4 ms·
When you take money away from someone who was saving to build a factory, so his factory is not built, then the factory doesn't produce anything, so wealth is lo
by xenophanes 13y ago
When you take money away from someone who was saving to build a factory, so his factory is not built, then the factory doesn't produce anything, so wealth is lost.
Moving money around disruptively (via inflation or other methods) makes it harder to do economic planning and successfully do large wealth creating projects. So it does mess up wealth creation.
You say you agree with my points but you are disagreeing. Hopefully this clarifies.
A major cause of inflation is printing money.
Fractional reserve banking is basically the same thing as loans. It increases the amount of money that exists only if you ignore the amount of debt that exists. If you subtract people's debt when considering how much money they have, like you should, then nothing actually happens to the money supply.
(In practice, banking is complicated by factors like FDIC insurance. But the basic idea of borrowing money then loaning out the borrowed money, while it does come with some issues, doesn't cause inflation because loaning neither creates nor consumes money, it balances out (unless you selectively ignore half of what's happening))
- betterunix 13y ago"When you take money away from someone who was saving to build a factory, so his factory is not built, then the factory doesn't produce anything, so wealth is lost." Unless he can find investors...
- nthj 13y agoInvestors are a subset of “people who save“
- userulluipeste 13y agoHe probably was also talking about investment banks, that will gladly lend you some money for the right price...
- tedsanders 13y agoYou make a good point, but I only agree partway. You are right that if a factory builder was saving money to build a factory, then inflation hurts his output. However, if a factory builder takes on loans to build a factory, then inflation actually helps his output! I would expect that most factories are built from loans, rather than savings. In general, banks are creditors and businesses/people are debtors. So perhaps inflation hurts the banking sector but helps other sectors. Lastly, inflation only hurts the factory builder if he's using money as a store of value. If he buys stocks/bonds/commodities, then he can store value without exposing himself to the risk of inflation. What do you think about these points?