Quote from: Catallaxy on December 03, 2011, 04:29:58 PM

Quote from: johnyj on October 06, 2011, 02:04:54 PM

The real question is: The country as a whole did not lose any wealth in the financial crisis, but why many people are getting poorer and the real tangible and consumable products are getting less produced?

Banks charge people to use currency. The higher they charge, the more expensive it is to do business, the higher the prices. If it gets too expensive to do business, business slows down.

People don't realize banks charge them to use currency. This is essentially what inflation is, a percent fee to use dollars per year.

I mean, for example, if I want to sell you an apple, and we agree on using dollars, then I will want to charge you for the apple plus all costs and profits.
If dollars are costing 3.6% per year, or whatever inflation government lies about this year, then I will want to charge 3.6% higher to make up for it. So I will charge you the apple plus 3.6% currency costs, plus say 5% other operating costs, plus 5% profit. People do this intuitively.

But unfortunately then consumers try to blame 'greedy business owners' who 'overcharge' them. This is what happened in Weimar hyperinflation. Everyone blamed farmers for 'taking advantage of everyone' and charging so high for food, when in actuality they were charging for the cost to use currency, which was in the 100's% per year. All people had to do was use a cheaper currency.

This is why Bernanke says gold is not money, because it's a cheaper currency. Gold would ruin Federal Reserve's monopoly, which allows them to charge so high anyway.

True, banks always charge as a middle man between all the business, and they only charge a small amount, otherwise they will just destroy their own creditability

Gold's creditability is backed by it's stable physical and chemical status and scarcity, and scarcity itself could already create some value and lots of desire, seems to be the human nature

Money's creditability is backed by law and government. From several hundred years' perspective, gold is much more trustworthy than dollar, but as long as U.S. government rules, US dollar is as valuable as gold, so Bernanke said that the gold just act as money for historical reason

Anyway, now I tends to believe that only small amount of wealth exist in eternal form, the most direct feeling about wealth is how much wealth we consume. Financial crisis greatly reduced the amount of wealth we can consume for years, due to uneven distribution of the wealth after housing bubble, but the wealth as a whole did not get destroyed at all