Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Don Lloyd who wrote (5867)	7/15/2001 7:01:03 PM
From: yard_man	Read Replies (1) \| Respond to of 74559

Good point ... >>However, since the desire to hold cash is really a desire to hold goods purchasing power, the effect is partially self-restraining.<<

To: Don Lloyd who wrote (5867)	7/15/2001 9:16:47 PM
From: Ilaine	Read Replies (1) \| Respond to of 74559

I agree, the money supply doesn't have to increase - but when the population increases and/or productivity increases, but the money supply doesn't increase, what happens to prices? If the thing you make costs you more to produce than you can sell it for, of course, you can sell it, at a loss, but then you don't have any profit, so either you consume your working capital or you quit producing. Well, after you consume your working capital you have to quit producing. But you might keep selling for enough to pay the fixed and the variable costs without a profit, or maybe you can sell for enough to pay the fixed costs, just to keep going until things pick up. And the downward spiral begins. You start consuming the seed corn, as it were, and then you're done.