Destroy the Money?

[The Intransigent Faction]

So a friend of mine was asking this:


Okay. I've been thinking. So 1 percent of the world's population possesses 46% of the world's money... would removing that 46% of the base currency increase the value of the remaining money? I.E. would cutting the money supply in half double the value of the remaining currency.
Supply and demand. You decrease the supply of money without changing the demand for it and the value (or at least the perceived value of it) increases.
So basically I'm asking if creating large pools of money that are not moving through the economy devalue the currency in the economy.

I'm confused on how to answer this, exactly. I know he's not really arguing it as a solution to capitalism's concentration of wealth, just asking about a hypothetical.

My understanding is that suddenly destroying this large sum of money would just cause a dramatic deflation, leading to fall in wages, a run on the bank, and making debt harder to pay back? How exact is the relationship between the supply for and demand of Canadian dollars and its value, though? I'm wondering because I've known some right-wingers to argue that "we should just print less money". In this case though a vast amount of purchasing power would be outright destroyed, not hoarded...I'm a bit confused. Thanks!

[tuwix]

You're right. Contraction of money supply is a direct cause of all capitalist crises. But it is only theoretical considerations. Knowing the role of bourgeoisie in capitalism and recognition of property law as "holy", it's just impossible to deprive the richest of their excessive wealth in classic capitalism.

[The Intransigent Faction]

You're right. Contraction of money supply is a direct cause of all capitalist crises. But it is only theoretical considerations. Knowing the role of bourgeoisie in capitalism and recognition of property law as "holy", it's just impossible to deprive the richest of their excessive wealth in classic capitalism.

In other words, not redistributing but just *removing* that vast amount of purchasing power would still see the value of the dollar increase sharply because the demand would greatly exceed the supply? Thanks!

Of course that doesn't even go into the question of insurance. Heh, for a communist I find hypothetical economics so bloody confusing.

[tuwix]

Value of currency isn't only dependent on its amount on market. When it would be taken away that everyone having it would like to get rid of them and despite contraction of the currency the value could fall down comparing to other currencies. But in long term the value definitely would increase, there would be deflation and recession. Unless the deprived money would go to the poorest ones. Then the effect would be rather opposite.

And I'm not aware of your insurance question. :)

[tallguy]

So a friend of mine was asking this:



I'm confused on how to answer this, exactly. I know he's not really arguing it as a solution to capitalism's concentration of wealth, just asking about a hypothetical.

My understanding is that suddenly destroying this large sum of money would just cause a dramatic deflation, leading to fall in wages, a run on the bank, and making debt harder to pay back? How exact is the relationship between the supply for and demand of Canadian dollars and its value, though? I'm wondering because I've known some right-wingers to argue that "we should just print less money". In this case though a vast amount of purchasing power would be outright destroyed, not hoarded...I'm a bit confused. Thanks!It would make no difference to the 1% who have been busy transferring their cash into hard assets over the last five or so years in anticipation of a currency bust. That's what the stock market and hard commodity bubbles we are currently seeing are largely (though not totally) about. If you hold your wealth in hard and essential assets, then you will always be able to exchange them for an amount of cash that has an appropriate exchange value. For example, lets say you wanted to turn your car into loaves of bread. First, you'd sell it for $1000 cash, then you would exchange the cash for loaves of bread. Let's say this gave you 1000 loaves of bread at 1 dollar a loaf.

Now assume we cut the money supply in half. This effectively will double the exchange value of cash. This will mean the exchange value of everything that cash is exchanged for will halve. So now, you will only get $500 dollars for your car. However, loaves of bread now only cost 1/2 a dollar, so you will still be able to get 1000 loaves at 50 cents each.

The people who mainly suffer from currency manipulations, in either direction, are people whose exchange value resides solely in the cash they hold and, for poor people, only in the cash they hold from month to month when their pay cheque comes in.

The one big advantage of a currency contraction, however, is that it would cause loads of debts to be extinguished due to default. Now THAT would put the shitters up the 1% because those debt obligations are the primary means by which they hold all the rest of us by the bollocks. If our debts became so unserviceable that we stopped paying, we might start getting ideas and start believing we had nothing left to lose.

And we can't have that, can we......

[erupt]

The demand would rise as soon as people realize there's less money going around, would it not?

[The Idler]

It would make the next highest percentile a new slightly-less rich 1%.

[Firebrand]

Question, how would you get past all the expensive security systems/armed guards/trained rottweilers/mystical magic wardings that the people with all this money have put in place to make sure they get to keep all their money, because they have enough money to make sure no one else can get near their money. Just questioning the basic viability of this plan. Unless you have a big red button that magically destroys all the money owned by rich people or something.

[ckaihatsu]

Question, how would you get past all the expensive security systems/armed guards/trained rottweilers/mystical magic wardings that the people with all this money have put in place to make sure they get to keep all their money, because they have enough money to make sure no one else can get near their money. Just questioning the basic viability of this plan. Unless you have a big red button that magically destroys all the money owned by rich people or something.


"Uh, cyu to the front desk, please.... Calling cyu to pick up any available courtesy phone...."


= )

[bryantsisto]

It would be great if this would be possible but then again, how can we trade stuff?

[ckaihatsu]

Ideal currency in Socialism

http://www.revleft.com/vb/ideal-currency-socialism-t187435/index.html