Quote:
Originally Posted by schola  The limit is the money supply. That is real. Whatever we designate as money, there is always only a finite amount of it in an economy. What you can theoretically owe (debit) or be owed (credit) is unlimited, but the money supply is definitely finite.
Interest doesn't increase the money supply.
Before the Federal Reserve and fiat money, silver and gold were money in the United States. The amount of money was directly connected to the production capacity of mines. I think it increased at something like 2% per year.
When the United States demonetized silver in 1873, it launched the whole country into a depression that lasted 5+ years.
It had nothing to do with the production capacity of the economy. The Powers that Be simply decided that silver wasn't "money" anymore. |
I'm curious- does it make
any sense to you to tie monetary policy to the amount of a few particular metals dug out of the ground in a given year??? I don't know if the current system is optimal, but I certainly wouldn't want to go back to money creation driven by the mining industry!