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Thread: Which economy is better?

  1. #1 Which economy is better? 
    Forum Senior chero's Avatar
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    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?


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    I thought that money bought goods In our economy.


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    I pick C) An economy that is based on money and a government that isn't.
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  5. #4  
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    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    I don't think we can escape credit, but we shouldn't rely on borrowing to support our economy. (as we seem to be) Is this what you mean? Sorry, just need some clarity. Personally, I'd like to see the U.S. get back to its manufacturing roots.
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    Quote Originally Posted by wegs View Post
    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    I don't think we can escape credit, but we shouldn't rely on borrowing to support our economy. (as we seem to be) Is this what you mean? Sorry, just need some clarity. Personally, I'd like to see the U.S. get back to its manufacturing roots.
    Yes. But the options given do not need to be restricted to what had been stated.

    I guess the question can be restated. Would it be beneficial to add goods as a means of acceptable trade? as in, if you do not have money or credit (which is a promise of payment), that the goods you do have (or services you are capable of) may be used to barter trade.


    Quote Originally Posted by Flick Montana View Post
    I pick C) An economy that is based on money and a government that isn't.
    are you refering to operating like a non-profit, or the concept that govt should not worry about pay check/bills? If neither, could you elaborate?


    Quote Originally Posted by cosmictraveler View Post
    I thought that money bought goods In our economy.
    It does. but what if money is not present? For instance, washing dishes at a restraunt in order to be provided food. Or pay a worker with materials of equal value of wage.
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  7. #6  
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    Ah, ok. The barter system. Yes, I like that...I think that at least between small businesses, that could be very beneficial. Collateral is something that many secured loans require, for example, with banks. Not like we have completely gone away from that idea, if we view it in different terms.
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    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    I don't disagree with the notion of accumulating money. It is how you spend it that matters. In a world of materialism, the accumulation of stuff can amount to waste which to me is the root of the problem. In my opinion a better economy in a capitalist system would be where a tax simply is imposed on ALL goods and services purchased whether through your own money or through borrowed money. .A tax such as this would tend to hamper the ability to spend 'beyond ones means' using credit. All other forms of taxes should be relegated to the dustbin. The role of the government then is to wisely re-distribute this tax revenue based on community need as opposed to personal need. Things however gets complicated when you don't go full bottle with these notions and start making exceptions here and there. My intuition tells me that a tax such as this would be simpler, fairer all round without stifling the principle of hard/clever work= reward. A tax such as this ensures some thought and effort is put into into the purchasing decision. Propping up a false economy from wasteful practices has longer term unsustainable impacts. :-))
    Last edited by Implicate Order; December 23rd, 2013 at 10:03 PM. Reason: Clever work is better than hard work IMO
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  9. #8  
    Forum Masters Degree Implicate Order's Avatar
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    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    Barter economies work well with small local communities not dependent on services in the supply chain such as distribution channels (eg. transport and market facilities). It is hard to create consumer choice through this model though as a 1:1 relationship on this style of system means that a consumer is critically dependent on a robust diverse community as all products/services need to be available to service their needs.

    A barter/ money hybrid economy might work and overcome this issue but this would slow down the production of highly capitalized projects such as major infrastructure projects or emergency community projects that may be needed NOW.

    I have no problems with an economy of money and credit, provided that the credit is used for 'sustainable purposes' that add to long term well-being and can be passed with a welcome to the future generation. Where things go 'bug-eyed' is when the system is used unscrupulously by those with a penchant for greed or a quick buck who like the fruits that leverage brings but do their best to transfer the risks of leverage to others knowingly. These characters tend to lurk in the trading world where 'worth' can be extracted from a market frailty or worse still a 'calculated bet'. If you put a goods and services tax on the instruments they trade with, then a short term money making opportunity from market frailty or a 'bet' becomes infinitely harder and a decision to 'invest' for a long term horizon takes precedence using sound market fundamentals.

    A mixture of these types of system gets unnecessarily complicated and incredibly difficult to manage in determining which goods/and or service goes where and what is the method of exchange for these things. The trader 'punter' mentality amongst us would have a field day with a complex hybrid system such as this and exploit the weaknesses in this hybrid system and things IMO would only get worse.
    Last edited by Implicate Order; December 23rd, 2013 at 10:04 PM.
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    Quote Originally Posted by chero View Post
    are you refering to operating like a non-profit, or the concept that govt should not worry about pay check/bills? If neither, could you elaborate?
    I mean that our politicians should not have a cushy job. They should not make four or five times the average income of their constituents. They should not receive unlimited, anonymous campaign funds from corporations. They should not be able to hold an office for 30+ years.

    The money should flow through the economy, not through Capitol Hill.
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    I don't think it's credit that's been the problem, it is absolutely essential for business and investment. Most of our problems have been through complex leveraged forms of credit.
    Last edited by Lynx_Fox; December 25th, 2013 at 10:10 AM.
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    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    Ok to effectively answer this question we need to seperate it out into the two constituent parts, credit being the first part and money - fiat currency being the second.

    Credit is an essential part of a modern capitalist economy, without it most business's just simply couldn't function. In order to expand, create new products, or simply maybe even just for improving manufacturing & distribution processes, many companies require access to credit to provide capital investment. Operating profits offer income for steady investment but often they just don't provide the enough finance up front. Perhaps a good example would be you or I taking out a mortgage to buy a new house - most of us over time could afford to buy the house from money accumilated from our incomes, but we just simply couldn't find the entire amount of money required to purchase it up front without some kind of credit or finance help.

    The alternative to having available access to credit would be to only ever make purchases when you as an individual or a company have the total amount of money required to pay in full up front. Whilst certainly this approach would help to eliminate debt growth the consequences would be quite dire for the competitiveness of a nations economy and virtually destroy consumer choice.
    It would make forward thinking and planning ahead near impossible as there wouldn't any money available for future investment. Furthermore normally companies are to track and predict future trends for consumer demand, they can then create appropriate products to meet this demand, however without the ability to obtain the necessary credit the new products just don't get made.

    Really we just simply couldn't easily replace or remove credit from a capitalist economy without serious problems, so yes it is better, certainly best that we keep credit available within the economy.

    Ok that deals with the credit aspect of the question, the second part is directed towards the money supply or fiat currency. The first thing we really need to do here is clear up any confusion over just what money or fiat currency actually is.

    To start with money and fiat currency are essentially the same thing, there isn't and certainly shouldn't be any distinction. What we are talking about here is an ownership exchange mechanism. Money gives us the ability to exchange our own goods or services for other goods and services.
    We work to earn money, the money is then exchanged for the things we want and need, that's basically how it works.

    Without enough money in an economy things get clogged up because it stops this process of exchange from effectively taking place. With to much money in a economy the value of this money starts to fall (inflation) and it means more money is required to exchange for goods and services, usually this level tends to set itself, the principles of supply & demand come into effect here. However on the world stage, a huge market place exists and with a global demand for a particular currency the equilibrium level can distort the exchange level for individual nations internal economies. This may present a possible long term cause for concern, but is still vastly better than the potential barter economy alternative.

    Once you remove the fiat currency from an economy you are pretty much stuck with a barter economy, if you attempt to replace it with any type of 'value' backed alternative you are stuck with a currency entirely restricted to whatever you are using to give it it's value. If this value goes down then so does your entire economy and with it your nations spending power, if however it goes up then your nations exports could suddenly become unaffordable in foreign countries.

    So really no advantages over a fiat currency, the fiat currency that's value is pegged to it purchasing power of any of the goods and services within your economy and it's ability to exchange for foreign currency and goods & services.

    But if you were to go further and remove money of any kind then you really are into the realms of the barter economy and the massive inconvenience that this would cause, one of the reasons being that it would be near impossible to keep up with the possible exchange values for every possible exchange trade when the trade values are constantly changing. Currently the actual prices of products in our capitalist consumer economies change all the time but we only have to learn one exchange value, this being what your money will allow you to buy at any given time.

    In conclusion the answer is an unambiguous yes, today's ecomony is by far much better than one without either credit or fiat currency.
    Last edited by Ascended; December 25th, 2013 at 08:23 PM. Reason: Spelling
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    Depends on how one defines "better".

    Any economy is viable, unless it's sustainable. Sustainable meaning has longevity, can provide a good living standard, supply adequate jobs, not have a bad social and/or environmental cost, etc.

    I guess by my own definition, a debt-based economy doesn't qualify lol...
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    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    Depends on the circumstances, right? If you are thirsty or hungry, and everyone else around you is as well, do you want two goats or a billion dollars? If you are in NY, at this very moment, do you want a billion dollars or two goats?

    Todays economy works for now. This will not be the case at some point in the future though.
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    Quote Originally Posted by Lynx_Fox View Post
    Most of our problems have been through complex leveraged forms of credit.

    substantiate.
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    Quote Originally Posted by Implicate Order View Post
    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    I don't disagree with the notion of accumulating money. It is how you spend it that matters. In a world of materialism, the accumulation of stuff can amount to waste which to me is the root of the problem. In my opinion a better economy in a capitalist system would be where a tax simply is imposed on ALL goods and services purchased whether through your own money or through borrowed money. .A tax such as this would tend to hamper the ability to spend 'beyond ones means' using credit. All other forms of taxes should be relegated to the dustbin. The role of the government then is to wisely re-distribute this tax revenue based on community need as opposed to personal need. Things however gets complicated when you don't go full bottle with these notions and start making exceptions here and there. My intuition tells me that a tax such as this would be simpler, fairer all round without stifling the principle of hard/clever work= reward. A tax such as this ensures some thought and effort is put into into the purchasing decision. Propping up a false economy from wasteful practices has longer term unsustainable impacts. :-))
    IN Hawai'i you are taxed on EVERYTHING!! food, water, gardener, etc....
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    Forum Bachelors Degree GoldenRatio's Avatar
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    Barter system works...decent enough on a small scale. On a big scale however its piss poor.

    Its like this, I have a goat I dont need but I need shoes. If you have shoes and need a goat. Barter works wonderful.

    However if you need a goat & all you have is lumber, I do not need lumber. I need shoes. Our deal falls apart.

    Not all is lost though, Because I will give you these fancy marks or scripts for that goat. The local shoe seller will honor these marks, He will use it to go out and buy bricks. Something neither of us have.

    Thus, money is born. Fancy strips of paper that is honored as fair trade for goods, service, or debt the world over.
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    barter is constant. barter is trade. fiat is held only for the period between buy and selling.
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    Quote Originally Posted by GoldenRatio View Post
    Barter system works...decent enough on a small scale. On a big scale however its piss poor.

    Its like this, I have a goat I dont need but I need shoes. If you have shoes and need a goat. Barter works wonderful.

    However if you need a goat & all you have is lumber, I do not need lumber. I need shoes. Our deal falls apart.

    Not all is lost though, Because I will give you these fancy marks or scripts for that goat. The local shoe seller will honor these marks, He will use it to go out and buy bricks. Something neither of us have.

    Thus, money is born. Fancy strips of paper that is honored as fair trade for goods, service, or debt the world over.
    Yes it does not work, on a large scale.
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    Quote Originally Posted by babe View Post
    IN Hawai'i you are taxed on EVERYTHING!! food, water, gardener, etc....
    I believe it was one of the Rockefellers, in 1901, complained that people who were worth only a million dollars could live just as well as people who were truly wealthy. (It's such a bitch having servants. The common people don't understand the issues it creates.)
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    aloha.
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    Today's economy seems to work well enough, today. I worry, though, that at some point all this fiat money that only exists as ones and zeros in computer storage somewher will eventually turn into a disaster. What if the world wide computer banking system just crashes one day? What if clever thieves were adding unearned electronic money to their accounts? Probably some already are, we just don't hear about it.
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    Quote Originally Posted by danhanegan View Post
    Today's economy seems to work well enough, today. I worry, though, that at some point all this fiat money that only exists as ones and zeros in computer storage somewher will eventually turn into a disaster. What if the world wide computer banking system just crashes one day? What if clever thieves were adding unearned electronic money to their accounts? Probably some already are, we just don't hear about it.
    But how is this really any different than the computers storing the amounts of money each of us have in our bank accounts? If you go to a cash machine one day and suddenly discover you have no money in your account you would probably, quite rightly I might add here, go and complain and insist that your money is indeed returned to you're account and the problem resolved.

    What happens with banking computer systems is multiple records kept in various different forms so that if, heaven forbid, something does happen to the computers controlling our bank accounts, the money can still actually be accurately traced and returned to it's rightful owners accounts.

    Really though the only serious alternative to the current electronic systems is to take a massive step backwards and return to a more physically orientated system where cash is recorded only on 'physical' paper records, but even then these are not entirely safe, theft or fire could erase them.

    Electronic banking is just really a more advanced way of storing, recording and moving money, it does every thing that you could do with actual bank notes but removes the need to actually physically store or move the notes yourself.

    But hang on a minute here, what we are forgetting is that bank notes themselves are still just merely records of this strange concept which we call money. The thing about computer records is that you can have multiple records of that same dollar or pound, where as with an actual bank note only one is allowed to exist so if anything happens to that note then that money is lost, so I guess you could actually make a case for a computer record with multiple backups being safer than the notes themselves.

    The real safety issues, and these are the far more unsecure aspects, relate directly to the concept of your dollar itself and it's relationship with what you can do with it. This is because it's an aspect very much out of the control of the average person, if inflation goes up then your dollar buys less it's as simple as this.

    No matter what form you store your money in there will always be risks attached and indeed ways in which you could end up far worse off, but the issue of prefering actual bank notes yourself than having them stored for you electronically in a banks computer system doesn't really seem to be much of an issue at all, more I might add just a choice of which you might personally prefer.
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    A good alternative would be some sort of RFID or other chip implanted into your hand. Wont have to keep up with your credit card or cash. Hard to steal unless someone wants to chop off your arm. Yeah i know rfid has security flaws right now but something like it in the future could be worth looking into.
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    Quote Originally Posted by John Galt View Post
    Quote Originally Posted by babe View Post
    IN Hawai'i you are taxed on EVERYTHING!! food, water, gardener, etc....
    I believe it was one of the Rockefellers, in 1901, complained that people who were worth only a million dollars could live just as well as people who were truly wealthy. (It's such a bitch having servants. The common people don't understand the issues it creates.)
    I love both of my gardeners and my housekeeper. I have no problem paying the taxes, but it is just different than the Mainland. Mainland, our taxes are worse. My gardener here comes once a week and housekeeper every two weeks, but she is in major need of work, so I am doing my best to create projects for her. When our gardener at our other house here, was out of work, I offered him the job. It gave him an income till he could get back on his feet.

    I don't have servants. I have employees, local people who need the work.

    I can be myself with them, and I can say I do or do not like something, without offense. I also listen to their suggestions. Is more of a team effort. *S*.....
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    Quote Originally Posted by Ascended View Post
    Quote Originally Posted by danhanegan View Post
    Today's economy seems to work well enough, today. I worry, though, that at some point all this fiat money that only exists as ones and zeros in computer storage somewher will eventually turn into a disaster. What if the world wide computer banking system just crashes one day? What if clever thieves were adding unearned electronic money to their accounts? Probably some already are, we just don't hear about it.
    But how is this really any different than the computers storing the amounts of money each of us have in our bank accounts? If you go to a cash machine one day and suddenly discover you have no money in your account you would probably, quite rightly I might add here, go and complain and insist that your money is indeed returned to you're account and the problem resolved.

    What happens with banking computer systems is multiple records kept in various different forms so that if, heaven forbid, something does happen to the computers controlling our bank accounts, the money can still actually be accurately traced and returned to it's rightful owners accounts.

    Really though the only serious alternative to the current electronic systems is to take a massive step backwards and return to a more physically orientated system where cash is recorded only on 'physical' paper records, but even then these are not entirely safe, theft or fire could erase them.

    Electronic banking is just really a more advanced way of storing, recording and moving money, it does every thing that you could do with actual bank notes but removes the need to actually physically store or move the notes yourself.

    But hang on a minute here, what we are forgetting is that bank notes themselves are still just merely records of this strange concept which we call money. The thing about computer records is that you can have multiple records of that same dollar or pound, where as with an actual bank note only one is allowed to exist so if anything happens to that note then that money is lost, so I guess you could actually make a case for a computer record with multiple backups being safer than the notes themselves.

    The real safety issues, and these are the far more unsecure aspects, relate directly to the concept of your dollar itself and it's relationship with what you can do with it. This is because it's an aspect very much out of the control of the average person, if inflation goes up then your dollar buys less it's as simple as this.

    No matter what form you store your money in there will always be risks attached and indeed ways in which you could end up far worse off, but the issue of prefering actual bank notes yourself than having them stored for you electronically in a banks computer system doesn't really seem to be much of an issue at all, more I might add just a choice of which you might personally prefer.
    Very well said!!!
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    Quote Originally Posted by chero View Post
    Is today's economy, revolving around money (fiat & credit) better than an economy operating on money and goods?
    Yes, very conditionally. The key of a monetary system is wealth (real goods & services) produced and money produced stay correlated. The amount of money should be correlated with the amount of wealth. Only in a credit based economy can money be produced to correspond to new wealth produced, as happens with a business loan. If currency can't be produced like this, the value of the money increases as the wealth is produced, and saving always becomes the most profitable path, stagnating the economy due to lack of investment. But if the business being created is a fraudulent paper entity and won't produce actual goods or services people want, the currency devalues, which is what's been happening.

    So the ideal system is omniscient: It produces currency for any venture (via credit) in exact proportion to the wealth that will be created. A real system can't be omniscient, and the current systems are prone to corruption as well. Certain parties may even see currency devaluation as desirable, as a way to lower the real value of wages, giving an invisible pay decrease to workers. It will be interesting to see what the Bitcoin crowd might dream up in terms of currency creation through credit in coming decades: I can imagine cold algorithms that could be more effective at it than the status quo, but at the same time its a tall order, because anonymity is cheap (which bitcoin is based on), but credit requires the opposite.

    edit: one really interesting x-factor is the fusion of big data/intelligence, AI, and this stuff. One new thing we'll have is the ability to look way, way, ahead. A bank who funds a business that cuts down the trees in an area that devalues the real estate they are invested in, may not give that loan, if they had all the facts on the table. So value takes on a whole new definition in terms of a way bigger picture. That could deeply effect credit.
    Last edited by TridentBlue; January 29th, 2014 at 02:34 AM.
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    Thing i never understood about the economy is how the US government can be 15 trillion in debt. the government prints the money, cant they just print up 15 trillion?
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    Both are the same, only difference is electronic vs non electronic. electronic is just more convenient.
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    Quote Originally Posted by GoldenRatio View Post
    Thing i never understood about the economy is how the US government can be 15 trillion in debt. the government prints the money, cant they just print up 15 trillion?
    I have heard explanations but they'd take hours to post!! *L*
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    Quote Originally Posted by GoldenRatio View Post
    Thing i never understood about the economy is how the US government can be 15 trillion in debt. the government prints the money, cant they just print up 15 trillion?
    It can but it shouldn't unless absolutely necessary - one of the core principles of finance is that governments cannot default on their domestic debt (and barring a couple of weird cases this is quite universal). The problem with just printing another $15 trillion dollars to settle the debt it has would drive down the value of the dollar, a phenomena also known as inflation. So that is the trade off, pay back debt slowly and keep inflation down or try pay it back all at once and induce hyperinflation.
    As is often the case with technical subjects we are presented with an unfortunate choice: an explanation that is accurate but incomprehensible, or comprehensible but wrong.
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    Forum Bachelors Degree GoldenRatio's Avatar
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    Also, indebt to who? Who do we owe so much money to? I have heard we owe china like 1-2 trillion but where is the rest in debt to?
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  34. #33  
    Forum Professor river_rat's Avatar
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    Quote Originally Posted by GoldenRatio View Post
    Also, indebt to who? Who do we owe so much money to? I have heard we owe china like 1-2 trillion but where is the rest in debt to?
    Most of it is money you owe yourselves: majority of government debt is held by the insurance and finance sectors if I remember correctly.

    EDIT: Here is a nice summary http://useconomy.about.com/od/moneta...ional-Debt.htm
    Last edited by river_rat; January 30th, 2014 at 03:58 AM. Reason: Added URL
    babe and GoldenRatio like this.
    As is often the case with technical subjects we are presented with an unfortunate choice: an explanation that is accurate but incomprehensible, or comprehensible but wrong.
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    Sir River Rat...Mahalo!
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  36. #35  
    Universal Mind John Galt's Avatar
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    Quote Originally Posted by babe View Post
    Quote Originally Posted by GoldenRatio View Post
    Thing i never understood about the economy is how the US government can be 15 trillion in debt. the government prints the money, cant they just print up 15 trillion?
    I have heard explanations but they'd take hours to post!! *L*
    Or you can just say inflation, and be done with it. If you wish a more comprehensive answer then say run-away inflation.
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    Quote Originally Posted by John Galt View Post
    Quote Originally Posted by babe View Post
    Quote Originally Posted by GoldenRatio View Post
    Thing i never understood about the economy is how the US government can be 15 trillion in debt. the government prints the money, cant they just print up 15 trillion?
    I have heard explanations but they'd take hours to post!! *L*
    Or you can just say inflation, and be done with it. If you wish a more comprehensive answer then say run-away inflation.

    Thank you Sir John....well said..
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    define better.

    better as in lower unemployment? lower inflation? higher economic growth?
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