Monday, June 7, 2021

Rectification: Purchasing Power

Purchasing power can't be fudged by accounting tricks. Total purchasing power is the amount of stuff for sale. 

If Ford has 100 cars for sale, and you double the monetary supply, Ford has 100 cars for sale. If Ford has 100 cars for sale and the monetary supply is slashed by 90%, Ford has 100 cars for sale. 

Though certainly if you perform radical operations on the money supply, the feedback gets all buggered and the price system has a tendency to lock up.

This is the very good reason not to have a national currency. Want at least two, so if one locks up the other can take over with minimal fuss. That or genuine specie-backed currency which makes manipulations impossible.

Basically accounting locks up when prices become inconsistent. A handful of bird feed is not worth as much as a car, but if the price system is buggered vigorously enough, the nominal prices can converge. Or, equivalently, when only folk who already have a car have any money, and thus Ford cannot see any demand from those who wish to buy a car. 

If you really bugger the price system you can always just re-issue the currency. Sort of guess how much money everyone is owed and re-set their net worth on the new standard. In other words issue funny* money and declare by law that its holders are allowed to buy food and pay wages and so on. As long as folk keep making stuff, the purchasing power exists and there is stuff to buy. Grandfather in revenue streams. It won't be accurate but it's better than accidental mass murder. 

*Funnier money, in this case. 

The second stage of this plan would be to slowly wean the system off newly printed money. You absolutely don't want the government centrally deciding wages any longer than strictly necessary. Or: methadone exists. If you have a heroin addiction, use it. Don't like methadone? The alternative is death, so...


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