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Date:      Thu, 25 May 2000 10:07:51 -0700
From:      Doug Barton <DougB@gorean.org>
To:        David Schwartz <davids@webmaster.com>
Cc:        chat@FreeBSD.ORG
Subject:   Re: The Ethics of Free Software
Message-ID:  <392D5DE7.FB5A9918@gorean.org>
References:  <000001bfc5e7$6f024440$021d85d1@youwant.to>

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David Schwartz wrote:
> 
> Terry Lambert wrote:
> 
> > I have never really understood the idea of the chairman of the
> > U.S Federal Reserve bank raising interest rates "because the
> > economy is running too hot".  There may be good reasons for
> > artificially braking the economy from where it would go in an
> > otherwise unregulated system, but I haven't ever seen any math
> > to tell me why where it would go in an otherwise unregulated
> > system, at least for the interest rate constraint, would be an
> > undesirable place.
> 
>         I must admit that this has never been satisfactorily explained to me
> either. But the gist of it is supposedly:
> 
>         1) Prices are the result of supply and demand. Not just the supply and
> demand of the good, but also the supply and demand of money. If the amount
> of available money increases, then all prices can increase. This is
> inflation.

	That's mostly right. The difference between inflation and economic
growth is how prices increase in relationship to the money supply. When
you add some other factors in you get what they call "buying power,"
which is what consumers perceive directly. 

	To simplify things fairly dramatically, if you're making more money
this year than you did last, and you can also _buy_ more this year than
you did last, that's economic growth. If you're making more this year,
and you can buy less, or roughly the same that's inflation. 

	The problem with this topic, like so much of economics is that a lot of
what's being measured is highly subjective. Someone else made the point
that if enough people believe a recession is going to happen, it's going
to happen. That's true of a lot of things... in fact in some ways it's
true of our entire economy, ever since the end of the gold standard.
Money is valuable just because we believe it's valuable. Or, in the
immortal words of Douglas Adams,

"... most of the people ... were unhappy for pretty much of the time.
Many solutions were suggested for this problem, but most of these were
largely concerned with the movements of small green pieces of paper,
which is odd because on the whole it wasn't the small green pieces of
paper that were unhapy." From "So Long, And Thanks For All The Fish."

Doug
-- 
        "Live free or die"
		- State motto of my ancestral homeland, New Hampshire

	Do YOU Yahoo!?


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