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Date: | Fri Mar 31 17:18:44 2006 |
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James Ahiakpor wrote: "Surely, Henry George is mistaken in the reproduced
quote. He thinks because bonds, mortgages, notes, and bank bills are
concurrently assets and liabilities that their increased level does not
represent an increased level of wealth in a community. But for someone to
purchase those financial assets, they must have earned income. Thus these
financial assets represent the (increased) savings of the community. Their
purchasers are only making it possible for others to increase their own
spending beyond their current levels of income. Indeed, it is in
high-income communities that more of these financial assets are prevalent,
not in poor communities."
I am puzzled. Is it possible that real wealth remains exactly the same but
the supply of fiat money created by banks increase so that the financial
value of the existing wealth increases? How may I be sure that George was
mistaken? What happened to the real value and nominal value distinction?
Imagine that banks do not create new fiat money. But real output increases,
and there is additional real savings. I wish to understand how the financial
value of the financial assets will increase without an increased stock of
money? Has a situation called deflation any meaning?
Just puzzled.
Mohammad Gani
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