34/ If the firm has 100 employees each earning $10/week, it's paying out 1,000 apples worth of wages per week. We'll ignore cost of goods sold, rent, etc.
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35/ So now, let's imagine some deflation. Either the fed screws up the fiat currency, or there is a surge in demand for gold elsewhere in the world, and there's less gold sloshing around the US. 10% deflation. Apples now cost 90 cents each. The firm is paying out $10/person.
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36/ Wow, those lucky employees! Last week they could buy 10 apples with their weekly paycheck, but this week they can buy 11 apples with their weekly paycheck! Except ... the firm has to sell widgets. Exchange rate of apples / widgets hasn't changed. Only NOMINAL prices did
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37/ So the firm has to drop its price of widgets by 10% in order keep up with the general deflation. But, hey, it's MERELY nominal prices. So firm goes to employees. "Guys, dollars are worth 10% more this week...so we're paying you 10% less"
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38/ Employee: the HELL you are Boss: no, it's cool. We gave you $10 last week and you could buy 10 apples, and we're going to give you $9 this week...and you can still buy 10 apples. YOUR SALARY HASN'T CHANGED IN REAL TERMS. Employees: <rioting INTENSIFIES> <strike starts>
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39/ I feel that this is kind of a loaded question, because I'm defending "fiat currency is real" and "deflation is bad", and folks are trying to hit me with every single policy they dislike, as if they're all the same thing. And they're not.https://twitter.com/tigerboy74u/status/1188973750475059201 …
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40/ > when you have a massive trade deficit first of all, it's rarely the case that there are real and prolonged deficits we export a lot of things. many of them are services. one of the big ones is "economic stability" when we export dollars, tons of them flow back >>>
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41/ to buy things like "bank accounts denominated in American dollars" and "real estate subject to the rule of law".
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42/ slightly, yes, I am. The problem with hard money is that the money supply does not scale in sync with the overall economy. Remember "won't be crucified on a cross of gold" from high school history? that said, I like multiple competing currencies https://twitter.com/relicn0cer/status/1188973952015712258 …
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Replying to @MorlockP
Finished Machinery of Freedom (can't believe I've somehow not read any D. Friedman!), was curious your thoughts on his commodity bundle idea?
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Replying to @MorlockP
Money backed by a bundle e.g. $100k corresponds to 1 ton of steel, 100 bushels of wheat, an ounce of gold, etc. The "What Commodity" section of chapter 46.
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Replying to @shlevy
Ah, yes. Independently invented this idea before read the book...so I approve!
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