Price
increase is the end result of pumping money into an economy. It is
interesting to notice prices have been declining steadily in history when the
money supply has been stable, whatever it is in Europe or America. By the
way, declining prices is good for everyone because the poor can now afford
things that were too expensive before. Think of the price of computers
which have been going down every year - it is good for all of us. Now
imagine if prices of houses, cars, food and tuition would go down every
year. You could now afford a bigger house, better car, eat higher quality
food and get bonus education for the same money.
"The reasons for this are complex,
but it seems clear that at least in part it was a matter of a sharply
increasing amount of money (in the form of silver and gold) chasing a
relatively fixed output of goods and services, thus bidding up the
price."
If you
increase the money supply, prices will increase according to the increase of
money supply and the interest rates will raise to adjust too. For
instance, let say I lend you $100K for a house and ask you to pay me
later. It is obvious that I expect to get $100K back plus an extra for the
risk and trouble. If in the next 10 years the price of houses has
doubled, then I will have to ask at least $200K so I preserve my original
purchasing power (buy a house). If I expect the price of a house in
2016 (10 years later) to be 5 times higher than it is today, then I
will have to ask you to pay at least $500K from the loan. Whatever
you make monthly payments or pay back in a lump sum, the end result is the same:
the higher the inflation, the higher the interest rate. If on the
other hand prices are declining, and I expect the price of a house to be 25%
lower in 10 years (similar as computer products), I may ask you to
pay $120K for the loan. Asking $20K for a loan of $100K over a
10-year period is a low interest rate (less than 2% compound interest per
year).
Another
important factor driving down the interest rate is high savings. If I
have extra money that I don't need, I will be willing to loan my
money at a lower interest rate. If on the other hand I
really want (or need) to spend my $100K, then I may not be willing to
loan it for 10 years for a mere $20K profit. A low interest rate is good
for the borrower, but most importantly it is beneficial to the society.
The entrepreneur may use that money to invest in production tools
and create additional jobs.
"Among other things the higher prices
meant Spanish goods became uncompetitive on European markets. Even the Spanish
themselves began buying foreign products, resulting in a lot of cash leaving
the country. In addition, inflation stifled local investment, with the
grandees spending their dough on conspicuous consumables
instead."
Pumping
money is not good for exports either. The conclusion is a stable money
supply is best for everyone, that is consumers, borrowers and
lenders.
Cheers,
-- Dan
Morin.
> -----Original Message-----
>
From: Jeffery Smith [mailto:jjs@geonomics.org]
> Sent:
Wednesday, March 08, 2006 8:36 PM
> To: socialcredit@elistas.com
>
Subject: Re: [socialcredit] Gold
>
>
> On Mar 8, 2006, at 3:24
PM, John G Rawson wrote:
>
> > Some hard facts and figures on
this would be appreciated.
> >
> > Whatever happened obviously
is of intense interest to anyone studying
> > money systems.
Casual queries by me to people only partly qualified
> > in the field
resulted in them saying there didn't seem to be much
> > effect after
Spain had paid off its heavy debts.
> >
> > Another
interesting line to pursue in detail would be the stages of
> >
deliberate inflation of the German mark to ease problems of
> >
reparations payments, set in German currency. All I have is an
>
> unfounded story that those doing it were astounded that for a start
>
> industry just rose to match the increased purchasing power, and
they
> > had to really activate the printing presses to get
results.
> >
> > Funny how really critical hard facts like
these (whatever happened)
> > never seem to be
promoted.
>
> Both the inflations of Spain and of Germany were
covered in my high
> school history text book; it's been eons since I've
held them. But I
> read references to both experiences in many places.
Just googling just
> now yields this:
> http://www.straightdope.com/classics/a2_437.html
>
>
SMITH, Jeffery J., President, Forum on Geonomics
> 7536 SE Milwaukie Av,
Portland Oregon 97202 USA
> 503/232-1337; jjs@geonomics.org;
www.geonomics.org
> Share Earth's worth to prosper and
conserve.
>
>
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