Why Its Pointless To Argue With Global Warming Believers 2045

First off, it's not true that someone has to go into debt. Wealth merely has to be transfered. If A lends B 10 bars of gold at 10% interest, and A invests that in developing a product and manages to collect 20 bars of gold selling that product to C, D and E, A can pay back the 11 bars. C, D, and E don't have to borrow any money to buy the product, if they can pay for it out of pocket.

But this little example does reveal exactly why a gold-backed currency (or any kind of fixed monetary supply) doesn't make any sense. The economy is not a zero sum game! One can invest $20 and generate $40 worth of value. This is how the economy grows. Apple invests money in making a Mac, and I buy one. I turn around and use that Mac to produce things for my clients, who in turn use those things to drive their own business, often selling products services which other individuals or businesses use for productive purposes, etc. At the end of this, everyone has more than they started with (well, on average).

With a fixed currency supply, all of this new wealth being generated has to be represented by the same amount of currency, which results in deflation. Deflation, of course, discourages investment (because you can get more buying power just by sitting on the same amount of money), discourages spending (why spend now when you can get more for the same price later?) and, when it's bad enough, makes lending at reasonable interest rates impossible.

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This is an absurd claim. *Everything* fluctuates in value, based on supply and demand. The idea that gold is somehow immune to this phenomenon has the character of a religious belief.

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-- "Those who enter the country illegally violate the law." -- George W. Bush in Tucson, Ariz., Nov. 28, 2005