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Source link: http://archive.mises.org/7637/memo-to-david-frum-more-money-not-necessary-for-economic-growth/

Memo to David Frum: More Money Not Necessary for Economic Growth

January 10, 2008 by

In discussion of gold as a monetary institution I often hear that the supply cannot expand fast enough to accomodate economic growth. But why should this be true?

(For a related discussion, see Bob Murphy’s response to David Frum’s articles on the gold standard.).

The idea that economic growth requires more money is based on a confusion of the real and the nominal. In fact, economic growth does not depend on the quantity of money at all. Any rate of economic growth can occur with any quantity of money. Economic growth occurs when savings are used to fund investment. Any level of real savings and real investment can take place with any quantity of money. It doesn’t matter, for example, if Apple Computer saves and invests 10,000 ounces of gold in a factory that produces 10,000 iPods each selling for 1oz of gold, or if it saves and invests 1,000 oz of gold to produce 10,000 iPods each selling for 1/10 oz of gold. Return on investment, (revenues divided by invested cost) is a dimensionless quantity. The nominal monetary prices cancel out.

Over time if the growth in total spending within the economy grows faster than the supply of money, prices will fall. This happened during the era of the classical gold standard. But falling prices of consumption goods does not restrict economic growth because costs are falling as well, so business is profitable. As Hayek explained when there is an increase in real savings investment, the structure of production expands relative to consumption, so producers costs fall faster than their selling prices and their sales volume increases, so in real terms, their profits increase, even though in nominal terms (say measured in gold oz) they might be falling or the same.

Another way to understand real savings and real investment is to think of Robinson Crusoe washed up on a desert island. He starts with nothing. He eats with fish that he catches with his bare hands. He catches 10 fish per day. He only needs to eat 5. He saves the other five. One day he desides to make a fishing rod, which will take 5 days. He invests 25 saved fish by giving himself five days of time. He uses the five days to make the fishing rod. With the rod he can catch 20 fish per day. Now banker gets washed up on the island and starts issuing bank notes. You can see that it doesn’t matter if the fish are priced at $5 and the rod $100 or $50 and $1000. The amount of real investment — 25 fish — is the same.

The idea that more money is required for economic growth is based on a confusion between money and wealth. Money does not fund economic growth. Money only allows savings and investment to take place in a price system. In a monetary economy, people can save in terms of money and invest by transferring their saved money to capital investment projects. But any amount of money could transfer any amount of savings — at some price. The price system can work with any quantity of money.

Money is important to economic growth only so that that a functioning price system can only exist with money. Prices enable entrepreneurs and investors to make a rational calculation of costs versus revenues in determining where to invest.

Entrepreneurs and investors are smart enough to take into account some variation in money as well. Suppose that economic growth is 3%/year and the gold money supply is growing by about 1%/year. Then there will be on average a 2% fall in prices. Investors can take this into account. This is a lot like what people do today with inflation, where they build the COLA or CPI into their wages and prices.

As Rothbard wrote,

    Goods are useful and scarce, and any increment in goods is a social benefit. But money is useful not directly, but only in exchanges. And we have just seen that as the stock of money in society changes, the objective exchange-value of money changes inversely (though not necessarily proportionally) until the money relation is again in equilibrium. When there is less money, the exchange-value of the monetary unit rises; when there is more money, the exchange-value of the monetary unit falls. We con­clude that there is no such thing as “too little” or “too much” money, that, whatever the social money stock, the benefits of money are always utilized to the maximum extent. An increase in the supply of money confers no social benefit whatever; it simply benefits some at the expense of others, as will be detailed further below. Similarly, a decrease in the money stock involves no social loss. For money is used only for its purchasing power in exchange, and an increase in the money stock simply dilutes the purchasing power of each monetary unit. Conversely, a fall in the money stock increases the purchasing power of each unit.


Neal January 11, 2008 at 12:41 am

Would people accept that they have to take a pay cut every year?

TLWP Sam January 11, 2008 at 1:02 am

Deflation good? Yeah right! Deflation benefits the wealhty and the owners of existing businesses. As they are the ones who are most likely to have idle money and existing investments. A similar scenario is that of fertile land – if the amount of fertile land is fixed then the only way to get more food is increasing the food output per acre. If the technical efficiency has peaked then existing farmers are safe.

This guy makes a good point against inflation and deflation:


Grant January 11, 2008 at 2:42 am

The wealthy don’t hoard money; they save by investing. In some cases that might be a commodity which serves as money, but in most cases it won’t be. The poor with their higher liquidity requirements are the ones who have more of their net worth in money. A rich person with tens of millions of dollars will only have a very small percentage of wealth in the form of cash.

Neal, with a constant supply of money, wages tend to stay the same. Its retail prices that drop, as the productivity of each individual worker increases.

maverick January 11, 2008 at 6:22 am

“Would people accept that they have to take a pay cut every year?”

Did you understand the article, if the purchasing power of the less money equal the purchasing power of the last year money they won’t have a pay cut. The purchasing power is what is important, not the nominal number on the paycheck.

“Deflation good? Yeah right! ”

Deflation is an interesting and controversial thing. First it is assumed that it force people to hold money and wait for a lower price, so that it will lead to that shrinking of the economy, but that is a very shallow thinking. First – most of the wealth is not in money but in real objects and holding money would put money out of use so the “price” of the money will increase because there will be more demand than supply, second – the market is not made only by goods in production, you have to deal with existing goods and with new goods already produced which must be sold in a case that the owner want more exchange value than utility value and the owner always prefer today than tomorrow even if today is more expensive. So generally deflation has nothing to do with growth, it won’t against it but it isn’t for it either. The ONLY way to advance the economy to have growth is saving more and investing that in the means of production. MONEY HAS NOTHING TO DO WITH THAT.

Now if deflation don’t affect growth, would it be true for inflation also? The distinction between inflation and the rise of the prices should be made. Prices can and do rise even if there is no inflation, if the supply/demand changes on the direction that demand rises more than supply. Inflation IS NOT EQUAL to rise of the prices it IS EQUAL to falling purchase power of money. But to answer the question. Inflation is a taxing mechanism a redistribution scheme there won’t be less capital by inflation but it lead to less optimal use of the existing capital, hence to a smaller growth. Because saving is affected, inflation kills the incentive of saving and as saving goes down, capital investment goes down and the economy growth rate is down. Also should made a distinction between saving and hoarding because the two is not the same.

This also affecting the incentive of people to hold money during deflation, if you hoard (cash holding – in your safe, cabinet, pocket) your money has no means; if you save, your money buys operating capital which market price goes down faster than the purchasing power of the money goes up, so the very strong incentives is there to utilize your capital and to make profit in order to maintain the price of your property. I don’t say value because value has little to do with price, but that is another issue.

maverick January 11, 2008 at 6:28 am

“The poor with their higher liquidity requirements are the ones who have more of their net worth in money. A rich person with tens of millions of dollars will only have a very small percentage of wealth in the form of cash.”

A powerful incentive for the poor to save and to get out of poverty. In inflationary fiat money, cheap credit world, there is no way for the poor to gain some capital because the system encourage them to spend more than they have so they became poorer because they don’t have any capital they actually has debt. Compounding on that credit kill them even more “Compounding are the most powerful force in the universe and when you are in debt it is against you”

The first step out of poverty is to save something and to use that something to be able to save more tomorrow by producing more. The worst step a man or for that matter a country can do is to go in debt for the sake of consumption.

Curt Howland January 11, 2008 at 7:49 am

The “deflation is bad” folks also make the error of assuming that “deflation” will be simply the reverse of what we now call “inflation”.

Sure, deflation of 8-10% per year could be very disruptive, just as the inflation we have now is destructive. But by what massive twist of logic can anyone compare fractions of a percent general deflation (as seen throughout the gold standard centuries) with the intense printing of money under fiat currencies?

Just another example of the intellectual dishonesty of the inflationists.

maverick January 11, 2008 at 8:14 am

Annual deflation of 8-10% would be a sort of science fiction to achieve in a free market because that would require growth well over 10%. But even if we assume that a 10% deflation is possible it doesn’t change anything because the purchasing power of money DOES NOT AFFECT economic growth, only saving/investment or the lack of it affect economic growth. The computer or mobile phone industry is a great example, there is deflation on that part of the market well beyond 8-10% per year (it is possible within some industries but hardly imaginable within the entire economy) and there is growth, higher growth than in any other industry. Investing more capital in production drive prices down but also drive production cost down, and profitability is maintained. The incentive for innovation is extremely high because it isn’t possible to maintain profit without driving cost down and more important without introducing new and improved products which would achieve higher prices than the prices of the massively produced and well marketed products already existed. This is a powerful force it drive the industry/economy faster than anything because the question is not what would you be able to buy for the money you have tomorrow, the question is how to use that money to get more utility value. Today the goal is to make more money, in the free market the goal would be to make higher utility value, and the only way to do that is innovation which can be achieved only by saving/investment.

Consumer driven economy tend to freeze the world, tend to make stability, but stability is not growth it is not development it is simple a lack of life it is a status society where there is maybe harder to sink but it is the place where no way to go up either. And I believe America is not a story about that, at least I refuse to believe in the story that America is about status about life by strict unjustifiable rules (tyranny), I believe it is about freedom, responsibility, courage, entrepreneurship, risk taking in order to be today or tomorrow on places where NO MAN HAS GONE BEFORE.

Inquisitor January 11, 2008 at 8:35 am

TWLP, your point? Deflation means increased purchasing power and higher returns on savings (which benefit everyone except the most profligate.) How is this bad? Why should people who save be penalized as opposed to those who borrow all the time? All prices ought to do is reflect the economy accurately; a deflationary trend is to be expected when productivity gains are constantly realized.

Maverick January 11, 2008 at 8:50 am

“This guy makes a good point against inflation and deflation:


After careful reading, I can tell you that this guy also made a mistake on the nominal versus purchasing power issue. Rothbard teach us the real problem with money today is that is not represent an actual measure (weight), there is a story about some bankers asked Newton about why money should be measured by weight and he answered because it must be a physical thing and physical things does not exist without physical dimensions or weight. The dollar was the name of 1 oz of Silver, the pound sterling was 1 pound of sterling silver, today nor dollar nor pound nor any other currency doesn’t represent any physical thing it is just an imagination which can’t has any relations to the price of any other physical good or for that matter with any other non physical “goods” either (like art, knowledge etc.), because the prices of all those non physical thing also can be measured by supply/demand laws, and fiat money has outside of the market it’s “price” is not based on supply/demand laws it is based on future expectations of purchasing power in the future. With real sound money (gold, silver) the “price” isn’t determined by expectations of purchase power in the future it is determined by supply/demand.

Credit is not the same as loan, loan involves money, credit involves only goods. The debt in goods is not the same than debt in money. The fallacy for this came from the Keynesian idea that money=wealth, while this is false. Money is a mean to temporarily store wealth but more importantly a is an instrument a medium of exchange. It has little utility value so there is no reason to hold money there is no reason to own money at all except for exchange one form of wealth for another form of wealth, one good for another good. So while inflation is “hidden” tax for EVERYONE except for the one who are issuing fiat money, deflation is no tax at all because it gives you more purchase power and not less it gives you the incentive to save/invest and not to consume more than you produce, it gives you an incentive to buy more products which you can use for advancing your life to produce more etc. and not like inflation which gives you incentive to buy consumer products, inflation lead to waste it lead to tons of garbage it leads to lack of responsibility it leads to decadency, it is a sure way to being more primitive to being a barbarian. Inflation is the worst enemy of civilization.

The worst idea is that deflation is bad because it discourage consumption and that consumption drive growth. But that is a serious lack of knowledge in economics theory. Consumption cames from production, and not the other way around. So in order to consume we must produce. Inflation don’t make as produce more it redistribute the wealth in such way that some industries, nations etc. can have more growth but not on the back of their own efforts and capital utilization but on expense of other industries, nations etc. Deflation is a bad word thats all, a bad word with unbelievable bad interpretation, but deflation encourage saving/investment and saving/investment leads to higher consumption. Inflation lead to high consumption without saving/investment. The only way we can keep up is borrowing, or to export the capital to other countries (China)… first export money then they buy the capital on the stock market with that money, which effectively means exporting capital.

Robert Blumen January 11, 2008 at 9:23 am

Concerning deflation being harmful, the word “deflation” gets used to mean many different things.

There will be falling prices due to increased production of goods outstripping the rate of money production. Call this a “growth deflation”.

The economy has no problem adjusting to the greater supply of goods (and therefore falling prices) because the goods could not have bee produced if the price structure had not adjusted to the increase in capital.

However, economies have had a hard time adjusting to sudden changes in the supply of money (either an increase or a decrease). A sudden decrease in the supply of money comes about through a bank credit deflation, which occurs when there has been bank credit expansion, resulting in mal investment, followed by a credit crunch. It is difficult for the relative price structure to adapt correctly when the money supply changes suddenly.

But there is no problem with a growth deflation. Only with a bank credit deflation.

Maverick January 11, 2008 at 9:28 am

Another problem with inflation. When it become “to high” people start to consume capital because the profit they are able to make is less than the loss of purchasing power of the money they hold. So not that saving/investment isn’t possible but even existing capital is being consumed. I think the inflation right now is already crossed this line, there in not small investment or zero investment there is actually disinvestment. The economy is already in high contraction the only reason we don’t feel this yet is because the output is not equal the production in government accounting, they measure “national” economy by the “value” created. And value is not measurable only price. If a Chinese guy produce a shoe and he earn $5 the government will put $5 in the Chinese GDP, an American guy buy that shoe from the Chinese for $10 and he sell that in the US for $100 the government will put $90 in the US GDP, but the fact is that the Chinese produced a shoe and the American produced no real value. The only thing made possible for him to charge his “service” 20x more than the Chinese guy can charge his productive effort is that the shoe is displaced outside the US economy and the US consumer is forced to use this service at that cost. If there would be US shoe producer he can maybe charge $50 for a shoe and the guy who sell a Chinese shoe would be able to charge not more than that. The only reason why 850 billion trade deficit is possible is that printing money is considered as wealth creation, the $90 income for the American guy is coming from the money press and not from production.

We don’t live in a world of globalization, we live in a world of frauds on a global level, we live in a world where people and their life, are controlled by governments and corporations. You can do only what they say you can do. Half of that is mandated by regulations, half of that is mandated by the environment they created by those regulations. Why there is no incentive for Americans to produce shoes? That is a good question. If you produce a shoe for $100 you would have great profit, but you can’t produce a shoe for $10 like the Chinese. The problem is that the consumer doesn’t pay the shoe $10 he pay it $100. So way it is easier to “export the job” to China then to produce a shoe in America? The only acceptable answer is because it is easier to print money than to make shoes.

TLWP Sam January 11, 2008 at 9:34 am

So ‘inflation’ is defined as its monetary version ‘more paper coming out of the printer’ whereas deflation is either defined as production efficiency or as the general lowering of prices. The only lowering of prices that matter is the one that comes from greater efficiency.

Alternatively, why does the computer analogy keep cropping up again and again? It could be argued computer prices are actually static. A new hard disk is going to the same as a hard disk did years ago it’s just that capacity has changed. Similarly, most the decreasing prices are due to nuministics-style valuation, people are paying less for older hardware because there’s new hardware coming out. Interestingly in 2005 in the CPU department there were next to no new processors and as such the CPU prices barely budged. DDR RAM price was rather static until DDR2 RAM became mainstream and in some periods actually went up! Somehow I doubt the ’00 depreciation rate for computer hardware is anywhere near the high depreciation of the ’90s.

Inquisitor January 11, 2008 at 9:45 am

Well actually deflation and inflation are merely monetary phenomena to do with the money supply, if one uses proper terminology. Rising purchasing power of money due to productivity gains is not really deflation per se.

Maverick January 11, 2008 at 9:55 am

“It could be argued computer prices are actually static. A new hard disk is going to the same as a hard disk did years ago it’s just that capacity has changed.”

No it isn’t because it isn’t the same good, the name are the same (hard disk) but higher capacity means greater utility value it is not the same good not the same product, otherwise nobody in the hardware industry would bother to improve all the time.

Of course this leads us to another fallacy, that market is one big thing. Actually there is storage market and one little part of that market is hard disk market and one little part of that market is server hard disk and so on. The conditions on all of those separate but interconnected and largely cross dependable markets are different. Anyway generally prices goes down on the whole computer market because for the same or even less money you get more and more utility value. Anyway this drop in price is due supply/demand laws it is because of investment in that industry it is because the production is based on higher capital today than it was yesterday.

Of course there is some problems with using this as an example. First it is the problem of the source of this investment. It isn’t by saving but by credit expansion. And the drop in prices is not a deflation in the true meaning of the word because there is inflation in the world, but I didn’t use this example as a way to show that deflation is not a bad thing, I use this as a way to prove that drop in prices (means higher purchasing power which can be analyzed as deflation in that particular industry) doesn’t mean that there won’t be growth nor it means that there would be no consumption. It means quite the opposite, higher production as the only way for higher consumption. But the problem with the computer industry is that it doesn’t happening in the US or in western countries it is in China, Taiwan, etc. so this would lead us to a point where money printing is the real industry of the west and production industry is the story of China and Asia. The only industry/business exceeding this computer industry in growth is the transportation industry and the price of oil, because if you export jobs and money and import products, you need an enormous transportation industry. But guess what, merchant ships are also made in China, Korea, Japan… and oil come from the Middle East, Russia…

Maverick January 11, 2008 at 9:56 am

“Well actually deflation and inflation are merely monetary phenomena to do with the money supply, if one uses proper terminology. Rising purchasing power of money due to productivity gains is not really deflation per se.”


Robert Blumen January 11, 2008 at 10:11 am

Possibly “growth deflation” should not be called deflation, it should be called something else.

There have been gold inflations in the past, for example, the California gold rush in the mid-1900s, and when the Spanish stole large amounts of gold from South American people and took it back so Spain.

I would argue that a gold inflation is less destructive than bank credit inflation because the money supply does not expand through the addition of debt.

But generally the supply of goods has grown faster than the supply of gold. These days gold mining has tended to add from 1-2% to the total above-ground stock.

Person January 11, 2008 at 11:05 am

Whoa whoa whoa, wait, any economy can sustain any amount of gold, but not the amount the Fed creates?

Michael A. Clem January 11, 2008 at 12:07 pm

Person, any amount of money can be used in the economy. A change in in the amount of money, though, takes some adjusting in the economy. The problem with the FED is that they aren’t trying to keep the amount of money in circulation constant–they keep inflating it.

Person January 11, 2008 at 12:31 pm

Michael_A._Clem: So, in other words, the quanity of money doesn’t matter, but the adjustment can be painful.

In other words, precisely the argument people use against the gold standard.

So the post is mostly non-responsive to gold standard haters.

Michael A. Clem January 11, 2008 at 12:38 pm

They worry about changes in the gold supply without accounting for larger changes in fiat money. This makes their argument useless, unless they have another way of limiting those changes. Like, for example, getting government out of the money business and allowing for competing currencies.

Person January 11, 2008 at 1:13 pm

Michael_A._Clem: Just to play devil’s advocate here, historically, adjustments due to changes in supply of gold have been much more painful than adjustments due to new fiat money, even when, as you claim, the fiat money changes are larger. As Mike_Sproul notes, that gain in money is offset by a gain the bank’s assets (which represents a coincident gain in demand for dollars), mitigating some of the inflationary effect.

Brent January 11, 2008 at 2:43 pm

The deflation haters fall into a bunch of different camps, but the main two (I think) are:

1) Deflation is bad because it “causes” recessions. This is your typical economist.

2) Deflation is bad because it is like inflation in reverse. These people equate deflation to the deliberate monetary inflation policies of government, when we are actually describing deflation (or even inflation) as the largely harmless and necessary (pure) market process in action.

Maverick January 11, 2008 at 3:21 pm

The problem with the FED and any other central bank is that they create money out of thin air.

rhys January 12, 2008 at 1:40 am

There are two issues. The first issue is the fact that inflation and deflation can never be eliminated. There is no way to know what the neutral interest rate is at all times. Therefore, any monetary policy will have inflationary or deflationary periods. The second issue is the fact that the biggest problems from inflation or deflation come from the unequal distribution of the inflationary or deflationary monetary units across the public, as these are never even.

If everyone’s money increased or decreased in purchasing power at the same time, then the effects of an increased or decreased money supply would be negligible. Just imagine if everyone had 0.5% less money tomorrow. And by everyone I mean every person, corporation, and government entity in the world. The price effect of this would be distributed in the most even way possible.

There is no way to stop inflation and deflation. So these pressures can only be controlled efficiently by a free market. This implies that interest rates can only be efficiently controlled by a free market. Money should be free – or market created. No government should control the money supply. Government may designate a legal tender, but that is it. There can be no coersion by government to pay private debts in any particular currency as this will inevitably create uneven inflationary and/or deflationary pressures that disrupt a free market.

Maverick January 12, 2008 at 7:41 am

Discussion about the negative or positive consequences of deflation (or inflation) leads us probably to nowhere, but we must not forget that the free market would deal with those things just as it deals with any other. If the people want inflation it will be inflation even in a free market because the quantity of money could rise faster than the quantity of goods (production), if the demand for gold as money rise, the exchange value can rise over the utility value and some of the gold used for non-monetary items will be used as money. But people will use silver too and some other precious metal as money if the market chose that. In the same time the opposite is also quite possible, people can use some of the gold as non-monetary goods and that would lead to deflation, and the third, the equilibrium approach is also possible (probably this would be the reality) when the market will working in that way that the quantity of money would increase just as much as the production does, by using other precious metals as money also.

fundamentalist January 12, 2008 at 8:53 am

Person: “So the post is mostly non-responsive to gold standard haters.”

Not exactly. It’s a matter of degrees. Under a pure gold standard, money could increase at about 2-3% per year, whereas with fiat money it regularly increases at a rate greater than 8%. Gold can increase suddenly, such as with the California gold strikes in the 1800′s, but that is rare. Even the huge amounts of gold that the Spanish stole from the Americas caused very mild price inflation by today’s standards.

Of course, some people will point to the many crises of the 1800′s during which we were supposedly on a gold standard, but if you look deeper you’ll find that paper money played the major role in those crises, that is, paper money not limited by gold reserves.

As for the benefits of price deflation, consider that the heart and soul of Austrian econ is the benefits of savings. Price inflation discourages savings and promotes debt. Price deflation encourages savings over debt.

Robert Blumen January 12, 2008 at 10:34 am

We seem to have gotten away from the original point of the post, which was whether money is necessary for economic growth, to discussing inflation and deflation.

Concerning “growth deflation”, perhaps this is not deflation at all. By a monetary definition, deflation is a contraction of money. “Growth deflation” is when the supply of gold inflates more slowly than the supply of goods. I don’t see how there could be a gold deflation, as the supply of gold cannot contract. People would have to destroy large amounts of gold to have a deflation.

There have been gold inflations in the past, but this is not likely to occur in the future as there are 5 billion ounces of gold above ground. A large gold deposit is 10M oz, while it would take hundreds of million oz to create any kind of substantial gold inflation. Even very few 10M oz gold deposits are found these days.

Adaptation occurs through the relative price system. There is not a problem in the price system adjusting to a rate of gold inflation lower than the rate of goods inflation. But the point of my blog post is that, even with zero monetary growth, economic growth can proceed. There is no need for any monetary growth whatever.

The problems with rapid money supply change are generally due to credit expansion and contraction. Most of the inflations and deflations have had their origin in the banking system through bank credit expansion. Bank credit expansion leads to an Austrian Business Cycle through distortions of capital goods pricing. These distortions are not primarily an issue of money supply but of credit supply in excess of savings.

If all past credit expansion were ex-post monetized, then there would still be a recession, but there would not be a deflation, only a restructuring or relative prices.

Under the gold standard, credit expansions were followed by credit contractions as the bad credit was liquidated back to the gold base of the banks. This creates an additional problem of adjustment for the economy: adjusting to a rapid change in the money supply at the same time that it is trying to adjust to distortions in the relative price system caused by bank credit expansion.

But this is not a problem with the gold money system, it is a problem with bank credit expansion. Jesus Huerta de Soto explains this all in his book on Bank Credit, on line in PDF at the site. See Charles Holt Carroll, the Organization of Debt into Currency.

The rapid fluctuations in the money supply are due to bank credit expansion and contration. This can be solved by preventing banks from expanding credit beyond available savings.

Henry Miller January 12, 2008 at 12:17 pm

There are asteroids known to contain more gold than has ever been mined on Earth. However the cost to get that gold back to earth is more than the worth of the gold (even is you assume no deflation from adding the gold to the economy – which obviously is impossible)

If you assume a breakthrough that allows us to get at that gold you might assume the fiat money is better. However central banks have the ability to add even worse inflation. In fact even if you could get the gold back for cheap, the rate that you could get it back would make gold inflation less than what central banks do.

I suppose fiat money with no central bank, just a legally known amount of money in existence would be better than gold. You have to enforce the amount of money though (not just counterfeiters, but also governments wanting to add more money which is unlikely). Socialism works great if you make enough impossible assumptions as well.

I’ve looked at mining asteroids (for platinum which has more demand on earth than there is physical supply leading to some potential customers to use worse alternatives), but I can’t see how to make it pay off – yet.

Michael G.R. January 13, 2008 at 11:34 am

“Would people accept that they have to take a pay cut every year?”

If it wasn’t already the case, we could ask the question: “Would people accept to pay more for the same goods each year?”

Inflation doesn’t make any more sense than deflation or anything else. People get used to what there is. Now we just need to find what works best, IMHO.

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