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You are correct, mining did increase the money supply! I hugely oversimplified things. But central banks do tend to be a more steady supply of new currency then

You are correct, mining did increase the money supply! I hugely oversimplified things. But central banks do tend to be a more steady supply of new currency then mines.

Gormo 16y ago
If we consider mining to be an economic activity in itself - given that it requires capital labor, etc. in order to undertake - wouldn't the scale of mining operations within a given community be proportionate to the scale of the overall economy? Presuming that mining generates a consistent supply of new silver, wouldn't this actually be a fairly decent way of scaling the money supply in proportion to economic growth? And if even if the money supply is fixed, wouldn't economic growth cause deflation, and just make each unit of currency worth more?
- bioh42_2 16y ago
  wouldn't the scale of mining operations within a given community be proportionate to the scale of the overall economy? If we consider mining success as a function of investment AND natural deposits, then if the natural deposit goes to 0, investment can go to infinity without increasing the success rate. A steady slow growth of the money supply has been proposed as a way to eliminate bubbles. No one has tried it, for all we know it is not much worse or better than what we have now. Deflation gives everyone a great reason to save. This can turn into an economic death spiral. Exceptions do apply, as for example after a destructive war there can be strong enough demand to rebuild that the economy grows even with mild deflation.
  - Gormo 16y ago
    > If we consider mining success as a function of investment AND natural deposits, then if the natural deposit goes to 0, investment can go to infinity without increasing the success rate. Sure, but people are still mining silver 2500 years later. I don't know if the same mines are still in use, but so what if they're not? Economies adapt: a local mine going dry might incentivize exploration, which might in turn lead to even faster economic growth. People searching for new silver mines once ended up naming a whole country after the stuff. > A steady slow growth of the money supply has been proposed as a way to eliminate bubbles. No one has tried it, for all we know it is not much worse or better than what we have now. Isn't this precisely what we do have now?
    - bioh42_2 16y ago
      a local mine going dry might incentivize exploration, which might in turn lead to even faster economic growth. This might be true in a modern commercial banking driven economy. But in the old days, the mines running dry usually resulted in a reduction in the local economy. Now on a very large scale you could argue that it caused empires like Rome to push and push farther, all the way to the tin mines of the British isles. Isn't this precisely what we do have now? You could argue, modern day West (and then unified) Germany had it, and with its dominance of the ECB the EU might have it... for now. But many other central banks are well beyond slow and steady, Zimbabwe comes to mind, but in a way also the BOJ.
- zeteo 16y ago
  Mining yields depend primarily on the quantity and accessibility of reserves, neither of which can be enhanced by capital investments. The discovery of new mines has caused significant fluctuations in prices, see for example http://www.straightdope.com/columns/read/611/what-happened-to-all-the-gold-spain-got-from-the-new-world http://www.straightdope.com/columns/read/611/what-happened-t...

You are correct, mining did increase the money supply! I hugely oversimplified things. But central banks do tend to be a more steady supply of new currency then mines.

Gormo 16y ago

If we consider mining to be an economic activity in itself - given that it requires capital labor, etc. in order to undertake - wouldn't the scale of mining operations within a given community be proportionate to the scale of the overall economy? Presuming that mining generates a consistent supply of new silver, wouldn't this actually be a fairly decent way of scaling the money supply in proportion to economic growth? And if even if the money supply is fixed, wouldn't economic growth cause deflation, and just make each unit of currency worth more?

bioh42_2 16y ago
wouldn't the scale of mining operations within a given community be proportionate to the scale of the overall economy? If we consider mining success as a function of investment AND natural deposits, then if the natural deposit goes to 0, investment can go to infinity without increasing the success rate. A steady slow growth of the money supply has been proposed as a way to eliminate bubbles. No one has tried it, for all we know it is not much worse or better than what we have now. Deflation gives everyone a great reason to save. This can turn into an economic death spiral. Exceptions do apply, as for example after a destructive war there can be strong enough demand to rebuild that the economy grows even with mild deflation.
- Gormo 16y ago
  > If we consider mining success as a function of investment AND natural deposits, then if the natural deposit goes to 0, investment can go to infinity without increasing the success rate. Sure, but people are still mining silver 2500 years later. I don't know if the same mines are still in use, but so what if they're not? Economies adapt: a local mine going dry might incentivize exploration, which might in turn lead to even faster economic growth. People searching for new silver mines once ended up naming a whole country after the stuff. > A steady slow growth of the money supply has been proposed as a way to eliminate bubbles. No one has tried it, for all we know it is not much worse or better than what we have now. Isn't this precisely what we do have now?
  - bioh42_2 16y ago
    a local mine going dry might incentivize exploration, which might in turn lead to even faster economic growth. This might be true in a modern commercial banking driven economy. But in the old days, the mines running dry usually resulted in a reduction in the local economy. Now on a very large scale you could argue that it caused empires like Rome to push and push farther, all the way to the tin mines of the British isles. Isn't this precisely what we do have now? You could argue, modern day West (and then unified) Germany had it, and with its dominance of the ECB the EU might have it... for now. But many other central banks are well beyond slow and steady, Zimbabwe comes to mind, but in a way also the BOJ.
zeteo 16y ago
Mining yields depend primarily on the quantity and accessibility of reserves, neither of which can be enhanced by capital investments. The discovery of new mines has caused significant fluctuations in prices, see for example http://www.straightdope.com/columns/read/611/what-happened-to-all-the-gold-spain-got-from-the-new-world http://www.straightdope.com/columns/read/611/what-happened-t...