Money: Does Objectivism Hold That Govt

[nimble]

I am not sure what i think about this issue. But, I have one question. Suppose that someone was able to discover a very large source of gold and a cheaper than usual way to extract it. In a system 100% tied to gold would this not lead to inflation.

The answer to your question is yes. An increase in gold would cause inflation. However, this would only be a short run effect. Once inflation set in, the price of gold AS A MEDIUM OF EXCHANGE would drop, once it drops below the usefulness of gold for INDUSTRIAL/RETAIL purposes then people would withdrawl their gold from the banks and invest their gold in other markets. These actions of taking gold out of banks and circulation and putting the commodity into retail and industrial uses would then decrease the money supply back to its equilibrium and cause deflation.

Basically, in a commodity based money system the value of it as a medium of exchange can never fall below its other uses. That is the point of using a commodity based money supply, it has an objective value other than its uses as money.

[norwegian_Objectivist]

I am not sure what i think about this issue. But, I have one question. Suppose that someone was able to discover a very large source of gold and a cheaper than usual way to extract it. In a system 100% tied to gold would this not lead to inflation.

Inflation is an undue expansion or increase in the money supply, not an increase per se. The process of mining gold is not an undue increase, and this would not be inflation. It is solely the government that is responsible for inflation.

[Capitalism Forever]

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[Felix]

Treating debt as money is fraud.

Debt is money. The only reason for a gold standard is that gold doesn't perish. It doesn't rot. Therefore it is the ultimate collateral for debt.

The fact that the banks can lend money means that they create money where there was none before. They multiply the money they have by giving it to other people as credit without mentioning it to the person "actually having that money in the bank". This creates debt for the people who borrowed it but it also gives them money in the amount of the debt. The debt rises and the money stays the same, but this is the debtor's problem.

How do you think we would have any economical growth if debt wasn't money.

We don't live in an exchange economy. Never did.

The reason we have inflation is not banks giving away money they don't have. They all do that. In fact that's how a bank works. They tell their customers that they still have the money but give it away for interest. No problem here.

Additional money is created but the corresponding goods are created by the poor sucker who has the debt on his shoulders and works it off. And if he doesn't he goes bankrupt and the bank just gets no additional money from him and the debt (=money) is erased. Period. No inflation either way.

Inflation comes if money is created but no services or goods. This only works when the government makes public debt. And instead of paying off the debt, it just adds it up by paying the old debt and the interest with new debt. Nobody works and we have more and more money (in the hands of the people who borrowed money to the state) but nobody works for it.

That is inflation. The other way of increasing the amount of money is perfectly legal. No fraud. In the end, this is just how capitalism and economic growth works. And you won't find any of it in an economics textbook.