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Originally Posted by fnord_too
You got $100 and 5 people now, on average everyone has $20. Then your population doubles, everyone is worth on average $10.
You lost me there. Just because someone else exists doesn't mean I'll share my wealth with him. 5 new people don't just get handed 10$ each. And money is not the only wealth that exists in an economy. So once the 5 people get born they own exactly 0$ and 0 everything else. Now let's say one of them hunts some game and produces meat that he does not want to use himself.
Let's say he wants to trade with a $ holder. If the $ holder wants the meat, he'll give him $ for it.
Let's say he wants to trade with one of the other newcomers who unfortunately doesn't have any $.
The other newcomer needs to find a $ holder and trade something that the $ holder desires (or revert to direct barter).
In either case if anything the worth of the gold goes up due to a higher demand for it.
The faulty assumption you seem to make is thinking that for some reason the money will just get auto-redistributed while in reality once a state where everyone holds 10$ is reached, the people that initially held 20$ will now also hold 10$ (or more) worth of products in addition to their 10$.
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But at any rate, if the average wealth is decreasing, just holding onto money has a positive return since money is getting relatively (to population) scarcer, which means you are at best de-incentivized to put your money in anything. There are some pretty serious implications to this.
Once again, why would the average wealth decrease?
And how do I have less incentive to use my money to buy something once it's worth more?
If the price of gold rises due to higher demand for it (because someone "hoards" and thus the available stock of money goes down or because new customers for gold get created), the prices of goods I can buy with the rest gold will also fall.
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Also, you really should look at history to see what happens when you have a sharp increase and poverty and a major schism between the classes. It is not pretty. But also not something you probably have to worry about because I don't think, for good or bad, the governments will let it get that far.
Funny I'd say that governments did let it get that far if there are historic examples, DUCY?
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Also, was your dad not suggesting gold hoarding? That is, taking it out and holding it some place safe?
Yes but you still haven't explained to me how hoarding gold is bad for an economy.
Some gold temporarely gets removed from the market, the gold that is being traded gains in worth. Once the hoarder pumps the gold back into the markets, the price for gold will adjust.
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At any rate, I would like to point out a huge flaw in your theory that you should have a gold standard run by independent banks (basically that currency is tied to a bank, and that market forces will police things). We have seen in recent days (and repeatedly in not so recent days that people keep forgetting) that banks and financial institutions are quite capable of blowing up. (That is, losing about everything if not more). The whole problem with the philosophy that market forces will push firms to operate fairly is that market forces are all lagging, so there is always the easy money is screwing people over, taking the money and running.
First of all using the current situation to point out that a gold standard in a free market is fauly is a little odd. I advocate a free market and the current financial market is about the most socialized industry there is (ultimately government controlled directly or indirectly everywhere).
Second of all why on earth is banks going out of business a bad thing? In a purely free market, the good banks will survive and the situation will be stable pretty quickly. It's also going to be somewhat harder to defraud someone if you have to be able to show them their gold at any given time.
In a socialist system bankrupt banks will be kept running artificially untill the **** hits the fan big time because there are no checks in place at all except for the "good word" of a corrupt body that has all the incentive in the world to lie to you.
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I am happy your wealth has doubled. I would caution you though that a lot of people have had huge success in strategies that they were sold on only to blow up later. My strong advice would be to diversify.
Nah I'll invest all in property/real estate. Maybe keep some gold.
I'll rent out the apartment(s) on as short a lease as I can though.