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  #21 (permalink)  
Old 12-07-2005, 08:35 AM
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Originally Posted by Zoe";p=&quot View Post
If the currency loses value or interest rates soar...
How would those things occur if the monetary base were frozen and the national debt paid off?
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Old 12-07-2005, 08:41 AM
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Default You cannot freeze the monetary base!

That would be the very definition of an economic killer.
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Old 12-07-2005, 08:48 AM
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Why can't we freeze the monetary base? After all, each new dollar printed is a form of inflation in and of itself. Growth doesn't depend on the amount of money, but rather the value that people place on goods apart from an artificial medium of exchange.
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Old 12-07-2005, 08:56 AM
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Default You need to be able to increase the supply of money

in order to grow the economy. Capital needs to be available. Freezing the money supply sets the amount of capital and freezes the ecomony in place. And inflation is not a bad thing in small doses. It's only bad in large doses. That's why we having lending limits where I work. We can only lend so much money because everytime we lend money we are creating money. That creates some inflation, but the growth it creates more than offsets the inflation. You only run into trouble when it's the opposite. Plus, freezing the money supply means that me for make X amount of money I literally have to take it from someone else.
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Old 12-07-2005, 09:24 AM
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But if new money is made, it immediately lowers the value of each dollar. A boom can occur only in spite of this. If the government prints 5% more money, it automatically reduces real growth over inflation by 5%. The fundamental realization that I came to is that money is not the measure of an economy but rather an expedient in lieu of the barter system. Moreover, if the value of each dollar increases annually, your second objection is not a problem. Of course, if we reached a point at which our economy realized a sort of maximum potential within such a system, I would "unfreeze" the monetary base again temporarily.
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Old 12-07-2005, 09:36 AM
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I didn't think that my plan would be a disaster, and now I'm sure that it wouldn't:

http://www.cato.org/pubs/pas/pa060.html
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Old 12-07-2005, 09:51 AM
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But if new money is made, it immediately lowers the value of each dollar.
Actually that's not true in the least. The value of the dollar is based on supply and demand like the value of everything else. You are totally ignoring the second part of the equation! Think about it this way. During thankgiving the supply or turkeys goes through the roof. So why aren't they free or 5 cents a pound? Because of demand. Adding to the money supply likewise does not lower the value of the dollar. The reason we can make a $100 million loan and not cause the dollar to fall is because there is demand for that $100 million. Econ 101.
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Old 12-07-2005, 09:53 AM
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On the other hand, it is equally possible that no economic plan will get us out of the hole that we've dug for ourselves. It is possible that just as with all of the social problems that eat at me, there is nothing that any of us can do. I guess that we'll have to fiddle while Rome burns (that story is apocryphal, I know). Well, so much for my brief attempt at optimism.
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Old 12-07-2005, 10:08 AM
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Originally Posted by stekim";p=&quot View Post
Quote:
But if new money is made, it immediately lowers the value of each dollar.
Actually that's not true in the least. The value of the dollar is based on supply and demand like the value of everything else. You are totally ignoring the second part of the equation! Think about it this way. During thankgiving the supply or turkeys goes through the roof. So why aren't they free or 5 cents a pound? Because of demand. Adding to the money supply likewise does not lower the value of the dollar. The reason we can make a $100 million loan and not cause the dollar to fall is because there is demand for that $100 million. Econ 101.
That first assumes that at any given time that the Federal Reserve prints more money there will be greater demand for money (Say's Law) and second, it assumes that the government can in some way anticipate what that demand will be. Certainly, my theory present difficulties, but so do all economic theories, and the current system has far more problems.
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Old 12-07-2005, 10:11 AM
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Default Sure it is

Relative to my size, my incurred debt is about like that of the US. I am dealing with it by taking up multiple part-time jobs for their ability to work around school rather than their ability to pay more, investing in more debt to pay for school, and consolidating my debt into lower interest loans. In addition I eat out less, don't buy CDs, take my car maintenance into more consideration, and have entered a partnership for mutual economic support. Though I will incur more debt, the result will eventually be more potential for economic returns using less time.
I'm certain that there must be something similar the country can do- like invest in science, education, and other human capital even if it means a short-term increase in debts, find better deals in the loans they take, and cut spending on programs that don't aid human capital (herein we enter a debate).
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