How much Gold should be minted every year?

I'm not an economist so does anyone have an idea on how much Gold/silver should be dumped into the market ever year from the new mines that will come on line soon?

Well inflation is a figure based upon how much new money is put into the system every year, relative to how is needed due to increases in production. Now this is functionally impossible, coupled with the fact that minting money is a source of government funds that aren't taxes mean your always running ahead. That said, if at all possible your don't want it to be too much, that causes problems.

Inflation occurs when you have more money chasing after the same amount of goods. The government is, generally speaking, buying new goods to replace goods which were destroyed ie, ships, guns, ammunition, food, etc. Additionally that money is being spent on increased production of goods, for example, the food which was being sent to Siddermark was being removed from the markets in Charis and Chisholm which could be inflationary in the short term however since more land is being put under cultivation that will correct and could, after the emergency is over, become deflationary. As long as people's wages keep up with increases in prices, and new goods come on the market you should be able to put a lot of additional gold into circulation.
Another point to remember is that the Writ specifies the precious metal component of a Mark, so there is a lot of trust in the value of coins. The church, however, is issuing notes, which are trading at a discount which is inflationary in itself, much as Charisian notes did when they were buying food etc. from Corisandian farmers during the invasion. Duchairn discusses that matter with Trynair and tells him that at the start of the war, the Church mark was worth 14% more than the Charisian but is now worth 11% less. (Gotta add that to the nitpick list - how do people who use roman numerals know what a percentage is, much less calculate it?)

Keith_w wrote:Inflation occurs when you have more money chasing after the same amount of goods. The government is, generally speaking, buying new goods to replace goods which were destroyed ie, ships, guns, ammunition, food, etc. Additionally that money is being spent on increased production of goods, for example, the food which was being sent to Siddermark was being removed from the markets in Charis and Chisholm which could be inflationary in the short term however since more land is being put under cultivation that will correct and could, after the emergency is over, become deflationary. As long as people's wages keep up with increases in prices, and new goods come on the market you should be able to put a lot of additional gold into circulation.
Another point to remember is that the Writ specifies the precious metal component of a Mark, so there is a lot of trust in the value of coins. The church, however, is issuing notes, which are trading at a discount which is inflationary in itself, much as Charisian notes did when they were buying food etc. from Corisandian farmers during the invasion. Duchairn discusses that matter with Trynair and tells him that at the start of the war, the Church mark was worth 14% more than the Charisian but is now worth 11% less. (Gotta add that to the nitpick list - how do people who use roman numerals know what a percentage is, much less calculate it?)

Hi Keith,

RFC has constructed the best of all possible worlds economically speaking. We know that productivity can grow explosively when you can skip steps in the normal evolution of production. We have seen that in Japan, the Asian Tigers, and even China. As long as they were skipping steps in business processing, they could grow twice as fast as the U.S. When they finally achieved parity in technology, their growth slowed down as their productivity was limited by technology that is being created.

The reason that I mentioned that is because the Inner Circle knows what new technology is being developed, and Owl can calculate the growth in productivity. That is on immediate critical technology that the EOC needs. The EOC has also created the academic basis to make new technology available to an open economy. Whether the EOC needs the products the technology make possible or not, investors can decide to use the technology if they believe that they can profit from it.

All of that means that the growth in the GDP should be in the double digits, and stay there as long as the money supply is growing, as long as new products are being produced as older products achieve market saturation, and the consumer spending is based on increases in take home pay verses increases in consumer debt.

In the immediate future some of those condition are not too critical as the government of the EOC is the largest consumer, and the EOC doesn't have to use deficit spending, or increased taxes to pay for goods and services. In fact, the EOC is now in a position make major reduction in taxes that will improve the profitability of all EOC businesses.

So the answer to the gold question would be as much as possible to promote GDP growth without consumer inflation, and/or asset inflation.

James

Keith_w wrote:" . . . .Gotta add that to the nitpick list - how do people who use roman numerals know what a percentage is, much less calculate it?"

A Roman goes into a bar and holds up two fingers
"Five beers, please"


Another, rather superior Roman, walks into a club and says to the waiter "Bring me a Martinus"
"Don't you mean a Martini" asks the waiter?
"If I wanted a double I'd have asked for one" comes the response.

chrisd wrote:

Keith_w wrote:" . . . .Gotta add that to the nitpick list - how do people who use roman numerals know what a percentage is, much less calculate it?"

A Roman goes into a bar and holds up two fingers
"Five beers, please"


Another, rather superior Roman, walks into a club and says to the waiter "Bring me a Martinus"
"Don't you mean a Martini" asks the waiter?
"If I wanted a double I'd have asked for one" comes the response.

And if he went into a Chinese bar he would have gotten eight beers

Alistair wrote:

I'm not an economist so does anyone have an idea on how much Gold/silver should be dumped into the market ever year from the new mines that will come on line soon?

The uses of gold can be divided into two types, monetary and non-monetary, so there are two answers to your question.

As an aside, some of the non-monetary uses of gold include jewelry, as an electrical conductor (offer not valid in some locations), brazing, thread, glass coloring, photography, as a reflector, heat shielding, and as a de-icing coating.

Taking the non-monetary side first: In a free market, which appears not to apply in Desnair, the amount of gold that should be produced is equal to the amount of gold that's needed for those purposes. If a little more is needed next year for, say, jewelry, then a little more should be produced. The free market signals the increased need by increased prices, so expect to see the price of jewelry to rise. A price rise of jewelry provides an incentive to make more jewelry and, thus, to use more gold. That causes a price rise in gold (relative to where it would have been without the jewelry increase) which provides the incentive to produce more gold.

This same is true of each of the uses of gold, and as some uses increase others decrease. We can expect to see each of the uses ebb and flow, and similarly for the production of gold.

The actual amount of gold that should be produced is a balance between how easy it is to produce the gold, and how valuable the resources are that go into producing it. For example, a gold miner could be put to use mining iron without much additional investment in his training, etc.

All of the proceeding is also true of silver.

However, none of that was your question, because you were really asking about gold's monetary uses. The answer to the monetary question is counter-intuitive. It's: none. No additional gold need be produced for monetary purposes.

Now, realize that I'm giving you my impression of an economist, so I can't leave the answer there. No economist would, so let me expand.

It's theoretically possible to use an extremely rare element as money. Suppose that there is exactly one gram of handwavium on the earth, and that it's extremely difficult or impossible to get more. Suppose, also, that all of the handwavium has been mined and smelted and is on a tiny pallet under the New York Federal Reserve. That could be the backing for all of the money in the nation, provided that warehouse certificates were issued for fractions of the handwavium, that the monetary authority does not over-issue, and that counterfeiting can be controlled. Under those conditions the value of the certificates would be stable, and could be used to purchase the entire GDP of the nation. Gold is the same way.

Suppose that the amount of money increases. If that happens then sellers will see increased sales, and will respond by trying to produce more of their product or service. The delay between the increase of money and increased business activity depends on a number of things. In the United States in the 1970s that lag was about five months.

Since we're supposing all producers are trying to increase production, they're going to find that they can't do it. After all, our gold miner can't mine both gold and iron the same day, the same hour. (Well, in general. Obviously, one could conceive a special mine that had both metals available.) The result will be price inflation. The lag between the increase of money and the increase of price inflation in the United States during the 1970s was about nine months.

Once inflation occurs people buy fewer goods and services. After all, their money is worth less, and we're supposing that they're not getting more money after the initial money infusion and wage inflation. Business activity decreases. In the United States in the 1970s that lag was about thirteen months.

Businesses respond to the reduced activity by lowering prices (below what it would have been without the initial money infusion). Since this is general, the result is deflation. In the United States during the 1970s the lag between the initial money increase and deflation was about eighteen months.

People respond to the reduced prices by increasing their purchases. Businesses respond to the increased activity by increasing their prices to the original level. The result, without additional money infusions, is a return to the original prices and production levels. In the United States during the 1970s the lag between the initial money infusion and the return to original conditions was twenty-four months.

If there has been long term price stability, and if the production of money has been unchanged then the lag increases. If there has been much price instability, and if money quantity has rapidly changed then the lag decreases. In Germany during the first half of the 1920s the lag between money increase and price increase was about four fours.

If there is a money reduction rather than a money increase then the same events happen, but in the opposite direction. Rather than an increase in business activity after five months there would be a decrease, etc.

Notice that productivity increases cause the same things to happen as a monetary decrease. Store shelves start filling, so businesses respond by decreasing their efforts. However, productivity increases cause less effect than money decreases because of the limits that productivity increases have. Monetary authorities, particularly those with fiat currencies, seemingly have no limit to their ability to increase or decrease the money supply. Milton Freidman famously stated that [price] inflation is always and everywhere a monetary phenomenon.

Now let me turn to Charis. Charis has experienced some major productivity increases. The invention of the cotton-steel gin and looms has greatly increased the quantity of cloth, ropes, and other products. The introduction of women into the workforce has caused similar productivity increases (measured as total productivity). The invention of air-powered machinery, standardized units of measurement, and the assembly line (pending) has as well. Depending on how you measure productivity, Charis has experienced decreases as well. For example, do you count someone moving from farming to sailoring as a productivity decrease, since he's no longer growing potatoes? Or is it a wash since he's now producing security? Is a galley on the bottom of Darcos Sound a loss, because it's no longer being used? Or is that the normal use to which galleys are put?

Inflation hurts some people and helps others. If you owe a debt, then inflation helps you. It allows you to pay back your debt with money that's not worth as much as the money you borrowed. Conversely, if a debt is owed you. Inflation consumes resources as the people who are hurt by inflation attempt to mitigate the damage. They have to negotiate contracts with inflation clauses, for example.

Let's leave the realm of positive economics, and turn to normative economics. Cayleb has a lot of economic power. It comes from his ability to tax, and his ability to legislate or affect legislation. Like inflation, taxes hurt some people. His ability to spend helps others. Howsmyn is one who's benefiting from governmental spending. With the gold discoveries on Silverlode Island, Cayleb can now use the power of inflation to help some and hurt others. He can also shift business activity forward or backward in time. Suppose for example, there is a noble on Charis who owes a great debt, and the increase in taxes on, say, shipping is dealing him a double blow. Cayleb could start inflating the money supply as a means of mitigating the former. Of course, it's going to hurt the debtee, but politically that may be the preferred choice because the debtee may be receiving much of the spending from either taxes or the new gold money production.

~Tonto

Tonto Silerheels wrote:Alistair wrote:

I'm not an economist so does anyone have an idea on how much Gold/silver should be dumped into the market ever year from the new mines that will come on line soon?

The uses of gold can be divided into two types, monetary and non-monetary, so there are two answers to your question.

As an aside, some of the non-monetary uses of gold include jewelry, as an electrical conductor (offer not valid in some locations), brazing, thread, glass coloring, photography, as a reflector, heat shielding, and as a de-icing coating.

Taking the non-monetary side first: In a free market, which appears not to apply in Desnair, the amount of gold that should be produced is equal to the amount of gold that's needed for those purposes. If a little more is needed next year for, say, jewelry, then a little more should be produced. The free market signals the increased need by increased prices, so expect to see the price of jewelry to rise. A price rise of jewelry provides an incentive to make more jewelry and, thus, to use more gold. That causes a price rise in gold (relative to where it would have been without the jewelry increase) which provides the incentive to produce more gold.

This same is true of each of the uses of gold, and as some uses increase others decrease. We can expect to see each of the uses ebb and flow, and similarly for the production of gold.

The actual amount of gold that should be produced is a balance between how easy it is to produce the gold, and how valuable the resources are that go into producing it. For example, a gold miner could be put to use mining iron without much additional investment in his training, etc.

All of the proceeding is also true of silver.

However, none of that was your question, because you were really asking about gold's monetary uses. The answer to the monetary question is counter-intuitive. It's: none. No additional gold need be produced for monetary purposes.

Now, realize that I'm giving you my impression of an economist, so I can't leave the answer there. No economist would, so let me expand.

It's theoretically possible to use an extremely rare element as money. Suppose that there is exactly one gram of handwavium on the earth, and that it's extremely difficult or impossible to get more. Suppose, also, that all of the handwavium has been mined and smelted and is on a tiny pallet under the New York Federal Reserve. That could be the backing for all of the money in the nation, provided that warehouse certificates were issued for fractions of the handwavium, that the monetary authority does not over-issue, and that counterfeiting can be controlled. Under those conditions the value of the certificates would be stable, and could be used to purchase the entire GDP of the nation. Gold is the same way.

Suppose that the amount of money increases. If that happens then sellers will see increased sales, and will respond by trying to produce more of their product or service. The delay between the increase of money and increased business activity depends on a number of things. In the United States in the 1970s that lag was about five months.

Since we're supposing all producers are trying to increase production, they're going to find that they can't do it. After all, our gold miner can't mine both gold and iron the same day, the same hour. (Well, in general. Obviously, one could conceive a special mine that had both metals available.) The result will be price inflation. The lag between the increase of money and the increase of price inflation in the United States during the 1970s was about nine months.

Once inflation occurs people buy fewer goods and services. After all, their money is worth less, and we're supposing that they're not getting more money after the initial money infusion and wage inflation. Business activity decreases. In the United States in the 1970s that lag was about thirteen months.

Businesses respond to the reduced activity by lowering prices (below what it would have been without the initial money infusion). Since this is general, the result is deflation. In the United States during the 1970s the lag between the initial money increase and deflation was about eighteen months.

People respond to the reduced prices by increasing their purchases. Businesses respond to the increased activity by increasing their prices to the original level. The result, without additional money infusions, is a return to the original prices and production levels. In the United States during the 1970s the lag between the initial money infusion and the return to original conditions was twenty-four months.

If there has been long term price stability, and if the production of money has been unchanged then the lag increases. If there has been much price instability, and if money quantity has rapidly changed then the lag decreases. In Germany during the first half of the 1920s the lag between money increase and price increase was about four fours.

If there is a money reduction rather than a money increase then the same events happen, but in the opposite direction. Rather than an increase in business activity after five months there would be a decrease, etc.

Notice that productivity increases cause the same things to happen as a monetary decrease. Store shelves start filling, so businesses respond by decreasing their efforts. However, productivity increases cause less effect than money decreases because of the limits that productivity increases have. Monetary authorities, particularly those with fiat currencies, seemingly have no limit to their ability to increase or decrease the money supply. Milton Freidman famously stated that [price] inflation is always and everywhere a monetary phenomenon.

Now let me turn to Charis. Charis has experienced some major productivity increases. The invention of the cotton-steel gin and looms has greatly increased the quantity of cloth, ropes, and other products. The introduction of women into the workforce has caused similar productivity increases (measured as total productivity). The invention of air-powered machinery, standardized units of measurement, and the assembly line (pending) has as well. Depending on how you measure productivity, Charis has experienced decreases as well. For example, do you count someone moving from farming to sailoring as a productivity decrease, since he's no longer growing potatoes? Or is it a wash since he's now producing security? Is a galley on the bottom of Darcos Sound a loss, because it's no longer being used? Or is that the normal use to which galleys are put?

Inflation hurts some people and helps others. If you owe a debt, then inflation helps you. It allows you to pay back your debt with money that's not worth as much as the money you borrowed. Conversely, if a debt is owed you. Inflation consumes resources as the people who are hurt by inflation attempt to mitigate the damage. They have to negotiate contracts with inflation clauses, for example.

Let's leave the realm of positive economics, and turn to normative economics. Cayleb has a lot of economic power. It comes from his ability to tax, and his ability to legislate or affect legislation. Like inflation, taxes hurt some people. His ability to spend helps others. Howsmyn is one who's benefiting from governmental spending. With the gold discoveries on Silverlode Island, Cayleb can now use the power of inflation to help some and hurt others. He can also shift business activity forward or backward in time. Suppose for example, there is a noble on Charis who owes a great debt, and the increase in taxes on, say, shipping is dealing him a double blow. Cayleb could start inflating the money supply as a means of mitigating the former. Of course, it's going to hurt the debtee, but politically that may be the preferred choice because the debtee may be receiving much of the spending from either taxes or the new gold money production.

~Tonto

I have to disagree with you on the change of employment reducing productivity. If a farm worker changes employment to become an employee of a different sort of business, manufactory, military, merchant sailor or whatever, then productivity is reduced ONLY if the total farm product that s/he produced is reduced, otherwise, if the produce remains the same there is an actual increase in the overall productivity of all other farm workers. For example, if the total farm production is 100 units, with a work force of 5 workers then the productivity of each worker is 20 units. If one of those workers leaves, but production remains at 100, then the productivity of each worker has increased to 25 units, if the worker leaves and productivity falls to 80 units then worker productivity has remained the same at 20 units per worker. The same holds true if a new technology is introduced, perhaps a new reaper/baler, which may allow a single worker to reap, thresh, winnow and bind an acre an hour where before it may have taken 4 workers a day to reap, thresh, winnow and bind an acre of land.

Tonto Silerheels wrote:Alistair wrote:

I'm not an economist so does anyone have an idea on how much Gold/silver should be dumped into the market ever year from the new mines that will come on line soon?

The uses of gold can be divided into two types, monetary and non-monetary, so there are two answers to your question.

As an aside, some of the non-monetary uses of gold include jewelry, as an electrical conductor (offer not valid in some locations), brazing, thread, glass coloring, photography, as a reflector, heat shielding, and as a de-icing coating.

Taking the non-monetary side first: In a free market, which appears not to apply in Desnair, the amount of gold that should be produced is equal to the amount of gold that's needed for those purposes. If a little more is needed next year for, say, jewelry, then a little more should be produced. The free market signals the increased need by increased prices, so expect to see the price of jewelry to rise. A price rise of jewelry provides an incentive to make more jewelry and, thus, to use more gold. That causes a price rise in gold (relative to where it would have been without the jewelry increase) which provides the incentive to produce more gold.

This same is true of each of the uses of gold, and as some uses increase others decrease. We can expect to see each of the uses ebb and flow, and similarly for the production of gold.

The actual amount of gold that should be produced is a balance between how easy it is to produce the gold, and how valuable the resources are that go into producing it. For example, a gold miner could be put to use mining iron without much additional investment in his training, etc.

All of the proceeding is also true of silver.

However, none of that was your question, because you were really asking about gold's monetary uses. The answer to the monetary question is counter-intuitive. It's: none. No additional gold need be produced for monetary purposes.

Now, realize that I'm giving you my impression of an economist, so I can't leave the answer there. No economist would, so let me expand.

It's theoretically possible to use an extremely rare element as money. Suppose that there is exactly one gram of handwavium on the earth, and that it's extremely difficult or impossible to get more. Suppose, also, that all of the handwavium has been mined and smelted and is on a tiny pallet under the New York Federal Reserve. That could be the backing for all of the money in the nation, provided that warehouse certificates were issued for fractions of the handwavium, that the monetary authority does not over-issue, and that counterfeiting can be controlled. Under those conditions the value of the certificates would be stable, and could be used to purchase the entire GDP of the nation. Gold is the same way.

Suppose that the amount of money increases. If that happens then sellers will see increased sales, and will respond by trying to produce more of their product or service. The delay between the increase of money and increased business activity depends on a number of things. In the United States in the 1970s that lag was about five months.

Since we're supposing all producers are trying to increase production, they're going to find that they can't do it. After all, our gold miner can't mine both gold and iron the same day, the same hour. (Well, in general. Obviously, one could conceive a special mine that had both metals available.) The result will be price inflation. The lag between the increase of money and the increase of price inflation in the United States during the 1970s was about nine months.

Once inflation occurs people buy fewer goods and services. After all, their money is worth less, and we're supposing that they're not getting more money after the initial money infusion and wage inflation. Business activity decreases. In the United States in the 1970s that lag was about thirteen months.

Businesses respond to the reduced activity by lowering prices (below what it would have been without the initial money infusion). Since this is general, the result is deflation. In the United States during the 1970s the lag between the initial money increase and deflation was about eighteen months.

People respond to the reduced prices by increasing their purchases. Businesses respond to the increased activity by increasing their prices to the original level. The result, without additional money infusions, is a return to the original prices and production levels. In the United States during the 1970s the lag between the initial money infusion and the return to original conditions was twenty-four months.

If there has been long term price stability, and if the production of money has been unchanged then the lag increases. If there has been much price instability, and if money quantity has rapidly changed then the lag decreases. In Germany during the first half of the 1920s the lag between money increase and price increase was about four fours.

If there is a money reduction rather than a money increase then the same events happen, but in the opposite direction. Rather than an increase in business activity after five months there would be a decrease, etc.

Notice that productivity increases cause the same things to happen as a monetary decrease. Store shelves start filling, so businesses respond by decreasing their efforts. However, productivity increases cause less effect than money decreases because of the limits that productivity increases have. Monetary authorities, particularly those with fiat currencies, seemingly have no limit to their ability to increase or decrease the money supply. Milton Freidman famously stated that [price] inflation is always and everywhere a monetary phenomenon.

Now let me turn to Charis. Charis has experienced some major productivity increases. The invention of the cotton-steel gin and looms has greatly increased the quantity of cloth, ropes, and other products. The introduction of women into the workforce has caused similar productivity increases (measured as total productivity). The invention of air-powered machinery, standardized units of measurement, and the assembly line (pending) has as well. Depending on how you measure productivity, Charis has experienced decreases as well. For example, do you count someone moving from farming to sailoring as a productivity decrease, since he's no longer growing potatoes? Or is it a wash since he's now producing security? Is a galley on the bottom of Darcos Sound a loss, because it's no longer being used? Or is that the normal use to which galleys are put?

Inflation hurts some people and helps others. If you owe a debt, then inflation helps you. It allows you to pay back your debt with money that's not worth as much as the money you borrowed. Conversely, if a debt is owed you. Inflation consumes resources as the people who are hurt by inflation attempt to mitigate the damage. They have to negotiate contracts with inflation clauses, for example.

Let's leave the realm of positive economics, and turn to normative economics. Cayleb has a lot of economic power. It comes from his ability to tax, and his ability to legislate or affect legislation. Like inflation, taxes hurt some people. His ability to spend helps others. Howsmyn is one who's benefiting from governmental spending. With the gold discoveries on Silverlode Island, Cayleb can now use the power of inflation to help some and hurt others. He can also shift business activity forward or backward in time. Suppose for example, there is a noble on Charis who owes a great debt, and the increase in taxes on, say, shipping is dealing him a double blow. Cayleb could start inflating the money supply as a means of mitigating the former. Of course, it's going to hurt the debtee, but politically that may be the preferred choice because the debtee may be receiving much of the spending from either taxes or the new gold money production.

~Tonto

Nice post, Tonto...could your fifth grade girls pass a test on this? I thought you were teaching them the Bible...Old Testament economics, maybe...you're a man of many parts!

Don

n7axw wrote:

Nice post, Tonto

Why, thank you, Don. You are always most kind!

...could your fifth grade girls pass a test on this?

Erm, this isn't in their normal range of interests.

I thought you were teaching them the Bible...Old Testament economics, maybe

Elisha replied, "Hear the word of the LORD. This is what the LORD says: About this time tomorrow, a seah of the finest flour will sell for a shekel and two seahs of barley for a shekel at the gate of Samaria."

NIV

Let's see, that's about double what flour and barley normally sell for, but it's about a fifth what it sold for today. What does that mean? OH! God is prophesying the end of the siege sometime between now and this time tomorrow.

...you're a man of many parts!

Well, the arm bone's connected to the shoulder bone, and the shoulder bone's connected to the...ahem! I'm told I'm a good listener.

~Tonto