Which isn't a bad thing. As long as they are unable to use violence (aka, government) to prevent competition, they have to remain the best, or they won't stay on top for very long. This means they won't abuse their monopoly position, unless we give them the power to.
I believe, monopoly is caused by lack of regulation, and once it established, it will last generations, since the later comer will not have enough accumulation of capital/resource/knowledge/credit etc... And, due to the limitation of resource and space on the planet, most of the monopoly will last even longer once it established For a static, unchanging world where every day was exactly the same as before, I'm pretty sure that we could eventually develop an excellent planned economy. But people die, and new people are born, and preferences change from day to day, and the world changes around us. The only way to cope with that sort of changing world is to decentralize, and let each man make their own decisions to create their own futures.
I do not favor a planned economy, to make the game rule fair to every one is more interesting. Unfortunately, everyone was not born the same, so its actually a question if it is possible to make game rules that are fair to everyone |
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How do you deal with the mess afterwards? IMO you would need to keep prices as stable as possible. Which would mean offsetting the contraction in Horizontal Money(Credit Money) with an expansion in Vertical money. The expansion in vertical money would offset the unemployment and related suffering caused by the Horizontal Money contraction. If prices are not kept reasonably stable then it is harder for economic participants to plan ahead, which may lead to significant malinvestment. Furthur, whenever the financial system is disproportionally distorted by a subset of economic participants, then prices in the economy will not reflect their actual relative worth. This is what actually causes the malinvestment too begin with. simple example of mal-investment: A bought a house from B at 3 million and wish it to rise in value, but it actually dropped to 2 million, A lose 1 million In this example, I just see it as a speculation game: A think the value of the house will rise (thus make the value of money less), so A exchanges money for house. But B think the value of house will drop (thus make the value of money more), so B exchanges house for money. When the house price dropped to 2 million, B still holds 3 million and he now can buy 1.5 houses; A hold the house which only worth 2 million Looking at the total, before and after house price change, A+B always holds one house and 3 million. If we take money as the measurement of value, then total value changed from 6 million to 5 million, 1/6 wealth were destroyed. But if we take house as a measurement of value, then total value changed from 2 house to 2.5 house, the wealth increased by 25%! So, only when measuring the wealth in money's form, you get that strange " wealth destroyed" conclusion |
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So how do you give the farmer the incentive?
Good question If the farmer is very poor, it will be easy for him to get the incentive, he need to continuously sell his products to get money, and buy other things he want Actually, all classical economics are based on the assumption that the farmer's incentive is kept forever due to that human's desire is endless But, if the farmer is very rich, it will be much more difficult for him to get enough incentive to work So, chasing for profit is the last incentive for a rich society? |
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There's no regulation more efficient that that of free competition.
Questions for this statement: Do you really need a very high efficiency to give everyone a comfortable life, at the current technology level? And, free competition always end up with monopoly, due to difference of each organization's capital/resource/intelligence etc... winner take it all. So, if you are already at the monopoly situation when it comes to money and financial, why do you want to start the whole process again (and bring chaos into society)? As mobodick said above, regulated monopoly could be very efficient, but anyway I don't see the need for higher efficiency, all these efficiency talk only suits a society in low technology level For many enterprises, they have the ability to produce enough utilities and services for everyone, but they can not do that, just because they have to sell the product/service for a profit, and the consumers do not have enough money. Money and its distribution is the problem here, not the technology |
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Another thought related to saving: One gold miner found a small piece of gold, he use that piece of gold to exchange for several bag of bread from a farmer, and he eat those bread for one week After one week, farmer still holds the gold, but there is no bread, since farmer think that he could use that gold to buy same amount of bread  This means: Farmer need some incentive to continously produce the bread, otherwise there will be inflation  |
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It might be my opinion and I'm different than others' in this forum, but money is wealth. Real Wealth.
That is exactly most of the people think, not those from economy school. Because this, we can say that wealth is destroyed if there is a rate hike (money destroyed by central bank) Now I have a better view! Imagine a simple game: First year, A sell his house to B for $3 million Second year, B sell the house to C at $4 million Third year, C sell to D at 5 million In this process, the amount of money required for transaction increased so much that bank must provide them bigger and bigger loans, thus lots of money must be created to facilitate the trades, and wealth is created from newly provided loans for this bubble (or bad investment, but you can never tell in forehand, if the price continously rise, then it is a good investment!) Then, at certain point, most of the people have joined the game and bought a house, there is not enough new buyers join the game to keep the price hype, at the same time, FED has realized this might be a bubble and start to tighten. Then the house price will fall back to 4 million and 3 million. It's this tighten really detroyed the wealth (or money), what we see after 2008 is the consequence of tightening during 2007, but the wealth is already destroyed in 2007 I remember a story: One guy spend holiday with his wife, he got up early in the morning, went to cassino and bet 1 dollar on number 7 of the roulette, he were super lucky and hit 7 four times in a row and won 1.6 million dollar, and at the last bet he lost it all. He return to his wife and said that he just had a dream. His wealth is created and destroyed in one morning |
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The saving happened when he made the product but didn't consume it himself, not when he sold it.
I suppose in a market-based economy, everything produced is for sell and exchange for money. And most of the things produced will be vanished/degraded quickly (compare to money). For most of the product, if you produce it and store it, it will lose value quickly, no matter if it is consumed, this is the issential difference of saving goods and saving money. If more products are produced and consumed everyday, the economy is stronger Of course people can produce something just for the purpose of store, like gold, but the incentive is really small if most of people's life is enough secure and comfortable |
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What I mean is...You say you want to reduce the value of past "labor certificates" or "proofs of work". And I ask why you want to reduce it through inflation instead of demurrage. Does inflation present any advantage over demurrage? Lol, this is just a personal preference, I like more, not less, "less is more" just sounds complicated |
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Bad investments occur all the time, but when they occur massively like in an boom-and-burst, that's because something interfered with prices, making people take decisions they otherwise would not. (if prices were a correct indicative of supply and demand). The major cause of such massive bad investments today is cheap credit created through inflation. Central banks create new money and buy debt bonds with it. Buying debt is the equivalent of lending. They increase the supply of money available for lending, without any actual increase in savings (resources, not money). With this cheaper credit, people will make loans they otherwise would not, and investments that wouldn't take place spontaneously now happen. These investments will not have the amount of actual resources they need to complete - remember, only new money was created, that doesn't magically create resources as well. When these investments start to fail, people will "realize" their lost. The actual lost happened when resources were wasted on investments that were not worthy it. In the example of the $5 million house, if somebody paid that price for it, it means he traded much more resources (the results of his labor) against this house than s/he needed to. That's the lost: you worked much more than you needed for the house. All that work was wasted (lost). As I explained above, the actual lost did not happen during the crises, it happened before, during the boom, when resources were being wasted on bad investments. The crises is the moment when people realize their mistakes. And the recession is the period in which society as whole reorganizes itself, mainly the capital structure. For example, in this particular real state crisis, too much capital and labor was directed towards real state building. Such capital and labor must be reallocated to activities that better suits society's more urgent needs. This reallocation is never easy: neither capital (means of production) nor people can easily change functions - some times they just can't. So, during this time, there will be poverty, unemployment and so on. And the total production capacity of society will probably be smaller, since lots of capital will be lost, as well as labor. Hope I've made it clearer instead of even more confusing.  That's a great view, I think most of the economy schools are taking this view, academically it is quite nice I have a different view When people sell product and get money, they save the money, but they did not save the value (the product was consumed or degraded), money was hold as a "proof of work" It's easy to see: Saving do not increase the society's consumable resource, it just increased society's "proof of work" So, in the example of the $5 million house, A paid B $5 million to buy the house, there are $5 million worth of "proof of work" transferred from A to B, but the real wealth is only that house, those $5 million worth of "proof of work" do not correspond to enough tangible wealth in the society Same house could worth 5 million one year and 3 million another year, but the house do not change, only the exchange value of the house changed |
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When people saving money, they are not storing wealth, they just stored a prof of work, and we know that past work worth less today due to higher and higher production quality every year, so basically inflation should be constant to reduce the value of past "prof of work"
Interesting reasoning but... Why not demurrage? Why prices need to go up? prices can go up and down If today's product have higher quality than last years, even if they have a higher price, people will more easy to accept If today's product keep the same price as last year while the quality improves, it will discourage the producer |
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I believe that no wealth has been destroyed, they just destroyed the fiction wealth they created out of nothing
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When people saving money, they are not storing wealth, they just stored a prof of work, and we know that past work worth less today due to higher and higher production quality every year, so basically inflation should be constant to reduce the value of past "prof of work"
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There is one thing always confused me: People always say that financial crisis destroyed trillions dollar worth of wealth
Based on general economy definition, only consumable goods and services are wealth, money is just a medium of exchange. So, if a house used to worth 5 million now worths 3 million, the actual wealth (the house) do not change, it is just the price of the house changed, and I think this price change are mainly caused by two things: money supply and people's desire
In my opinion, only war or natural disaster can really destroy wealth massively, any kind of financial loss is just a illusion, since people mistakenly think that money is wealth
The real question is: The country as a whole did not lose any wealth in the financial crisis, but why many people are getting poorer and the real tangible and consumable products are getting less produced?
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Current law does have some justice when it comes to force, it can protect people with less force, but it can not protect people with less intelligence, so in that sense human are still very savvy, slaughter each other by using intelligence
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If they did not do a good job I would just call another company.
At first there will be several companies competing each other, but eventually they will be merged/bought by super captalists and then capital will take over the operation, finally end up in the bank's control And, if the banks did not do a good job, you have no other choice |
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Exactly, since most of the products have very short lifespan, there is not a lot of wealth people can save, what people save is only money and the purchasing power of it
And I disagree with the idea that printing money will easily cause inflation, that kind of inflation in Zimbabwe is caused by a combination of extremely low productivity and the exessive amount of money supply
Any modern developed country will generate enough goods in a short time to chase the newly added money supply, if those money are distributed to the right people (the unemployeed or low income people)
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http://en.wikipedia.org/wiki/BarterAt the end of this article:
Difficulty in storing wealth: If a society relies exclusively on perishable goods, storing wealth for the future may be impractical. However, some barter economies rely on durable goods like pigs or cattle for this purposeThis is funny, seems using money to store wealth created an illusion: The goods were perishable, money is not, so money holds wealth longer. But what happens when goods are all perished and only money left?
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How do you reconcile this within the Bitcoin economy? Do people with Bitcoin savings owe a 'debt' to some other party?
Or can such savings be viewed as loan with zero interest and no maturity? Which is the definition of money.
Good questions, there are still something I have not figured it out very clearly, but money sure is a very special product In bitcoin economy, money is generated out of something (electricity, hardware investment and time), so it is not a debt But in modern monetary system, money issuer created the money out of nothing, so its actually a debt, its credibility is backed by central banks and governments, through countries productivity. Everyone else is chasing the money, this created all kinds of economy activities. But if people chase money instead of real products, then the deflation will kick in |
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How do you know what people need or desire in a recession? Are you omniscient?
Money is indeed the commodity that is the exception to the marginal law of utility because people always want more of it so they can use it to get more of the things they want. However, printing it reduces its purchasing power which means people can get less of what they want with the money.
You don't need to be a prophet to know that people are saving more in money's form in a recession, the financial security is the first thing people seek when in trouble High jobless hurt economy because those people who have a job feel unsecure and they have to save a lot to prepare for the hard job-hunting time just in case they get fired one day People want money not because of the products they want, they just want money, so if there is anything that they are interested showed up in the future, they can purchase, but if there is nothing interesting showed up, they just hold the money and feel comfortable  |
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As soon people have all the horses and carriages they need and enough kerosene for their lamps they will never desire ("demand") any other luxuries or goods.
They will, but that is some kind of luxury they do not need in a recession. And people's consumption behavior takes a long time to change I forgot, there is one thing that people always want more no matter what, it is money, printing more money is right on the spot |
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