01-15-2018, 05:47 PM
(01-15-2018, 12:50 AM)Galen Wrote:(01-15-2018, 12:21 AM)Kinser79 Wrote:(01-14-2018, 02:51 PM)David Horn Wrote: Currencies -- all currencies -- act as transactional lubricants and short term stores of value. Note: they are not intended to provide long term store of value, because that defeats their function as trade enablers. In fact, they need to decline in value slowly over time: fast enough to motivate trade but slowly enough to maintain discipline.
Central banks have proved that they do not have the capacity to enforce discipline economically. Since 1914 the USD has lost almost 94% of its value. A currency system that does not maintain a relatively stable store of value is essentially useless in lubiricating transactions, unless the goal is to speed up the accumulation of goods. After all if a dollar today will be worth 75 cents tomorrow I may as well buy up as many things as I can as those goods will maintain their value in the main.
This also makes capital formation, particularly for small business, much more difficult. It also make planning for long term projects just that much harder.
Inflation of roughly 2% doesn't preclude capital formation, or we wouldn't be awash in capital today. It does incentivize spending, which is the lifeblood of every economy.
Intelligence is not knowledge and knowledge is not wisdom, but they all play well together.