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That spreadsheet is another great example, thank you. I think I might make a presentation or animated gif or something that shows it visually as it progresses. But both of these examples are great, thank you both.
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That's an excellent answer, thank you. I agree that it seems like chasing the ball (or maybe chasing the dragon!) but that spreadsheet sums it up nicely. My only question is that at step5, while the "borrowers" have 500g to purchase goods and services from "everyone else" the "lenders" have nothing. What if they need
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[quote user="Jonathan M. F. Catalán"]The critique is of the mechanistic quantity theory of money. Here is Jesús Huerta de Soto on the topic.[/quote] Thanks for the link. I read that page and couldn't make heads-nor-tails of his argument. I'm printing out the whole PDF now so maybe some light reading tonight and a few
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"The Essential von Mises" by Rothbard. He agreed with classical "quantity theory". The equation I am talking about is the equation of exchange: M * V = P * T Where M is the total money in circulation, V is the velocity of money, P is the price level of all economic transactions, and T is the real value of aggregate transactions.
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[quote user="Juan"]Not sure what you mean by deflation.[/quote] The opposite of inflation. If the money supply grows too fast then you have a decrease in that money's purchasing power. If the money supply doesn't grow fast enough you get deflation...an increase in that money's value. That I understand...it's pure supply/demand
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According to your logic, yes it will, Actually, it's not my logic. It's Ludwig von Mises' logic. I'm just trying to understand it. As from what I can tell, in your example, you would have neither deflation nor inflation because the real value of all aggregate transactions in the economy would also decrease so the equation would balance
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monetary cranks are the worst.... Because.... Please help me understand, because I don't have an economics degree or a Nobel Prize and obviously you must since you can call people like John Stuart Mill, Ludwig von Mises, and Milton Friedman "cranks".
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Wow. Snarky replies. How original. According to the quantity theory equation if the supply of money doesn't increase you have deflation. End result is the same...economic output decreases since people can increase their wealth just by sitting on their money rather than investing it. So the only way to get stable growth is to increase the money supply
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I have been doing more research on this issue, and I'm just getting more and more confused. I'm talking about Milton Freidman's money supply equations and monetarism...specifically that if you assume the velocity of money stays constant then the supply of money in a system must increase to allow for economic growth. Put another way, the
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That 10g comes from Joe selling goods on the market That's what you would think, but that 10g had to come from somewhere outside the system since there is a fixed amount of money in the economy. Jane is asking for 10g of gold that does not exist in the system. There was 1000kg of gold in the economy, but now there needs to be 1000.01kg of gold so