The two concepts which are the lynchpins of understanding arguments about the economy, especially those revolving around the monetary policy, are:

1) relative value

and

2) the determination of the optimal amount of dollars to be circulating within the market.

The only thing I remember from my college economics class was the first one. That, and the look of anguish which would come over the faces of my fellow students every time I raised my hand. Anyway, the basic form of a transaction which sets the price of an item or action is the relative valuation of a dollar to an item or action (item, for short) by two parties. The valuation of a dollar in possession of the purchaser relative to the value of the item possessed by the seller is, to the purchaser, less than the value of the item to the purchaser; and the value of a dollar in possession of the purchaser is, to the seller, greater than the value of the item to the seller. We see from this that neither the item nor the dollar has an objective value determined by the price, but that the price is determined by the relative value of each to both parties.

As for the second, I believe the easiest way to understand it is to see this as the basic formula applicable at all times in U.S. history and probably a generally valid proposition across a great range of hypothetical and actual case studies: capital sets the prices and the wages.

Of course the objection will arise immediately "No! You just admitted that prices are agreed upon by the buyer and seller! So are wages!" The problem with that is that this is true only after the number of dollars in circulation has been determined as being optimal for the purposes of investing capital. As Marx explained, labor is not capital- it forms part of capital. That is, I cannot view my labor as capital; I can (as "free labor") excercise some individual discretion in developing my labor capacities (a relative ability in various ways) and where I consent to have my labor exploited. But, the relation of wages to prices is determined by the seller of items (objects, and the actions which produce them are added to the price to the consumer/worker).

Now, a more objective way of stating this is possible. Perhaps case studies of actual "growth economies" are offered; perhaps it is posited that the notion of valuation can be constructed in such a way as to envision a global "growth economy" of some sort. Growth or no growth, shared or otherwise, the determination of #2 above is set in relation to a comprehensive assessment of the set of all transactions of the type described in #1 above (via delegated authority discounting the possibility of direct dictatorial administration of this measure), over time.

Images

the value of a dollar 2

Comments

Carson L's picture
Carson L 6 years 24 weeks ago
#1

Thank you Nim! I love that feeling when something seemingly incomprehensable suddenly comes into focus. Maybe that's what the first dude with an adequate telescope thougth of Mars? What's his name,, Anyways, I apologize if I missed this part but shoudn't inflation be set to the increase of our living population and not the increase of GDP or assumed numerical value of our money or some other subjective variable? I apologize if it already is, I'm still learning here, clearly

nimblecivet 6 years 24 weeks ago
#2

Good question, I'll try to give an answer that at least makes some sense.

I would say that inflation could be zero if:

1) banks did not lend money, people did. therefore interest was a private matter where applicable.

2) individuals responsible for adding to the population also added value to the economy in proportion.

Then, the relationship between GDP and population growth would be such that determining that more dollars need to be added into circulation would be a determination that either the population was growing, number of items of value per capita has increased, or both.

I guess banks theoretically could lend money without interest, but whose money would that be? In the first post, "value of a dollar", I took a stab at exploring the idea that in the current system banks are lending the depositor's money, essentially. But that's a matter of interpretation arguably. That gets to the problem of a person being able to say "I own my house." or "My house is bought and paid for." But even under the pre-Fed system the government had the right (arguably) to "recall" money so the problem of ownership of money also has to do with the contract between the citizens and their government.

Here's some ideas which sound interesting: https://www.youtube.com/watch?v=TwmM5Nb6hiE "The Money Fix"

I think someone who works as a janitor is doing honorable work and not everybody who can do more will be able to, so my criticism there (as far as what is not addressed in the context of the video) is the idea of the number of hours a person needs to work decreasing. The new ideas are towards the end, in the second half of the video.

Natural Lefty's picture
Natural Lefty 6 years 24 weeks ago
#3

It seems the amount of money in circulation would rationally be proportional to the population, too, but according to the model used, the amount of money in circulation is supposed to be the optimal amount for investing (whatever that is). So, who decides that, and how?

the_hopping_mad_flea's picture
the_hopping_mad_flea 6 years 24 weeks ago
#4

Actually, it's faith in the system that allows fiat currency to become a reality. Without faith you would just have 3 cents worth of specially prepared paper with free masonry symbols all over it. The perceived value (of anything) is always a leveraged idea, orchestrated to produce an emotional response, which is designed to cause the flow of capital from fools like us into a black hole never to be seen again. This is the constant struggle when keeps us in bindage.

For you to really understand what is happening, know that the FED, a privately owned tax exempt bank, dominated by foreign bankers, obtains Federal Reserve Notes from the US Treasury for roughly 3 cents whether a note for a dollar or $50k. Then they sell it to us at face value and charge interest for loaning it to us.Privately own expansion and illegal usery of the nations money supply is equivalent to state sanctioned counterfeiting and ecomnoic parasitism. I see they didn't teach you this at college, but these are the facts you need to plug into your matrix to start to understand what the hell.

the_hopping_mad_flea's picture
the_hopping_mad_flea 6 years 24 weeks ago
#5

And for real news about the dollar, watch comedy central's the daily show

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