Re: Interesting Economics Questions


<royls@xxxxxxxxx> wrote in message news:427cfb85.3805556@xxxxxxxxxxxxxxxxx
> On 7 May 2005 01:28:11 -0700, "555666hahaha" <skepticdude@xxxxxxxxxxx>
> wrote:
>
>>Forgive me for not knowing as much as you think I should about
>>economics, but I have a few ideas I'd like the higher forms of life
>>here to comment on.
>>
>>The price of everything is going up all the time,
>
> Not so. The prices of many products are declining, especially
> high-tech products that quickly become obsolete. What is the price of
> a VCR compared to 20 years ago? How about the price of a hand-held
> electronic calculator compared to 30 years ago? Microwave oven? And
> the new one will almost certainly be better than the old one. The
> prices of some commodities like wheat and soybeans are pretty much the
> same as they were 80 years ago, or even less.
>
>>which prompts 2 questions:
>>
>>1 - If minimum wage keeps going up with the cost of living increase,

Minimum wage is stuck where it was in the 90's. We have CEO's
salaries pulling upper incomes creating an increasing gap
between the wealthy 1 to 5% and all the rest.

>>does that mean that there will come a day when this wage will be
>>$100.00 per hour? And then even more ridiculously high wages in the
>>farther future? Are personal cars and trucks one day going to cost
>>millions of dollars each?
>
> Probably.

That may happen very soon.

>>2 - Why do prices go up anyway?
>
> The general level of prices goes up because the amount of money
> available to buy things increases faster than the amount of things to
> buy.

The amount of money in circulation is the amount created
by deficit spending minus the amount held in bonds by
the Chinese (and others) plus the amount held in actual
dollars by foreigners. The great deflation that would
have occurred due to cheap foreign labor has been
averted by deficit spending. What a shame that we have
no improves infrastructure to show for all that wasted
money.

>>The way I figure, everything most
>>people buy everyday, can ultimately be traced to large factories, owned
>>by fat cats or corporations that are never satisfied with their current
>>profit margin. Aside from rich fat cats that are never satisfied with
>>their profit increases, what else am I missing from this picture?
>
> The fact that fat cats can't just raise prices, because people only
> have so much money. If they have to pay more for gas, they'll demand
> less of something else, which will reduce its price.

This does not account for land rent. By exporting jobs and using
H1B to destroy wages the fat cats end up gaining significant
advantage over the middle class. This advantage is used to gain
more and more control over the means of production. While
the price of manufactured goods has declined dramatically due to
the use of cheap foreign labor the price of assets continues to
rise. That produces more and more rent for the fat cats. The fat
cats do not need to raise prices and the Fed only looks at the
price of hoola hoops in calculating "inflation".

>>I was intrigued by a discussion I happened upon a year ago, which said
>>that the idea behind money's "worth", originally, was because it was
>>backed up by gold at the treasury. The discussion went on to point
>>out, correctly I believe, that gold's relationship to the dollar notes
>>in your wallet is extremely superficial, and it's functionality has
>>more to do with the seller BELIEVING this money has actual worth (as he
>>takes the money from you), than in the money actually POSSESSING worth.
>>In other words, today's money is not worth the paper it is printed on.
>>This of course is obvious, but i cannot help but think of how decietful
>>this scheme really is. To me, it boils down to this: that the value of
>>money is completely determined by the seller of goods you wish to
>>purchase from, and has absolutely NOTHING to do with possessing actual
>>worth. Further, the seller's appraisal of the money's worth, will be
>>determined by what HE thinks he can do with it. In other words, money
>>has no ACTUAL value, as it originally did, and thus has only illusory
>>value. Comments?
>
> You are somewhat confused about money. Modern fiat money has value
> because
>
> 1. Government restricts the supply: i.e., only government is allowed
> to print money.
>
> 2. Government requires payment of taxes in its own currency: i.e.,
> everyone needs money in order to keep their property and ultimately
> their liberty.
>
> 3. Government (i.e., a court) often requires payment of
> government-issue currency to settle private debts, too. This is often
> even printed on the notes, something to the effect of "in settlement
> of all debts public and private."

ALL of those things are true and correct. But at this time we are
on the oil standard. The Republicans are holding a gun to the
head of every oil sheik: The current "ruler" of the, so called,
sovereignty knows that if he attempts to accept some other
currency for oil then the Republicans will invent whatever pretext
they might need to remove him form power and, at the same
time, create some more demons to keep themselves in office.
So the thing that gives dollars their value in the current "we
refuse to collect taxes" mode of government is this forced
association with oil. The Chinese could be buying oil with
their dollars and pumping it into salt domes in China as a
reserve against the future as opposed to buying Treasuries.
In that case the price of oil will go through the roof and the
US economy would be toast.

>>Forgive me if you've heard this question before, but....
>>
>>What would be the economic consequences if the Treasury, only one time,
>>sent a stack of $100 bills, say, $500,000 worth, to every family
>>currently on welfare?
>
> The value of all money and money-denominated assets would decline
> roughly in proportion to the increase in the supply of money, and
> there would be a big boom in sales of alcohol, fancy cars,
> designer-label clothes, illegal drugs, pornography, prostitutes'
> services, and other goods and services poor people who don't
> understand money would buy if they suddenly had a lot of money. When
> the money was starting to get low, there would be a big increase in
> sales of lottery tickets, which would probably then be sustained even
> after the money was all gone.

Good grief! While I am quite certain that this would
be true by and large, there would also be some
small segment of the society that would advance on
the rich.

>>How would this negatively impact the economy if
>>familie currently on welfare were suddenly able to pay off all debts,
>>buy cars and houses for themselves, and send their kids to private
>>schools? I see lots of businesses making profits and thus growing, and
>>I cannot foresee any disasters.
>
> I can. Many poor people who win lotteries later report that it is the
> worst thing that ever happened to them. Money is power. Poor people
> typically don't know how to handle that power (many rich people don't
> either, of course), and end up hurting themselves with it. Imagine
> what would happen if you put an 8-year-old boy at the controls of a
> car.
>
>>As you answer, ask yourself what you thought President Bush was up to,
>>when he sent that $300 tax-refund check to so many blue collar workers
>>back in 2000 (2001?). The check was drawn on the "U.S. Treasury."
>
> That was just vote-buying.

He forced us all to borrow $300.

>>If that didn't hurt the economny, why couldn't they have written the
>>check for $300,000 for each person, instead of $300?
>
> The resulting inflation would be 1000-fold greater.

There was no inflation because prices were sinking due to
cheap foreign labor. This is the only "good" accomplished
by the Bush deficits. Prices did not plummet which would
have been worse than staying somewhat constant. But
land prices did escalate dramatically and so too with
gold.

>>And finally, if it is true that fake money hurts the person who
>>discovers it and hands it over to authorities (or throws it away, etc),
>>let us suppose one that is so good that it never is detected? Would
>>this good fake still be hurting the economy as it is passed back and
>>forth between businesses, banks and customers?
>
> Yes, to some degree, but it depends how quickly it entered the
> economy.
>
>>If it isn't hurting anybody in the chain of people who pass it back and
>>forth in the sincere belief that it is real, then this seems to cement
>>my earlier contention that modern American currency has no actual worth
>>itself, nor is it's being backed up by gold reserves sufficient to
>>impart actual worth, but that the money is believed falsely by sellers
>>of goods to have innate worth.
>
> People believe all sorts of false and silly things. I have explained
> the sources of money's value above.
>
> -- Roy L


.

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