Hundreds of Coins Found in Patient’s Belly (Associated Press)
Source link: http://archive.mises.org/1587/distrust-of-fractional-reserve-banks-carried-too-far/
Distrust of Fractional-Reserve banks carried too far
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at the very least, the poor chap’s done his part to reduce inflation.
unless of course the coins were reintroduced into the marketplace after removal from his stomach. i hope they used soap.
Interestingly, anytime you have a certain type of miser, you get a minute level of deflation in the effective monetary supply. Let’s say I make a billion dollars a year. If I keep that all in my house in the form of gold, rather than investing it or spending it, that is effective deflation. Money just sitting around — neither being invested nor exchanged for consumption — is effectively not a part of the monetary supply. When I die, or when I invest the money or use it for consumption, there is an effective re-flation.
which is why the argument that tax cuts “for the rich” won’t help the economy because the rich won’t spend it holds no water. Even if the rich hide it under their mattresses, they’re still taking money out of the flow, thereby creating deflation. Of course, this is just for argument’s sake. When peole have more money, they are inclined to spend it. Miami Herald humorist Dave Barry said it best….
“See, when the government spends money, it creates jobs; whereas when the money is left in the hands of taxpayers, G-d only knows what they do with it. Bake it into pies, probably. Anything to avoid creating jobs.”
David,
“…Money just sitting around — neither being invested nor exchanged for consumption — is effectively not a part of the monetary supply….”
In my view, this is close, but not quite right.
Effective money supply must be that part of the money supply that can affect the objective exchange rate of money through the subjective choices of individuals.
Imagine that Jane Doe gets a monthly paycheck for $1000. There is no question that all of this $1000 is a part of the total technical money supply. However, assume that she has to pay a monthly rent of $900 and sets it aside to be paid later in the month. It is only the remaining unallocated $100 that is initially available for making subjective buy/no buy decisions that is part of the effective money supply and as it declines over the month, Jane’s valuation of the money unit increases independently of precisely when she actually pays her $900 rent.
If you hold money (or gold if gold is money, or you treat it as money, setting that argument aside), then it is only part of the effective money supply to the extent that its existence reduces your subjective valuation of the marginal dollar and affects your choices of action.
The value of money comes from your willingness to give it up in exchange, but the actual exchanges made are only history and the money spent will either be or not be a part of the effective money supply depending on the subjective valuations of the person or persons who receive it.
Regards, Don
The title “Distrust of Fractional-Reserve banks carried too far” posted by Robert Higgs, caught my attention. However, I was really surprised to see it was about a 62 year old that ate coins. I think Don summed it up with his comments about the “effective money supply” and how its value is up to the individual holding that money. However, we’ve learned even if the “effective money supply” shrinks…the gov’t can always print more.
Govt. can only print mor, Fed is willing to buy goverment security…ultimate control is with FEd
and its 12 regional Bank shareholders.
http://land.netonecom.net/tlp/ref/federal_reserve.shtml
http://coininfo.com
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