Monday, August 25, 2008

2 + 1 Rules (please discuss).

1. Money Represents the economy, inflation and deflation represent the gap between money and the economy.
2. The government cannot raise the rate of economic growth, only lower it own hindrance.

Update:
3. The government is solely a transfer agency. It does not create.

7 comments:

NMMM.NU said...

1. Money Represents the economy, inflation and deflation represent the gap between money and the economy.

>>>Money Represents the economy
Not true. PAPER money represents the expectations of the economy, but also interest rates etc.

>>> inflation and deflation represent the gap...
Never thought for inflation/deflation in this way. I believe both inflation and deflation are bad. The only exception would be very small inflation, let say 0.5 to 1.0 % per year, because it will make money "move", else money will sit in banks and doing nothing. Higher inflation will make money take huge risks, but small one will be just right.

2. The government cannot raise the rate of economic growth, only lower it own hindrance.

Generally true. But what about protectionism? It helps local economy growth, but not always.

NMMM.NU said...

One more thing about small inflation. Let say we have money backed by gold. Every year there are new gold discoveries, and new gold is mined. This however is small quantity, so gold inflation is small.

However, at the end of 19th sentury someone discovered new way of silver mining. Then the word saw big silver inflation, because the silver mined raise unexpectedly.

AntiCitizenOne said...

> Generally true. But what about protectionism? It helps local economy growth, but not always.

Protectionism transfers money from consumers to companies/ and the government. The lowering of competition will make companies less efficient, not more.

Mark Wadsworth said...

Good equation, there's not really much to add (sic).

NMMM.NU said...

>>> Protectionism transfers money from consumers to companies/ and the government.

What I ment is not allowing foreign companies to concurent local companies.

Everybody gives example with pre-EU France.

However, here you are a strange example :-) - Bulgarian Tomatoes, even they are very good (the best), are pricy. Turkish Tomatoes are cheaper. However if you import tomatoes from Turkey, you pay huge taxes.

This helps Bulgarian "tomatoes sector" to grow more rapidly.

However, this helps same sector not to develop better techniques.

Finally is very difficult to say if this protection is good or bad.

Philip Thomas said...

Whilst I'm rarely one to blow the government's trumpet, what about infrastructure development or enforcement of property rights? I think your rules are handy maxims for most people to remember because most people are vulnerable to the notion of "government is good/god". For the small-state brigade though, it's always worth reminding that we need the bastards for something.

AntiCitizenOne said...

> Whilst I'm rarely one to blow the government's trumpet, what about infrastructure development or enforcement of property rights?

I'm in favour of an LVT in order to directly pay for the externalising right to exclude that is property rights. Connecting Infrastructure (roads etc) raises the value of surrounding property and will be best paid for by a LVT.

Basically where we've gone wrong is that the government is there to administrate the land, not rule the people.