Derek McDaniel
Jul 28, 2017 · 2 min read

Fortunately, there is not a linear relationship between deficit levels and inflation. That idea is known as the quantity theory of money, and there are a million reasons why it isn’t an accurate description of how money actually works.

Money is fundamentally credit. Solvency is a specific legal accounting rule imposed on accounting entities, to enforce certain norms. But there is no inherent reason why that is the only way we could resolve these social credits.

The national debt is simply a bunch of savings accounts with the treasury. While you could get people to save entirely using the stock market and private banks, this would have the same problem, except you are now relying on private entities and not public ones to guarantee your savings. Without public authority it’s a lot less reliable.

You could get rid of credit entirely, but then you would have no money, you would have to either trade things directly or rely on giving and taking based on honor or other cultural rules.

Inflation is an increase in the cost of an arbitrary Consumer Price Index in a specific unit of currency. People and other financial entities have broad discretion to set prices at whatever level they like, so prices and inflation inherently can’t be reduced to simple ideas.

One simple idea, however, that gives us part of the picture, is that whenever people have more available money to spend, and which they want to spend, than goods that could be produced, then people are trained to increase prices as a way to discriminate access to these resources whose maximum availability cannot meet the desired consumption level.

I don’t agree with your conclusions, though I do agree with the importance of discussing public financial issues that can affect all of us.

    Derek McDaniel

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    Technology, programming, and social economy.