“keeping score” money and inflation
So, one of the discussions I had recently centered around the insanity that we have inflation.
A common myth that floats around is that any time the government increases the money supply, we should have inflation. This bit of insanity is carefully ignoring that money is a pointer that points to resources, and we have more of those every year. We certainly have more man-hours to get things done as the population rises, and we develop more intellectual property (a major thing we spend money on) every year – and every time we learn to do things more efficiently, it’s as if we had more nonrenewable resources – for example switching large portions of our grid to wind, or even just building more efficient coal plants, makes us effectively have more resources.
So, the only way you should see inflation is if the amount of money printed is larger than the gain in resources for the year.
In addition, the only money that means anything is money that is actively in play or is going to be. “Keeping score” money – i.e. the money of people like Trump and the Koch brothers – money that isn’t going to be spent – does not get used for resources and therefore is out of service. A long time ago I wrote a article about why having a high net worth is a destructive thing to do, but the truth is, it shouldn’t be. Everyone should be free to live the way they want, and if it makes billionares happy to have a bunch of money, they should be able to do that – if we were running a bucketized currency system in parallel with our fiat currency system, people deciding to keep billions in the bank wouldn’t be so destructive. But at the moment, there’s less money in circulation than available value, and as a result we often destroy value (let food rot on store shelves, for example).
As a reminder, fiat currency is only making the world a better place and enabling us to have fun adventures when it is changing hands.
February 13th, 2016 at 11:42 am
Actually, money is a medium of exchange. In America, money has no inherent value, like the stock market, it’s value is what others perceive it to be.
Our money is not based on available resources. That would mean our fiat system of money would actually be based on something of value, it’s not.
Inflation happens when peoples perception of the value of money decreases. They think it is worth less, therefore it is. That is the problem with fiat (faith based) currency…
February 16th, 2016 at 12:59 pm
Yes.. this is why I think we need to leave fiat currency behind, or alternately have something we can trust (like a well designed computer system) telling us whether we should or shouldn’t have faith in the currency.