Tuesday, March 27, 2012

Modern Monetary System: There Is Another Way

Modern monetary theory seems almost too good be true. It seems as if "one is getting something for nothing". Too many people who understand and write about modern monetary systems are very professor-ish and don't really answer the basic question: How can one get something for nothing?
We do get something -- a lot, actually -- for very little effort. How?

All goods and services (i.e., wealth) creation involves not only production (the engineering part) which is easy to see but also exchange (i.e., trading of one’s produced output for produced output of another person). The exchange part is hard to see unless one is involved in barter. Getting money for one’s produced output and buying other people's produced output with that money is just an extremely efficient form of barter. Therefore, going through this thing called "money" makes barter (trading) extremely efficient. So, there you have it. One is getting something (one becomes extremely efficient at barter) by using fiat money that costs very little to produce.

Of course, the producer (the seller) must trust that the money received will retain its value over time to a sufficient degree. This is the main challenge of all currency management by governments or anyone else: Maintain the trust. Currency failure occurs when this trust is compromised (actual rampant inflation or an expectation of rampant inflation). Read more......

1 comment:

  1. Great if your:
    1. China, since that where the bulk of plastic pumkins are made
    2. Alcohol. Liquior sales will no doubt reach the moon
    3. Local Drug pushers
    4. Porn Websites.

    During the 2007 tax credit that awarded everyone, included those living on welfare. The above four items had double digit sales increases. It did nothing to create real long term jobs.

    In additional all this will do is devalue the currency faster. Its a dumb idea, period.


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