[OT] Ameros will clog the tubes - was Re: Network Neutrality

Von Fugal von at fugal.net
Fri Dec 5 10:58:33 MST 2008


<quote name="Nicholas Leippe" date="Fri,  5 Dec 2008 at 10:14 -0700">
> On Friday 05 December 2008 09:18:21 am Von Grant Fugal wrote:
> > There is less MONEY to go around, but I will say it time and time again,
> > MONEY IS NOT WEALTH!
> 
> I agree. Money is not wealth. Money is a means of wealth transferrence. 
> Wealth, is measured in property. An interesting aside is, when you use a 
> precious metal as money, it now wears two hats.
So why do we need more money to have more wealth?

> > Why is it bad for me or anyone else, if when capita increases, we all
> > have less money? There's more people per unit money, but there's also
> > more goods per unit money, so really it all balances out.
> 
> How is there magically more goods per unit money with an increase of capita?
> An increase of capita is an increase in demand, not supply.
I explain exactly how that 'magically' happens below.

> > How does constant per capita money facilitate exchange? If the US
> > population doubled tomorrow, those new people would absorb approx half
> > the money supply.
Increased demand for money. But how does anyone demand money? By
offering a product, good, or service, or more generally, by increasing
the common wealth.

> > I can see why this would be problematic, but such
> > dramatic change does not occur. With the doubling, eventually all the
> > new people would become producers (you might even say they would become
> > producers by necessity before they absorbed any of the money supply)
Increased supply of wealth (goods, services).

> > so at the same time they are shrinking the per capita money supply, they
> > are also increasing product, or generally maintaining a relatively
> > constant per capita production
So with maintaining a constant per capita production (which if this does
not happen, we get poorer as a whole no matter what you do with the
money supply) then you have, as you describe, an increase in the demand
and an increase in the supply. Both curves shift equally, thus you say
"prices" remain the same.
> > (in reality per capita production goes up
> > over time, THIS is economic growth, THIS is wealth, regardless what the
> > money does.)
So by this argument, prices actually go down, the supply curve shifts
faster than the demand curve. Everyone is wealthier! Again, regardless
of what the money does.

> > So if everyone makes pies, and there's on average one pie
> > per person. What mattereth it that now there's twice as many pies, twice
> > as many people, but we all have half the money with which to buy pies?
> > Pies would simply cost half as much.
So, supply curve goes right, demand curve follows behind. Now, the price
is lowered. But supply/demand is not at all dictated by price, it's
called supply demand because that's exactly what determines it, supply
and demand. So in reality, these new supply/demand curves dictate new
prices. The price of yesterday is simply now a new price, half as much
gold.

> > In reality such changes take place
> > gradually, giving plenty of time for these adjustments to happen
> > naturally and smoothly.
> 
> I think this argument is seriously flawed.
Hopefully I explained it better this time around.

> Let's assume from your example that an increase in capita incurs an equal 
> increase in both demand and supply. Both curves shift to the right by the same 
> amount. In this case, prices stay exactly the same while the quantity of goods 
> exchanged increases. Fine and dandy.
Yes, as I also noted above.

> However, you're forgetting, that with a static currency supply, the per capita 
> purchasing power has now decreased inversely proportional to the increase in 
> capita.
The money supply per capita has decreased, but not the purchasing power.
Because rememeber, there's increased supply, so the purchasing power of
a given amount of money goes UP, that means I actually need less money,
hence it's just fine that new producers are absorbing some of the money
supply. Just look, they are aqcuiring that money fairly by supplying
something in return!

> Now what have we got? We've just lowered the demand--the demand curve 
> shifts to the left, lowering both the price,
Yes, the price lowers.
> and the number of goods exchanged 
No, the demand is still the same.

> per capita--some of your population now cannot afford the goods. When this 
> gets to excessive levels, we call it poverty.
What we have is wealth, and a medium of exchange for that wealth. If
someone is producing enough wealth to get by, then it matters not the
amount of money is used in exchanging that wealth.

> Now redo this with a steady per-capita currency supply, and that final 
> decrease in demand is eliminated. Everyone's purchasing power is unaffected by 
> changes in capita. Your economic growth is still measured in terms of quantity 
> of goods exchanged, so you grow with your capita, moreso if you have exports.
Ok, here goes.
Supply and demand both go to the right. Demand a little behind. This
means lower prices (for arguments sake let's take price as a unit of
labor). Before I could buy a pie for one hour labor. Now I can buy
that pie for 50 minutes. Yay.
Now that final decrease in demand (what you call money price). I still
need as much pie as I did before. But now I can get it cheaper (in
terms of labor). I now have extra time with which I can eat more pie
and get fat, or go on vacation, or do any number of things. But here
comes the increased money supply. Awesome, now not only do I get to buy
pie for 50 minutes of labor, the actual money price of those 50
minutes is the same as before. So if I got $6 per hour before, now I
pay $5 for my pie. This indeed works, as you claim, and I am still
better off for it. Without the increased money supply, I would probably
have to renegotiate my wages, and earn less at some point (if the capita
increased sharply enough) but you know what? That's OK too, because now
that loaf isn't $5, it's now $4.50, because everyone's
share of the money supply is smaller. If I have savings, it's even
better.

Don't confuse cost (dictated by supply and demand) with price (dictated
by money supply).

So yes, if you can magically distribute money and maintain a constant
per capita money supply, then that works. But why do we have to have it?
It still works without it, and without it we don't have to worry about
the distribution problem!

That distribution problem is really really difficult. If you allow
someone to print the new money, then they use it to their own
advantages, they increase their own wealth dispraportionately to the
rest of the population. So while our overall wealth and prosperity is
increasing (so long as inflation isn't rampant) we're still not all
benefiting equally from our collective increased production. Government
slurps up that wealth and uses it for pork, bailouts, increased
salaries, war, and outright waste! Inflation allows our government to
waste a portion of our wealth, which would otherwise benefit us all so
greatly that there truly would be no poor among us.

Von Fugal
-- 
Government is a disease that masquerades as its own cure
-- Robert Lefevre
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