Comments on: Wealth Creation and Asset Inflation http://whiskeyandgunpowder.com/wealth-creation-and-asset-inflation/ Whiskey and Gunpowder features articles on gold, oil, currencies, emerging markets, energy, and more. Sat, 21 Nov 2009 16:43:32 -0600 http://wordpress.org/?v=2.8.4 hourly 1 By: karl http://whiskeyandgunpowder.com/wealth-creation-and-asset-inflation/comment-page-1/#comment-3294 karl Thu, 10 Sep 2009 20:17:21 +0000 http://agoratestsite.com/wordpresswhiskey/?p=509#comment-3294 If we didn't have inflation, why would people use money? Ex: How could the interest rate exist if you borrowed all the money in an economy, say it was only $100 total in the economy, and had to pay 10% interest, say $10 for a total of $110 all in 1 lump sum. You can't, the extra $10 doesn't exist. Credit exists so the borrower pay back that total of $110 over time via working and getting paid (via the lender), even though there's only $100 in the economy. Inflation and interest forces the people with money to use it in the system, otherwise it becomes valueless. I agree inflating too fast is bad, ends up in people going back to bartering and buying only long term assets. Also, lets say your Economy only had $100 in the system, and someone earned 90% of it over time. And then they took it and burned it without anyone else knowing. What then happens to values? What if another government hoarded 50% our currency and then used it against us? Inflation devalues the possibilities of many unlikely, but horrible actions. The only way outta this mess, with all the parties fighting each other in the political arena, is to print money to keep the housing bubble pop minimized. Wages won't go up, other imported goods like cars might be inflated, but that's the cost of government and banks determining our future. Through bankruptcy's the tax payers are going to foot the bill, but don't they always? Also, gold sucks. It's a good that people could hoard just like money. At least money is more easily countable via the Fed who printed it. I could go and find gold in the mountains, slip it into the system and no one would know. I might as well be a counterfeiter. A country that has hoards of it hidden away could sink the whole system over night. Or another Nazi government could steal it from other countries and hide it. The only other asset worth anything long term is land. The population increases, land becomes more valuable. It decreases, less valuable. Do you see the population of the USA decreasing anytime soon? I just don't think people really understand economics as much as they think. Even Economists say they're in the same boat. I think its just a matter of checks and balances. In the end, we all want to work, eat, and sleep in a bed. MS in Econ, but what do I know. If we didn’t have inflation, why would people use money? Ex: How could the interest rate exist if you borrowed all the money in an economy, say it was only $100 total in the economy, and had to pay 10% interest, say $10 for a total of $110 all in 1 lump sum. You can’t, the extra $10 doesn’t exist. Credit exists so the borrower pay back that total of $110 over time via working and getting paid (via the lender), even though there’s only $100 in the economy. Inflation and interest forces the people with money to use it in the system, otherwise it becomes valueless. I agree inflating too fast is bad, ends up in people going back to bartering and buying only long term assets. Also, lets say your Economy only had $100 in the system, and someone earned 90% of it over time. And then they took it and burned it without anyone else knowing. What then happens to values? What if another government hoarded 50% our currency and then used it against us? Inflation devalues the possibilities of many unlikely, but horrible actions.

The only way outta this mess, with all the parties fighting each other in the political arena, is to print money to keep the housing bubble pop minimized. Wages won’t go up, other imported goods like cars might be inflated, but that’s the cost of government and banks determining our future. Through bankruptcy’s the tax payers are going to foot the bill, but don’t they always?

Also, gold sucks. It’s a good that people could hoard just like money. At least money is more easily countable via the Fed who printed it. I could go and find gold in the mountains, slip it into the system and no one would know. I might as well be a counterfeiter. A country that has hoards of it hidden away could sink the whole system over night. Or another Nazi government could steal it from other countries and hide it. The only other asset worth anything long term is land. The population increases, land becomes more valuable. It decreases, less valuable. Do you see the population of the USA decreasing anytime soon?

I just don’t think people really understand economics as much as they think. Even Economists say they’re in the same boat. I think its just a matter of checks and balances. In the end, we all want to work, eat, and sleep in a bed.

MS in Econ, but what do I know.

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