If you stop printing money, you’ll cap the money supply.
Although this sounds like a tautology, there is a deep dark fundamental error hiding here. By which I mean the myth of “money supply”.
Let’s begin from the beginning. The wealth of a nation is the amount of goodies it has, meaning useful things.
Money, by which I mean the green pieces of paper in iour wallets, in and of itsef is not very useful, I think we all agree.
And yet, everybody wants the stuff. Why? The ultimate answer is that those green pieces of paper are used in our society as RECEIPTS. I’ll explain by example. Say I work and put in ten hours of labor. The employee is now obligated to give me something in return, as we agreed. If therewas no such thing as money, it would be very inconvenient to always make sure he has what I want to be paid with. So instead he gives me a receipt, a $100 dollar bill, say. This tells everyone I have worked for him a certain amount, and to please give me what I want that is worth that amount of labor at this moment. They agree to this because they know they can use that reciept to buy things that they want, and so on down the line.
Same thing if I buy sell something and take green paper as payment. Again, it is a reciept that I am owed a certain amount of value in return for the thing I sold you.
Now what happens if the govt prints new money? It is in effect saying, “People owe us stuff. Fork it over, even though WE HAVE DONE NO PRIOR LABOR TO DESERVE IT.” And you, dear poster, are in favor of this? You want them to take stuff away from everyone without having given something in return?
“Ah,” you may say. “But the money supply. There isn’t enough moey around right now.”
“Enough for what?” asks Smiling Dave.
“Simple. For every goody we have there has to be a dollar in circulation to represent it. If we have ten trillion dollars worth of cars, say, there have to be ten trillion dollar bills out there to represent them. Otherwise the cars won’t have any value.”
“Huh?”
This will boost the currency’s value.
You mean every dollar I have in my wallet will buy me more than it used to? And this is bad?
Although have a negative impact on a country’s economy.
This is not a proper English sentence, so I have no clue what you mean.
You seem to be saying that if the money in my wallet will buy me moire, this is terrible for the country’s “economy”. Why?
“Because the poor cheated opppressed used car salesman will get $500 for his used car, instead of $1,000.”
"But he will be able to get the same amount of stuff for the $500 as he got for the $1,000. "
“Duh.”
And if you are running a trade deficit, it will really have a profound impact.
Because the dollars those cunning Chinese have will get them more US stuff than they should. How much better to rip them off and give them less then they deserve.Way to preserve our international reputation.
But there is a serious error here. If the money supply stays the same, why would prices go down? Why should they not stay the same, and thus the honest Chinese will get what they paid for?
“Because prices always go down in a developed economy. Look at the prices of computers and cell phones and just about everything. You want to give those Chinese thieves two cell phones instead of the one they deserve?”
“But they are getting what they deserve. Cell phones aren’t worth as much anymore.”
An if the population is growing, it’ll have devastating effects on future generations.
No it won’t. On the contrary, the money my son will inherit will actually be worth something. I see this as good.
As the available money supply will be locked up in the pockets of a few.
By what magic will this happen? If no new money is printed, and what’s in my wallet becomes more valuable, so I have to spend less of it to get what I want, how will it get locked up in somebody elses pocket?
“Because the wealthy employers will pay you less dollars, and keep the rest locked up in their pockets.”
"How can they get away with paying me less?"
“Because the few pennies they give you will buy the same amount of goodies as you were able to get when they paid you much more.”
“Oh.”
It´s not easy for the policy makers to decrease the amount of money spent on public expenditure.
true. It takes a certain tempermant to be able to do that. Like concern for other peoples money.
When taxes aren´t enough to cover the expenditure, the Government prints more money. In the short term it works, in the long run an inflation occurs.
Ho w pleasant to agree on something.