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a crisis like this can't exist in a vacuum. dumping money on an economy doesn't magically making people's labor less valuable, neither does disappearing a bunc

a crisis like this can't exist in a vacuum. dumping money on an economy doesn't magically making people's labor less valuable, neither does disappearing a bunch of money. the only reason it has an effect is because of aforementioned stickiness. labor values are relative to one another not absolute. then you identify the root cause but shy away from it. how would this crisis happen without fiat money in the first place? large amounts of some commodity with inelastic demand would have to be dumped on the market at once (or taken away).

bokonist 18y ago
Fiat currency is the cause of the problem, but it also provides the solution. I agree that our financial system should be running MacOS, not windows. I agree that running Windows is why we get so many bugs and viruses. But as long as we are running Windows we should still apply the patches that Microsoft sends us. Or in this case Bagehot. And declaring that we should just let the virus wipe out our computers, so then we can all buy Macs, is neither an effective strategy for making friends and influencing people, nor is it in your interest. If you're going to run a fiat currency, try and keep it as close to gold-like as possible. Do not inflate, do not deflate. If bug in the banking system wipes out half the currency in the world, simply run a patch to add the money back. If you find some alchemist created gold in a laboratory and pushed it into the market, you should shut down the alchemists lab, but allow the gold that has already entered circulation to continue circulating.
- nazgulnarsil 18y ago
  the best way to make fiat currency like gold would be to stop inflating entirely, print no more dollars. the whole point of gold is that supply is relatively INelastic. That is it does not respond to fluctuations in demand. This is what leads to stability, stability leads to confidence about investing for the future. we inflate every year.

bokonist 18y ago

Fiat currency is the cause of the problem, but it also provides the solution. I agree that our financial system should be running MacOS, not windows. I agree that running Windows is why we get so many bugs and viruses. But as long as we are running Windows we should still apply the patches that Microsoft sends us. Or in this case Bagehot. And declaring that we should just let the virus wipe out our computers, so then we can all buy Macs, is neither an effective strategy for making friends and influencing people, nor is it in your interest. If you're going to run a fiat currency, try and keep it as close to gold-like as possible. Do not inflate, do not deflate. If bug in the banking system wipes out half the currency in the world, simply run a patch to add the money back. If you find some alchemist created gold in a laboratory and pushed it into the market, you should shut down the alchemists lab, but allow the gold that has already entered circulation to continue circulating.

nazgulnarsil 18y ago
the best way to make fiat currency like gold would be to stop inflating entirely, print no more dollars. the whole point of gold is that supply is relatively INelastic. That is it does not respond to fluctuations in demand. This is what leads to stability, stability leads to confidence about investing for the future. we inflate every year.