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Higher taxes will produce inflation anyway, since higher taxes will make Americans less productive by having the rich either abandon employment expansion plans or close up and retire. That reduced productivity will reduce demand for the dollar. To understand monetary inflation, you have to see both sides of the equation: supply AND demand.
Not really. Taxes take money out of ciculation causing fewer dollars to chase goods and lower inflation.
"When inflation is too strong, the economy may need a slow down. In such a situation, a government can use fiscal policy to increase taxes in order to suck money out of the economy."
"When inflation is too strong, the economy may need a slow down. In such a situation, a government can use fiscal policy to increase taxes in order to suck money out of the economy."
Yes, the supply is decreased, but lower productivity caused by more taxation also reduces the demand for those dollars. That's what I'm saying: some of the deflationists only concentrate on supply and not demand. If 25% of money is dropped from circulation, but demand for those dollars drops 50% due to reduced productivity and well because it's just worthless paper, how much are those dollars worth?
Explain the process of what happens? I am reading some posts and would like to know what exactly happens to the economy? What can one do to protect themself? Some say eventually riots in the streets is this over the top?
Where are we headed?
Thank You,
Marilyn
It depends. If you print a million dollars, and loan it to a bank, and when then bank pays it back, the Fed eliminates it, then nothing will happen. But if it is not withdrawn, then it will inflate themoney supply. We have been printing like crazy since the 1970s, and inflation is thousanfold because the money was not drawn back.
Yes, the supply is decreased, but lower productivity caused by more taxation also reduces the demand for those dollars. That's what I'm saying: some of the deflationists only concentrate on supply and not demand. If 25% of money is dropped from circulation, but demand for those dollars drops 50% due to reduced productivity and well because it's just worthless paper, how much are those dollars worth?
No is is money in circulation is by far the the greatest cause not the demand for dollars for inflation. Please back up your assertion with any evidence. I think it would be difficult since none exists.
Last edited by shorebaby; 11-01-2009 at 06:37 AM..
No is is money in circulation is by far the the greatest cause not the demand for dollars for inflation. Please back up your assertion with any evidence. I think it would be difficult since none exists.
Allow me to use an example to illustrate my point. Let's assume that buggy whips are a form of currency and we're in the late 1800's. When the car was invented, buggy whips immediately lost much of its value due to the reduced need of horses for transportation. Even though buggy whips were being destroyed due to their reduced need, their intrinsic value still became relatively worthless (except as a collector's item in extremely limited numbers). Now let's take my example and apply it towards dollars. As the dollar is dumped as an exchange for oil around the world, its value will necessarily decline even if taxes are increased and fewer are left in circulation. Yes, you are partially correct in that supply of dollars necessarily creates inflation. However, the same is true for demand destruction. But, it's undetermined which has the greater impact and neither you nor I have evidence to suggest that either the supply increase or demand decrease will be the deciding factor.
It depends. If you print a million dollars, and loan it to a bank, and when then bank pays it back, the Fed eliminates it, then nothing will happen. But if it is not withdrawn, then it will inflate themoney supply. We have been printing like crazy since the 1970s, and inflation is thousanfold because the money was not drawn back.
Wow, you have something correct.
Indeed thats what is currently going on. The fed is printing TONS of money and loaning it to the banks which they sit on, which results in no inflation. (which is why we havent seen any).
If/when the banks pay it back it simply removes money from money supply that wasnt available to the consumer to begin with.
If/when the banks begin to loan it back out then indeed inflation is the outcome because money is to "easy" to obtain.
Allow me to use an example to illustrate my point. Let's assume that buggy whips are a form of currency and we're in the late 1800's. When the car was invented, buggy whips immediately lost much of its value due to the reduced need of horses for transportation. Even though buggy whips were being destroyed due to their reduced need, their intrinsic value still became relatively worthless (except as a collector's item in extremely limited numbers). Now let's take my example and apply it towards dollars. As the dollar is dumped as an exchange for oil around the world, its value will necessarily decline even if taxes are increased and fewer are left in circulation. Yes, you are partially correct in that supply of dollars necessarily creates inflation. However, the same is true for demand destruction. But, it's undetermined which has the greater impact and neither you nor I have evidence to suggest that either the supply increase or demand decrease will be the deciding factor.
The dollar is and for as long as China is swimming in dollars the dominant currency in the world and your thesis has no relevence in this inflation discussion. By the way every economist talk about increase in dollars in circulation as a threat to the economy, not the fall of the dollar.
Indeed thats what is currently going on. The fed is printing TONS of money and loaning it to the banks which they sit on, which results in no inflation. (which is why we havent seen any).
If/when the banks pay it back it simply removes money from money supply that wasnt available to the consumer to begin with.
If/when the banks begin to loan it back out then indeed inflation is the outcome because money is to "easy" to obtain.
Well, a lot of the banks have already paid back the money, so the question is what happens to the money now. If is eliminated, or is it added to the circulation.
Yes, I know I am correct. Perhaps one day you will be correct about something too.
A small group of "legal" private counterfeiters were put into business by "our" government in 1913.
Original dollar = 1/20 oz. gold.
Current dollar = 1/1044 oz. gold
Apart from everything else that can be discussed about counterfeiting currency, it is the private monopoly over "our" currency that has destroyed the value of the dollar more than anything else. Where did that value go? Primarily into the pockets of those who own the "Federal Reserve".
The simplest analogy would be something like this:
There are 100 dollars total in the economy valued at two eggs each.
The Morgan Reserve counterfeits an additional 100 dollars.
Now all dollars are worth just one egg each.
So half of the wealth of everyone holding the original dollars has just been cut in half and transfered to those holding the "new" dollars.
A drastic real example was the "bailout" of the banks.
The Morgans counterfeited nearly a trillion dollars. (Essentially taking a trillion dollars from the people indirectly.)
The Morgans gave these counterfeits to themselves and their friends.
The Morgans sent the people a bill for a "debt" for their counterfeiting service.
The Morgans collect "interest" on this "debt" for their counterfeiting service.
Soooo...when the Morgans, uh the "Federal Reserve", counterfeit currency they are actually just charging you for being mugged by them. Simplest terms.
Counterfeit (Steal)
"Donate" the plunder to themselves and friends. (Wallow in the stolen wealth.)
Bill everyone else for the "loan". (Steal again)
Charge everyone else interest on the "debt". (Steal yet again)
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