Being close to the printers so to speak also means you can get richer by causing inflation. You have a greater value to your money than others but you also have a greater suplly, meaning you can first invest in real estate and tangible assets, then borrow against this and buy out/up from those who feel inflation harder, especially if interest rates are raised.
Or even simpler: the casino exists to make the owners richer, not the punters and rubes.
What's always amazed me re: inflation and the causes of it, is this:
Inflation is more money put into existence without corresponding increase in production of goods, increase in resources et c. Creating money out of nothing essentially.
If that is so, then what of the stock market and the rest of the financial sector where you make money on exchange rates, derivatives, borrowing using debt as security, and so on? Every such transaction is done to increase the monetary value of said/other monetary assets, right?
Where's the increase in value coming from? From other investors thinking they too will be able to make money from the same transactions, basically making it a big confidence game, pyramid scheme and chain letter all at once.
If Krupp makes 10 Dicke Bertha at 100k Mark/unit in cost, and sell them to the Heer for 150k/unit, they've made 50k profit, right? They've made -created- 50k more money, but it is connected to something real, both at the producer and consumer points on the axis.
But if Krupp sells 10 units of stock for 10k/unit, and these shares are re-sold at 15k/unit, all the while producing 5 Dicke Bertha per annum due to cut-backs and downsizing - what creates the extra 50k profit for shareowners/sellers?
Confidence, interest and trust in the system - while creating inflation, inflation which has to be combatted with interest rates, taxation and increasing the pool of potential workers.
Why? To ensure the richest 1/1 000 citizen doesn't lose their owenrship of 90%+ of everything.
Gee whiz, capitalism sure is much different from communism in regards to who owns things, yes?
As regards the supply-side of things: sure, the (lack or under-supply) of goods affects inflationary pressures, too, but since most of 'Western' economies consists of services, the material side of things don't appear as important as the monetary aspects.
Your Krupp example, though, points to yet another very important aspect (that I didn't cover in the above piece), which is--currency (money) creation by non-central banks.
Another aspect (apart from the ownership issues you allude to) is--democratic control. So far, fiscal policy (taxes) are technically controlled by the legislature, with monetary policy being the purview of 'independent' central banks.
Since autumn/winter 2019/20, however the latter are more and more engaged in controlling the former, thus calling into question that particular separation of power.
Being close to the printers so to speak also means you can get richer by causing inflation. You have a greater value to your money than others but you also have a greater suplly, meaning you can first invest in real estate and tangible assets, then borrow against this and buy out/up from those who feel inflation harder, especially if interest rates are raised.
Or even simpler: the casino exists to make the owners richer, not the punters and rubes.
What's always amazed me re: inflation and the causes of it, is this:
Inflation is more money put into existence without corresponding increase in production of goods, increase in resources et c. Creating money out of nothing essentially.
If that is so, then what of the stock market and the rest of the financial sector where you make money on exchange rates, derivatives, borrowing using debt as security, and so on? Every such transaction is done to increase the monetary value of said/other monetary assets, right?
Where's the increase in value coming from? From other investors thinking they too will be able to make money from the same transactions, basically making it a big confidence game, pyramid scheme and chain letter all at once.
If Krupp makes 10 Dicke Bertha at 100k Mark/unit in cost, and sell them to the Heer for 150k/unit, they've made 50k profit, right? They've made -created- 50k more money, but it is connected to something real, both at the producer and consumer points on the axis.
But if Krupp sells 10 units of stock for 10k/unit, and these shares are re-sold at 15k/unit, all the while producing 5 Dicke Bertha per annum due to cut-backs and downsizing - what creates the extra 50k profit for shareowners/sellers?
Confidence, interest and trust in the system - while creating inflation, inflation which has to be combatted with interest rates, taxation and increasing the pool of potential workers.
Why? To ensure the richest 1/1 000 citizen doesn't lose their owenrship of 90%+ of everything.
Gee whiz, capitalism sure is much different from communism in regards to who owns things, yes?
As regards the supply-side of things: sure, the (lack or under-supply) of goods affects inflationary pressures, too, but since most of 'Western' economies consists of services, the material side of things don't appear as important as the monetary aspects.
Your Krupp example, though, points to yet another very important aspect (that I didn't cover in the above piece), which is--currency (money) creation by non-central banks.
Another aspect (apart from the ownership issues you allude to) is--democratic control. So far, fiscal policy (taxes) are technically controlled by the legislature, with monetary policy being the purview of 'independent' central banks.
Since autumn/winter 2019/20, however the latter are more and more engaged in controlling the former, thus calling into question that particular separation of power.
Thanks for the Krupp references. I once wrote a college term paper on the Krupp family and their relationship to Prussian and later German history.
I’m proud to say that my professor (economics, economic history) said that mine was the best paper that he had received in his 35 year career.
Great discussion!