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One of the most illuminating comments I heard recently was on a Bloomberg podcast where they made the point that fiat money is a closed system. Money can flow b
by ellius 8y ago
One of the most illuminating comments I heard recently was on a Bloomberg podcast where they made the point that fiat money is a closed system. Money can flow between economic actors, and it can obviously influence behavior, but in both a theoretical and real sense it is really just an abstraction that hovers above the physical world. That's not to deny the economic effects of monetary policy, but I do think it helps clarify a lot of monetary phenomena.
- pjc50 8y agoYes. It's deeply out of fashion but trade balances are also important. If your country is producing more than it's consuming then debt is unlikely to become a problem.
- bduerst 8y agoYep, but the same applies to debt as well. A contractual IOU may say seem abstract but it can be almost as valuable as the money itself (sometimes more valuable, with attached APR).
- whatever1 8y agoIt is not exactly closed. We also pump new money into the system based on our models for the actual increase of the gdp. Many times our models are off and we create inflation because of this (even if someone has no agenda).
- sunstone 8y agoLanguage and mathematics are two more abstractions that "... hovers above the physical world."