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How is that any different than controlled dilution of a fiat currency, like the Federal Reserve does? The net result is the same.
by colanderman 13y ago
How is that any different than controlled dilution of a fiat currency, like the Federal Reserve does? The net result is the same.
- jchrisa 13y agoIt's actually sort of the opposite. Interest based money is designed so that the numeric value grows over time. A tax on holdings makes its numeric value decrease over time. See http://en.m.wikipedia.org/wiki/Demurrage_(currency) http://en.m.wikipedia.org/wiki/Demurrage_(currency)
- colanderman 13y agoNo, it's the same thing, as that link points out: Both inflation and demurrage reduce the purchasing power of money held over time, but demurrage does so through fixed, regular fees while inflation does so through expansion of the money supply by a central monetary authority distributing newly issued currency or through endogenous money creation (such as fractional reserve banking).
- kaonashi 13y agoThe Fed controls reserves, not net financial assets. The net result from a fiscal injection and a financial composition shift is not the same at all.
- colanderman 13y agoExactly how do they differ? My impression is that the net result (depreciation of cash assets) is the same.
- deleted 13y ago[deleted]
- kaonashi 13y agoIncreasing the amount of available reserves doesn't really transmit to inflation as it's constrained by demand for loans. The loanable funds model which says that increases in reserves leads directly to increases in loans doesn't really apply under a floating-rate non-convertible currency regime.
- colanderman 13y agoInteresting, thank you.
- bad-news 13y agoYeah, direct tax is a lot more fair.