Thought experiment involving 'money'

[Lynx]

Basic outline
The world has changed and there is only one country.
In this fictional capitalist country, an electronic bank account exists for each human being.
When a person is born, their account is opened and when they die, their account is closed.
There are no longer any paper currency or tokens.
What was known as 'money' only exists within these electronic accounts.
These accounts function in much the same way a regular checking account does.
However, two types of electronic deposits are recognized: funds earned through work and global wealth funds
Global wealth funds or GW for short = the sum total of all electronic bank accounts / human population.
It is calculated on an arbitrary date once a year.
On this day, all account balances are adjusted to contain the same amount: the GW
Accounts that held zero funds or thousands or billions now hold each person's share of the GW.
No 'money' is created or destroyed during this process. If all transfers were added, you would find that transfer credits = transfer debits.

Spending
All deposits that derive from earned income (work) can be spent.
The amount of GW funds that can be spent is limited to a % of earned income.

That's it. Analyze, build or tear apart as you wish :)
You may wish to consider the implications of additional deposit types: for example, funds obtained from the sale of property, funds derived from rent; and the restriction you may wish to place upon them (ie. how those types of deposits can be spent).
I'm not an economist, so I realize this is probably insane.
This is just a thought experiment, not an endorsement of capitalism.

[lvleph]

Well, as population increases money for each person decreases, since there is no money created nor destroyed. If prices remain the same, eventually no one could afford anything.

If it is a free market system, this would result in price decreases.

[Easterbrook]

Cool thought experiment.

Couple questions. Each person has two accounts, Global Wealth Fund account ("GW") and the funds earned account ("FEA").

1) Is this arbitrary date, reset date, the same each year, such that it is known and certain?

2) Is the following correct: on the arbitrary date, all funds, both GW and FEA, are reset to the same amount. So, if there are 5 people and 100 dollars in our economy, each persons GW would be 10 dollars and each person's FEA would be 10 dollars. (100 / 5 = 20, then two accounts so $10 in each account).

3) "The amount of GW funds that can be spent is limited to a % of earned income." Thus, if a person didn't work at all, they'd wouldn't be able to spend the $10 in their global account, correct? Furthermore, we must assume that a large portion of money will never leave the GW accounts (b/c some people will work less than others, such as retired people).

4) When people die, you said their accounts are closed, and when they are born, a new account is opened. Thus, they'll be a lag. If I die the day after the reset day, my $20 will be frozen essentially. And if you are born the day after the reset day, you won't get any money until the next reset (not that you would spend much money when you are less than 1, but your parents could use it to pay baby expenses).

[AGITprop]

Originally posted by [email protected] 29, 2007 06:02 pm
Well, as population increases money for each person decreases, since there is no money created nor destroyed. If prices remain the same, eventually no one could afford anything.

If it is a free market system, this would result in price decreases.
actually..just to put it out there...money is created everyday by the bank...you should look up the theory on how banks create money. we are not confined to a finite amount.

[lvleph]

Originally posted by Ender+November 29, 2007 02:23 pm--> (Ender @ November 29, 2007 02:23 pm)
[email protected] 29, 2007 06:02 pm
Well, as population increases money for each person decreases, since there is no money created nor destroyed. If prices remain the same, eventually no one could afford anything.

If it is a free market system, this would result in price decreases.
actually..just to put it out there...money is created everyday by the bank...you should look up the theory on how banks create money. we are not confined to a finite amount. [/b]
From the thought experiment:

No 'money' is created or destroyed during this process. If all transfers were added, you would find that transfer credits = transfer debits.

[Lynx]

Originally posted by [email protected] 29, 2007 02:54 pm
Cool thought experiment.

Couple questions. Each person has two accounts, Global Wealth Fund account ("GW") and the funds earned account ("FEA").

1) Is this arbitrary date, reset date, the same each year, such that it is known and certain?
Yes. (Feel free to consider the alternative)

2) Is the following correct: on the arbitrary date, all funds, both GW and FEA, are reset to the same amount. So, if there are 5 people and 100 dollars in our economy, each persons GW would be 10 dollars and each person's FEA would be 10 dollars. (100 / 5 = 20, then two accounts so $10 in each account).
I was thinking along the lines of a single account, therefore 20 in GW funds only. Your method might appear less scary, so perhaps, yes.

3) "The amount of GW funds that can be spent is limited to a % of earned income." Thus, if a person didn't work at all, they'd wouldn't be able to spend the $10 in their global account, correct? Furthermore, we must assume that a large portion of money will never leave the GW accounts (b/c some people will work less than others, such as retired people).
Essentially, yes. If the rate was 100% then for each FEA dollar you earn, 1 GW dollar would become available for you to spend. I did not consider those who are retired. As it stands now they receive pensions or investment income (if they are lucky to live in a country with pensions or are wealthy).

4) When people die, you said their accounts are closed, and when they are born, a new account is opened. Thus, they'll be a lag. If I die the day after the reset day, my $20 will be frozen essentially. And if you are born the day after the reset day, you won't get any money until the next reset (not that you would spend much money when you are less than 1, but your parents could use it to pay baby expenses).
In that case I would propose that the funds be transferred so they may remain unfrozen and available. I am unsure if there should be inheritance when someone dies. I see now that if births outpace deaths there will be a shortfall until the next reset.

[Lynx]

Originally posted by Ender+November 29, 2007 03:23 pm--> (Ender @ November 29, 2007 03:23 pm)
[email protected] 29, 2007 06:02 pm
Well, as population increases money for each person decreases, since there is no money created nor destroyed. If prices remain the same, eventually no one could afford anything.

If it is a free market system, this would result in price decreases.
actually..just to put it out there...money is created everyday by the bank...you should look up the theory on how banks create money. we are not confined to a finite amount. [/b]
I do not yet understand what part of the money supply these electronic funds would represent. There is M1, M2 and M3 and also M0 if I recall.

I do not know what inflationary or deflationary effect would occur.

The 'year end' process, as auditors call it, is fairly straightforward. The trial balance of all accounts is added, then divided by the number of people (or accounts). Whether you use direct adjustments to each account or the two step transfer, it is trivial to prove that no funds were created out of nothing or made to vanish.

[Easterbrook]

Originally posted by [email protected] 29, 2007 08:50 pm

I do not yet understand what part of the money supply these electronic funds would represent. There is M1, M2 and M3 and also M0 if I recall.

I do not know what inflationary or deflationary effect would occur.

The 'year end' process, as auditors call it, is fairly straightforward. The trial balance of all accounts is added, then divided by the number of people (or accounts). Whether you use direct adjustments to each account or the two step transfer, it is trivial to prove that no funds were created out of nothing or made to vanish.
Under this experiment, as I understand it, you'd get deflation.

The money supply is being held constant, and, assuming that productivity increases because of increases in either technology or population, there will be more stuff to buy in the economy each year. Thus, prices will have to decrease.


BTW, you could easily get rid of any money multiplier (http://en.wikipedia.org/wiki/Money_multiplier#Money_multiplier) by changing the rules for loaning money. Thus, we'll assume no money multiplier and a static money supply.

[RevSkeptic]

It is essentially unworkable because it violates the core sound accounting principle of equivalency for items purchased with money. If the global wealth fund is to be the average of all money amounts in all accounts which will then be rebalanced to have this same amount as the GW fund then all items purchased would also need to have their asset value readjusted to match this otherwise you'll get the contradiction of having purchased something at either a lower or higher price than what the GW fund is rebalanced to. Purchasers will either be short changed on what they've bought or made profits simply from the act of GW fund rebalancing at year end. The incentive will simply be for the cunning speculator to produce and sell large quantities of cheap poor quality items while holding on to scarcer items of higher quality. Using this strategy the cheaper poor quality items would give them a profit when its time to rebalance the GW funds provided the cheap mass produced items are below GW fund average value.

Because the population grows with usually the poor having bigger families and the placated middle class busy with their careers or lifestyle the overall effect would be deflationary even though the GW fund averaging effect would dampen inequality for a while. Overall, the poor may be able to afford some cheap goods given the incentive to profit on cheap goods by speculators as mentioned above, but because population growth occurs on a exponential rate this effect would only be temporary as population numbers outstrip the limited money supply which means a smaller amount of money would be worth more, but you would still need to acquire that smaller amount of money that's made more valuable due to the smaller pool of available money. Overall, even if money is worth more it will be more difficult to earn (for workers) because of it's scarceness relative to the population size trying to acquire it.


The money supply is being held constant, and, assuming that productivity increases because of increases in either technology or population, there will be more stuff to buy in the economy each year. Thus, prices will have to decrease

This is only if the needs of the future bigger population is less in money value than it's productivity. Translated, this means the poor will have to work more while eating less to be able to buy more stuff.

[Easterbrook]

Originally posted by [email protected] 30, 2007 12:51 am



The money supply is being held constant, and, assuming that productivity increases because of increases in either technology or population, there will be more stuff to buy in the economy each year. Thus, prices will have to decrease

This is only if the needs of the future bigger population is less in money value than it's productivity. Translated, this means the poor will have to work more while eating less to be able to buy more stuff.
Money is just a measuring stick for utility. You can't say something is inherently worth $XX. Rather, it's worth what consumers are willing to pay. (In a capitalistic, competitive market, that is).

But I think I agree with your other stuff. It really wouldn't work well. For example, who's going to sell stuff a few days before the reset? Say I own a clothing store: I'm shutting down as the reset draws nearer because any money I earn from selling clothes will soon disappear from my account.

Thus, the incentive would be to get rid of all my money during the year, and to acquire as many assets as possible. Assets last through the reset, money doesn't. It would truly be odd.

People would probably just stop using this money as a means of exchange as it is reset every year.

[SkipSievert]

Money is Voodoo. It is a social control mechanism. A class and caste system control mechanism. That is all it is. http://video.google.com/videoplay?docid=-9...debt&pr=goog-sl (http://video.google.com/videoplay?docid=-9050474362583451279&q=money+as+debt&pr=goog-sl)
Money As Debt - Google Video
and that is all it has ever been http://docs.google.com/Doc?id=dfx7rfr2_70cmz88f
I am the Price System - essay. Technocracy Incorporated.

It is a mistake to misrepresent it as any thing more.

It is an antique and ensures the destruction of our society for abstract and really idiot reasons. In other words more abstract concepts such as value, debt, etc.

[SkipSievert]

Any questions ? Ha ha.

[Easterbrook]

Originally posted by [email protected] 30, 2007 02:49 am
Money is Voodoo. It is a social control mechanism. A class and caste system control mechanism. That is all it is. http://video.google.com/videoplay?docid=-9...debt&pr=goog-sl (http://video.google.com/videoplay?docid=-9050474362583451279&q=money+as+debt&pr=goog-sl)
Money As Debt - Google Video
and that is all it has ever been http://docs.google.com/Doc?id=dfx7rfr2_70cmz88f
I am the Price System - essay. Technocracy Incorporated.

It is a mistake to misrepresent it as any thing more.

It is an antique and ensures the destruction of our society for abstract and really idiot reasons. In other words more abstract concepts such as value, debt, etc.
Money is just a medium of exchange.

Say I make custom automobiles in my garage and you produce t-shirts. It takes me 500 hours to produce an automobile, and it takes you 1 hour to produce a tee shirt (we're assuming materials are free). Now, say I want one of your t-shirts. I can't exactly give you 1/500th of an automobile, nor do I need 500 of your t-shirts. I only need one. Thus, it would be cool if there was some way to work this out. Perhaps I could give you a certificate for 1/500 of an automobile, and then when you've collected 500 of these, you can trade them in for one of my cars. Like an IOU.

In a sense, that certificate is a medium of exchange backed by one of my automobiles: money. Perhaps I make similar deals with the butcher, baker, etc. Thus, you could trade one of my certificates in for a loaf of bread b/c the baker is collecting them as he's going to soon want a car.

[SkipSievert]

Obviously you did not read my links and have no idea what a Price System is and why it is used.

So... yes you are brainwashed.

You are a stooge. That is fine. You belong to the larger club of stooges. Sorry, but that is the truth.
http://docs.google.com/Doc?id=dfx7rfr2_52fthx9n
Technocracy and History. Propaganda/Public Relations/Marketing.

While what you are saying makes sense in the construct of 'if you believe the premise, the rest is easy', mostly you are parroting what you have heard about 'economics'.

http://docs.google.com/Doc?docid=dfx7rfr2_55dh6wv9&hl=en_US#
Technocracy An Idea For Now Stephen L. Doll.

Money measures nothing real.

[Lynx]

Originally posted by [email protected] 29, 2007 10:50 pm
Any questions ? Ha ha.
What if the funds in our imaginary electronic accounts were calculated and denominated via energy credits?

Just wondering... not really sure of the implications of what I'm asking :wub:

[Easterbrook]

Originally posted by [email protected] 30, 2007 04:02 am
Obviously you did not read my links and have no idea what a Price System is and why it is used.

So... yes you are brainwashed.

You are a stooge. That is fine. You belong to the larger club of stooges. Sorry, but that is the truth.
http://docs.google.com/Doc?id=dfx7rfr2_52fthx9n
Technocracy and History. Propaganda/Public Relations/Marketing.

While what you are saying makes sense in the construct of 'if you believe the premise, the rest is easy', mostly you are parroting what you have heard about 'economics'.

http://docs.google.com/Doc?docid=dfx7rfr2_55dh6wv9&hl=en_US#
Technocracy An Idea For Now Stephen L. Doll.

Money measures nothing real.
First of all, I don't think we'll ever see a world without scarcity. Secondly, my post was about energy like certificates based upon an hour of work. 1/500th of a car = 1 hour of work. Just like 1 t-shirt = 1 hour of work. thus, for a t-shit I gave you a certificate worth 1 hour of work; that's what the certificate measures!


See this:

http://docs.google.com/View?docid=dfx7rfr2_93dqt642

[Lynx]

Originally posted by [email protected] 29, 2007 07:21 pm
Under this experiment, as I understand it, you'd get deflation.

The money supply is being held constant, and, assuming that productivity increases because of increases in either technology or population, there will be more stuff to buy in the economy each year. Thus, prices will have to decrease.
I have trouble grasping this. Say I own a house I paid 60,000 'dollars' for. This means there would be 60,000 dollars in funds in the account of the seller and then elsewhere as the seller spends that money. The transaction involved an exchange of money for property. If I sell my house a few years later for 65,000 dollars, where does the extra 5,000 come from? Did the extra always exist?
Are you saying I would not be able to sell it for more?

How does the value of property translate into funds? When does it translate? Someone who owns property is missing the equivalent value in funds. In imagining this, I think to myself "global wealth is initially the amount of funds in each account (working capital) but somehow it also represents the monetary value of property not yet sold or translated into 'money'

BTW, you could easily get rid of any money multiplier (http://en.wikipedia.org/wiki/Money_multiplier#Money_multiplier) by changing the rules for loaning money. Thus, we'll assume no money multiplier and a static money supply.
You are of course free to imagine full reserve banking, or the existence or absence of anything really, whether I mentioned it or not. That's part of the fun of a thought experiment :)

[Lynx]

Originally posted by [email protected] 29, 2007 10:19 pm
Money is just a measuring stick for utility. You can't say something is inherently worth $XX. Rather, it's worth what consumers are willing to pay. (In a capitalistic, competitive market, that is).

But I think I agree with your other stuff. It really wouldn't work well. For example, who's going to sell stuff a few days before the reset? Say I own a clothing store: I'm shutting down as the reset draws nearer because any money I earn from selling clothes will soon disappear from my account.

Thus, the incentive would be to get rid of all my money during the year, and to acquire as many assets as possible. Assets last through the reset, money doesn't. It would truly be odd.
Spend it or lose it!
Naturally you wouldn't want to sell, you would want to spend. I wonder whether people would wait until near the end before attempting a spending spree, or spend it soon after they earned it, to try and avoid 'the rush'.


People would probably just stop using this money as a means of exchange as it is reset every year.
But what if electronic funds are the only means of exchange?
You either work to earn it, sell property to obtain it, or use your property to derive profit or rent. Generating income to meet your needs would seem to be the priority.

[Easterbrook]

Originally posted by Lynx+November 30, 2007 04:40 am--> (Lynx @ November 30, 2007 04:40 am)
[email protected] 29, 2007 07:21 pm
Under this experiment, as I understand it, you'd get deflation.

The money supply is being held constant, and, assuming that productivity increases because of increases in either technology or population, there will be more stuff to buy in the economy each year. Thus, prices will have to decrease.
I have trouble grasping this. Say I own a house I paid 60,000 'dollars' for. This means there would be 60,000 dollars in funds in the account of the seller and then elsewhere as the seller spends that money. The transaction involved an exchange of money for property. If I sell my house a few years later for 65,000 dollars, where does the extra 5,000 come from? Did the extra always exist?
Are you saying I would not be able to sell it for more?

How does the value of property translate into funds? When does it translate? Someone who owns property is missing the equivalent value in funds. In imagining this, I think to myself "global wealth is initially the amount of funds in each account (working capital) but somehow it also represents the monetary value of property not yet sold or translated into 'money'

BTW, you could easily get rid of any money multiplier (http://en.wikipedia.org/wiki/Money_multiplier#Money_multiplier) by changing the rules for loaning money. Thus, we'll assume no money multiplier and a static money supply.
You are of course free to imagine full reserve banking, or the existence or absence of anything really, whether I mentioned it or not. That's part of the fun of a thought experiment :) [/b]
A house is a tough example because it involves real estate (land). So, let's say it's a mobile home.

I think your mobile home will be sold for less dollars in a number of years, assuming that both population and productivity increase. That's deflation: each dollar buys more. Your example is inflation: each dollar buys less.

I'm getting confused about what we are calling value. In my responses to you, I was using a typical capitalist (supply/demand) definition of value. Assuming a competitive market and a static money supply.

Money isn't really wealth. If money were wealth, we'd legalize counterfeiting. Money is just a rough tool for measuring how much people value something (assuming capitalist definitions); it's a proxy for wealth.

Just like grades in school. If I have straight A's, you will think I'm smart. However, say next semester I get all F's. You can say I'm dumb; but my smartness hasn't changed. Grades are just a proxy, a way of measuring, smartness/hard work in school. Money is just a way of measuring how much folks value something.

[Lynx]

Originally posted by [email protected] 30, 2007 01:02 am
A house is a tough example because it involves real estate (land). So, let's say it's a mobile home.

I think your mobile home will be sold for less dollars in a number of years, assuming that both population and productivity increase. That's deflation: each dollar buys more. Your example is inflation: each dollar buys less.

I'm getting confused about what we are calling value. In my responses to you, I was using a typical capitalist (supply/demand) definition of value. Assuming a competitive market and a static money supply.
If I want to buy a mobile home, I would have to be informed as to what its market value is. If I wasn't I might pay too much. I don't understand it beyond my wanting to pay as little as possible for the home and the seller wanting to obtain the largest amount from the sale.


Money isn't really wealth. If money were wealth, we'd legalize counterfeiting. Money is just a rough tool for measuring how much people value something (assuming capitalist definitions); it's a proxy for wealth.
Money is a means for exchange?
How much money I have is a representation of my wealth?

[synthesis]

Money isn't really wealth. If money were wealth, we'd legalize counterfeiting. Money is just a rough tool for measuring how much people value something (assuming capitalist definitions); it's a proxy for wealth.

That doesn't explain how currencies can be valuable commodities in and of themselves, nor does it explain how people can amass great fortunes simply through the manipulation of money itself, like banking and so forth.

Wealth used to be measured by land, and livestock before that, but in a capitalist system, money, in and of itself, is wealth.

[Easterbrook]

Originally posted by Kun Fanâ@November 30, 2007 05:51 am


Money isn't really wealth. If money were wealth, we'd legalize counterfeiting. Money is just a rough tool for measuring how much people value something (assuming capitalist definitions); it's a proxy for wealth.

That doesn't explain how currencies can be valuable commodities in and of themselves, nor does it explain how people can amass great fortunes simply through the manipulation of money itself, like banking and so forth.

Wealth used to be measured by land, and livestock before that, but in a capitalist system, money, in and of itself, is wealth.
I've thought about my earlier post, and I think we agree.

Money is a commodity. I agree. And today if you have lots of money you are considered wealthy.

However, money is only valuable because it's used as a means of exchange. I can exchange $200 for an iPod, or $200,000 for a Ferrari. It's only use is as a tool of exchange (though I suppose you could burn it for heat, or use it as scrap paper). I don't drive money, nor do I listen to tunes on money.

If no one accepts my money, it's useless. For example, if after the civil war I had $1,000,000 confederate dollars, I'd not be wealthy because confederate dollars are no longer used as a medium of exchange.

So, it is wealth in a sense because it represents wealth and can be traded for wealth. But then again, it's not wealth apart from it's ability to be traded for stuff.

[RevSkeptic]

I think your mobile home will be sold for less dollars in a number of years, assuming that both population and productivity increase. That's deflation: each dollar buys more. Your example is inflation: each dollar buys less.

No, only if per capita productivity increases and wages stays the same of increases otherwise if either per capita productivity decreases or wages decreases you'll get less wages negotiating for scarcer goods.


I'm getting confused about what we are calling value. In my responses to you, I was using a typical capitalist (supply/demand) definition of value. Assuming a competitive market and a static money supply.

Nothing in the world is static other than a total vacuum. Things in the universe either progresses and grows or declines and dies. Money being an scholastic exercise resembles nothing more than an idealistic picture of reality that only exists within the narrow minds of it's advocates. Weather forecasters relying on empirical quantities like barometric pressure does a more accurate job of predicting the weather than economists do of predicting markets.


Money isn't really wealth. If money were wealth, we'd legalize counterfeiting. Money is just a rough tool for measuring how much people value something (assuming capitalist definitions); it's a proxy for wealth.

Sure, but how can you accurately compare a chicken to a chicken farm in terms of monetary value? The former is transient in terms of value while the latter is a continuous generator of value. Even without having to deal with the vagaries of the market you have no way of reliably specifying a value on either without running into contradictions where either the purchaser or seller is gaining or losing more than the actual stated money value of the item that is by it's very nature dynamic in value.

Think of a simple agrarian economy which is not much different from today's energy economy. If I had a chicken farm and you rely on me paying you money to buy chickens to consume after labouring hard on my chicken farm then you'll be continuously labouring as well as your future generations as I will be the one owning the farm and continuously paying you admission tickets to eat (which pretty much amounts to temporary licenses to live) after exchanging those admission tickets (money) for what you've laboured for.

Why innovate? Why rely on engineers and scientists for automatic farms or artificial meat when I have so many slaves coming back for more. Further, because assembly-line methods are as dumb as dirt, it encourages the mental retardation of the human race. Why value education or enlightenment when you could simply live like a cow and purchase your admission ticket to eat after your daily routine at work? So, in addition to turning people into dimwitted wage slaves the most it could accomplish for the people lulled into contentment with that kind of rote work routine is to turn them into unthinking livestock much like the food they grow to eat which goes a long way to explain why our current epoch has so few enlightened people as a percentage of the population.

[Lynx]

So if the money supply in our hypothetical system is fixed (or static) then:
- an increase in productivity would increase purchasing power (same money can buy more items) yet not necessarily, according to RevSkeptic
- an increase in population would reduce the GW redistributed to each person (less money, less purchasing power)

And the overall effect of this would be deflation?

Is deflation a bad thing?

Unrelated question:
What would happen if FAE deposits were exempt from the reset?

[synthesis]

So, it is wealth in a sense because it represents wealth and can be traded for wealth. But then again, it's not wealth apart from it's ability to be traded for stuff.

Sure it is - think about accrued interest. Plenty of wealthy people's grandkids are eating off the interest of their trust fund.


If no one accepts my money, it's useless. For example, if after the civil war I had $1,000,000 confederate dollars, I'd not be wealthy because confederate dollars are no longer used as a medium of exchange.

That's because the mediums of exchange change with conditions. Back in the day, if you had a hundred cattle, you were the Boss Hogg of your town, but you would no longer be wealthy by those standards. Owning land, as well, was once a measure of wealth, but now it's money. I think you might be confusing "value" with "wealth".

[Easterbrook]

Originally posted by [email protected] 30, 2007 08:13 am

No, only if per capita productivity increases and wages stays the same of increases otherwise if either per capita productivity decreases or wages decreases you'll get less wages negotiating for scarcer goods.

I'm guessing changes in technology will cause per capita productivity to increase or, at the very least, stay the same. However, even assuming that per capita productivity decreases, overall productivity should increase as long as the population increases more than the per capita productivity decreases.

As I said, I'm assuming the per capita productivity will at least stay the same. Thus, with an increase in population, we'll have more "stuff" to buy and the same amount of money. In stuff, I'm including both goods and services, including labor. That is why I believe prices will have to decrease. More stuff, same amount of money: the price of that stuff will have to adjust (assuming a competitive market).


Nothing in the world is static other than a total vacuum. Things in the universe either progresses and grows or declines and dies. Money being an scholastic exercise resembles nothing more than an idealistic picture of reality that only exists within the narrow minds of it's advocates. Weather forecasters relying on empirical quantities like barometric pressure does a more accurate job of predicting the weather than economists do of predicting markets.

Firstly, I was assuming a static money supply for sake of this experiment. Secondly, it would be possible to create a static money supply, assuming no counterfeiting of currency. I'm well aware of the money multiplier, but if we change the rules for banking and lending, we can create a static money supply. Thirdly, there's nothing wrong with assumptions in thought experiments. When doing physics, we'd often assume 0 friction or make other assumptions. It's a thought experiment.


Sure, but how can you accurately compare a chicken to a chicken farm in terms of monetary value? The former is transient in terms of value while the latter is a continuous generator of value. Even without having to deal with the vagaries of the market you have no way of reliably specifying a value on either without running into contradictions where either the purchaser or seller is gaining or losing more than the actual stated money value of the item that is by it's very nature dynamic in value.

Think of a simple agrarian economy which is not much different from today's energy economy. If I had a chicken farm and you rely on me paying you money to buy chickens to consume after labouring hard on my chicken farm then you'll be continuously labouring as well as your future generations as I will be the one owning the farm and continuously paying you admission tickets to eat (which pretty much amounts to temporary licenses to live) after exchanging those admission tickets (money) for what you've laboured for.

Why innovate? Why rely on engineers and scientists for automatic farms or artificial meat when I have so many slaves coming back for more. Further, because assembly-line methods are as dumb as dirt, it encourages the mental retardation of the human race. Why value education or enlightenment when you could simply live like a cow and purchase your admission ticket to eat after your daily routine at work? So, in addition to turning people into dimwitted wage slaves the most it could accomplish for the people lulled into contentment with that kind of rote work routine is to turn them into unthinking livestock much like the food they grow to eat which goes a long way to explain why our current epoch has so few enlightened people as a percentage of the population.

Your criticism of capitalism is well taken, though you are preaching to the choir.

I'm assuming a capitalist society and in such a society prices are a rough approximation of how much folks value one commodity or another. It's the old cup full of water v. cup full of diamonds example. A capitalist will tell you the cup full of diamonds are more valuable because they demand a higher price b/c of their scarcity and perceived value. However, water is essential to live, but because it's not scarce, it's not perceived as being valuable. Were you to drop a cup of water on a sidewalk, no one would think twice. Now, try dropping a cup of diamonds on the sidewalk and see what happens.

But, please don't confuse my statements with any sort of acceptance of this system.

[Easterbrook]

Originally posted by [email protected] 30, 2007 08:36 am
So if the money supply in our hypothetical system is fixed (or static) then:
- an increase in productivity would increase purchasing power (same money can buy more items) yet not necessarily, according to RevSkeptic
- an increase in population would reduce the GW redistributed to each person (less money, less purchasing power)

And the overall effect of this would be deflation?

Is deflation a bad thing?

Unrelated question:
What would happen if FAE deposits were exempt from the reset?
That's my understanding of it.

Deflation isn't bad per se. In the US, the Fed is a bit wary of it for a number of reasons. Firstly, people expect inflation and thus position themselves assuming that some inflation will occur. In the US, this expectation is especially important for banks and any lending institutions, as well as investors and the like. Thus, unexpected deflation would cause liquidly problems and put major hurt on many capitalists.

Think of all the loans out right now, and the US national debt. Should deflation occur, those debts would all increase in real terms.

Secondly, in the US wages are sticky downward. That is to say, employers generally do not reduce the wages of workers. This is partly because employee's wouldn't stand for it, and partly just a social norm. If you make $8 and hour one year, you probably wouldn't take to well of your employer lowering your wages to $7 an hour the next year. That's just the norm in the US and that's how things have been going.

However, if banks, investors, and the like expected deflation to occur, they could deal with it just fine. Just as laborers probably could (I think). However, that's not our current system.

So, deflation not bad, but would probably be bad in the US, under our current system, for the reasons listed above, among others.

[Lynx]

Okay then. I will study a bit more on Wikipedia to see what it says about deflation. For the purposes of this thought experiment, what would be the effects of deflation over time?
From Wikipedia:
While an increase in the purchasing power of one's money sounds beneficial, it can actually cause hardship when the majority of one's net worth is held in illiquid assets such as homes, land, and other forms of private property.

Thought experiment:
- Redistributing the money supply places a time limit on savings.
- After taking care of their immediate needs, people will want to convert as much capital as possible into assets that can survive the reset date.
- Asset holders will want to avoid the risk of selling too close to the reset date.
- Savings (no longer carried forward) limits effective purchasing power for more expensive assets, like property.

Exemption for pending transactions
To avoid the reset, a transaction can be marked as 'pending' and sent to a holding account. After the reset is done, the funds are transferred from the holding account to their intended recipients, and the transaction is completed. To avoid abuse of this exemption, the % of funds that are pending as compared to the total money supply is subtracted from each transfer and added to the redistribution fund for GW.

From Wikipedia:
In the U.S., as of December, 2006, M1 was about $1.37 trillion and M2 was about $7.02 trillion. If you split all of the money equally per person in the United States, each person would end up with roughly $4,550 ($1,370,000M/301M) using M1 or $23,320 ($7,020,000M/301M) using M2. The amount of actual physical cash, M0, was $749.6 billion in December, 2006, almost three times the $261 billion in cash and cash equivalents on deposit at Citigroup as of the end of that year and roughly $2492 per person in the US.

[Lynx]

A reset economy signals the end of savings
If no human being, through work or business or trade, can accumulate more than a said amount, then no property whose perceived value is above said amount can be bought or sold.
While no such property or means of production can be owned by a human being, they can be managed. For instance, by an individual at the approbation of a group, or by a group at the approbation of society. If such individuals or groups or societies 'mess things up', they are replaced. Just as workers are replaced.

Ownership, has and always will be, the end of replacement. Instead of accountability, it grants security and power. If ordinary workers must be accountable for their own lives through their own efforts, then why not ask the same of all human beings? Power does not respect any freedom that is not its own.

[Lynx]

Calculations for a pending transaction mechanism:
M= total money supply
P= people in economy
T= amount of money in pending transactions
PT= number of people involved in pending transactions
GW= global wealth
DW= distributed wealth
A= adjustment to make DW = GW

The basic equation was GW = M / P
The new equation is DW = ( M - T ) / ( P - PT )
We want to make DW = GW

If the ratios M / T = P / PT then DW = GW
If unequal then DW will be decreased or increased.

A = ( GW - DW ) * ( P - PT )
If A is positive then an adjustment is required with funds transferred from T to M, if negative, from M to T
A / T gives us the adjustment ratio
For each PT account, the adjustment ratio is applied.

[Lynx]

So, what would happen with this experiment?
What would people's behavior be?

This is capitalism with a few changes. One is structural (the absence of physical currency; or any means of exchange outside the electronic payments system). The other is an arbitrary reset mechanism (redistribution of all monetary capital on a fixed date). No changes to the means of production or property relations have been mentioned.

My initial analysis was:

The cappies' sacred incentive to work mechanism is left unchanged.
The incentive to accumulate money is reduced.
Lifestyle becomes more dependent on income + spending, because the ability to save one's surplus over the long term is eliminated.
Monetary capital inequalities that are the result of 'correct' and 'incorrect' economic decisions are reset back to equal status.

Please criticize the above deconstruction.

[Lynx]

Continuing the experiment:
Is ownership of the means of production necessary?

Ownership vs. command hierarchy:
In the military, soldiers follow the orders of their superior officers. In the workplace, employees follow the directives of management. Both soldiers and employees can be disciplined through use of a command hierarchy. However, the military does not have private ownership of its 'means of destruction'. Therefore, is ownership necessary? Are large disparities in income between management and employees necessary?

[pusher robot]

Originally posted by [email protected] 01, 2008 05:38 pm
Continuing the experiment:
Is ownership of the means of production necessary?

Ownership vs. command hierarchy:
In the military, soldiers follow the orders of their superior officers. In the workplace, employees follow the directives of management. Both soldiers and employees can be disciplined through use of a command hierarchy. However, the military does not have private ownership of its 'means of destruction'. Therefore, is ownership necessary? Are large disparities in income between management and employees necessary?

However, the military does not have private ownership of its 'means of destruction'.

Yes, it does. The military is an arm of the government. All military assets are government property.

If the military does not own its assets, who do you think does?


The cappies' sacred incentive to work mechanism is left unchanged.

This is wrong, because the value of the money starts approaching zero from the first day of the new year, and reaches zero on the last day. This result would be, essentially, annual hyper-inflation.


The incentive to accumulate money is reduced.

So is the incentive to lend money. Your system would abolish credit, making it likely impossible for most people to ever own anything that would cost more than a third of their annual income.

In reality, your system would simply encourage the incentive to accumulate non-monetary assets, like gold or property. So what would actually happen is that nobody would use your currency unless they had to, because it wouldn't make it possible for them to do the things they want to do, like buy on credit. This would further devalue your currency, which would lead people to abandon it, and so on, in a spiral.


Lifestyle becomes more dependent on income + spending, because the ability to save one's surplus over the long term is eliminated.

The effect would be to totally disempower workers. Since their savings are usually in cash, you would destroy any accumulations they might make over time. Property-owners and capital-owners, however, would not lose their accumulations because they converted their cash to non-monetary assets. You would be creating actual wage-slavery. Eventually, the workers would figure this out and instantly transfer any holdings of your currency into stocks, bonds, precious metals, property - anything nonmonetary that holds its value. Soon enough, third-party currencies, backed by gold or other nonmonetary assets, would utterly dominate your currency, which would become irrelevant.


Monetary capital inequalities that are the result of 'correct' and 'incorrect' economic decisions are reset back to equal status.
"Monetary capital" is an oxymoron because capital is, by definition, nonmonetary.

[Lynx]

Originally posted by pusher robot+January 01, 2008 02:55 pm--> (pusher robot @ January 01, 2008 02:55 pm)
[email protected] 01, 2008 05:38 pm

However, the military does not have private ownership of its 'means of destruction'.
Yes, it does. The military is an arm of the government. All military assets are government property.

If the military does not own its assets, who do you think does?[/b]
In what way is ownership relevant to the functioning of the military? Government ownership is public ownership, which is a variation of what leftists want.


The cappies' sacred incentive to work mechanism is left unchanged.
This is wrong, because the value of the money starts approaching zero from the first day of the new year, and reaches zero on the last day. This result would be, essentially, annual hyper-inflation.
This prediction is contrary to the earlier deflationary one. Can you explain in more detail?
I have proposed a mechanism to exempt pending exchanges from the reset, to avoid a mad rush to spend all savings towards the reset date.



The incentive to accumulate money is reduced.

So is the incentive to lend money. Your system would abolish credit, making it likely impossible for most people to ever own anything that would cost more than a third of their annual income.
If most people cannot afford to own something, what happens to prices? What happens to the value of ownership?


In reality, your system would simply encourage the incentive to accumulate non-monetary assets, like gold or property. So what would actually happen is that nobody would use your currency unless they had to, because it wouldn't make it possible for them to do the things they want to do, like buy on credit. This would further devalue your currency, which would lead people to abandon it, and so on, in a spiral.
In one scenario, non-monetary assets would need to be converted to a monetary value in order to be exchanged.
The objective is to make electronic fund transfers the sole means of exchange. Ownership of property would require legal documentation (as it does now), to avoid any form of exchange outside the electronic payments system.



Lifestyle becomes more dependent on income + spending, because the ability to save one's surplus over the long term is eliminated.

The effect would be to totally disempower workers. Since their savings are usually in cash, you would destroy any accumulations they might make over time. Property-owners and capital-owners, however, would not lose their accumulations because they converted their cash to non-monetary assets. You would be creating actual wage-slavery. Eventually, the workers would figure this out and instantly transfer any holdings of your currency into stocks, bonds, precious metals, property - anything nonmonetary that holds its value. Soon enough, third-party currencies, backed by gold or other nonmonetary assets, would utterly dominate your currency, which would become irrelevant.
They must spend their accumulations. Those who earn more can spend more.
Again, this experiment assumes but a single means for exchange. I created one country to avoid implications of different 'currency'.



Monetary capital inequalities that are the result of 'correct' and 'incorrect' economic decisions are reset back to equal status.
"Monetary capital" is an oxymoron because capital is, by definition, nonmonetary.
But when money makes money, does it behave as if it were capital?

Thank you for ripping this apart :)

[pusher robot]

In what way is ownership relevant to the functioning of the military? Government ownership is public ownership, which is a variation of what leftists want.

Because by owning the property, the government can restrict access to it to those who it employs to utilize that property the way that it wants. In other words, if you want access to that property, you have to be employed in the military hierarchy (or as a high-level bureaucrat). This theory is easy to test: simply walk into your nearest armory and try helping yourself to the armaments.


This prediction is contrary to the earlier deflationary one. Can you explain in more detail?
Sure. The reason that inflation would occur would be because the ability to benefit from a given dollar decreases as you approach the reset date. This is best illustrated by looking at the two extremes. Suppose I want you to paint my house. At the beginning of the reset cycle, you might be willing to do this for $100. You could save that $100 up to a year and spend it on whatever you want at the time it is most convenient to you. But if it's the last day of the reset cycle, you would have to spend that $100 immediately or have it be lost forever. That makes it worth a lot less to you, which means you would no longer be willing to do the job for $100. Maybe now it would cost $1000. As you apply this dynamic throughout the economy, you see an increase in the price of some set of goods and services in a given economy over a period of time, which is the definition of inflation.

I have proposed a mechanism to exempt pending exchanges from the reset, to avoid a mad rush to spend all savings towards the reset date.
Then there is no reset, since every transaction that has not yet occurred is in some sense "pending."

If most people cannot afford to own something, what happens to prices?
In a competitive market, nothing.

In one scenario, non-monetary assets would need to be converted to a monetary value in order to be exchanged.
That's obviously unworkable. How do you propose to prevent people from working outside this system?

The objective is to make electronic fund transfers the sole means of exchange. Ownership of property would require legal documentation (as it does now), to avoid any form of exchange outside the electronic payments system.
That is an impossible objective so long as you create incentives to work outside your system. For example, what is to stop an exchange of property from involving "off the record" transfers of nonmonetary assets?

Again, this experiment assumes but a single means for exchange. I created one country to avoid implications of different 'currency'.But anything can be made into a currency, it's totally arbitrary. The only reason people use currency is because it is convenient. If you make your currency inconvenient to use, people will use something else.

But when money makes money, does it behave as if it were capital?
No. Money only makes money when it is converted into capital. If you stuff a s-a-c-k of money under your mattress it will not make more money. Generally, only if it is invested into business and industry does it make more money.

[Robert]

if you had a hundred cattle, you were the Boss Hogg

What would they call you if you had a hundred pigs?




If you stuff a s-a-c-k

Why are there hyphens between those letters? Are you guys talking in code?

[Lynx]

Originally posted by pusher [email protected] 01, 2008 05:02 pm
Because by owning the property, the government can restrict access to it to those who it employs to utilize that property the way that it wants. In other words, if you want access to that property, you have to be employed in the military hierarchy (or as a high-level bureaucrat). This theory is easy to test: simply walk into your nearest armory and try helping yourself to the armaments.
Is there any appreciable difference between that relationship (legal powers of ownership) and a command hierarchy?


This prediction is contrary to the earlier deflationary one. Can you explain in more detail?
Sure. The reason that inflation would occur would be because the ability to benefit from a given dollar decreases as you approach the reset date. This is best illustrated by looking at the two extremes. Suppose I want you to paint my house. At the beginning of the reset cycle, you might be willing to do this for $100. You could save that $100 up to a year and spend it on whatever you want at the time it is most convenient to you. But if it's the last day of the reset cycle, you would have to spend that $100 immediately or have it be lost forever. That makes it worth a lot less to you, which means you would no longer be willing to do the job for $100. Maybe now it would cost $1000. As you apply this dynamic throughout the economy, you see an increase in the price of some set of goods and services in a given economy over a period of time, which is the definition of inflation.
But charging a $1000 would not get you additional benefit - if you don't think you'll be able to spend $100, how will you be able to spend $1000?
I don't see this as inflation, but a decrease in the velocity of exchange or the velocity of money.


I have proposed a mechanism to exempt pending exchanges from the reset, to avoid a mad rush to spend all savings towards the reset date.
Then there is no reset, since every transaction that has not yet occurred is in some sense "pending."
Not all transactions would be pending at the time of reset. The calculations involved would accomplish the redistribution by determining what % of the total money supply is involved in pending transactions with regard to what % of the population are participating in those transactions. Pending means they 'pend' until the day after the reset. The transaction would be delayed for the buyer, and the funds illiquid for the seller.


In one scenario, non-monetary assets would need to be converted to a monetary value in order to be exchanged.
That's obviously unworkable. How do you propose to prevent people from working outside this system?
The same way the black market might be abolished: eliminate unaccountable physical representations of the means of exchange.


The objective is to make electronic fund transfers the sole means of exchange. Ownership of property would require legal documentation (as it does now), to avoid any form of exchange outside the electronic payments system.
That is an impossible objective so long as you create incentives to work outside your system. For example, what is to stop an exchange of property from involving "off the record" transfers of nonmonetary assets?
Well, if I were to sell you my house for something other than electronic funds, how can you become the legal owner of my house? And how can I become the legal owner of property you own and used for the exchange? Ownership implies a paper trail and registration in a central database.

But anything can be made into a currency, it's totally arbitrary. The only reason people use currency is because it is convenient. If you make your currency inconvenient to use, people will use something else.
Yes, electronic fund transfers are very convenient to use, while property barter exchanges are not.


But when money makes money, does it behave as if it were capital?
No. Money only makes money when it is converted into capital. If you stuff a s-a-c-k of money under your mattress it will not make more money. Generally, only if it is invested into business and industry does it make more money.
And if I loan it and collect interest? Does the same principle apply? Something about fractional reserve banking tells me this isn't so :blink:

[Lynx]

Originally posted by Robert the [email protected] 01, 2008 05:53 pm
What would they call you if you had a hundred pigs?
A porciphile?

[Ugge]

The result would be cyclic inflation centered on the reset date, as people would convert their hard earned money into assets, raising prices wildly.

The scheme would not have much of a redistibutionary effect, as the money receved on reset-day, would be largely worthless, as people would turn to bartering for exchange of goods and services.

Any currency relies on trust for it to carry any value. For a person to accept money in exchange for his labour or his produce, he would have to trust that he could trade the money for other peoples labour or produce at an equal rate. Thus capitalism relies heavily on trust.

The resetting mechanism would take away most of that trust.

[pusher robot]

Is there any appreciable difference between that relationship (legal powers of ownership) and a command hierarchy?

Well, there must be. The fact that the military owns property does not give them command over the non-property owners except to the use of that property. Yet soldiers who DO have use of the property are under much greater command and control. So obviously there must be some difference.


But charging a $1000 would not get you additional benefit - if you don't think you'll be able to spend $100, how will you be able to spend $1000?
I don't see this as inflation, but a decrease in the velocity of exchange or the velocity of money.
The problem isn't that you won't be able to spend the $100, the problem is that $100 is a lot less useful to you NOW than it was THEN.


Not all transactions would be pending at the time of reset. You need to define what is and is not pending then. If I take out a thirty-year loan, is that a transaction "pending" such that my borrowed money doesn't get reset?


The same way the black market might be abolished: eliminate unaccountable physical representations of the means of exchange.
Uh, well - I hate to point this out, but even totalitarian states have found it impossible to abolish the black market. You certainly wouldn't be able to do it in any kind of free state.


Well, if I were to sell you my house for something other than electronic funds, how can you become the legal owner of my house? And how can I become the legal owner of property you own and used for the exchange? Ownership implies a paper trail and registration in a central database.Very simply, the same way people avoid paying excess sales taxes on things like used cars. The buyer and seller agree on a "real" price, let's say, $10000. So we engage in a legitimate transaction wherein the buyer sells it for, say, $1000, and the buyer pays the other $9000 in gold under the table. A legitimate $1000 transaction has taken place, along with paper trail and database logging, so the buyer has complete legal ownership of the car, but at the same time a black market transaction has occurred.



Yes, electronic fund transfers are very convenient to use, while property barter exchanges are not.
Electronic fund transfers are not convenient if you cannot use them to accomplish your goals, such as saving or borrowing.

Mass transit is convenient to use, but people won't ride it if it doesn't go to their destination.


And if I loan it and collect interest? Does the same principle apply? Something about fractional reserve banking tells me this isn't so :blink:Yes, that applies. Loaning money = investing. You make a loan because you believe that the loan will enable the borrower to pay you back with surplus. If you don't believe the borrower will be productive enough to pay back the loan with surplus, you shouldn't make the loan.


Quote:
If you stuff a s-a-c-k
Why are there hyphens between those letters? Are you guys talking in code?It's because the previous board wouldn't allow you to use the word "sack" in a post, along with several others, such as "shoes."

[Lynx]

The result would be cyclic inflation centered on the reset date, as people would convert their hard earned money into assets, raising prices wildly.

The scheme would not have much of a redistibutionary effect, as the money receved on reset-day, would be largely worthless, as people would turn to bartering for exchange of goods and services.
In a system where money cannot be created or destroyed, nor hidden, redistribution cannot be avoided. The success one person has in emptying their account results in those funds being transferred to other peoples' accounts. There is nowhere to hide your $ savings!
The simplest method to avoid 'inconvenience' would be to arrange payment the day after reset.

Any currency relies on trust for it to carry any value. For a person to accept money in exchange for his labour or his produce, he would have to trust that he could trade the money for other peoples labour or produce at an equal rate. Thus capitalism relies heavily on trust.

The resetting mechanism would take away most of that trust.The reset takes away the ability to accumulate savings in the form of money. Money was originally intended as a means of exchange, to replace barter. The motive was convenience. The end motive for accumulating savings is to avoid having to earn one's income from work. I view this as non-productive and exploitative.

The reset is intended to encourage use of money as a means of exchange. It encourages spending. Instead of investing their savings on Wall Street, people would have an incentive to acquire and improve their homes and other forms of property.

Credit appears to be a means to get people to spend other people's money. Money the borrower doesn't have and money the lender can't make money on. Is this necessary? Why is it necessary?

As an aside, forget about the reset for a moment. Consider only the structural changes to the means of exchange. What effect would it have on our fictional economy?

[Lynx]

Well, there must be. The fact that the military owns property does not give them command over the non-property owners except to the use of that property. Yet soldiers who DO have use of the property are under much greater command and control. So obviously there must be some difference.
Perhaps it is the difference between ownership and management. Owners do not necessarily have to be involved or knowledgeable, but most everyone else has to be. It's as if ownership were a lip service, a mere formality. I would like to be able to separate what is needed and what isn't.


The problem isn't that you won't be able to spend the $100, the problem is that $100 is a lot less useful to you NOW than it was THEN.

You need to define what is and is not pending then. If I take out a thirty-year loan, is that a transaction "pending" such that my borrowed money doesn't get reset?Pending at its most simplest: "I'll paint your house, just make sure you pay me the day after the reset."
If you take a loan one would assume you would spend it. Why grant an exemption?


Uh, well - I hate to point this out, but even totalitarian states have found it impossible to abolish the black market. You certainly wouldn't be able to do it in any kind of free state.

Very simply, the same way people avoid paying excess sales taxes on things like used cars. The buyer and seller agree on a "real" price, let's say, $10000. So we engage in a legitimate transaction wherein the buyer sells it for, say, $1000, and the buyer pays the other $9000 in gold under the table. A legitimate $1000 transaction has taken place, along with paper trail and database logging, so the buyer has complete legal ownership of the car, but at the same time a black market transaction has occurred.I don't believe switching the means of exchange to physical gold is a viable solution. I'm not opposed to barter, per se, just that it be 'above board'.


Electronic fund transfers are not convenient if you cannot use them to accomplish your goals, such as saving or borrowing.Why is saving and borrowing so important? Aren't we supposed to live within our means?


Yes, that applies. Loaning money = investing. You make a loan because you believe that the loan will enable the borrower to pay you back with surplus. If you don't believe the borrower will be productive enough to pay back the loan with surplus, you shouldn't make the loan.I understand that concept (it is somewhat related to rent). But this is not how fractional reserve banking appears to work.

[pusher robot]

In a system where money cannot be created or destroyed, nor hidden, redistribution cannot be avoided. The success one person has in emptying their account results in those funds being transferred to other peoples' accounts. There is nowhere to hide your $ savings!But it can be converted into assets that are not reset. That's the glaring loophole in your plan.


The end motive for accumulating savings is to avoid having to earn one's income from work. I view this as non-productive and exploitative.Frankly, I find this view bizarre. If you earn money from production, how is saving that money avoidance of production? It sounds like you are saying that people should not have the choice to delay gratification from now to later, or ever be able to make a choice to stop working to live off the earnings of past work. That's not wage slavery, that is actual slavery. Of course, it wouldn't work so long as people are allowed to convert their money into non-resetting assets like gold.


Instead of investing their savings on Wall Street, people would have an incentive to acquire and improve their homes and other forms of property.First of all, we want people to invest on Wall Street. That's how businesses get money to employ these people in the first place. Otherwise, who exactly do you think is going to be paying these wages? How would a person ever start a business without investors?

Not to mention, how are you ever going to buy a house in the first place without credit and without savings?


Credit appears to be a means to get people to spend other people's money. Money the borrower doesn't have and money the lender can't make money on. Is this necessary? Why is it necessary?The purpose of credit is not to spend other peoples' money: that's what government is for. Credit is a way to spend your own money that you haven't earned yet.

If you ever want to buy something that is more expensive than the discretionary portion of your paycheck, you only have two options:

1. Save up over time, then buy it later.
2. Borrow the money and buy it now, and pay back the loan over time.

Essentially, either method is a way to pay over time. Option 2 is more expensive, but you get the benefit of using the item during the time that you are paying for it. If that usage is worth more to you than the cost of the borrowing, then it's a wise option.

Consider, for example, a car. Suppose your options are: save $300 a month for four years, then pay cash for the car, or finance the car and pay $300 a month for five years. The extra cost is $300*12 or $3600. If having the car now instead of four years from now is worth $3600 or more, you should finance it.

Having both saving and credit gives people choices. Your system, which has neither, not only deprives them of choice, but makes it impossible to ever purchase anything costlier than their annual discretionary income. This means, for most people, no house, no car, no college education.


As an aside, forget about the reset for a moment. Consider only the structural changes to the means of exchange. What effect would it have on our fictional economy?Without the reset, having an inflexible currency is probably going to be deflationary. This is because even if money cannot be created or destroyed, wealth CAN be. If wealth is created (which it historically has) and the amount of money stays fixed, then that money becomes more valuable and it deflates.

This is the main reason why most national currencies abolished the gold or silver standard and became strictly fiat currencies.

[pusher robot]

Pending at its most simplest: "I'll paint your house, just make sure you pay me the day after the reset."

Well, now you're asking the painter for forgo payment for his services until the reset date. That has a cost too, especially if some of that payment is just going to get redistributed as soon as it is received.


I don't believe switching the means of exchange to physical gold is a viable solution. You're clearly wrong about this, since gold-backed specie was the primary currency until the mid-20th century and it worked well for centuries.
I'm not opposed to barter, per se, just that it be 'above board'.Well that's fine, but how are you going to enforce this? You can't, without totalitarian measures.

I understand that concept (it is somewhat related to rent). But this is not how fractional reserve banking appears to work.Why, do banks make unproductive loans?

[Lynx]

But it can be converted into assets that are not reset. That's the glaring loophole in your plan.
It is a loophole to the extent I haven't integrated it into the experiment. I'm in no rush to tinker with people's freedom to hoard property, the current changes are problematic enough.


The end motive for accumulating savings is to avoid having to earn one's income from work. I view this as non-productive and exploitative.Frankly, I find this view bizarre. If you earn money from production, how is saving that money avoidance of production? It sounds like you are saying that people should not have the choice to delay gratification from now to later, or ever be able to make a choice to stop working to live off the earnings of past work. That's not wage slavery, that is actual slavery. Of course, it wouldn't work so long as people are allowed to convert their money into non-resetting assets like gold.A person who earns more than they spend can use their surplus to reduce the amount they work. This is theoretical in the short term and becomes obvious over the long term. In addition, property can be used to obtain rental income and money can be used to obtain investment income. Rental and investment income constitute non-work income. Thus, the person receiving these types of income can choose to become less productive.
The capitalist economy could no more support large numbers of idle rich than it could legions of unemployed. Somebody has to work.

First of all, we want people to invest on Wall Street. That's how businesses get money to employ these people in the first place. Otherwise, who exactly do you think is going to be paying these wages? How would a person ever start a business without investors?

Not to mention, how are you ever going to buy a house in the first place without credit and without savings?A mechanism exists by which people with savings have an incentive to loan or invest their surplus in order to make their surplus grow. The existence of this mechanism creates certain conditions. Changing the mechanism would effect changes to the conditions.
Crude example:
If nobody can save $100,000 to buy a house, or be able to meet mortgage payments above a certain level, then such items cannot be obtained. If they cannot be obtained, then their price must decrease.

The purpose of credit is not to spend other peoples' money: that's what government is for. Credit is a way to spend your own money that you haven't earned yet.

If you ever want to buy something that is more expensive than the discretionary portion of your paycheck, you only have two options:

1. Save up over time, then buy it later.
2. Borrow the money and buy it now, and pay back the loan over time.

Essentially, either method is a way to pay over time. Option 2 is more expensive, but you get the benefit of using the item during the time that you are paying for it. If that usage is worth more to you than the cost of the borrowing, then it's a wise option.

Consider, for example, a car. Suppose your options are: save $300 a month for four years, then pay cash for the car, or finance the car and pay $300 a month for five years. The extra cost is $300*12 or $3600. If having the car now instead of four years from now is worth $3600 or more, you should finance it.Is this strictly a personal preference?
Observing the US, it appears that choice 2 is more popular, especially for large ticket items. Americans prefer to borrow up to their eyeballs and hope for the best. They sometimes declare bankruptcy or attempt to refinance what little equity they have left. Perhaps they believe there is more value in enjoying these items now than delaying their gratification through saving. Other Americans look at this behavior and lament the lack of discipline.
Which choice is of more benefit to an economy?

Having both saving and credit gives people choices. Your system, which has neither, not only deprives them of choice, but makes it impossible to ever purchase anything costlier than their annual discretionary income. This means, for most people, no house, no car, no college education.It could mean having time off next year because you earned more than you spent. Or it could mean things like cars and houses remain affordable because fewer people are interested in saving or borrowing and working like slaves for most of their lives in order to obtain them.
It's not surprising that people behave according to the conditions they find themselves in. They see savings as a way out and it is, at a personal cost of time spent. Some spend their whole lives in pursuit of that goal.

Without the reset, having an inflexible currency is probably going to be deflationary. This is because even if money cannot be created or destroyed, wealth CAN be. If wealth is created (which it historically has) and the amount of money stays fixed, then that money becomes more valuable and it deflates.

This is the main reason why most national currencies abolished the gold or silver standard and became strictly fiat currencies.There was also mentioned the effect of increasing population, which would also contribute to deflation.


Pending at its most simplest: "I'll paint your house, just make sure you pay me the day after the reset."Well, now you're asking the painter for forgo payment for his services until the reset date. That has a cost too, especially if some of that payment is just going to get redistributed as soon as it is received.Well, one could accept a reduction in the redistribution if the % of pending transactions were not at an abusive level.
For my purposes, the psychological benefits should outweigh the costs. If not, may as well get people used to bartering services once a year, perhaps near Christmas, perhaps not...
The "keep your savings, work less next year" idea might be an alternative to the reset, but it needs more thought.


You're clearly wrong about this, since gold-backed specie was the primary currency until the mid-20th century and it worked well for centuries.What do you mean by gold-backed specie?
Don't you need a physical means or a virtual one hacked into unofficial cyberspace?

Why, do banks make unproductive loans?Banks multiply money through loan 'recycling'. When I try to do this using my printer, or when other countries try to do it, your government is not okay with it. We call it productive, they call it counterfeiting. Perhaps we should do like the banks do, and loan our "product" out.

[pusher robot]

Crude example:
If nobody can save $100,000 to buy a house, or be able to meet mortgage payments above a certain level, then such items cannot be obtained. If they cannot be obtained, then their price must decrease.Not necessarily. Price will never fall below cost. If it takes a home-builder more than a man-year of labor to build a home, and home-builders demand average wages, then it becomes strictly impossible for an average wage-earner to be able to afford to compensate the home-builder. You might argue that the home-builder could lower his demanded wage, but his logical choice would be to simply move to a different job that paid an average wage.

Is this strictly a personal preference?
Observing the US, it appears that choice 2 is more popular, especially for large ticket items. Americans prefer to borrow up to their eyeballs and hope for the best. They sometimes declare bankruptcy or attempt to refinance what little equity they have left. Perhaps they believe there is more value in enjoying these items now than delaying their gratification through saving. Other Americans look at this behavior and lament the lack of discipline.
Which choice is of more benefit to an economy?
It doesn't matter. It is a personal preference, so the choice is properly up to the individual.

What do you mean by gold-backed specie?I mean any physical currency either made out of or backed up by gold (or other precious commodity.)

Don't you need a physical means or a virtual one hacked into unofficial cyberspace?
Physical means aren't as difficult as you might think. The Romans were able to mint gold coins two millennia ago. Later, certificates were used, like this one:
http://inyourface.tv/tim/pictures/10_silver%20certificate.jpg

Banks multiply money through loan 'recycling'. When I try to do this using my printer, or when other countries try to do it, your government is not okay with it. We call it productive, they call it counterfeiting. Perhaps we should do like the banks do, and loan our "product" out.Huh what? Banks do not print money. They can only loan out cash on hand, which they get through deposits, assets, or borrowing. They don't do anything that you couldn't do yourself.

[Zurdito]

This thread reminds me why I always have a :confused: reaction to economics. all that matters is who got the guns, dammit.

sorry I'm not really entering into the spirit, am I?

[Lynx]

Not necessarily. Price will never fall below cost. If it takes a home-builder more than a man-year of labor to build a home, and home-builders demand average wages, then it becomes strictly impossible for an average wage-earner to be able to afford to compensate the home-builder. You might argue that the home-builder could lower his demanded wage, but his logical choice would be to simply move to a different job that paid an average wage.
For existing homes, the situation would require that someone take a loss (price < cost). For a socio-economic system, affordability is necessary.
We already see a progression where credit is used to break a purchase into smaller, more affordable chunks. What is next?


It doesn't matter. It is a personal preference, so the choice is properly up to the individual.Tinkering with it then, might not matter to the economy.


I mean any physical currency either made out of or backed up by gold (or other precious commodity.)
Physical means aren't as difficult as you might think. The Romans were able to mint gold coins two millennia ago. Later, certificates were used, like this one:
http://inyourface.tv/tim/pictures/10_silver%20certificate.jpg
Legal tender, backed by government. Your gold species would have to be made out of gold, in order to maintain control through personal possession.
I don't wish to belabor the point, but I would like to ask if cash could be banned for real, in our present system.


Huh what? Banks do not print money. They can only loan out cash on hand,
which they get through deposits, assets, or borrowing. They don't do anything that you couldn't do yourself.Banks expand the money supply, creating a difference between M0 and M1. Counterfeiters expand M0. How I can do what banks do all by myself? Would it be wise?
http://en.wikipedia.org/wiki/Fractional-reserve_banking

[Lynx]

This thread reminds me why I always have a :confused: reaction to economics. all that matters is who got the guns, dammit.

sorry I'm not really entering into the spirit, am I?
You're almost there. Think about sorcery.

[pusher robot]

Legal tender, backed by government. Your gold species would have to be made out of gold, in order to maintain control through personal possession.
I don't wish to belabor the point, but I would like to ask if cash could be banned for real, in our present system.No, because while the silver certificate is also legal tender, it is perfectly possible to have specie certificates that are not legal tender. A bank or other company prints notes that are NOT legal tender, but redeemable for a fixed amount of gold. This has often been done before and is not difficult to do. All you need is a mint or press and a vault to store the commodity.
The only way you could ban cash would be to actually ban physical exchanges completely.

Banks expand the money supply, creating a difference between M0 and M1. Counterfeiters expand M0. How I can do what banks do all by myself? Would it be wise?
http://en.wikipedia.org/wiki/Fractional-reserve_bankingHow could you do this? First, start with some reserve, say $50. Next, convince a friend to let you hold on to his $10. Loan out that same $10 to another friend. Assuming he spends it, convince the person he spent it to to deposit that same $10 with you. Loan out that same $10 again, etc. Repeat as necessary. Congratulations! You've just expanded the money supply!

Is it wise? Probably not unless you actually become a banker, because on your own you aren't backed up by the central bank, so if your reserves become depleted, you are screwed.

[Comrade Rage]

Price will never fall below cost.
WTF are you talking about? Selling items at below cost is actually a tactic of 'big box' chains. They (Wal-Mart) in particular, will cut the price on select items to at, or below cost and take the hit so as to shut down or impair competitors and drive up profit in the long run.

[Zurdito]

You'll never guess what, some corporations are really powerful and with their funding can make or break a government, and they sometimes even use this power to get the state to help them out! It sounds crazy but I'm starting to think this Economics 101 textbook didn't equip me for the real world!

[Dean]

Huh what? Banks do not print money. They can only loan out cash on hand, which they get through deposits, assets, or borrowing. They don't do anything that you couldn't do yourself.

They don't have to print money, they only have to create loans which amount to a greater degree of the "cash on hand" (which is not actually backed by cash, but numerical expressions of monetary possession). The banks can loan money out which is greater not only than the actual paper in the vault, which is really only useful for withdrawls, but can also loan a sum of money which is greater than the principal. This means that the bank literally creates money. The actual print is irrelevant; paper money is only useful for certain transactions.

In fact, this creation of money by creating debt has an exponential effect on the ratio of debt to money supply, which means that so long as we maintain this sytem, which has been in place for a few hundred years, we will continually sink deeper and deeper into debt, because the money created by the bank is always creation of a debt, the sum of which is greater than the money currently held by society.

[Lynx]

No, because while the silver certificate is also legal tender, it is perfectly possible to have specie certificates that are not legal tender. A bank or other company prints notes that are NOT legal tender, but redeemable for a fixed amount of gold. This has often been done before and is not difficult to do. All you need is a mint or press and a vault to store the commodity.
Which happens to be what the government needs: a mint to flood the market with notes and a vault for possession of the gold, accompanied by a press release to inform everyone of the good news.


The only way you could ban cash would be to actually ban physical exchanges completely.Wouldn't banning cash be a sign of complete trust in capitalism? I rarely use cash nowadays, there are only a few legitimate businesses that continue using it. I don't believe their reluctance to join the electronic payments system is due to technical limitations.


How could you do this? First, start with some reserve, say $50. Next, convince a friend to let you hold on to his $10. Loan out that same $10 to another friend. Assuming he spends it, convince the person he spent it to to deposit that same $10 with you. Loan out that same $10 again, etc. Repeat as necessary. Congratulations! You've just expanded the money supply!

Is it wise? Probably not unless you actually become a banker, because on your own you aren't backed up by the central bank, so if your reserves become depleted, you are screwed.Perhaps knowing that would make me a more cautious banker.

[Lynx]

Correct me if I'm wrong, three arguments are being made:
1. It is impossible to achieve a closed, zero sum model for the means of exchange.
2. It is undesirable to do so.
3. Current monetary policy is working just fine.

[pusher robot]

[quote=Lynx;1049838]Which happens to be what the government needs: a mint to flood the market with notes and a vault for possession of the gold, accompanied by a press release to inform everyone of the good news.

My point is that it doesn't take a government to issue a currency.


Wouldn't banning cash be a sign of complete trust in capitalism? I rarely use cash nowadays, there are only a few legitimate businesses that continue using it. I don't believe their reluctance to join the electronic payments system is due to technical limitations.

No, it's a sign of trust in the financial institutions that handle those electronic transactions.


Correct me if I'm wrong, three arguments are being made:
1. It is impossible to achieve a closed, zero sum model for the means of exchange.
True, because anything can be exchanged for anything else.

2. It is undesirable to do so.
True, because it is (a) futile, and (b) extremely deflationary.

3. Current monetary policy is working just fine.
Eh...current monetary policy is adequate. Let's say it's sufficiently superior to your proposal.

[Lynx]

My point is that it doesn't take a government to issue a currency.So? Fiat and representative currency are dependent on government backing. It is trivial to undermine these types of issuances. Only commodity money is independent of government control and perhaps beyond its reach.


No, it's a sign of trust in the financial institutions that handle those electronic transactions.Both means are trusted but the decline in the use of cash is due to greater convenience of the electronic payments system. Motivations for using physical currency: tax evasion, criminal activity


True, because it is (a) futile, and (b) extremely deflationary.What's wrong with deflation?