Again, if one accepts the great value of fractional reserve baking in providing, simultaneously, improved living standards and greater opportunity for economic advancement, than one has to accept that significant deflation is harmful and must be avoided just as high inflation rates must be avoided.
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When Inflation Wipes out a Country's Currency...
- Thread starter zghorner
- Start date
Again, if one accepts the great value of fractional reserve baking in providing, simultaneously, improved living standards and greater opportunity for economic advancement, than one has to accept that significant deflation is harmful and must be avoided just as high inflation rates must be avoided.
No
Read "America's great depression" rothbard... The interventionism and money printing only exasperated in prolonged the issue and the Great depression the problem is that assets need to be liquidated to be reprice correctly that doesn't happen when there's a bunch of money floating around all of a suddenDalio is of the opinion that this is the cause of the "credit cycle". I'm thinking "belly up " is not the best descriptor for what happens. Their is "belt tightening", as people are maxed out on credit and are forced to spend less and pay down loans. The economy contracts due to decreased consumption and a recession results.
You'd have to go back a long way to find a time when there was no money printing. But reams have been written on various money systems. You can find out what happens when there is no printing by studying the history of money.
Of course for a long long time we have had money printing. For example, under a gold standard, governments print gold certificates that could then be used to buy gold and could also circulate as money convertible to gold. If the government wanted to expand the money supply they would just print up some gold certificate and use them to buy gold from the private sector. Now the government had gold and the private sector had more money,i.e., the gold certificates. Eventually as trust was built in the government's money, the government could print new non-convertible money and buy gold with it. Then the government would tax the private sector to raise revenue to buy the goods and services the government needed.
This system has two drawbacks, one big, the other insurmountable. The first is it is very inconvenient when the government needs to expand the money supply very rapidly , as in a depression, war or other emergency, (see the intentional rapid devaluation of the dollar under Roosevelt that was resisted by Congress and the Central Bank, but nevertheless allowed Roosevelt to convince enough of the Congress to adopt Keynesian economics. This had already begun to lift the U.S. out of the Great Depression well before we entered WWII in 1941. And then there is the real killer: not enough gold! So the price of gold rises destabilizing the money it backs -- exactly as Keynes said, in 1944, would happen. It did happen! And only 14 years after the Bretton wood accord was fully implemented by 1957! The gold standard could no longer be sustained, because the U.S. could no longer maintain the price of gold constant. Fiat money is far more convenient and flexible! We will never go back to a gold standard because we can't, but why on Earth, even if we could, would we want to do that and completely hamstring ourselves every time a hard recession hits?
I don't accept this at all. Of course if you flood the market with unlimited funds you tend to create some good things much faster, but precisely at the expense of the inevitable crash. The world worked just fine in 1950. If we stopped at having the internet in 2000, but no cell phones, I'm not sure that humanity would have been suffering that much. Since the venture capitalists gobbled up all the money and had it to throw at lots of projects, of course innovation accelerated, but we will now see the true costs of all this.Again, if one accepts the great value of fractional reserve baking in providing, simultaneously, improved living standards and greater opportunity for economic advancement, than one has to accept that significant deflation is harmful and must be avoided just as high inflation rates must be avoided.
In our world there is always room for people with opinions that differ from the mainstream. But of course no one should pay attention to them unless they are backed by sound argument. "Sound Argument" means an argument that is consistent with facts. And by definition there is no such thing as an "alternative fact".I don't accept this at all
LOL... you want to talk about facts? You think fractional reserve banking is the holy grail. You deem this a fact. I think there are enough experts out there that can trace back the demise of a currency to the very point that fractional reserve banking was created. Facts aren't as black and white and are often used to push a narrative. I hope the FED doubles down on money printing, causes hyper inflation, and puts to bed the idea that money printing is ever good.In our world there is always room for people with opinions that differ from the mainstream. But of course no one should pay attention to them unless they are backed by sound argument. "Sound Argument" means an argument that is consistent with facts. And by definition there is no such thing as an "alternative fact".
I never said that. But now that you have caused me to think bout its virtues and faults I think I am becoming convinced fractional reserve banking just may be the "The Holy Grail" behind the great success of modern banking systems and the economies they serve.You think fractional reserve banking is the holy grail.
If only the basis of fractional reserve banking could be used for food. Here, eat 10% of a bagel and feel full. Or buy only 10% of a tank of gas and drive for 500 miles! Fractional reserve banking creates a debt based system where those closest to the money printing end up exceedingly wealthy and everyone else becomes a debt slave. I think you're ready for a position in the government with your logic.I never said that. But now that you have caused me to think bout its virtues and faults I think I am becoming convinced fractional reserve banking just may be the "The Holy Grail" behind the great success of modern banking systems and the economies they serve.
a) You have not given proper thought to the alternative; b) You are attributing an inequitable and socially damaging wealth distribution to false causes. The three factors most contributing to inequitable wealth distribution in the United States are: a. the tax structure; b. return on capital > economic growth rate; c. defunding of public education and the acceleration of it's perverse effects via feedback.If only the basis of fractional reserve banking could be used for food. Here, eat 10% of a bagel and feel full. Or buy only 10% of a tank of gas and drive for 500 miles! Fractional reserve banking creates a debt based system where those closest to the money printing end up exceedingly wealthy and everyone else becomes a debt slave. I think you're ready for a position in the government with your logic.
We have a real example of a world without fractional reserve banking to consider; yet you seem to have given no thought at all to wealth distribution when there was no fractional reserve banking. Fractional reserve banking is actually a valuable force against inequitable distribution of wealth. Perhaps you have spent too much time watching "The creature from Jekyll Island on You Tube.
You are young. You know everything that can be known at this point in your life. Give yourself some time. You will know less then.
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They are doing it now to the USAInflation isn't something that "just happens" to a currency.
Inflation is orchestrated destruction by government.
Suppose a closed system.a) You have not given proper thought
100,000 units of paper currency are 'created' and lent out at 10% interest due in 1 year.
A year rolls by, time to complete the deal.
The Borrower needs to pay the Lender 110,000 units of paper currency.
Where do the additional 10,000 units of paper currency come from?