Thursday, August 25, 2016

The Chimera Of 'Stable' Money
The purchasing power of money is determined, like most things in a capitalist system, by supply and demand. Changes in the demand for money (think of shifts in the curve) are caused essentially by two forces .. Sound money is a medium of exchange that enables absolute and relative prices to function the most efficiently in allocating goods and resources that best meet society’s most urgent needs. Its purchasing power is determined by markets, independent of governments and political parties. Sound money does not need, and should not be expected, to be stable. To be perfect, it should be exclusively determined by factors influencing the demand for money .. The gold standard is the closest we have come to sound money .. A monetary reform to sound money would significantly boost growth, as well as significantly alter and diminish the roles of government and banks in our economy. Stable money was a chimera. It did not bring stability to the world economy. It did not counter the instability emanating from deposit banking. It actually added to the severity of booms and busts. To function efficiently, capitalism needs a foundation of sound money, not stable money."
- Frank Hollenbeck
LINK HERE to the essay

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