Re: OT: Time to dust off the bomb shelter!

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> >> "Raveninghorde" > > >> Money is the problem. Booms occur because there is too much money in > >> circulation. =A0By money I mean money in the broadest sense, cash, ban=

>> lending, etc > > >Next step is to understand why is there too much "money"? > > Well INAE, but I guess at least in part the basic cause is fractional > reserve banking. > > > > >> The question is how do you control the money supplly in a free market. > > >Simplest way is to go to gold standard and no central bank. > > >Treat bank as any other business. No money on demand - go bankrupt. > > I'm not convinced that a random commodity should be the basis of a > financial system. =A0Possibly a basket of commodities would work.

Try the thought experiment of trying to pick the commodities and you will discover that although it sounds good in general when you try to get specific things don't look so good.

Any mined commodity can have a sudden discovery. Imagine that we pick oil as one of the items and that somebody we don't like discovers that they have more than anyone has found before.

Any grown commodity can have a bumper crop.

Any manufactured commodity could suddenly get much cheaper to produce by some new method.

Robert Heinlein was writing about this 50? years ago suggesting that > the money supply had to track the productive output of the economy.

It is a good idea to try to keep the money supply and what it is chasing in about equal proportions. This can be made to happen partially automatically by how you write the tax code. Increases in productivity usually mean that those of modest means can afford things that they couldn't in the past. Increases in the money supply usually cause an increase in the dollar income of the more well to do. It also causes what appears on the surface to be an increase in capital gains. Making the tax rates nonlinear can cause the effect rate to increase when the money supply does. This reduces the rate of increase in the money supply and makes things more stable with human action.

> In the end the system is defective if people want to work and want to > buy products but the financial system blocks the exchange of goods and > services.