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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: GraceZ who wrote (91146)10/2/2007 8:50:38 PM
From: neolibRead Replies (1) of 306849
 
<i. One could say the monetary system would work better if it was fiat but acted like a gold based system, in that the rate of growth wasn't equal to the GDP but equal to the long run rate of productivity growth, which is the true measure of wealth.

So we have now had the following proposals for money supply growth:

1) Zero
2) savings growth
3) productivity growth
4) GDP
5) Fed's > GDP approach

Do you see why I'm confused? There are (supposedly intelligent) economists who will back any of the above. I admit I'm not an economist (intelligent or otherwise, LOL!) so how do I know who is clueless and who is not? Elroy at one point or another backed three of these (1, 2, and 4) but seems most attached to 1).

Since you proposed 3) I'd ask what happens if the savings rate > productivity growth and you are on a gold standard? It is pretty easy to envision 3% savings and 2% productivity. Since the savings are all hard currency, where does the 1% shortfall come from? Assume these thrifty savers keep all their gold in a mattress (or vault, same effect). Please do not tell me they "invest" most of their savings, hence no gold required. This is a society that saves the good old fashioned way, whatever "interest" their savings make is off the fact that productivity makes manufactured goods cheaper to buy in the future. Hence they are satisfied leaving their loot safely and worthlessly in a mattress.

BTW, I much appreciate both posters educational lessons! When I go read Wikipedia articles one can't poke the obvious week points, so you don't learn much.
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