One matter the powers that be concern themselves with is the right amount of money. What concerns them is there be enough to serve the economy, or at least the economy as they see it. Essentially they believe they can help direct society by fine tuning the amount of money available to meet the needs of the economy.
Since the Fed has the dual mandate of full employment and stable prices, the amount of money theoretically serves the mandate. O! How quickly this becomes a mess. First, what they deem money is ersatz, but we can set that aside because full employment and stable prices are mutually exclusive events. If you cause prices to be stable, unemployment will rise. If you manipulate the money supply to effect fullest employment, then prices go unstable. In a robust economy, prices are constantly falling and there is much temporary unemployment as people change work as they ever improve their economic weal.
On the other hand, in a free market, there is always precisely the right amount of money available, if you properly define money as a medium of exchange. Let's use the classic medium, gold, as an example.
In a free market, as prices fall, it takes less gold to act as a medium of exchange, so coins get smaller and help match demand. But we also have velocity, as demand for media of exchange grows, the media is coaxed out and onto the market place. Where in a slower economy the pelt merchant might pay out a gold coin on Monday to the jute merchant who normally buys his raw materials on Friday, as an economy heats up the jute merchant may be buying the raw material Monday afternoon, holding the gold coin for hours instead of days.
Then there is that great regulator: decoration. When the underlying commodity that serves as a medium of exchange (money) is in less demand, it begins to be converted into plate, decoration and jewelry. As it becomes more in demand, it is melted down to become coins again.
Finally, to meet demand, there is invention, an additional medium of exchange is created. Say where gold is felt in short supply, silver will fill the need.
By coming up with a mendacious definition of money, and directing an agency to perform what cannot be accomplished, we experience the massive waste, fraud and abuse of the capitalist system. We can eliminate all of that and return to market regulation of the proper amount of money.
Update:
Another aspect of gold as money is it serves as a final settlement of any transaction wherein it is employed. This is universal, even during WWII Nazi and UK negotiators met regularly in Switzerland to settle up accounts in gold. Countries continue to do business with each other even during war.
Also, another safety valve is credit... wherein a seller wants to sell, the buyer wants to buy, but no coins are available... sometimes the seller is willing to take a promise for a coin later to get rid of his merchandise today. Nothing wrong with that, only if usury is introduced.
Since the Fed has the dual mandate of full employment and stable prices, the amount of money theoretically serves the mandate. O! How quickly this becomes a mess. First, what they deem money is ersatz, but we can set that aside because full employment and stable prices are mutually exclusive events. If you cause prices to be stable, unemployment will rise. If you manipulate the money supply to effect fullest employment, then prices go unstable. In a robust economy, prices are constantly falling and there is much temporary unemployment as people change work as they ever improve their economic weal.
On the other hand, in a free market, there is always precisely the right amount of money available, if you properly define money as a medium of exchange. Let's use the classic medium, gold, as an example.
In a free market, as prices fall, it takes less gold to act as a medium of exchange, so coins get smaller and help match demand. But we also have velocity, as demand for media of exchange grows, the media is coaxed out and onto the market place. Where in a slower economy the pelt merchant might pay out a gold coin on Monday to the jute merchant who normally buys his raw materials on Friday, as an economy heats up the jute merchant may be buying the raw material Monday afternoon, holding the gold coin for hours instead of days.
Then there is that great regulator: decoration. When the underlying commodity that serves as a medium of exchange (money) is in less demand, it begins to be converted into plate, decoration and jewelry. As it becomes more in demand, it is melted down to become coins again.
Finally, to meet demand, there is invention, an additional medium of exchange is created. Say where gold is felt in short supply, silver will fill the need.
By coming up with a mendacious definition of money, and directing an agency to perform what cannot be accomplished, we experience the massive waste, fraud and abuse of the capitalist system. We can eliminate all of that and return to market regulation of the proper amount of money.
Update:
Another aspect of gold as money is it serves as a final settlement of any transaction wherein it is employed. This is universal, even during WWII Nazi and UK negotiators met regularly in Switzerland to settle up accounts in gold. Countries continue to do business with each other even during war.
Also, another safety valve is credit... wherein a seller wants to sell, the buyer wants to buy, but no coins are available... sometimes the seller is willing to take a promise for a coin later to get rid of his merchandise today. Nothing wrong with that, only if usury is introduced.
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