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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: Zeev Hed who wrote (75270)	3/4/2001 6:29:59 PM
From: yard_man	Read Replies (3) of 436258

Zeev, Your argument is completely flawed because you rely on fiat as the ultimate measure of value, not the goods and services produced. Take the fiat out of it. Assume gold is the only money. If gold purchases more goods as there is growth in the goods produced and less growth in the supply of money (gold) -- that means prices are actually falling in terms of gold required to purchase the goods -- you get more goods for less gold good grief! You only get inflation when you resort to defining things in terms of the fiat being replaced. Yours is a prime example of circular reasoning. A stable monetary base would cure many ills. Much of what folks consider to be healthy economic growth is just part of a business cycle -- a cycle wherein alternately money and especially credit have grow far too fast only to contract on the flip side -- boom/bust, boom/bust -- that's the legacy of an unstable monetary base. The larger question is what function should money perform? Is it to be a medium of exchange or something more? In this world where the fiat system has taken root and money and credit can grow (it would appear) without limit and the economic resources employed cannot -- fiat becomes a weapon to do 2 basic things 1) redistribute true economic wealth (i.e. I'm talking about real resources -- not paper claims on them) 2) a means along with a tax structure to govern. You look at the dislocations that happened in Asia -- a scenario that has played out time and time again. All distortions produced by the banking system the grow money and credit on a regional basis without respect to the flow of goods in and out of a country. A stable monetary base (doesn't have to be gold -- but governments have demonstrated that it is hard to have one without some form of external discipline) -- where savings would be required to provide investment for further economic activity -- the deployment of capital would have a real feedback mechanism -- alternately rewarding those investments that serve the greater good (based on untold number of individual decisions to buy/not buy) and penalizing investments that don't serve the greater good. Without a stable monetary base -- fiat introduces a fiction -- it is a simple fiction that relates to what economic resources are really available. Savings (i.e. foregone consumption) is not required for capital investment -- with limited economic resources -- fiat (as it is always "managed" by bankers) is simply a lie about the natural world that we live in. You watch too many PhD economists on TV

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