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Re:Central bankers rethink their devotion to slaying inflation by rayiner on Sunday December 23, 2012 @03:03PM (#4960455)
Think about it from first principles. What is money? Money is nothing more than a proxy for goods and services. So, how much money do you need in an economy? Well if money is a proxy for goods and services, it is no good for the supply of money to stay fixed while the amount of goods and services expands. Indeed, the money supply has to not only expand with the present volume of goods and services, but also with peoples' willingness to enter into contracts to trade goods and services over some future time frame (i.e. loans).

So the money supply must generally keep growing in a growing economy. How should that be effectuated? For a long time, we tied expansion of the money supply into how quickly we could mine gold and put it into vaults. Given the exponential growth of the economy, and the distinctly non-exponential nature of gold production, it's obvious that wasn't going to work for long. So we have what we have now, with a central bank controlling the money supply.

That's the justification for the existing system. Are there alternative mechanisms that don't involve someone with their hands on the big money supply dial? Maybe, but I haven't seen any convincing ones yet.

Re:Central bankers rethink their devotion to slaying inflation by white_devil on Sunday December 23, 2012 @06:31PM (#4961136)
> it is no good for the supply of money to stay fixed while the amount of goods and services expands.

Yeah, you sure wouldn't want the purchasing power of your money to increase, would you now?

Re:Central bankers rethink their devotion to slaying inflation by rayiner on Sunday December 23, 2012 @08:25PM (#4961415)
Great if you're a retiree, not so great if you're a young person just starting out having to deal with continually falling salaries and the old people owning everything worth owning in the society.
Re:Central bankers rethink their devotion to slaying inflation by uvdiv on Sunday December 23, 2012 @06:37PM (#4961153)
The purchasing power of my debts? No, not really.
Re:Central bankers rethink their devotion to slaying inflation by white_devil on Wednesday December 26, 2012 @02:06AM (#4968484)
It's not like you can count on inflation to eat away your debts when considering whether to take them on in the first place.
Re:Central bankers rethink their devotion to slaying inflation by eli_gottlieb on Sunday December 23, 2012 @03:48PM (#4960608)
There was a big proposal from the IMF to make what would actually be a major reform: eliminate fractional-reserve banking and nationalize the power of credit-creation. The state would accrue the interest and economic rent derived from the power to loan money into existence.
Re:Central bankers rethink their devotion to slaying inflation by meric on Sunday December 23, 2012 @05:44PM (#4960987)
So basically centralize economic power into the state. I can see many ways this won't work out well. Instead of a bunch of Wall Street banks pretending to compete, you just have one monopoly government, not competing.
Re:Central bankers rethink their devotion to slaying inflation by yxhuvud on Sunday December 23, 2012 @06:03PM (#4961035)
Indeed. Government works best when it is the scrorekeeper, not when it is both scorekeeper and a player.
Re:Central bankers rethink their devotion to slaying inflation by smokeyj on Sunday December 23, 2012 @08:05PM (#4961352)
It's great in theory, until the player lobbies the scorekeeper to throw out the other players.
Re:Central bankers rethink their devotion to slaying inflation by digeridoo on Sunday December 23, 2012 @06:24PM (#4961108)
Well, if the money supply kept up perfectly with economic growth then the value of money would stay the same. Inflation is extra money supply expansion.