Player Features and Ideas Discussion

There was also significant inflation in silver prices after the discovery of Potosi.

You are no William Jennings Bryan...

Currency in circulation.


I didn't ask how it gets from one individual to another. I asked how the banks are putting banknotes into the hands of individuals after they print them. They're not going up to people and saying, 'Hey guys, here's a load of free money but don't get too excited, it's not actually worth anything to you lol'.

Which implies that increasing the supply of money increases demand for resources. That might be true at first, if people are fooled into thinking they are wealthier because they have a greater sum of currency, but after the dust settles, their purchasing choices will return to a normal state based on their means. Demand for resources doesn't increase just because money is worth less. It's the other way around. Money is worth less because resources have a higher perceived value, which is why the cap on the price of gold mentioned earlier in the thread could never work. You can limit the cost of gold, but you can't limit how people perceive its value.

Ok



Debt



If you're a Keynesian.



This is backwards. When you have more money, the marginal utility of money, for you, decreases. The more you have of something, the more willing you are to part with your excess. The value of the resources doesn't change one bit, it's the value of the money, to you, that has gone down.

I encourage you to examine the concept of marginal utility.

Assuming you're not a penny pinching miser, like myself, are you more or less likely to use faction ammo to shoot high sec belt rats if you have 500,000 ISK or 5 trillion ISK? Faction ammo still does the same damage to the high sec belt rats regardless of how much ISK you have. You do not perceive the value of the ammo any differently. The value you perceive differently is the value you place on the ISK, not the faction ammo.



Brenton Woods, just such an attempt to cap the price of gold failed, not because people valued gold any differently, but because they valued dollars differently. Why? Because there were more dollars than the gold they were supposedly worth in redemption.

"You owe us money, so here's some free money".


You said it though.

Yep, and the value of money is always going down for everyone. This is because we live in a world of limited resources with constantly increasing demand for resources. When resources become rarer, people are willing to pay more for them. In fact, they have to pay more for them if they want to prevent them being sold to someone else who is willing to pay more.


I'm already familiar with it.

The faction ammo thing is a really bad analogy.


You'll have elaborate a little. I'm not sure what you mean.

Your reading compression is a bit off or an obscure attempt at a strawman.



Reread your post, #13. And extrapolate how your third sentence, in that post, is going to work out in an environment of a fixed money supply.



You've yet to prove it.



At this point, I am not surprised.

Get sucked in.. don't get sucked in...What the hell.

Prehistoric, we lived in communal, nomadic, hunter-gatherer family groups. All resources were shared within the group. You wouldn't charge your parents or children for the berries you picked, or your wife for a slab of meat from the deer the group killed. The food was kept in a central storehouse, communal meals were prepared. Barter only occurred between tribal leaders of different groups.

Then came agriculture and we stopped being nomadic. Food was still kept in a central storehouse to guard from brigands. BUT, as family groups grew into villages and into towns, family groups wanted to keep its stuff separated. Tribal leaders established standardized weights and measures, then rare shells, carved stones or bones or other tokens were used to represent a standardized unit of goods within the storehouse. Government fiat as to standardized weights and measures and tokens always underpinned the value of token money that represented physical goods.

Then records began being kept as scratches on clay tablets. Show up with 100 bags of wheat, of government fiat standardized weight each, and 100 scratches would be made on a clay tablet with your name (mark) on it. When you took wheat out, scratches were rubbed off your ledger. You could buy things from other people by having scratches rubbed off your ledger and added to theirs.

Along with the creation of money, came the creation of debt, and debt created near-money. If I had 100 bags of wheat in the central storehouse, and you didn't have any, I could loan you my wheat. Now you have money to spend, and I have near-money in the form of the loan. While I can't directly spend the near-money, the way I could real money, I could sell the loan to someone else, converting it to money to be spent. And immediately with the creation of near-money and debt came the boom-bust cycle. In good times, the rich were very willing to lend, creating a feedback loop that made the good economy better and with all the money flowing, inflation. Then the debt would get too large, so the rich would become afraid of not being paid back, so would stop lending and demand loans be repaid... crash. Much of the oldest known codes of laws actually dealt with debt, near-money, lending terms, etc. in an attempt to regulate and mitigate the boom-bust cycle that debt and near-money create.

Yes, gold and silver came into use as "money" but only for really rich people making really big transfers, such as large parcels of land. Because of the rarity and difficulty determining purity, the average person did not use gold and silver on a regular basis until about 500BC, when the first coins were introduced as bits of gold or silver stamped with a government seal to assure weight and purity.

A few Greek city-states attempted to move to gold and silver as common currency, but all the money was quickly removed from circulation due to hording by the few rich. Soon they were back to base metal coins to represent the gold and silver, with government fiat declaring exchange rates between base and precious coins at a fake rate that did not reflect the actual value of the base metals (fiat money). This was the foundation of the Roman Empire, few precious coins used only by the rich for very large transactions and base metal coins given fiat value by government fiat exchange rate.

Then came the dark ages and then the crusades. Nobles would transport gold from Europe to th Holy Land to fund their troops. The gold would end up in the hands of merchants that would take the gold back to Europe to buy goods. The goods were purchased from the nobles, or people who paid taxes and rent to the nobles. The nobles would take the gold back to the Holy Land... repeat. Brigands began raiding the trade routes and taking the gold. The Pope asked the Knights Templar to guard the gold shipments. They came up with a better idea. They set up "banks" in each side of the trade. The nobles deposited money in Europe and withdraw in the Holy Land. The merchants deposited in the Holy Land and withdrew in Europe. The birth of modern banking. Soon, letters of credit became very common, issued by guilds, cities, etc.

Then came bank note money. If you had land, you could walk into a bank and borrow some money into existence against the value of the land. You could repay the loan in gold or bank notes. People accepting the bank notes as money could take them to the bank that issued them to get gold. If you don't repay your loan, they take your land and sell it for the gold needed to cover the bank notes. Everything is awesome... unless too many people come to get gold and the bank can't sell the loan to get the gold it needs (liquidity issue) or the value of the land falls and can't be sold for enough gold to redeem all the notes (solvancy issue).

Governments got into the debt/money business as script that could be used to pay takes.

Gold standard was a short-lived attempt to convert between international currencies. Attempting to lock fiat currencies to a standard resulted in wild swings of value, booms and busts. The 1800s, the golden era of the gold standard, the USA had 7 depressions and 12 recessions, which consumed 48 years century, and culminated in the "Gilded Age" where a few people were insanely rich and the vast majority lived in abject poverty.

Then came banking liberalization and regulation, with fractional reserve requirements (which limit the money creation via debt, not enable it) and central banks to ensure there would always be a buyer of loans to resolve liquidity issues. Combined with other liberalizations of the economy such as anti-monopoly, pro-union, overtime, child labor, anti-script, income tax and other laws, the conditions for the average person improved greatly.

Having to go to the Bank of Jita every time I wanted to make a purchase (or else risk losing all of my money from a suicide gank) does not sound fun.

Your correct and intuitive comments indicate you probably understand all I'm about to say, so consider it piling on, not disagreement to your comment.

Demand for goods and services is indeed stimulated by getting more money into the hands of people that will spent it. However, growing the money supply does not necessarily mean we're putting money into the hands of people that will spend.

Quantitative Easing, for example, is central banks buying bonds. From whom are they buying the bonds? Poor people living paycheck-to-paycheck that spend every bit of money that lands in their hands?

NO? Central banks are buying bonds from billionaires that already have way more money than they could spend, which is why they owned bonds that were paying interest rate that was barely (or not even in some cases) keeping up with inflation.

This is why the QE is not creating inflation. All it is doing is further pushing down interest rates, and reducing USA government deficits because almost all the interest on the debt held by the central bank is handed over to the government and used to reduce deficits.


The value for money comes from its usefulness, which ultimately is the ability to use it to pay down debt. That is, afterall, the government fiat that gives it value. There is no law that says you can trade money for stuff. The law is that you can use money to repay all debts and pay taxes. People will trade you stuff for money because either they have debt, or they know other people will trade them stuff for the money (because somewhere, debt exists in the economy offsetting that money, and the people with the debt need to get the money to repay).

When interest rates are low and lending standards are loose, money loses value because there is lots of supply and little demand for money. IF we tighten lending and raise interest rates, the value of money goes up because of falling supply and reduced demand. 2008, everyone was trying to dump assets to get money to repay debts, and we were facing deflation...


And deflation is death to a debt based money supply. The whole thing is based on the belief that someone can pay or that assets can be taken and sold to cover the debt. Deflation crushes peoples' ability to pay on their debt and crushes the ability to sell collateral to repay debt. This usually leads to a cascade default and deflationary feed-back cycle (see 1800s and GD for examplea).

Because deflation is so deadly to a debt based money supply, it is to be avoided. The best experts and people with their hands on the steering wheels of the economy only have secondary control of inflation via things like interest rates, lending conditions, taxes and spending. Because they only have a secondary rather than direct control of inflation, they are usully only able to get within 1 or 2 % of target.

If they placed the target at 0% inflation, as something like the gold standard requires, then half the time they will be high, creating bubbles, and half the times they would be low, creating collapse. Again, see the 1800s, where we were on the gold standard and spent half the century in some sort of economic collapse or decline.

So, by aiming for 2% inflation, they "mostly" avert the risks of deflationary spiral of cascade debt default.

AND.... here is a point most people miss.

Inflation is good for the little guy that has more debt than savings. Inflation is only bad for the rich who have more money than debt.

The greatest achievement of the rich has been
1) to convince the middle class that high taxes on the rich, with lots of deductions for spending, is bad for the middle class.
WRONG, that is what created the middle class.
2) inflation is a bad thing for the middle class.
WRONG, without steady, sustained low infaltion, we bounce between inflation and deflation. The inflation causes debt creation, and the deflation results in all the assets moving into the hands of the rich via default and foreclosure.

The gold standard of the 1800s and the resulting boom/bust resoulted in the gilded age where a few were very rich and the masses lived in abject poverty.

High inocome taxes on high income people, with lots of deductions for spending, kept money in circulation, reversed inequality, and created the middle class.

the buying power of gold and silver have remained basically the same for 2000 years. Inflation is caused by increases in fiat money supply.

Actually you can buy gold sovereigns from the national mint that are both gold and legal currency.