Why more money is bad

[Sprax]

Maybe this is obvious, or maybe I’m wrong, but there seems to be some confusion about what money is. Hopefully this contributes.

Imagine an island with a population of 100 people. Every year each person creates 1 unit of goods and services and receives 1 $ in pay. So, each year:

- Total production or goods and services: 100 units
- Total amount of money paid in wages: 100 $

In order to pay the wages of 100 $, the income generated by the goods and services sold must also be a total of 100$. So, 1$ will buy 1 unit worth of goods and services.

One year, the islanders decide that in order to be able to buy more goods, they’d like more money. So they raise wages to 2$ each per year.

The total amount paid in wages is now:
2$ * 100 (the population) = 200$.

Since the production output remains the same, in order to pay for increased wages, each unit of goods and services now has to be sold for 2$:
2$ * 100 (units of goods and services) = 200$.

So despite a doubling of the money supply, each person can still only buy 1 unit of goods and services because they now cost 2$/unit.


* Money represents value, it is not value.

* Increased money supply = inflation, the total worth of the money remains exactly the same, but the value per dollar decreases

* Increased production = good, a doubling of the production would have led to a doubling of the value of the islands money

 

[Sticki]

Seems to make sense, I think the real problem is that people making goods and services in most countries have come to the understanding it was effective to produce and export 99.9% to another country and import for personal use.

However, With the collapse of the financial systems and more so the international currency. It is driving the value of the dollar, pound or euro into the ground. I have watched recently that the price of gold rose by $150 an Oz but in the UK it remained the same £800 for the past 2 months. In the last 2 weeks the Oz has gone up by almost $100 so the price is roughly $1500 the UK price is still only £915, However It has climbed that £100 in the last week or 2 really.

It seems hyper inflation is slowly gripping the US which will have consequences for the rest of the world...
(Its a good point to make that if you have the money for an oz or 2 of gold or a kilo or 2 of silver, It may be worth the investment)

The point Im trying to make now though is, The money is worth nothing and the more they print the less its worth and times continue to get worse.

The only true way to solve this problem would be to go back to local land owners and trades men, However I doubt this plausable. The monetary system is there to benefit the ones at the top.