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Politics : The Obama - Clinton Disaster
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To: Wayners who wrote (10104)3/30/2009 2:19:01 PM
From: DuckTapeSunroof  Read Replies (1) of 103300
 
Re: "I don't know but that is what all fiat currencies are really based on, namely the ability of the people to produce goods and services in greater and greater supply and pay taxes."

I read an excellent paper some years back, that broke down 'what factors' are MOST important in setting a currency's value, at various stages over the time horizon: short-term, mid-term, long-term.

Short-term obviously Central Banks' actions (setting overnight interest rates, currency 'repo' operations, etc.) absolutely had the most impact.

Mid-term factors such a the foreign trade balance become important indicators....

Over the longest-term, obviously the amount of money supply (chasing the amount of goods) is of maximum importance... but this is conditioned by an important consideration --- it's actually the money supply vs. goods supply measured in 'real' terms, and the goods supply is affected by the PRODUCTIVITY of the economy.

HIGH PRODUCTIVITY (relative to all other economies that you compete with) means RISING PRODUCTION OF GOODS. So... as long as that exceeds growth in money supply you have long-term deflation (or disinflation) in real terms... while if growth of money supply but slightly exceeds growth produced by rising productivity you have slight positive inflation, etc.

he article argued that --- all other things being equal --- PRODUCTIVITY was the most important factor over the long-haul.

Re: "I would rather Gold or Silver be the slaves rather than the people."

I don't know what that exactly means... but it sure *sounds good*! <g>
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