Quote from: Zapffe on March 25, 2014, 02:09:48 PM

Quote from: Erdogan on March 25, 2014, 01:33:42 PM

Quote from: Zapffe on March 25, 2014, 12:14:51 PM

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But still, it's more efficient to have a central planner, and to have a dynamic supply rate. If supply rate isn't regulated to cause price stability, then it would cause you a lot of problems if you are in finance or even if you're an entrepreneur. When doing prognosis, then you have to calculate in the possible inflation (or deflation for that matter). When the inflation rate is stable, then you can create more solid prognosis and predict the needed numbers. With fixed supply and unstable value of money, you can never be sure which way will it go next year, or even next month. Doing business will be more of an lottery, and that's not a good thing. It's not good when competition is decided by luck, not by competence.
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Here you propose that the inflation rate (of prices) can be stable. But if it is, it is just a matter of computation to convert from a zero inflation rate to some positive inflation. To suggest that people can be fooled into spending, or workers fooled into believing that the value of their wages don't go down when they are nominally fixed, is foolish, and an expression of a master mentality.

Even if it is theoretically possible to have a stable inflation rate (in prices) or a zero inflation rate, it is not possible in practice, because 1. the point of the whole thing is making it unpredictable, to shake out those calculating with a stable inflation, 2. it is counter to the interest of the elite, 3. there is always a crisis that needs to be curtailed with printing and 4. even with the best intentions, it is difficult, after an expansion, to tax more only to rein in the extra fiat.

A zero inflation rate (in money supply) does not necessarily imply unstable prices. The typical seasonal demand variations for money can be countered with temporary expansion in private credit level between firms in the different production stages. A general increase in the savings rate should lead to price reductions (including interest), also increased productivity should lead to price reductions. A natural disaster destroying vast volumes of capital and consumer goods, should lead to a price increase.

An increase or reduction of population will effect prices, unessesarily maybe, but it doesn't matter, because it is known to everybody and they can adjust.

What I was talking about, was that with dynamic money supply, the prices and the inflation rate are a lot more stable then they would be with fixed supply. Decent companies also have an stable system for salary raises, to both rewards workers and to take inflation into consideration. You are blaming the faults of the greedy entrepreneurs on the system.

There is no such thing as perfect stability, and I have never claimed that there is one. I just compared two models and brought out the one that has more stability.
If the money supply will be static, then money will be much more attractive to speculative play, and the value of money will be dictated by the market leaders, who can manipulate it according to their choosing.
It's still funny to see how the same people who often present themselves as "anti-establishment" or "anti-Fed", are mostly also in favor of ultra-liberal views of Greenspan, who was actually to blame for messing up Fed together with US finance. Bernanke has just been a loyal dog who follows the same trail that Greenspan put in motion. The trail where money regulation is trusted in the hands of the private sector without the supervision or restrictions from Fed itself. This has caused the US to go into a growing bubble that is on the verge on popping. You can't just let the mob run wild without any central leadership. A person is smart, but the mob is dumb, greedy and without perception of limits.

If you have a market based interest rate, the wider money supply (including some forms of credit) will be dynamic, but adjust according to the demand for money.

Greenspan is ultra-liberal? That is a new one. An elitist, pretending to not understand money, pretending to not understand the destructive forces of monetarism, pretending that central planning is capitalism, and pretending to not see the absurdity that is the government colluding with big firms. That is how I describe him.