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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (91050)	10/1/2007 10:42:48 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 306849

How much money do you estimate is needed? Enough to make a pencil worth $10,000 - or even more? People who are not familiar with history are doomed to repeat it. All of the technically clever money systems you have imagined have been tried repeatedly in the past and all have failed for the same predictable reasons such as "Flucht in die Sachwerte". Let's say we have a fixed money supply, and the GDP grows by 4.5%. What will happen? Real estate, wages and raw materials will generally remain at the same price - while the price of manufactured goods will decline by 4.5%. How frightening! Contrast this to a monetarist solution where the currency is debased by 4.5% that year. What will happen? Real estate, wages and raw materials will generally rise by 4.5% - while the price of manufactured goods will remain the same - and savers pay a 4.5% hidden tax to the central bank. How is this better? Would creating even more money be more efficient? Real estate, wages and raw materials could generally rise by 950% - while the price of manufactured goods will increase by 945%. *Are we getting to your preferred level of "enough money" yet?* If a gold-based monetary system existed, in an economy where no additional gold could be found, this would be a fixed money supply. In practice, gold can be mined. When the price of god is set by market, there is little incentive to mine gold - as the costs of mining an ounce of gold merely buy you an ounce worth of gold-backed money. Effectively this leads to very little mining except when new abundant regions are found or new cheaper methods of production are discovered. Examples of this are the Spanish conquest of Latin America, which led to ruinous inflation in Spain, and the discovery of gold in California. This system has proven itself over a very long period of time. Lenin and others have attempted to run a "scientific" economy and have seen their results come up short. Yet may people need to learn all of these truths on their own by placing their hand onto the piping hot stove - they can't learn any other way. Only through the pain of personal experience can they come to wisdom. This is why "currency crank" economics becomes popular again and again, in spite of uniform failure. Once the lesson is forgotten, it needs to be re-learned. .