Tuesday, September 11, 2012

Advantage 10 – Self-regulating monetary and economic system

Excerpt from the book »Gradido – Natural Economy of Life«

»If we do not demonstrate our determination to organize national finances sustainably, we will have neither financial stability nor sound economic growth«.

      Ben Bernanke
FED President

The central banks have for a long time been unable to cope with their task of regulating the money supply so as to create financial stability. How are they supposed to be able to stabilise a complicated system whose basic functions are constructed in a way that is dysfunctional and contrary to nature?

The Natural Economy of Life is a self-regulating system. The money supply stabilises automatically through the cycle of growth and decay. And how does it work with the supply of goods?

Let’s assume that a vital product, for example an item of food, is in short supply. There may be different reasons for such a situation. The crop may have been destroyed by hail or production has become too cost-intensive and is no longer worthwhile. The distances for transporting the product may be too long or the work too laborious and there are not enough people who want to work in its production. Whatever has caused the shortage, the item becomes more expensive.

If it is an essential product, the costs of living will increase and some people will no longer be able to live so comfortably from their basic incomes. As a consequence, they will want to earn some extra money. The highest wages and salaries are to be found where an urgent shortage needs to be remedied, in our case in the production of a food that is in short supply. Job-seekers will first and foremost apply for such jobs.

The scarce product will be produced in larger quantities again. Prices fall again and production evens off at a normal level.

The system has automatically regulated itself without the need for external intervention. If attempts had been made to influence the money supply, something uncontrollable – a bubble – would have resulted. 

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