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Strategies & Market Trends : Heinz Blasnik- Views You Can Use -- Ignore unavailable to you. Want to Upgrade?

To: yard_man who wrote (2409)	6/11/2003 2:24:54 PM
From: Don Lloyd	Read Replies (3) \| Respond to of 4905

tippet, Increasing capital formation and increasing productivity => naturally falling prices. Such naturally falling prices don't impede economic growth Even more emphatically, attempts to stabilize such prices by monetary supply inflation are highly damaging, even if it were possible and even if the attempts succeeded. When one product or group of products is produced more productively, either by the application of capital production equipment or by a more efficient use of specialization and the division of labor, competition has a strong tendency to both increase the real wages of the workers involved, and to reduce the prices of the products produced. It is this reduction in product prices that tends to spread the benefits of the productivity enhancements over the entire economy, including to workers whose productivity has not been enhanced at all. This is the result of either these workers buying products at the new, lower prices themselves, or by seeing an increased demand for the products that they DO produce as others paying the lower prices have more left over to buy their non-productivity enhanced products. This benefit spread is stopped in its tracks when the government increases the supply of money to try to stabilize the money prices of the productivity enhanced products. The other workers have not seen their productivity enhanced, they cannot buy products at lower prices, they do not see an increased demand for their products, and the wages that they receive are worth less. Regards, Don

To: yard_man who wrote (2409)	6/11/2003 7:09:57 PM
From: GraceZ	Read Replies (1) \| Respond to of 4905

>>Money is just a medium of exchange. If the number and value of exchanges goes up the money supply has to grow in order to provide enough "medium of exchange" to transact.<< Simply untrue. Beyond being conveniently divisible -- there is no "right amount" of money. The right amount is the amount that clears the money cost market. What is important is that the supply be stable without reference to the amount of activity taking place. Yes. The Friedman Rule. Not the Von Mises extrapolation. Growth in the formation of real capital (resources that can be reinvested in new or additional production) by no means requires the expansion of the money supply Growth in capital needs no money representation. Humans can add expansion to capacity without ever going to a bank or spending money. It's called sweat capital. It's merely convenient to go to a bank, not necessary. A strong argument exists that all value is only human sweat capital. No money need be involved, so trivially, no addition to money supply would be needed. -- one could almost say the reverse -- to the extent that new currency is exchanged for something, but acquired for nothing. Why do you assume that currency representation of value must be unfair? More revisionist BS!! What is being revised? What is needed for a healthy economy is capital accumulation in concert with the preference of consumers being freely expressed in the marketplace. Why assume that isn't occurring? What is the evidence that that isn't occurring? Increasing capital formation and increasing productivity => naturally falling prices. Such naturally falling prices don't impede economic growth Following that logic eventually everything would be worthless including gold. At worthless there is no incentive for capital formation or productivity. Stagnation sets in = impedes economic growth. QED. The examples you would cite are all precipitous declines brought about by the inflationary policies beforehand. Take an example and show how your conclusion follows. Hll!! It's going on right now ... the economic contraction we are seeing now (minus government spending) is the symptom of the easy money policy that went before. All avoidable.* Economic contraction? GDP is rising.