Quote:
Originally Posted by tnrtinr
I read your article. Why he chose a perishable item (fish) for money has me scratching my head. Now it is time for you to do some work.
Explain what happens when a woman washes ashore of my island and Menard and I have kids with her, and they have kids and so on. Before you know it there are 100,000 of "us" on the island (the womans family is know for multiple births).
Do they produce or do Menard and I do all of the work with our same output as we had when it was just the two of us? Do we increase the money supply (fish) as the population increases? If the money supply is expanded at the EXACT same rate as population growth is there inflation?  |
So he uses perishable fish, Dollars are made of paper and are perishable also.They burn easily and if left to rot outside will decompose quite readily. Precious metals are the ultimate money. Its just an example because its very easy to understand.
If everyone fishes, then there is MASSIVE inflation as there will be 100,000 fish for each loaf of bread. But that would not happen its not possible, markets will find equilibrium. Half will bake bread and half will fish if those are the only choices, in which case there would be no inflation. If everyone bakes bread there would be massive DEFLATION, as the Fish would become worth more and more bread. So just adding people into the mix does nothing to inflation , only creation of money can affect it.
What makes you think that adding people and at the same time adding money would not create inflation? I Don't understand your logic here, adding more people only creates more demand, which drives up prices when there is no complimentary increase in supply. But that isn't inflation either its just law of supply and demand, inflation is the process by which ALL items increase in price.