brckwlt wrote:then if it doesnt have to be that way how could it be. Like a socialist economy? please explain.
OK, I'm home and can go into this further. The market goes up and down because the money supply gets expanded. All those new dollars have to go somewhere
See, I can ask for a raise, or my company can ask for a million dollars for it's product, but if the money doesn't exist, where will the increases come from?
Government prints money and inject it into the system. Banks loan it to businesses which start buying things. That stimulates demand. Demand stimulates prices. You see the rising prices and ask for a raise. Your company is getting it's million dollars for it's product so it gives you the raise.
All this "works" until the things start to get out of hand(like say $100,000 houses selling for $500,000) and the money supply gets shut off.
As we've seen, that's when the wheels fall off the wagon.
So why do governments print money? Because they like to buy things. Roads, bridges, tanks, countries. Whatever it is. But they can't spend money until they take it from the people in the form of taxes. If you don't have it, they can't spend it.
So they pump money into the system and business people do what they do....try to make more money. Maybe that's investing in a company with a sock puppet for a mascot or speculating on house flipping or trading derivatives. But everyone is happy because everyone is working. The politicians get reelected and the wheel goes 'round.
The fix is sound money. Something not easily counterfeited. Historically, that's been gold and silver.
Article 1 Section 10 of the Constitution says "Section 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money
; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts
; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
The Constitution was well thought out. The words carefully chosen. "COIN" is different than "PRINT". They had done both and knew where paper money led. During the Revolutionary War, we printed "Continental Dollars". No one wanted them because they were just paper with nothing behind them. Lots of soldiers had a rough time at Valley Forge, not because there was nothing to be had, it was because as Washington said, "A wagon load of dollars will scarcely buy a wagon load of provisions."
And the second part about "no THING" but gold and silver was specified because it's the only thing which has proved through the years to retain it's value, be durable enough to be used as money, and can be verified as to it's value. Everything has been tried. Jewels, salt, spices, and sea shells. Nothing has lasted.
This is a bit disjointed but I'd be happy to expand on any/all of it if you'd like.