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One thing that might be interesting to consider is wealth distribution over population growth. Thought experiment: Say our money supply is fixed (10 million d
by pnathan 15y ago
One thing that might be interesting to consider is wealth distribution over population growth.
Thought experiment:
Say our money supply is fixed (10 million dollars), and there are 1 million people in our economy. Everyone averages out to holding about 10 dollars. Everyone goes on a massive baby-making spree, and in 10 years, there are still 10 million dollars, but 2 million people in the economy. Average wealth is $5 per person. Either prices dropped (unlikely, demand has doubled in this ideal world), or everyone is averaging to be poorer.
To my mind that thought experiment demonstrates the need for the supply of money to keep pace with population growth.
I might be wrong, I am not an economics student, and there might be angles I've missed.
- daedhel 15y agoBut the absolute variation of the value the 5$ represent is based on systems that can't exist with a limited total amount of money. What will hapen is that if the population doubles, then the 5$ will also double. Laws of demand and supply.
- jotto 15y agoin your thought experiment, the buying power of a unit of currency would go up so the prices would go down. a big reason for a non-fixed money supply is so the government has the ability to change the money supply to maximize employment
- harryf 15y agoBut money isn't static. It circulates. Liquidity etc. It's more like electric current - if your system allows it to circulate fast, it will enable more buying...
- WillyF 15y agoI'd argue that the supply of money should keep pace with production, not population growth. Though you'd expect those two to be strongly correlated.