Tism: When the supply of money increases relative to the supply of goods that the money pays for, the effect is an inflation of prices.
IF: Why?
Like you mentioned, more money (old + new money) being used to bid against the same amount of goods.
Has there been any talk on regulating the way money is used after it's being lent? For instance, government should take stock of what the current biddings are for products, and only lend to those who don't have money, with the agreement that, when they get the money, that they will not bid for products any higher than the average of what the products have recently been bought for. That way, prices won't inflate, and thus currency will stay strong.
Think of it this way: If the prices of goods did not change, then there would become a relative shortage of goods, as more people would want to spend their money on goods and be unable to.
I'm not sure I follow you here. It sounds like you are pointing toward the relationship between available resources and price-setting. You seem to be implying the ever-escalating prices protects an industry from becoming over-saturated with businesses, and thus preserves resources?
Think of it this way: If the prices of goods did not change, then there would become a relative shortage of goods, as more people would want to spend their money on goods and be unable to. That may even happen initially, in sectors which typically receive the newest money first. The immediate effect is shortage*<snip>
Here's my confusion: I'm thinking about the auto industry. They are printing and lending a lot of money to bail them out, but I don't see how this is going to lead to increased prices, nor do I see how it will introduce new businesses within the auto sector, nor do I see how the resources needed to sustain the auto-sector will suddenly become more scarce (well, I suppose the mining industry is always encountering diminishing returns, but I don't see how lending money will necessarily lead to any kind of acceleration towards depletion).
That may even happen initially, in sectors which typically receive the newest money first. The immediate effect is shortage*
* Toward sectors where the issuing agent typically spends new money first, this shortage can be perpetual, since new money continues to outpace production.
Why does new money outpace production? Is it because consumer appetites/demand, outpace supply? In other words, is new money a reflection of increased demand?
The insidious effect of this is that new money can actually spur growth at those sectors relative to other sectors.
Why is it insidious for new money to grow a sector? Why is one sector growing in relation to another, insidious?
Money gains or loses value when natural resources increase or wane. It seems like agriculture and mining are the very heart or foundation of the economy. If your country has rich agriculture and mining, then you're in good shape.
Isn't that right?
Not entirely. Money's value comes from the demand of it, just as with any other resources.
Yeah, but the demand of money seems to be a reflection of the supply of resources. Where there is a healthy supply of resources, then there develops a healthy demand of new money. When the supply of resources is sickly, then there develops a pathological demand for new money.
I'm not saying this very confidently, I just want to know what you and others think about it.
Some of this demand is coercively created such as from government decree that the money it endorses is the only money that shall be used, and decree that some of the money is to be paid toward the government (the government demands payment of taxes, denoted in the money it endorses).
I think you're implying that a population should be free to create their own currency and micro-economy, given that they perceive that the macro-economy and traditional currency is failing. Am I right?
Aside from that, even if inflation is minimal or considered "stable" by the economists, it does not make acceptable that the value of goods and work in whole sectors of the market is distorted by the direction of money being spent from the source,
This last point you're making is particularly confusing to me. When you saying "money being spent from the source" are you referring to the money that is being
printed and lent by the issuers? Is printing and lending money the same as spending? Do you thinking printing and lending money is
always wrong?
in order to impose the issuers values onto the market and extract wealth from it.
Your logic here seems to be: increase the money supply, and increase the taxes extracted from it (thereby increasing the wealth of the government/ruling class)
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tism wrote:Isaac Feynman wrote:It seems like a country like Zimbabwe's currency swirls down the drain because people who buy currency imagine living in Zimbabwe, they take stock of what businesses are charging for products, and since everything costs a lot, then it follows that $1 American or Canadian NEEDS to be the equivalent to A LOT of Zimbabwe dollars, otherwise, if you were to go to Zimbabwe, you wouldn't be able to afford anything.
People in Zimbabwe can't afford anything because, if they work, unless they are close to the source of new money, they cannot raise their asking prices fast enough to keep up with the rapid increase in prices on basic goods.
What do you mean by new money? As far as I know, there is only one currency in Zimbabwe. Although, I suppose when Zimbabwe exports goods, they receive money from other countries...
I think importing goods becomes problematic only AFTER internal industries become pricey on their own, and they become pricey due to a scarcity of resources within the country. I talked to tism about how business owners compete for raw materials needed to manufacture their products. When resources are scarce, and when business owners are given big loans from the government, the business owners engage in a bidding war. Then disaster strikes.
Yes that is accurate. To put it simply: Those who are using new money can crowd out those using old money, causing a devastating scarcity.
I need to clarify something here. When you referring to
those people who are using new money, are you simply referring to another country (like America) who is buying products from Zimbabwe with their American currency?
