel concept for some people.

natedogg

[adios]

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my question is then who controls gold production (or maintenance/storage)? whoever controls gold supply thus controls the money supply.

does that not also restrict freedoms even though it is in absolutely no way a fiat currency system?


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You're asking a different question now no I'll defer to pvn. I'd probably pick the last option in the poll (as you probably would guess) but I concede that you could make similar arguments about that option.