To have a stable currency, the amount of money and the amount of value being traded using money must remain in the same aggregate balance.

No. There’s nothing wrong with deflation sprung from productivity. Tampering with the money volume is the root to many problems.

the_nile on April 30, 2009 at 5:24 PM

That’s why I said in the aggregate. Prices of some things drop, but slowly so that the deflation in those things does not do harm. And people buy more. And maybe more people are buying more. So in the aggregate the currency is stable.

You can’t avoid changes in the money volume unless you completely do away with fractional reserve requirements in banking. And without them, the banking system grinds to a halt. There isn’t enough money in circulation, and people start creating their own with personal IOUs and corporate scrip.

Remember that in the 19th century USA, banks printed their own currency, and books were published reporting on the soundness of each of those dollars, and what ‘exchange rate’ should be given to an out-of-state bank’s currency. Do we want to go there?

There are problems, and one of them is that the Fed’s mandate to maintain full employment is equal to its mandate to maintain the stability of the currency. We have accepted the idea that some small inflation is necessary. I’d prefer to have that piece of programming changed than to destroy the whole system.

Liberals think those ways are vast and conservatives think they are limited.

calbear on April 30, 2009 at 6:55 PM

My sense from modern-day liberals is that they have a hard time conceiving of a situation where the government can’t spend your money better than you can. Of course, it’s all “for the children”.

The Green Room officially rocks!

Well done, Doc! Excellent essay!

I hope Dr. Zero stays in the Green Room where, as someone said, he is as good as VDH.

I speculate whether the good Dr. is a doctor or engineer or scientist. He write too well and thinks too clearly to be a journalist of professor of the humanities.

Can’t use the “Send to a Friend” feature. Says there’s a 404 error code. Not being incredibly tech savvy, what does this mean? I want to send this to everyone I know!!!!
mimi1220 on April 30, 2009 at 4:42 PM

404 means Page Not Found. Sometimes the server can redirect to another page and that could trigger the page not found if the destination page isn’t there. But without reproducing the problem myself, hard to know the real cause. I haven’t tried.

That is why deficit spending on Obama’s scale is so awful: because it takes a trillion dollars from the future without asking its permission, burns away a vast amount of the wealth that money represented, replaces it with a debt that can only grow worse with every passing year, and tries to convince the American people the whole transaction was a bargain.

Yes.
So well done as always Doctor Zero. Thanks for doing this. I love to read what you write because you know how to address the subtext and hidden ramifications of the broader surface issues.

I asked if he knew that if all the county employees got a raise…they’d lose money in the long run, as prices would go up in the near term, let alone the long term, as inflation is just round the corner. His response, not to worry, he’d have more money coming in, thanks to the “stimulus” drop to the county this week.

This is the sort of message that needs to be nailed on the foreheads of every voter. Then, they might just get it.

The flawed reasoning behind the idea of fiscal “stimulus”, really.

No, not really. The stimulus is premised on the idea that the government can better spend money to create wealth than you can. To be fair, there are ways that the government can spend the money better. Try invading Afghanistan with an independent private militia alone and see how far you get. Try coming up with the Internet, one of the greatest wealth multipliers of all time. Try building a truly workable interstate system made entirely of toll roads. There are ways government can spend money better. Liberals think those ways are vast and conservatives think they are limited. But I don’t think Obama passed the spending measures due to a confusion between money and wealth. Those who support him, however, might be a different story….

Rod on April 30, 2009 at 5:22 PM

Thanks for the link.

To have a stable currency, the amount of money and the amount of value being traded using money must remain in the same aggregate balance.

njcommuter on April 30, 2009 at 4:58 PM

No. There’s nothing wrong with deflation sprung from productivity. Tampering with the money volume is the root to many problems.

How could I get a copy of that awesome string of sentences?

DanMan on April 30, 2009 at 4:12 PM

I think that was something I wrote after Janeane Garofalo erupted… I’ll have to see if I can find that and put it up… I don’t want to spam the Green Room, though…

Doctor Zero on April 30, 2009 at 4:31 PM

I think this might be it here: Doctor Zero on April 16, 2009 at 11:20 PM

Someone should take the time to collect the good doctor’s writings and publish a book.

While I wait for that to happen, I am going to start collecting them and sending them to my friends and family.

Thank you, Doctor. I and many others are looking forward very much to your next post.

If you still doubt that money is a bookkeeping mechanism, consider this: if you deposit that twenty-dollar bill a bank, the moment the bank accepts the deposit that bill is no longer money. It is currency, but not money. If the bank decides that the bill is too worn and sends it to the Federal Reserve for destruction, neither you nor the bank has lost the slightest part of that twenty dollars, which exists now on the books of the bank, and only there.

A stable currency means that “twenty dollars” will have, in aggregate the same value tomorrow that it has today. Some things will be cheaper, some more expensive. Computers have gotten cheaper. Most raw metals have gotten more expensive. To have a stable currency, the amount of money and the amount of value being traded using money must remain in the same aggregate balance.

Thanks, everybody! I’m glad you found it worthwhile. Hitting “submit” on that first blog post, for a first-class place like this, did the same thing for my heart rate as signing my mortgage…

Doctor Zero on April 30, 2009 at 3:44 PM

Holy ****… you mean that was your first post?

I have read and marveled at your posts for some time now. This is typically brilliant, and I can only hope your stuff finds an even broader audience.

Thanks for sharing your insights, which are much appreciated.

F’ing brilliant metaphor! Terrific article. Kudos.

Doctor Zero……..

……. with your permission, I am going to link everyone I know to this article.

Seven Percent Solution on April 30, 2009 at 4:05 PM

I’d be honored!

Buddy I put your writing up there with Victor Davis Hanson and it is so refreshing to do so, thanks for the work. About 10 days ago you posted a very succinct response that went on to explain why liberals could not see the good in the west and America and how they cling to every perceived wrong like it was an anchor around our collective necks.

How could I get a copy of that awesome string of sentences?

DanMan on April 30, 2009 at 4:12 PM

I think that was something I wrote after Janeane Garofalo erupted… I’ll have to see if I can find that and put it up… I don’t want to spam the Green Room, though…

How could I get a copy of that awesome string of sentences?

DanMan on April 30, 2009 at 4:12 PM

Copy and Paste?

I would like to add – those who are in favor of “money” have never had nor created wealth – hence their desire to both recieve it for free, while not understanding its damage.

How could I get a copy of that awesome string of sentences?

……. with your permission, I am going to link everyone I know to this article.