Preciesly.technovelist wrote:This is completely wrong. In a free market economy with gold money, whoever has gold can lend it if he wishes to do so, which he is likely to do if he thinks the reward outweigs the risk. Doubling the amount of "money" by printing an additional amount of warehouse receipts equal to the actual monetary gold will not increase the amount of wealth; all it will do is rearrange the wealth in favor of the printers.moda0306 wrote:Generally, entrepreneurs can't build a widget factory unless there is debt to help them pay for the cost of it. Lack of credit prevents investment from occurring that otherwise could have. If I have a great idea, but instead of our economy being limited by productive potential it's limited by not enough quantity of medium of exchange, we have a situation where we're far less productive than we otherwise could be.technovelist wrote: One more time: No, limiting debt to the amount of gold in existences would NOT hamper investment. The total amount of goods in existence is NOT increased by printing money. All printing money can do is to REARRANGE existing goods. Thus, there is no increase in REAL investment available by printing money.
Of course NOMINAL investment can be increased by printing money; that is one of the effects of the "money illusion". But real investment cannot be increased other than by saving (spending less than one earns).
This is elementary, people.
This, my friend, is elementary. Not only is an economy's growth limited by insufficient monetary expansion, but it's actually a policy decision. As some of the other threads have shown, gold was a store of value initially used to help governments, not individuals.
I'm not saying that simply printing gobs of money will miraculously make our economy a utopia. But it's monetizing an economy in the first place that leaves us exposed to the Mexican standoffs that we call recessions. Having a fixed money supply amidst a growing economy is a recipe for disaster. We might as well use bartar at that point.
So if someone wants to build a widget factory and they can't afford the equipment, etc., they have two choices:
1. Take an equity partner who will accept part of the profit and part of the loss in exchange for supplying money; or
2. Take on debt, agreeing to pay the money back regardless of the profit or loss, presumably from other sources of wealth if there is a loss.
Neither of these is helped by money printing... other than by allowing the parties to the transaction to extract wealth from others via dilution of the money due to the printing. But of course in that case they don't even need to build the factory at all; they can just live off the extracted wealth, as the government does.
Again, this is elementary logic, not even moderately complex economic theory. You can't get something for nothing unless someone else gets nothing for something.
To quote Browne from page 34 of yada yada - "3. That brings us to the most subtle method (he's referring to the government financing his purchases). It is inflation. The government, in effect, merely prints extra money substitutes and spends them for whatever it wants. We have seen, however, that these money substitutes only take on purchasing power at the expense of the other money substitutes which are thereby reduced in purchasing power. Prices are higher than they otherwise would have been"
With that I must bow out since it's exhausting hitting the same topics day after day like it's Groundhog's day.
I would encourage everyone to read Browne's works. Maybe he's not the greatest economist in history but he's the best I've ever read at conveying economic principles in the English language.