A Mental Walkthrough on how the United States monetary system actually works!

I'm seriously tempted at times to use Microsoft Paint to explain this...

 

From a year to year basis. If you take how much they had in 1914 compared to now, then yes. The point is it is a continuous system where people are continually trying to increase their amount of money.

Take for example, you and I have $10,000 right now. In 10 years if you did not do anything and still have that same $10,000 and I went out and invested it and turned it in to $50,000. Per dollar value of course would be the same 10 years later but I now have $50,000 compared to your $10,000. Inflation allows the macro economy to be a net gainer. With out inflation you are living in a zero sum society where there is a winner and a loser.

Lol, I didn't say more money equals more worth. I said more money means there is more money. If there was $100 in the economy and $1 could buy you a loaf of bread. Then 10 years later there was $1000 in the economy and bread now costs $2. Bread costs 100% more but there is 1000% more money. Now wouldn't you say that we are better off as a whole?

I don't get what you are talking about. Even people on welfare are making more than doctors in 1913. What relevance does the devaluation of the dollar from a previous point of time have when you don't incorporate there being more dollars? Real GDP per capita is inflation adjusted. We are almost 700% better off now in real wealth per capita than in 1913.

You guys are smoking some real good stuff!!

 

Are you one of these economic analysts that merely focuses on GDP and GDP per capita? You know, the economic consensus is that these two figures are not the only figures that shine light on the health of the economy. Inflation and unemployment play a crucial role in economic analysis as well.

 

You guys focus specifically on the value of a single dollar from a point of time in the past. You guys say that $1 could buy 4 loaves of bread in 1913 but now $1 could buy you a quarter loaf. None of this takes in to account how much more money there is now, none of it takes in to account technology, innovation, etc.

If you think that someone in 1913 who had $100 should be able to buy the same amount of stuff now in 2011 with that same $100 then you guys simply do not understand how economics works. The point of money isn't for it to retain value, it is meant to be used as a medium of exchange to increase a countries productivity. If you want goods to increase in value, then you need more money. If you want your house to increase in value, if you want your gold to increase in value, etc, etc, then you simply need more money.

 

Dude, what do you see in any set of data that says we are worse off now than in 1913?? Are you kidding? So you value how much 1913 dollars are worth more than current GDP or real GDP per capita growth?

Inflation is the catalyst that drives our economic ship. This is as simple as it is. You and I at this period of time have $100. What are you going to do with that? Inflation tells us that it is going to be worth less in the future. You can sit on it and lose value or you can try to earn more of a return than inflation giving you more purchasing power.

Inflation forces action. When you spend that $100 in order to gain more money, that is money going in to another persons pocket. That is a transaction. Economic growth is based on transactions. Money is a medium of exchange, it is not meant to retain value and it is not meant to be invested in like a house or gold.

 

Technology changes and since there were no Iphones in 1913 our argument is nulled... truly another classic.

Also your next part makes absolutely no sense because the Market itself determines the value of the Product itself. The Price on Goods doesn't go up when Dollars are printed it's merely the value of the Dollar declining...

 

This is pure babble. No truth to it what so ever. The purpose of fiat currency is to maximum productivity and not limit growth based on a silly metal in the ground. And poor people have been (*)(*)(*)(*)ed and powerless throughout the history of society. There has never been a time where poor people were as well off as they are in America.

 

Supply and Demand... there are two parts. You forget that more money can lead to more demand which can lead to more supply. Oh my gosh!! Econ 101 all over again.

I'm not saying that you can spend yourself in to prosperity, I'm saying if you are a productive country like America where supply is plentiful, then you can handle a lot more money than a country that can not keep up with demand.

You guys only focus on one part of the equation. Inflation is not a bad thing at all unless you do not know how to make more money and your worth to society becomes stagnant or non-existent. The point of inflation is to get me to try to make more money than you.

 

The value of goods wouldn't go up if the dollar was backed by gold and silver. The Coinage Act of 1792 allowed goods and services to remain relatively stable in price, because any paper money had an intrinsic value of gold and silver. This is a fundamental reason why people propose returning to the gold standard or silver standard.

 

Clearly you've proven me completely wrong by simply saying I'm wrong... I'm so profoundly shocked that your words alone completely denounce me. Any links to prove it isn't the case because looking at the past century.. ummm yeah it clearly shows it swinging my way.

Also I love the typical "America is great and it has helped the poor people better den dah rest of dah world." which concludes to me having to delve into History then say I'm wrong again with you providing nothing but, your words alone. So I'll simply say Free Market Capitalism with the Gold Standard attached has kept the USA in the Dominance it has and other reasons such as WW2 & the Cold War. The FIAT system has never helped the USA to be what it is today it is due in large part because of our Economic system pertaining to Economic Freedom and not the Controlled Economic practices you advocate. Look at the USA today with all of its price controls, regulations, subsides and massive inflation via printing press... Clearly the USA is still competing Economically Globally... Right? *EHHHH* Wrong.

 

How does having more bills equate to having more supply? Hell we can downsize the entire current circulation to that of 10,000 dollars to 1 dollar. There would be no significant difference because the Marketplace would still be able to determine the value in the end. So your point is null in saying larger numbers are needed to keep a large system in play.

 

Lol, did you just make that up?

I will give you a hint. There will never be a time in the future of America that we will ever return to the gold standard or any commodity backed standard. It has been proven to be completely inadequate and a destructive force to progressive economies.

There is absolutely nothing about gold or silver that keeps the value of goods from going up or down.

 

Dude, it's about transactions. If there is someone out there willing to produce, someone willing to work, and someone willing to consume... and all they are missing is a medium of exchange, then there is not enough money. The only thing that matters in an economy is money going from one person to the next. It is called the velocity of money. Learn it!

And I'm not saying large numbers of money leads to large numbers of growth. I'm saying if you have more room for productive growth, then you have more room for more money. Productivity and consumption is all that matters. The medium of exchange simply connects the two.

 

No. This is historical fact:

http://www.constitution.org/uslaw/coinage1792.txt

http://www.enotes.com/major-acts-congress/coinage-act

 

So you are saying all the money I have and all the utility I can get with it means nothing because it is fiat money and wasn't dug out of the ground?

Lol, you people need to take the armadillo hats off and join the 21st century.

 

Any material that doesn't have a large quantity present on this Planet will hold its value compared to something that has near limitless amount like printing more zeroes on a Dollar Bill. I'm sorry to tell you that things that are tangible and rare are worth more while also lasting forever. Also I find it humorous to believe that for the past I don't know... 6,000yrs Gold has been around and has been held as standard for all currency is now worthless because you say it is. Are you God? No no wait... You're an Alchemist who can turn sand into Gold!
http://www.youtube.com/watch?feature=player_detailpage&v=8ACTIVntAKg#t=10s

 

Lol!!! So you think that all evolution of money stopped in 1792? That they knew everything that we know now and that they knew more about what we know now? Ridiculous!

There is absolutely no logic in saying that gold and silver retain their value as a currency.

 

Provide proof.

 

Did I say that? Hmm not even close buddy... The Market itself determines the value of the said Product whether it's Golf balls, Currencies or Kool Aid. That being said a product that has a limited quantity has a longer lasting value compared to FIAT currencies that are constantly abused to the point they're no longer considering valuable. Once that happens they're wall paper!

 

Lol. Gold was useful because people were uncivilized. People who found gold didn't all of a sudden become smarter and more innovative than everyone else. They just had a stupid lump of metal. The fact that it evolved in to a currency is simply the nature of the simplicity of civilization. It was easy to use as a currency.

Welcome to the 21st century! We have evolved, I suggest you put Adam Smith down and start entering the current world.

And fiat currency "is" limitless but "it is" not limitless. As in it could be limitless but in reality it is not limitless since we know how much exists. Any corrupt Govt can destroy a nation regardless of it's currency. Happened to every society known to man even with your magical gold bars.

 

Welcome to the island of logical fallacies. Societies get destroyed for many reasons. Very few societies get destroyed because they print too much money. They print too much money because their society is destroyed. The Weimar Republic wasn't destroyed because it printed too much money, it was destroyed because it tried to take over the world and lost and was left completely ravaged and disintegrated. They had no productivity. No amount of gold would have provided food or innovation to that society.

They printed money by necessity.

Focus on productivity. America had a quarter of the world's productivity last year. We are fine. The value of the dollar is the least of your concerns. Go out, get smarter and earn some more money.

 

Inflation is actually a greater threat to those that continually build more wealth unless they keep zero capital assets.

This is mindless blather. Zero meaning whatsoever.

I fail to see what bread becoming cheaper has to do with more money supply. If the bread maker does nothing to decrease cost, the bread would have cost $10.

Wow. I am running into a lot of frustrating stuff on here tonight. Increased standard of living has to do with society becoming for more productive. Increasing money supply has nothing to do with more net worth.

I am convinced you are not intentionally missing this elementary logic, and that in and of itself, is sad. Increased money supply can be argued to support innovation and increased productivity even though I disagree with that argument, but saying that having more money directly affects having more net worth is funny.

Your confidence makes it actually very entertaining.

 

First, understand the difference between The Weimar Republic and the Third Reich. The two are completely different governments, and the Weimar Republic was on the brink of destruction under its currency, the mark. The only escape: establishing a new currency, the Rentenmark. Without this, Hitler and Nazism woud've risen to power in Germany at an earlier time.

 

It's actually a greater threat to those that don't build more wealth. But nice try.

If demand didn't increase than the bread maker wouldn't have to cut cost. In fact things would be cheaper. Nice try again.

I never said that. I said it can lead to more net worth if you have more productive capacity.

Never said that. I said more money can lead to more net worth because of more productivity. Quit lying about what I'm saying.

 

Are you selling me a Religion? Jesus lol... I can see it now wavy lines as I drift into my hypnotic sleep.

"FIAT is limitless but, it is not limitless..."

Of course you add in a scary ghost wail and you have me converted.

Your Economics are based from faith and nothing tangible. Sorry I don't believe in God FIAT like so many of your Covenant Brothers but, I choose a path of Reality.