LOki
The Yaweh of Mischief
- Mar 26, 2006
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- 359
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Relevent only with fiat currency when the value of of everything goes up or remains constant. A deflated currency, where the value of that currency is based upon upon an objective standard of value rather than than some retard's capacity to print money, is simply a reflection the deflation in the value of everything being bought with it: If on one day your salary is worth $100 and it buys 100 widgets, and then your salary becomes worth $10, but you can still buy 100 widgets, then despite the deflation in your salary, it still carries the same objective value it did previously. Currency that is hard indexed to objectively etsablished value cannot deflate (or inflate) relative to value of things it's exchanged for in the manner that one founded upon some retard's capacity to print money, or force an interest rate can. The value of a currency cannot be predictably and objectively established where currency is subject to the whims of political expediencies--hence, the intrinsic weakness, and frankly moral failing, of fiat money.In a deflating currency economy, salaries eventually go down.
But the objective value of those salaries does not neccessarily have to follow.Less dollars with more people and goods = salaries go down.
Money, whether fiat or gold, has value only as a predictable representatiion of value, unless it also has some intrinsic value.Money, whether fiat or gold, only has value for its relative purchasing power.
Unsubstantiated promises printed on slips of paper have, quite literally, no intrinsic value. Consider the value of the Mark in the Weimar Republic.Gold does have some instric value as jewelry.
Borrowing is not a right or an entitlement. Borrowed wealth is not created wealth or earned wealth. Credit should not come easy . . . EVER, and repaying loans early SHOULD be rewarded by the minimization of the cost of the loan.If the purchasing power of the currency has increased, it costs you more in purchasing power to repay a loan in a deflationary environment.
EG You borrow $1m for 20 years. Over 20 years deflation causes prices to fall by 1/2. You are making 1/2 the income. When you pay back the $1m, it is costing you $2m in equivalent purchasing power. Plus whatever interest.
Loans are more expensive for people and businesses. They borrow less and therefor can buy/produce less.
But who would loan you money if the money you repay with is objectivly worth less than the money you were loaned, even if there is more of it? You could pay higher interest . . . but then you and your lender have to predict the whims of some retards with the practically unlimited capacity to print and destroy money, or force an interest rate that erodes the value of the loan to you, or your lender, depending upon the direction of thier notion of political expediency.Unlike a deflationary scenario, If you just hold you're assets long term in cash, in an inflationary currency situion, I agree that would be retarded. So what do you do? You put your money in investments that keep up with inflation. That money is available for businesses and loans to buy things and increase production.