Originally posted by Dustytoad
reply to post by herrw
Speaking on your student loan answer...
How come inflation isn't higher now? Wouldn't the government (debtor) want their debt to be worth less or even worthless while at the same time
having more money out of thin air to pay it off with? Or does that balance out some other way that I don't understand? Sounds like it may be a not so
bad time to be in debt as long as you are getting inflated wages due to lowered buying power, but I guess minimum wage stays the same as usual..
I do not understand all this money stuff. I think it's on purpose like the tax code.. Need to have a life long study to find the loopholes, and
connections to keep the holes open.
No simple answer on this, but I will do my best.
There are several theories on economics. Most economists follow the Keynesian model, which says that in times of high unemployment the government
must spend money on public works to jump-start the economy. The problem with this is that, eventually, the government will reach a point where it can
no longer sustain itself. It works something like this:
Unemployment rises, so the government either lowers taxes or spends more money, or both. Then unemployment comes back up. When that happens, the
governnment 'should' reduce spending or increase taxes to offset the earlier action. This is, however, not politically advantagious. So the
spending remains and the taxes don't come back up. Industry flourishes under this environment, but the government continues to spend itself into
oblivion. Inflation increases to close the gap, and unemployment rises. The government then increases spending or lowers taxes.
What we have reached, in western society, is the point where the only way that we can correct is either to completely dismantle the system in favor of
a new one, or drastically increase the population to offset the ridiculous amount of money floating around out there.
Let's not fool ourselves, however. There are a lot of people in the world. The petro-dollar represents all of them. That is a lot of 'counters'
to account for their industry potential. Further, a huge amount of those petro-dollars are sitting in banks unused. Unused currency doesn't affect
the economy. In essence, saved money is money you have removed from the system. Further, the human race is increasing its numbers exponentially.
This slows down inflation.
So, on the 'no inflation' side, you have these factors:
Savings and Investment
Discovery of new commodities
On the 'inflation' side, you have these factors:
Cost of supporting population
Money in use
Money being printed (LIBOR Scam)
Flat-line, we have 10% inflation as a standard rule. Every 10 years, the general cost of everything doubles. It's a result of the system, even
though the relative value of the goods remains constant.