What thermodynamics can teach us about economics – money is NOT wealth
February 17, 2012 By Leave a Comment
One of the basic assumptions of Keynesian economics is that government can plop money into the system when the system is slowing down. The new money starts flowing around and things get revitalized. The new money is either borrowed from someone else, say China, or it is stolen from the population of the US itself by printing it and slicing off a piece of everyone’s wealth by diluting the dollar.Let’s just assume for now that the money is borrowed instead of printed. OK, so the US government borrows money from someone else by selling a bond and then using that money to “jumpstart” the economy. They “jumpstart” it by sticking that money somewhere and hoping that whoever they give it to uses it to make more money. Eventually, the money that they borrowed has to be repaid.
The moral hazard here is that the government feels that it can just print the money when the bill comes due. Technically, they can. And that’s the problem. Read the rest on: Settlers of Samaria
Fiat Money or a gold standard – either way it’s backed by work
February 14, 2012 By 2 Comments
Thinking about paper currency lately, money backed by nothing so to speak. This is in contrast to money backed by gold. Meaning, first people passed around gold or silver, then they got tired of carrying it so they started passing around paper that could be redeemed for a certain amount of gold or silver.It hit me today. There really isn’t such a thing as money backed by gold either. Gold only represents something. That something is called work. Gold doesn’t and cannot create prosperity in itself. All it can do is sit somewhere and look shiny. Gold only represents the prosperity achieved by people who do work. Read the rest on: Settlers of Samaria
Enjoy!
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