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To: pater tenebrarum who wrote (4447)	6/7/2001 11:32:37 AM
From: LLCF	Read Replies (1) \| Respond to of 74559

<an additionally printed dollar does is debase the value of all remaining outstanding dollars. no value is created> Heinz, wouldn't you say that to the extent dollars are held by foreigners there is 'some value' to the U.S. albeit no reason to do such? DAK

To: pater tenebrarum who wrote (4447)	6/7/2001 1:09:43 PM
From: Ilaine	Read Replies (3) \| Respond to of 74559

No value is created by "printing" a dollar. But value is always being created by man that requires dollars, or something like them, for keeping score. Let's look at Rothbard's theorem. >>The invariable result of an increase in the supply of a good is to lower its price.<< It's an economic truism, but the real world does have a way of intervening. If 7 billion people want something, and there is only one, does the price really go down if there are two? But that's a quibble, so let's say he's basically right. >>For all products, except money, such an increase is socially beneficial and living standards have increased in response to consumer demand.<< Money isn't a product. It's a lot of things, primarily a medium of exchange and a store of value, but it's not a product. >>But an increase in the supply of money cannot relieve the scarcity of goods<< He means that money can't be substituted for goods. So what? Money isn't goods, that's why it can't be substituted for goods. >>; all it does is to make the dollar or the franc cheaper, that is, lower its purchasing power in terms of all other goods and services<< In a vacuum, in a closed system that doesn't exist. If we assume there is only one item of whatever good he is talking about, or a thousand, or a million, increasing the money supply won't affect the number of goods in and of itself, because, as he already said, money can't be substituted for goods. >>Hence the great truth of monetary theory emerges: once a commodity is in sufficient supply to be adopted as money, no further increase in its supply is needed. Any quantity of money is "optimal." Once a money is established, an increase in its supply confers no social benefit.<< Now this, please forgive me for my rudeness, which is not directed towards you but to Rothbard, is ludicrous. We can call the year the money - let's call it dollars - was established Year One. There are $500,000, and there will never be any more because Rothbard says so. We can assume a closed economic system, perhaps Pitcairn Island or another similar island far from international trade routes. Let's assume there are 100 inhabitants, 50 men, 50 women. They live in 50 houses. There is a fixed money supply, and it circulates between them as money usually does. The prevailing wage for a carpenter is $1 an hour, and the average sale price for a house is $1000. The men and the women have children, and the children have children, and those children have children. The children grow up and they want houses of their own. Some of them become carpenters. Soon there are 1000 inhabitants and 500 houses, and by the year 100 there are 3000 inhabitants and 1500 houses. (They had large families.) What happened by the year 100 to the prevailing wage for carpenters? What happened to the average sale price of houses? There's only $500,000 for everyone - the wages of carpenters must be cut, or they can't be hired, and the price of houses must be cut, or they can't be sold. For every child that is born and grows up to become a carpenter, he or she will know with certainty that the hourly wage for carpenters will be less than it was for his or her father, which was less than it was for his or her grandfather. The people who buy houses will know with certainty that the sales price of their house will be reduced every time a new house is built. But the people who live on the Island want carpenters to continue to be paid $1 an hour, because they believe that this is a fair wage for carpenters. And they want houses to sell for $1000, because they believe that this is a fair price for houses. So they institute a barter system, and to keep track, they start writing IOUs, which, strangely, enter the stream of commerce and serve the function of money. And they all live happily ever after and forget Rothbard.-g-

To: pater tenebrarum who wrote (4447)	6/7/2001 7:34:26 PM
From: Maurice Winn	Read Replies (2) \| Respond to of 74559

<all an additionally printed dollar does is debase the value of all remaining outstanding dollars. no value is created, it's just a piece of paper. what it DOES do, is punish all savers. so even though it is a form of back-door taxation, it does NOT confer a social benefit. > True, another printing dilutes existing dollar holders and they lose value. My point was that most people [not me] consider taxation to be socially desirable and better than leaving the money with those who earned it. Printing another dollar is the most painless, simple way of taxing people. No tax collectors are needed. No search warrants of court cases or imprisonment of defaulters. Just another day at the printing press. It doesn't punish savers as a group. It just punishes people who collect dollars. Saving can be done by way of share ownership. Earn a dollar and deposit it straight into your share account means you suffer no tax loss from the printing. Nobody needs to hold dollars, so if they choose to, they can avoid the printing tax. But if the printing is kept to a low level, people often prefer to hold the cash, earn a bit of interest and suffer the dilution. Running a money supply does deserve some reward. The payment is included in the printing. Deflation is generally considered bad. So they always print enough to keep a very slight inflation rate. Most people are unaware of just how big a scam that is. Our job as investors is to understand these scams and own money or shares or something else to benefit from the outcomes. I handle it by borrowing some of those puff-ball dollars at derisory interest rates to buy the technological revolution [while avoiding borrowing too much - which can cause margin calls in the downdrafts]. Mqurice