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Politics : Mainstream Politics and Economics -- Ignore unavailable to you. Want to Upgrade?

To: Little Joe who wrote (6895)	1/14/2012 3:03:02 PM
From: grusum	Read Replies (1) \| Respond to of 85487

Simple I can buy something with paper dollars or by writing a check or taking money from my savings account, but all contribute to aggregate demand and pressure prices. no it doesn't. how can it contribute to aggregate demand when all you're doing is transferring dollars from one person to another? when you write a check, you've lost the buying power that the other has gained. you just wrote a check for dollars that already exist, and transferred them to someone else. aggregate buying power has remained constant. I just had some work done at my home, I paid with a check, which will probably be deposited to another checking account and in turn the wages and materials will be paid by check, without any dollars changing hands. none of this puts more dollars into the economy. all you're describing is a transfer of existing dollars. Remember what is a dollar but a Federal Reserve Note of course. 'dollars' are just shorter and easier to type. In other words it is an obligation of the government to pay the holder a dollar, whatever that means. it means that the government or FED is promising to run an honest currency (which in my opinion they are no longer doing). A treasury note is the thing an obligation of the government to pay off the note. I have a checking account I hardly ever carry any money I pay using a bank card. If you are right none of my purchases contribute to inflation. that cant be. your actions aren't creating more dollars. so if more dollars means more inflation, how can you be creating inflation? Also if every bank deposit and every check were cashed and every government bond or note were cashed the government would simply print the dollars to pay them off. which hasn't happened. so why are we experiencing inflation now?