In the Beginning was the Command Line

[Marcus Brubaker]

On Wed, 2003-12-10 at 16:29, JoeHill wrote:
> On Wed, 10 Dec 2003 13:51:40 -0500
> lsorense-1wCw9BSqJbv44Nm34jS7GywD8/FfD2ys at public.gmane.org (Lennart Sorensen) wrote:
> 
> > I wonder what some south american countries would think of your idea.  I
> > don't think their devaluation of money has helped their economy at all.
> 
> LOL! Of course, it doesn't work if *everyone* doesn't participate. Besides, it's
> a little more complicated than the one-line explanation that I provided,
> so I don't think you can take too much from it. 

The same could be said of every major system.  Communism would work
beautifully...if only everyone participated.  The reality is that any
successful system of capital must be able to handle non-participants. 
In a sense, thats the beauty of capitalism, there is no way to not
participate short of not having capital.

Actually, the South American markets (Brazil in particular) provide an
even better counter-example to what I understand you to be suggesting
than just the recent currency devaluations.  In the 1970s and 1980s the
Brazilian government spent money they didn't have in an attempt to
distribute capital and build the economy.  Unfortunately, this caused
hyperinflation (> 1000% inflation) and utterly decimated the middle
class which didn't have the funds to invest in more stable resources to
protect the capital from the inflation that the government was causing. 
My girlfriends parents were living in Brazil in the 1980s.  The reality
of life wasn't pleasant.  People were payed (at least) twice a day and
given a break immediately after being payed to go out and buy food with
their pay before prices went up further.  If you didn't have a job you
were screwed because any savings you had were worthless unless they were
invested in other resources.

You can't really blame external forces for this inflation[1] either,
because at the time Brazil had completely isolated itself from imports
in order to encourage internal industries.  The key is that money is a
commodity and its value is dictated by supply and demand just like
everything else.  The benefit of using a currency over hard goods is
precisely that it can be borrowed without it actually existing.  You
can't borrow a loaf of bread that doesn't exist, but you can borrow
money which doesn't really exist.  This allows investment and economic
growth that wouldn't otherwise be possible.

>  
> > Incentive to spend rather than horde may be an OK idea, but money that
> > looses value isn't necesarily such a good thing, although I guess at the
> > moment basic interest rate isn't doing much better than inflation.  Of
> > course encouraging people to spend money they don't have is a really bad
> > idea and I think that too happens sometimes when spending is encouraged
> > too much.
> 
> Well, only *money* loses value, so there's not necessarily any real effect on
> personal wealth. One's wealth comes from material and/or service accrual,
> and *cash flow*, instead of interest.
> 

Which screws anyone who provides services, especially seasonal
services.  IT workers being noteworthy, as well as migrant crop workers.

In essence, the current reserve banks in North America try to achieve
what you're suggesting by low interest rates which encourage spending
and borrowing over saving.  Of course, they have to balance
spending/saving carefully, less we get inflationary problems.

> You'd be better off reading about it from someone who can explain it in more
> detail, in the long run. That was really just a one-liner in a much bigger
> argument, an example of an alternative mainly.
> 

Any suggestions?  Economics is a hobby of mine :)

Regards,
-- 
Marcus Brubaker <marcus.brubaker-H217xnMUJC0sA/PxXw9srA at public.gmane.org>

[1] As opposed to most of the inflation that happened in North America
during the late 70's which was a result of the oil crisis.

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