To: Aloysius Q. Finnegan who wrote (355 ) 11/7/2008 4:32:00 AM From: Elroy Jetson 1 Recommendation Read Replies (2) | Respond to You asked me to comment on your post. Your question reveals the typical confusion between Credit and Money. You'll see that you even use these terms interchangeably - but they're not the same thing. And understanding the difference is the key to understanding economics. . . . wars can and have been fought on a gold or other commodity standard, but when the government is allowed to expand the money supply it can raise more money." . . . when the barbarians are at the gate and defenses have to be rapidly built up? Will they never use credit under any condition? I believe you have two questions. If you have others, you can ask.1.) I assume your first question is, or should be: can an economy experience price inflation with a fixed money supply and variable credit? Answer:) Yes. As the credit supply increases, this will tend to push up prices, but these prices will decline when total use of credit contracts. As long as you don't change the money supply you can't have any inflation that is not temporary due to a change in the use of credit. 2.) I assume your second question is, wouldn't an increase in money supply be useful in a time of great need? Answer:) No, an increase in money would not be helpful except as a method of theft. If a government requires funds, it can obtain the money by tax, credit or theft. Increasing the money supply is theft through a counterfeiting fraud. The advantage of theft is you don't need the agreement of those who would lend, and don't need to spend the overhead and time to find assets to tax.To understand these two answers, it's VERY important to understand the difference between Money and Credit. In the current system we live under, they appear to be nearly indistinguishable and some will claim that the entire system is one of credit without money. But no one at the Fed believes this. The distinction between credit and money is quite clear to them, even if the difference is lost on others.Credit is merely an increase in monetary velocity. This may sound stranger still, but follow along.
