...is "fiat" money - money that derives its value from trust in an institution rather than any material good. It doesn't even have to be issued by any government power. During WW2 in internment camps for American POW's, ciagrettes provided by the red cross (ironic) became "currency" for the soldiers. Even a soldier who didn't smoke would gladly accept cigarettes in payment for some good or service, trusting in their "institution" that they could later exchange their cigarettes for another good or service that they wanted.

As far as the worries that have been professed on this board, anyone who has taken intermediate macroeconomics has studied the Solow Model (which oversimplifies many things but whose underlying principles are sound). The model tells us that the overall determinant of economic growth per worker in a country, otherwise known as average living standards, is derived from gains in technology, which increase worker productivity. Increasing the number of workers, I.E population growth, leads to a larger economy but a lower GDP per capita, as the population increases faster than the productivity per worker due to decreasing marginal products of labor and capital.

My conclusion is thus: Unless we are experiencing a drop in technological progress, what is taking place in today's economy is simple a part of the investment-led business cycle: Recession, Recovery, Peak, and Downturn. The Fed has developed increasingly sophisticated computer models that enable it to "smooth out" the large movements in GDP growth by forecasting earlier when it should raise interest rates to keep inflation in check (it's primary goal in the modern day), and when to cut rates to spur the economy. Contrary to what has been stated in some of these messages, the fed is by no means "out of money" to influence rates (which it does by using the required reserves that banks deposit with it to buy and sell bonds on the Fed Funds Market, known as Open-Market Operations). The fed funds rate is the lowest it has been in decades, but the fed has stopped cutting rates in appreciation of the fact that the market seems already on the road to recovery, and many analysts are predicting that the fed will actually begin to Raise rates again in late 2003.

Okay, give me an 'A'. What? The final was yesterday???!!!

posted by 65.126.19...

• OT: Economics ... Deflation worries, J, Sat, 14 Dec 2002 11:43:15
  • The supply of 'new' money does not necessarily..., Jon in Chicago, Tue, 17 Dec 2002 13:34:53
    • Oh, maybe better explained..., Jon in chicago, Tue, 17 Dec 2002 14:44:15
      • 1) I agree with what you're saying ..., J, Tue, 17 Dec 2002 15:19:52
        • Re: 1) I agree with what you're saying ..., Jon in Chicago, Tue, 17 Dec 2002 16:28:21
    • I don't understand reason for sarcasm, but ..., J, Tue, 17 Dec 2002 14:31:59
  • Some Misunderstandings....., Alex C, Sat, 14 Dec 2002 23:43:42
    • Nixon took dollar off of gold standard years ago., J, Sun, 15 Dec 2002 00:56:28
    • Re:J, you original q was about deflation?, Jon906, Sun, 15 Dec 2002 00:32:02
      • Alright ... there isn't a simple answer, but I did ..., J, Sun, 15 Dec 2002 01:33:20
      • Do you live in Ithaca, NY? Lovely part of country ..., J, Sun, 15 Dec 2002 01:05:48
      • thanks. it makes more sense now. n/m, J, Sun, 15 Dec 2002 00:52:16
  • Deflation worries>> VERY long, K-9, Sat, 14 Dec 2002 18:54:26
    • The word you are all looking for...and more... (LONG), Jeff Malin, Mon, 16 Dec 2002 22:19:16 <-- Viewing This Message
      • Thank you... and... I hope "fiat" money is better than, K-9, Tue, 17 Dec 2002 14:42:52
      • You get a B-. Your answer was good, but it answered, J, Mon, 16 Dec 2002 23:23:19
        • What to do next, Jeff Malin, Wed, 18 Dec 2002 15:47:28
    • O.K ..., J, Sat, 14 Dec 2002 21:13:56
      • Improving Economics Education, economic barometer, Wed, 2 May 2012 12:54:31
      • Re: O.K ..., K-9, Mon, 16 Dec 2002 13:56:04
  • Re: OT: Economics ... Deflation worries, Ed MA, Sat, 14 Dec 2002 15:32:56
  • Re: OT: Economics ... Deflation worries, bRAD, Sat, 14 Dec 2002 12:25:59
    • Re: Deflation_big problem., Jon906, Sat, 14 Dec 2002 13:27:11
      • So, why not print money?, J, Sat, 14 Dec 2002 14:14:54
        • OT: Economic theory worries.............., zeke, Sat, 14 Dec 2002 19:09:19
          • Deflation is created by too much of a good thing?, J, Sat, 14 Dec 2002 21:37:22
          • Zeke, question for you>, K-9, Sat, 14 Dec 2002 19:36:43
            • Higher Ed' opportunities in MA....., zeke, Sun, 15 Dec 2002 07:38:33
              • Zeke, thanks for the info, K-9, Mon, 16 Dec 2002 14:02:11
        • Re: So, why not print money?, Ian Glenday , Sat, 14 Dec 2002 16:51:20
          • Ian Ian Ian ... you should answer the casting call for, J, Sat, 14 Dec 2002 21:28:09
  • It's certainly hurt the used vehicle market..., b.flippo, Sat, 14 Dec 2002 12:23:49

No Site Registration is Required to Post - Site Membership is optional (Member Features List), but helps to keep the site online
for all Saabers. If the site helps you, please consider helping the site by becoming a member.

• Prev by Date: makes sense, as Modern German transposes, terraplanem, Mon, 16 Dec 2002 21:58:56
• Next by Date: (none)
• Main General Bulletin Board

StateOfNine.com

SaabClub.com

Jak Stoll Performance

M Car Covers

Ad Available

The content on this site may not be republished without permission. Copyright © 1988-2024 - The Saab Network - saabnet.com.
For usage guidelines, see the Mission & Privacy Notice.
[Contact | Site Map | Saabnet.com on Facebook | Saabnet.com on Twitter | Shop Amazon via TSN | Site Donations]

Random Saabnet.com Member Gallery Photos (Click Image)