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When currency production becomes too easy
Generating paper currency is remarkably straightforward. When a government determines the need for more money, it simply activates its printing operations, producing additional currency as long as there is a supply of paper and ink. This process, which might be viewed as sanctioned counterfeiting, is officially termed as expanding the money supply, a euphemism preferred for its positive public relations connotation. Typically, governments are reluctant to justify these actions in terms that the general populace can easily grasp.
The Economic Justification - Superficial growth
When pushed for a straightforward explanation, authorities often argue that without a regular increase in the money supply, most people's earnings would rarely see growth. This argument holds merit. In an economy strictly adhering to the gold standard, individuals are compensated fairly for the services they provide and the goods they produce. Thus, despite Joe Lacklustre's demands for automatic yearly wage hikes, unless there's a significant rise in the gold reserve, the financial resources for such increases are nonexistent. Instead, pay raises are allocated to employees who have demonstrated notable improvements in their value to the company, be it through further education, experience, or innate talent. The principle is clear: the more one contributes, the more they are rewarded. It's an intriguing concept, isn't it?
The Illusion of Progress under the Paper Standard
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The nature of inflation and the problems with the paper standard
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