295: The Economics of Meat

[Sentox6]

The easiest solution to this problem is to eliminate fiat currency (paper money) and use gold (or some other commodity, like uranium or gold-pressed latinum or whatever sci-fi sounding thing you can come up with). You can't inflate gold, because you can't print more of it. (You can dig more out of the ground, which will lead to price fluctuations on occasion, but you're going to get this no matter what commodity you use for your exchange basis, and gold has the benefit of being homogenous, divisible, and durable, which you can't say about, for example, a ham sandwich.)

Yes, the gold standard helps to avoid long-term inflation, but you also end up with a lot more short-term price and output shocks. Price instability in the United States was about 20 times higher under the gold standard.

Friedman was right, it doesn't matter if your currency is fiat or commodity: the question is whether the money supply stays in line with the needs of the market. If you don't trust the Fed to keep inflation low, then you wouldn't trust them to stick to the gold standard either. It's a more fundamental issue.

 

[Crazy_Bird]

[...] John Maynard Keynes's horribly incorrect fears about "overproduction" and the need for protection of markets and other nonsense.

What is your problem with demand shortfalls in particular?

 

[Baresark]

Basically the more total money exists, the less the money is perceived to be worth.

To me, that is illogical because an individual piece of money is hypothetically worth the same no matter how much you have. Whether you have $5 or $5000, a dollar is still a dollar and it is not made less so with the increase in quantity.

Haha, if I didn't know any better, I would say your being purposely obtuse about the subject, but that aside, you may be over thinking a very simple concept.

A dollar is a dollar, that is true, and nothing will change that. But, as time goes on, your dollar can buy less. The dollar is always the same, but the products you buy change in quantity and quality and so fourth. So, if there is a lot of an item, there is less demand, so your dollar buys more of it. If there is less of an item, and not enough to meet demand, the price increases because the intrinsic value of the item increases.

Imagine there is a single copy of a game left, but there is you and a friend that both want it. The seller says, whoever can pay me more gets it. So, the value of an item goes up because the supply is too low for demand. This is why/how Ebay works.

Also, remember that there is an infinite number of dollars (in a shit economy like everyone has now). But commodities such as food, precious metals, land, etc., are limited. The means that supply will never ever meet demand where there is an infinite supply of money, so the cost of these things go up and up. Think about why one US dollar is not worth 1 Mexican Peso.

OT: WoW is a very limited example of good economics though. It breaks down because no matter what, there is an infinite supply of Capital goods. So, it's really only limited by the amount of time people are willing to put into obtaining the capital goods. The author isn't really demonstrating good economics by using WoW as an example. In the long run, it'll break down. The more complex a system, the longer the breakdown takes.

Interesting article that has a lot of fluff and limited economic insight. I wish the author went less into game examples and more into explaining economic theory.

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
-F.A. Hayek, the best economic thinking imo.

Hayek's work is exemplary. Especially the "The Road to Serfdom", what he won the Nobel Prize in Economics for. A shining light in a very dark time when socialism was the wave of the future.

 

[Baresark]

The easiest solution to this problem is to eliminate fiat currency (paper money) and use gold (or some other commodity, like uranium or gold-pressed latinum or whatever sci-fi sounding thing you can come up with). You can't inflate gold, because you can't print more of it. (You can dig more out of the ground, which will lead to price fluctuations on occasion, but you're going to get this no matter what commodity you use for your exchange basis, and gold has the benefit of being homogenous, divisible, and durable, which you can't say about, for example, a ham sandwich.)

Yes, the gold standard helps to avoid long-term inflation, but you also end up with a lot more short-term price and output shocks. Price instability in the United States was about 20 times higher under the gold standard.

Friedman was right, it doesn't matter if your currency is fiat or commodity: the question is whether the money supply stays in line with the needs of the market. If you don't trust the Fed to keep inflation low, then you wouldn't trust them to stick to the gold standard either. It's a more fundamental issue.

It still happens that way today though. But governments in general fix prices and prevent corrections in the market. In the short term this is good, but in the long term you get huge bubbles that economically decimate the world like the housing bubble, the credit bubble, and soon the government bubble. Those small corrections would be a pain, but the big busts wouldn't happen.

I appreciate how you take ideas from Milton Friedman, but he spoke of any stable currency with favor. It can be a Fiat currency, but it has to be be stable. And by stable I don't mean never fluctuating, more like no long term increase or decrease in value. This is best represented by an idea such as $1 +/-($*1/2) as an example. The idea should be that prices are going to fluctuate, this is a given. As of now, the USD is 96% inflated form it's 1932 value. This is an unacceptable rate of inflation by any stable currency standards.

Also, I would like to bring people back to ANCAP, it was a suggested commodities based currency back in 1984. I'm not saying it's perfect, but it sure is something to take ideas from.

 

[Sentox6]

It still happens that way today though. But governments in general fix prices and prevent corrections in the market. In the short term this is good, but in the long term you get huge bubbles that economically decimate the world like the housing bubble, the credit bubble, and soon the government bubble. Those small corrections would be a pain, but the big busts wouldn't happen.

I'm not sure quite what you're thinking of, but price fixing is not a major feature of most Western economies. Most governments are trying to reduce cyclical fluctuations through fiscal and monetary policy tools, not regulation.

I appreciate how you take ideas from Milton Friedman, but he spoke of any stable currency with favor. It can be a Fiat currency, but it has to be be stable.

I'm also not sure why you felt the need to insert "but" in the first sentence. I never said anything to contradict his stance on stable money supplies.

Obviously monetarism hasn't proven particularly successful. But the idea of the gold standard is archaic and somewhat rooted in historical familiarity. In terms of value, the ratio of gold held in central banks to deposits is extremely low, which poses difficulties. Gold can't grow as rapidly as international trade, and since it can't be augmented as needed you begin to exchange the risk of inflation for that of deflation, which is hardly preferable.

The idea of backing a fiat currency with a commodity has merits, but gold is hardly a great choice. It's just an overly romanticised one.

 

[Baresark]

I'm not sure quite what you're thinking of, but price fixing is not a major feature of most Western economies. Most governments are trying to reduce cyclical fluctuations through fiscal and monetary policy tools, not regulation.

I appreciate how you take ideas from Milton Friedman, but he spoke of any stable currency with favor. It can be a Fiat currency, but it has to be be stable.

I'm also not sure why you felt the need to insert "but" in the first sentence. I never said anything to contradict his stance on stable money supplies.

My apologies, I didn't meant to add the word, "but". It made me sound argumentative, which is the last thing I actually wanted. I love a good debate, that's for sure, but I hate useless fighting and trolling. I'm attempting the former exclusively, but I fail sometimes.

Historically speaking, it's not policy to openly admit to price fixing in Western Culture. But it has happened pervasively throughout Western History. This is handled through many means though. Corn prices are to this day set. That is why we have such massive corn stores in the US. Also, tariffs on Sugar importing has fixed the prices higher in America than they are in other countries. This is only a few modern examples. These two examples have been in place since the 70's.

Obviously monetarism hasn't proven particularly successful. But the idea of the gold standard is archaic and somewhat rooted in historical familiarity. In terms of value, the ratio of gold held in central banks to deposits is extremely low, which poses difficulties. Gold can't grow as rapidly as international trade, and since it can't be augmented as needed you begin to exchange the risk of inflation for that of deflation, which is hardly preferable.

The idea of backing a fiat currency with a commodity has merits, but gold is hardly a great choice. It's just an overly romanticised one.

Everyone likes to point out the relative scarcity of gold to counteract the idea of non-fiat currency. The fact is, it's the scarcity that makes it worth something. But, I know gold isn't enough, that is why a currency based off a large range of commodities from land, crops, other precious metals, etc., is the only thing that makes sense if you want to back a currency with something. I guess the idea is that you want to back it with something that has value based on scarcity. I actually have a group of friends who hate me when this subject comes up because their only defense is that there isn't enough gold to back a currency with, which they are right, haha. I agree completely with your assessment, it's an overly romanticized commodity. That isn't to say I wouldn't love to own a pallet of it though. =]

 

[Sentox6]

My apologies, I didn't meant to add the word, "but". It made me sound argumentative, which is the last thing I actually wanted. I love a good debate, that's for sure, but I hate useless fighting and trolling. I'm attempting the former exclusively, but I fail sometimes.

I know the feeling. Every now and then I run out of patience and start flaming, which I inevitably regret.

Historically speaking, it's not policy to openly admit to price fixing in Western Culture. But it has happened pervasively throughout Western History. This is handled through many means though. Corn prices are to this day set. That is why we have such massive corn stores in the US. Also, tariffs on Sugar importing has fixed the prices higher in America than they are in other countries. This is only a few modern examples. These two examples have been in place since the 70's.

Ah, I suspect our divergence stems from me using a much stricter definition of price-fixing than you. No real disagreement otherwise.

The fact is, it's the scarcity that makes it worth something.

That's true enough. When you think about, most of the inherent value of gold is simply because it's accepted as such, just as with fiat money. It's... shiny. The only really functional use I can think of is that it makes for a great heat reflector (there may be more uses I'm unaware of). But largely, it's valuable because we've deemed it to be so.

A lot of criticism is levelled at the way modern economies work, with talk of them being inherently unsustainable or self-destructive because they're debt-based. My opinion is that it's partially a social problem as well, in terms of people's seemingly increasing willingness to fund non-productive assets and consumables with debt. Debt is fine, so long as it's used for investment to increase production. But funding goods that solely depreciate in value with credit is another matter. Even so, it's not necessarily bad, if the consumer is just trading future consumption for current consumption, but, solely from casual empiricism, it seems to me that people are living increasingly unsustainable lifestyles.

That isn't to say I wouldn't love to own a pallet of it though. =]

Eh, you and me both.

 

[JMeganSnow]

Friedman was right, it doesn't matter if your currency is fiat or commodity: the question is whether the money supply stays in line with the needs of the market. If you don't trust the Fed to keep inflation low, then you wouldn't trust them to stick to the gold standard either. It's a more fundamental issue.

There shouldn't be a Fed at all. Period. Then I don't have to "trust" them with ANYTHING.

The point is not to keep prices stable or maintain inflation at a certain acceptable "low" rate. The point is to have money that does what it's supposed to do: acts as a store of value and means of exchange. There's nothing wrong with price fluctuations. Inflation, on the other hand, is a different animal.

 

[JMeganSnow]

[...] John Maynard Keynes's horribly incorrect fears about "overproduction" and the need for protection of markets and other nonsense.

What is your problem with demand shortfalls in particular?

You mean, apart from the fact that they're total bullshit?

 

[Sentox6]

There shouldn't be a Fed at all. Period. Then I don't have to "trust" them with ANYTHING.

So you want a country devoid of monetary policy, in essence? Good luck with that.

The point is not to keep prices stable or maintain inflation at a certain acceptable "low" rate. The point is to have money that does what it's supposed to do: acts as a store of value and means of exchange. There's nothing wrong with price fluctuations. Inflation, on the other hand, is a different animal.

Pray tell what the problem is with low rates of inflation, then. Money also needs to act as a unit of account, and in this sense extreme short-term price fluctuations are a lot more disruptive to an economy that consistently low (1-3%) inflation.

 

[neosonichdghg]

Counterattack, try thinking of it from this perspective:

I'm a fruit merchant. When I sell an apple, I want to get as many dollars as possible for it. You have ten dollars, and I think you'll give me ten percent of your money, so I charge a dollar for an apple. You look at that price, and it seems fair, so you give me a dollar for an apple.

Thus, a dollar is worth one apple.

Then the government gives everyone a thousand dollars. I know you have a thousand dollars, so I think you'll give me a ten dollars for an apple. That's only one percent of your money, after all. And you think the same thing - you give me ten dollars for my apple.

Thus, a dollar is worth one tenth of an apple.

Now we extend the concept further. I bought milk for a dollar last week, but now the dairy farmer knows I have a thousand dollars. He charges me fifteen dollars for milk. That seems okay - I have a thousand dollars. So I give him fifteen dollars. Pretty soon, everything's ten or fifteen times its original cost.

And if everything costs ten or fifteen times as much, the dollar is worth only a tenth or fifteenth of its original cost.

 

[JMeganSnow]

There shouldn't be a Fed at all. Period. Then I don't have to "trust" them with ANYTHING.

So you want a country devoid of monetary policy, in essence? Good luck with that.

Devoid of centralized government "monetary policy".

The point is not to keep prices stable or maintain inflation at a certain acceptable "low" rate. The point is to have money that does what it's supposed to do: acts as a store of value and means of exchange. There's nothing wrong with price fluctuations. Inflation, on the other hand, is a different animal.

Pray tell what the problem is with low rates of inflation, then. Money also needs to act as a unit of account, and in this sense extreme short-term price fluctuations are a lot more disruptive to an economy that consistently low (1-3%) inflation.

Where you go wrong is in thinking that the point is to have a "stable" economy, as if this is some kind of unlimited virtue in and of itself. The point is to have a just and moral political system. A *self*-stabilizing economy is a result of that, a side effect, but it is not the purpose.

A low rate of inflation is, from a principled moral standpoint, no different from a high rate of inflation. It still means that the government is meddling with the money supply, pumping credit artificially into some part of the economy. Why stand for being just a little bit sick when you can get rid of the whole sick system?

No government that has adopted a program of economic management in the name of somebody's so-called good has ever stopped at just a little bit over the long term. When you state that your purpose is to "help" people by robbing other people (either by taking the money directly through taxation or by indirectly reducing the value of their savings through inflationary policies), anything goes. Anyone can say, "but I need 'help' too. Throw me some money!" On what grounds can you refuse them? The desires are infinite. The ability to meet them is not.

Occasionally you may get a political shift, like the Reagan Revolution in the 80's, a slight rolling-back of the statist policies that amounts to a stay of execution. (And sometimes it comes along with some lovely religious dogma, yay. The cure is worse than the disease.) In the U.S., we've already hit a scary sort of milestone. In 2010, government expenditures were more than 40% financed by borrowing. Peter Bernholz found that 40% was approximately the threshhold for the worst cases of hyperinflation to have ever occurred. (One thing that's been saving us from ourselves is that the recipients of "stimulus" money have been, pretty much, sitting on it. The velocity of "new money" affects immediate inflation as well. Otherwise we may have already found out how telling that 40% number is. But it's going to start moving eventually.)

The mortgage crisis is nothing compared to the bullshit that's heading toward the fan now.

 

[Sentox6]

Devoid of centralized government "monetary policy".

For macro policies to be effective you require some sort of centralised authority that possesses leverage. That's just a tautology.

Whether you think government intervention is desirable or not is another matter.

Where you go wrong is in thinking that the point is to have a "stable" economy, as if this is some kind of unlimited virtue in and of itself. The point is to have a just and moral political system. A *self*-stabilizing economy is a result of that, a side effect, but it is not the purpose.

Having a different perspective and/or opinion from you does not mean I have gone wrong in any fashion. I just means I have a different perspective and/or opinion from you. You are not the font of all wisdom, and neither am I.

There is nothing to suggest that a morally ideal political system (however one defines that) will necessarily result in a stable economy, which is an important goal. Not the only goal, but any means, but it is more than just a nice side-effect.

A low rate of inflation is, from a principled moral standpoint, no different from a high rate of inflation. It still means that the government is meddling with the money supply, pumping credit artificially into some part of the economy. Why stand for being just a little bit sick when you can get rid of the whole sick system?

Frankly, trying to moralise inflation is just ridiculous. Inflation is a rise in the general price level of goods and services. Nothing more, nothing less. It is not inherently evil or "sick". I have nothing more to say on this matter.

-snip-

The rest of your post basically deals with socio-economic policies motivated by political ideology (or often political necessity). That's a topic much wider than pure economics itself.

 

[JMeganSnow]

Frankly, trying to moralise inflation is just ridiculous. Inflation is a rise in the general price level of goods and services. Nothing more, nothing less. It is not inherently evil or "sick". I have nothing more to say on this matter.

Good, because you've basically indicated that you have absolutely no understanding of the underlying causes of this inflation.

A constant, generalized rise in prices over time indicates one thing--watering down the currency. When you have a fiat currency created by a government, this means the government is printing too much money. This would have zero net effect except for one thing--the extra money is first accepted as if it were *unwatered* money, payment for goods and services. The government takes the goods and services, and the people who accepted the money are suddenly left staring at a pile of bills that aren't worth what they were any more. They can either throw them away, soak the loss (and probably suffer horribly for it), or palm them off on some other poor sucker who still thinks a dollar is worth a dollar for what they can get until it's spread evenly across the whole country or globe.

A loss spread over a million people is still a loss--they are poorer by the amount of the goods and services that the government got from them in return for what amounts to a rubber check.

What this really does is make it much harder for people to save. You can't just take a pile of money and let it sit in a bank any more, because the interest (on which you must PAY TAXES) won't keep up with inflation. You will wind up with less effective money than you had before. So you would actually have been better off, have gotten MORE out of your money, if you'd spent it all immediately.

THAT, is sick. It is a symptom of a horrendous disease, of robbing people without their knowledge and turning the prudent savers who provide the financing of the future into martyrs *because they did something beneficial with their money*.

 

[Sentox6]

Good, because you've basically indicated that you have absolutely no understanding of the underlying causes of this inflation.

A few quick points:

1) You're using the layman's definition of inflation. True inflation means wages are rising as well, so while the purchasing power of a dollar may be declining, individuals are not poorer on the whole.

2) I'm not sure where you live, but in most Western countries the government does not expand the money supply by buying goods and services. Avoiding this is one of the key reasons for the existence of a central authority in control of monetary policy.

3) Your assertion that the real after-tax interest rate is zero or negative is solely an assumption.

Your entire post reeks of hyperbole at best, and willful misunderstanding at worst.

 

[deleted_by_strongbad]

Good, because you've basically indicated that you have absolutely no understanding of the underlying causes of this inflation.

A few quick points:

1) You're using the layman's definition of inflation. True inflation means wages are rising as well, so while the purchasing power of a dollar may be declining, individuals are not poorer on the whole.

2) I'm not sure where you live, but in most Western countries the government does not expand the money supply by buying goods and services. Avoiding this is one of the key reasons for the existence of a central authority in control of monetary policy.

3) Your assertion that the real after-tax interest rate is zero or negative is solely an assumption.

Your entire post reeks of hyperbole at best, and willful misunderstanding at worst.

Re #1) If you look at the growth of price inflation and wage inflation there is a massive disparity between the two, so yes individuals are making X more money than they were making before, but now products cost X^2 more so they are indeed poorer.

Re #2) False, the U.S. Federal Reserve through the Federal Operations Management Committee routinely buys and sells federal holdings and currencies to and from private investors and other nations in order to alter the value of the dollar/inflation.

Ultimately, I keep hearing, since a supplier of a good or service is producing a certain amount of product for a given amount of money, once that supplier figures out that the people have more money, that supply of money is exploited in the name of supply and demand. Knowing that people have more buying power amounts to the sellers maintaining the original status quo by reducing the meaning of that buying power by inflating their prices, rather than maintaining prices at a rate comparable to the efforts and cost of producing and allowing both buyer and seller to prosper.

The problem with the standard breakdown of supply and demand, it plays on pity for the supplier by implying that they are effectively just able to make ends meet so as demand increases the supplier's livelyhood becomes at risk unless there is an increase of prices. In the real world, if a supplier is not creating enough profit to make not only growth but an increase of personal success viable at the ratio of values supplied by the current status quo, that supplier is on the road to failure. In increase in demand will neither harm nor help that supplier. On the other hand a supplier is already succeeding, and thus growing their capabilities to supply along with their personal incentive, if the demand grows that supplier will profit additionally relative to the proportional increase in demand, WITHOUT an additional price hike.

The additional price hike, rationalized by extra consumer buying power, is motivated purely in greed. There is no organic purpose for the reduction in the value of the dollar, there being more dollars does not decrease the value it is the suppliers determining they can make a higher profit ratio per consumer by exploiting growing consumer wealth. All this does is transfer the growth of success of consumers to suppliers meaning that the consumers stay at a stagnant position of growth where the suppliers are growing at a disproportionately successful rate.

EDIT for re #2) I guess you are right in that the "Government" is not doing this, as the Federal Reserve is a private institution, but it is acting as a governmental entity, buying/selling public wealth, and making private loans to the government at interest which further increases inflation due to the fact that each dollar is a dollar plus interest in debt owed to a private institute. So yeah I guess this unconstitutional and wholly unethical process of allowing one private organization the ability to leach away success from every entity within a Nation by not having the government manage its own handling of currency does allow the government to not expand the money supply through buying and selling.

 

[Sentox6]

Re #1) If you look at the growth of price inflation and wage inflation there is a massive disparity between the two

Sure, but the only term used thus far has been "inflation", even though the discussion has been implying price inflation.

The additional price hike, rationalized by extra consumer buying power, is motivated purely in greed. There is no organic purpose for the reduction in the value of the dollar, there being more dollars does not decrease the value it is the suppliers determining they can make a higher profit ratio per consumer by exploiting growing consumer wealth. All this does is transfer the growth of success of consumers to suppliers meaning that the consumers stay at a stagnant position of growth where the suppliers are growing at a disproportionately successful rate.

If we're talking about a central monetary authority increasing the money supply at a faster rate than growth of real output, there is a very good reason for price hikes, and it is certainly not suppliers exploiting consumers in some calculated fashion. Mainstream economics generally agrees than in the long run, money is only nominal: "money is a veil". The real output capacity of your economy is determined by available technology, labour, capital stock, and natural resources. If a large amount of money is injected into the economy, prices must necessarily rise. Output cannot be magically increased, given these constraints. The increase of fiat currency, which is in itself essentially worthless, does not represent any additional productivity. In the long run, suppliers must raise prices.

Furthermore, in your theory, suppliers haven't benefited at all. They've raised prices to capture the supposed extra buying power of consumers, in which case they'll the same quantity of goods at a higher price. But what will they do with this extra revenue? Suppliers must eventually become consumers, and they too will face proportionally higher prices, meaning their purchasing power has not risen.

Any decent first-year econ textbook will have infinitely more to say on the subject. Mankiw is good.

 

[deleted_by_strongbad]

Re #1) If you look at the growth of price inflation and wage inflation there is a massive disparity between the two

Sure, but the only term used thus far has been "inflation", even though the discussion has been implying price inflation.

The additional price hike, rationalized by extra consumer buying power, is motivated purely in greed. There is no organic purpose for the reduction in the value of the dollar, there being more dollars does not decrease the value it is the suppliers determining they can make a higher profit ratio per consumer by exploiting growing consumer wealth. All this does is transfer the growth of success of consumers to suppliers meaning that the consumers stay at a stagnant position of growth where the suppliers are growing at a disproportionately successful rate.

If we're talking about a central monetary authority increasing the money supply at a faster rate than growth of real output, there is a very good reason for price hikes, and it is certainly not suppliers exploiting consumers in some calculated fashion. Mainstream economics generally agrees than in the long run, money is only nominal: "money is a veil". The real output capacity of your economy is determined by available technology, labour, capital stock, and natural resources. If a large amount of money is injected into the economy, prices must necessarily rise. Output cannot be magically increased, given these constraints. The increase of fiat currency, which is in itself essentially worthless, does not represent any additional productivity. In the long run, suppliers must raise prices.

Furthermore, in your theory, suppliers haven't benefited at all. They've raised prices to capture the supposed extra buying power of consumers, in which case they'll the same quantity of goods at a higher price. But what will they do with this extra revenue? Suppliers must eventually become consumers, and they too will face proportionally higher prices, meaning their purchasing power has not risen.

Any decent first-year econ textbook will have infinitely more to say on the subject. Mankiw is good.

I don't mean to say that there is a defined coalition of suppliers who are intentionally jacking up prices, but as you say the money effectively only has the value attributed to it as it is fiat currency. As such, trends within the market place drive prices upwards due to a response of demand being analyzed through the lens of classic economic theory.

The increase in monetary supply is meant to reflect the added productivity already within the system. As people work and generate wealth the extra money is to be printed to account for that increase, we go astray by treating money, with definably no inherent value, as a commodity itself with no previous connection to the system/wealth in play which allows the concept of an extra supply without demand decrease its value.

In the theory I mentioned, it is assumed that the supplier is utilizing a portion of the profits (s)he is making at the current ratio in order to expand their supply. They don't benefit at an increased rate, but they do continue to benefit at the same rate as before, but now calculated against higher number of sales giving them additional profit.

Sadly I have read a number of economic text books, on my own, and with the aid of a few economics classes, most of which are just rationalizations for Adam Smith's short sighted theories that encourage personal gain over anything else, while ignoring any of the other models. I have also read a number of theories/essays on the subject like Chaotics, which points at some of the flaws of the classic economic theory through looking at the system under the scientific concept of a complex system. Also I am well versed in C.H. Douglas, Fuller, and many other non-standard economic models, most of which make the point that inflation within a properly managed economic model is synthetic and is mostly unnecessary.

Please don't try to cut down people who oppose your views by making them seem unread/unlearned. It is a cheap tactic, we both have simply encountered different arguments for different models, it is not that I am unfamiliar with the classically accepted theory.

 

[Sentox6]

The increase in monetary supply is meant to reflect the added productivity already within the system. As people work and generate wealth the extra money is to be printed to account for that increase, we go astray by treating money, with definably no inherent value, as a commodity itself with no previous connection to the system/wealth in play which allows the concept of an extra supply without demand decrease its value.

It's kind of errant to refer to inflation as a decrease in the value of money, because, as you yourself point out it, it has no inherent value. It simply adjusts as a unit of account. Money allows us to value real goods and services in such as a way to make their exchange infinitely more convenient. Without it, you would have to supply your own output directly to others, which would be an almost mortal wound to the sort of economic growth we've become used to over the previous centuries.

Your post seems to be implying that prices should not rise when money supply growth outstrips output growth, which clearly does not make sense. Every market would be out of equilibrium and experiencing supply shortages.

At any rate, this discussion is somewhat overrating the negative impact of inflation. Inflation is far from a crippling issues at low rates, and may even be beneficial in keeping the labour market more flexible.

Please don't try to cut down people who oppose your views by making them seem unread/unlearned. It is a cheap tactic, we both have simply encountered different arguments for different models, it is not that I am unfamiliar with the classically accepted theory.

I'm not trying to imply this. I'm simply making the point that even an entry level textbook has a lot more thought on the subject that I will ever be able to put in a forum post (or will ever care to).

Based on your statements, I'm probably more studied in the field than you. This does not, however, make me any more likely to be right, or my opinions any more valid by default. No one economic theory has all the answers.

 

[Danceofmasks]

Ah, SOJs ... my friends and I sold a windforce bow for 170 Stones of Jordan.
Good times.