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To: Oberon
Your example indicates how shares in the money stock changes hands and how we account for it. But the money stock came from somewhere: the money supply.

A pond is equivalent to the money stock, and the creeks which feed it, the money supply.

In the old days, the money supply was gold and silver mining, and the gold and silver provided means for wealth storage and more efficient trade and markets rather than inefficient barter. So people with wealth, farmers; would trade wealth, wheat; for gold and later buy a tracter which would increase productivity; or some consumable the farmer doesn't have the time to make for himself.

Today, the money supply is the central bank and its relationship with treasury to conduct open market operations, and back money with bonds the interest and principal of which will be paid for out of the hides of 1040EZ taxpayers.

The government has a great position because it gets to use the new money first, when it has the greatest purchasing power. By the time it passes hands a few hundred or thousand times, prices have risen and the last person to earn that dollar sees the price tag and squeals about the "high cost of living."

Under the old way, prices were more or less stable for over 100 years. Since 1970, prices have gone up ten times. This inflation robs the holder of FRNs. Old folks like my dad have to pay $300 for medicine with money that was saved when it would buy the same medicine for $30. The difference, 90% of the purchasing power that my dad lost, was expropriated, stolen, by the criminals in government, and in the central bank.

Neglecting the 1980 crisis peak, and 20 years following of dropping prices in gold: If he had bought gold coins at $35/oz, and kept them 30 years, TODAY, he'd find his wealth was preserved. Generally: Gold preserves wealth. Paper currencies erode wealth.

65 posted on 11/16/2005 12:23:04 PM PST by Jason_b
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To: Jason_b

Since 1970, prices have gone up ten times. >>>>>>>>

The commonly used figures that the government likes say that $4.74 in 2003 was equal to $1.00 in 1970. I don't agree with those figures and apparently you don't either. I say ten to one is about right.


88 posted on 11/16/2005 3:26:22 PM PST by RipSawyer (Acceptance of irrational thinking is expanding exponentiallly.)
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