Re:Yellen on Bitcoin: Fed Doesn’t Have Authority to Regulate...
by logfromblammo on Sunday March 02, 2014 @08:46PM
(#7331609)
Assumption: The value of money is the aggregate value of market transactions divided by the product of the available quantity of money and its velocity.
Assumption: The money itself has zero intrinsic value. It is only worth what you can trade for it. Thanks to the previous assumption, that is a fraction of all goods and services on the market.
When you change the size of the money supply from 100 to 102, the 2 new notes increase in value from 0 to 1/102 of everything on the market, and all of the 100 old notes decrease from 1/100 to 1/102 of everything. The guy that prints the new notes gets 2/102 of everything for free. That value is not created; it is taken. Everyone who held any old note has their buying power reduced by 1.96%.
Is it justifiable? Yes. Is it a gross simplification because economics is a dismal, dismal science? Also yes.
Assumption: The money itself has zero intrinsic value. It is only worth what you can trade for it. Thanks to the previous assumption, that is a fraction of all goods and services on the market.
When you change the size of the money supply from 100 to 102, the 2 new notes increase in value from 0 to 1/102 of everything on the market, and all of the 100 old notes decrease from 1/100 to 1/102 of everything. The guy that prints the new notes gets 2/102 of everything for free. That value is not created; it is taken. Everyone who held any old note has their buying power reduced by 1.96%.
Is it justifiable? Yes. Is it a gross simplification because economics is a dismal, dismal science? Also yes.