Monday, January 13, 2014

Want: Or How the Gold Standard Satisfies Marginal Utility in Individuals.

In basic terms, marginal utility is the degree of want someone has for something. Obviously, individuals have unlimited wants, but the more of a person's overall marginal utility that is filled (including intangibles, such as love, relinquishment of guilt, and health) , the wealthier they are. But here is the rub: the less the Dollar, Yen, or whatever currency is worth, the less overall marginal utility that is satisfied. And the more pent up marginal utility there is, the more someone wants something, which is distorted by the inflationary nature of the dollar. So as (in my case) the Dollar devalues, my dreams are cut of further from my merit, and are downsized from owning the world, to maybe having my little piece of the American Dream. The farther away from (almost) complete equilibrium of marginal utility is pulled, the more desperate people become. And when this happen, we tend to get rather greedy. Instead of enjoying life, we dive into more hours, and more and more, until we are worked to death, all to buy less and less each year. This also increase the crime rate, as well as a general hostility towards one's fellow man.

Contrast this with the gold standard. Instead of earning less and less each year, and person would actually hold their purchasing power, or perhaps even gain purchasing power. In fact, until 1913, most people complained about deflation, not inflation! This was because we were based on the gold standard, not a fiat standard which is the fodder for war, famine, and the plague. If we replaced the dollar with a 100% gold standard, instead of there being a disconnect between savings and dreams, and a disconnect between earning more and a larger satisfaction of marginal utility, our marginal utility would be satisfied more, and thus there would be less of a "greed is good culture" and more of a cooperation culture. It is because of the fiat dollar marginal utility satisfaction is less, and why more people get more desperate in order to satisfy it, even it that means crime. Thus because of mal investment, we are less content, and thus because of this economic insufficiency poverty is increased. Overall morality and a civil attitude towards our fellow man decline.

Also consider the investment that is not made due to lack of purchasing power. If a dollar would be equivalent to $20 dollars in real terms, we could perhaps cure cancer, build a (private) next gen infrastructure. But because we dilly dally on the economic inefficiencies of the Federal Reserve, the poorer get poorer, and the richer get richer.

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