Q&A: —“Would you mind detailing the hard currency problem? I still can’t get m

Q&A: —“Would you mind detailing the hard currency problem? I still can’t get my head around why a fixed amount of currency is problematic.”— Bob Moran

Curt Doolittle

Lets say that the only currency you have to work with is gold and silver coin. Now, if, as a country, you are a net exporter, you will accumulate coins in exchange for your exports. But if you are a net importer (you’re wealthy) you will low on coins, the cost of coins will increase, and therefore the cost of imported goods will increase, and your economy will stall. Those are two extremes. In the middle, coins circulate and credit circulates, and consumption slows because prices increase, simply because the cost of coins themselves – that are necessary for trade – increases. This continues until some niche markets resort to barter. Now barter is a high risk, because it isn’t liquid like money (coin) is.

Instead of coin, all governments slowly moved to ‘shares’. Paper money is not money per se (a commodity, or a token exchangeable for a commodity), but a share in the economy of the issuer. And like commercial shares, its dilutable. So when the price of money increases (interest rates), the government issues more shares to maintain a stable price of money (shares), so that there is no artificial shortage of money (money substitute: shares) so that productivity isn’t going to pay for the scarcity of money, and continues to pay for consumption and trade, and the economy continues.

Governments (federal reserves, central banks, etc) function for the simple purpose of ensuring relative price stability of money, by maintaining a money supply at levels that hold it steady.

The problem is, governments, once they have this power, spend money they don’t and can’t have, which creates a constant rate of inflation as well. Inflation destroys prices and savings and assets.

The only way to preserve savings then, is to invest in things that appreciate over time (land, stocks, etc) but in general it is nearly impossible to stay ahead of the rate of inflation. so you must work constantly to prevent your money from evaporating.

This creates the treadmill that we live under.