How much Gold should be minted every year?

OrlandoNative wrote:

All of this is theoretically interesting, but I think it's a bit off the mark (no pun intended) as far as Safehold goes...

I found most of your post to be well said. I do have strong disagreement with some of your statements. For example...

Realistically, mining gold and silver on Silverlode Island and minting new coins isn't going to really affect *prices* per se.

On the contrary, those mines can potentially cause massive inflation. The reason is two-fold. First, there is approximately the same amount of production after Silverlode mining as before. People will be moved from one occupation to another, for example, from copper mining to silver mining, or from galley building to galleon building, but the net production is approximately the same. Second, the amount of money in circulation will be drastically increased. Those conditions are the traditional ones causing inflation--more money chasing the same amount of goods.

For one thing, it's not like a host of private folks minting their own; it's the government.

Actually, government creating money is the major cause of inflation in the world (Earth) today.

The government is going to be using that money to buy things, or to support various ventures. It's just going to be able to do so without raising additional taxes (which, if they had been necessary to impose, *would* have probably caused price increases as the various internal costs increased) or, possibly, doing without what it needed (in which case it could lose the war).

Taxes are deflationary. Had Charis increased taxes to pay for their war purchases, then little inflation would have appeared. That's because spending is inflationary. If Charis created some amount of new taxes and also the same amount of new spending then the inflationary and deflationary forces are approximately equal and offsetting.

The intrinsic value of a "based" currency really depends on whose hands the supply of the currency base is *in*. That person, or group, sets the value. Even in the "Gold Rush" days, the maximum value of gold was fixed.

I suppose. For example, at one point in time the US dollar was intrinsically worth 375.21 grains (troy) of fine silver. That value didn't vary so long as the governmental guarantee to trade the dollar for that amount of silver was honored. I don't know that the stability of the intrinsic value of the dollar is that important because very few people want fine silver. Of much greater general import was the extrinsic value of the dollar, which was equal to the extrinsic value of the silver. What really concerns me is how many pounds of potatoes or gallons of vodka I can purchase.

...and taken out of order...

There may also be a "favoritism effect"; namely that for personal reasons someone may prefer one nation's currency over anothers; even if the actual denomination - and the amount of metal backing it - is the same.

There are a number of reasons that a Charisian mark might have a different value than a Knights of the Temple Lands mark. One possible reason is that Safehold doesn't have a universal standard of weights and measures. Suppose the mark is defined a a circular disk of gold two-and-fifteen-thirty-seconds of an inch in diameter and four-and-a-half per centum of an inch thick. If the Charisian inch is 3% longer than the KotTL inch, then the C mark contains 9.28% more gold than the KotTL mark.

Another possible reason is that smelting ability or ore sources may make composition of the coins different. Perhaps the C mark contains 96% gold and 3% silver, while the KotTL mark contains 92% gold and 5% silver.

Another possible reason is that governments may place different taxes on different coins. For example, in the Temple Lands there might be a 30% per annum tax on KotTL marks and a 100% per annum tax on C marks.

~Tonto

Tonto Silerheels wrote:Incognitia wrote:

In an ideal economy there would be no inflation, no unemployment, and productivity and population increases would be the only way in which growth occurred.

Weeks and weeks ago my teacher told me that it should raise a red flag whenever someone used the word, "optimum." You have to ask, "optimum in what sense?" Are you trying to minimise travel time? Fuel consumption? Travel over dangerous routes? Each of those could be considered optimum.

I suppose the same is true of the use of the word, "ideal."

No, I'm afraid not.

Ideal, in economics as in science, means a simplified system which can be modeled by simple formulae. It does not mean optimum, or anything like that, and does not try to optimize anything. It is ideal in the same sense as Ideal Gas Law. It just means a simplified system where some of the complications of a real system are removed or assumed negligible, for purposes of calculation and rough modeling.

By it's nature, an ideal system does not reflect reality, perfectly, and no one expects it to. It is just a simplified model, not an optimum model nor an optimized model nor even a hypothetical perfect system.

SWM wrote:

No, I'm afraid not.

Ideal, in economics as in science, means a simplified system which can be modeled by simple formulae. It does not mean optimum, or anything like that, and does not try to optimize anything. It is ideal in the same sense as Ideal Gas Law. It just means a simplified system where some of the complications of a real system are removed or assumed negligible, for purposes of calculation and rough modeling.

By it's nature, an ideal system does not reflect reality, perfectly, and no one expects it to. It is just a simplified model, not an optimum model nor an optimized model nor even a hypothetical perfect system.

I see. So, what is an ideal economic system?

~Tonto

Tonto Silerheels wrote:SWM wrote:

No, I'm afraid not.

Ideal, in economics as in science, means a simplified system which can be modeled by simple formulae. It does not mean optimum, or anything like that, and does not try to optimize anything. It is ideal in the same sense as Ideal Gas Law. It just means a simplified system where some of the complications of a real system are removed or assumed negligible, for purposes of calculation and rough modeling.

By it's nature, an ideal system does not reflect reality, perfectly, and no one expects it to. It is just a simplified model, not an optimum model nor an optimized model nor even a hypothetical perfect system.

I see. So, what is an ideal economic system?

~Tonto

Ideal comes from the word "Idea". An ideal system (economic or physics or whatever) is a purely intellectual construction; it does not exist in reality. It is something you can model and describe and make predictions from because it is simplified and follows simple equations.

The closer the ideal system is to reality, the closer the predictions will be to what happens in a real system. When using an ideal system, it is important to know the limits of the model. For instance, the Ideal Gas Law does not account for intermolecular interactions. If those interactions are important in a particular real system, the model cannot be expected to make useful predictions. The Ideal Gas Law models most gasses quite well, but there are exceptions.

McGuiness wrote:

I'm no proponent of inflation, and theoretically in an economy whose currency is based on precious metals with the government controlling how much new currency is injected into the system, inflation isn't inevitable, and with careful management, can largely be avoided.

I, too, am no proponent of inflation. Historically, though, when a nation is fighting a major war, its continued survival is contingent upon it resorting to all means available to it. Charis is fighting such a war, and I think it will have to resort to inflation.

Howsmyn can also negotiate contracts to provide the food, supplies, and luxuries his employees need and want, which keeps prices down since he buys in bulk.

That activity has little or no effect on inflation. The thing is that everything he spends, someone else in the economy is paid. Everything he buys, someone else sells. In an economic system, that appears as money and goods moving from one bucket to another. Once the dust settles there are the same number of buckets holding the same amount of stuff. Inflation happens when someone spends money he wasn't first paid (or borrowed). In economies today that happens when money is created.

Unlike the CoGA, which threw vast sums of money into its building program for the NoG in highly concentrated locations,

I'm on the fence about this one. If the gold sitting in the Church's treasury can be considered as money not in circulation then their actions are highly inflationary. However, if they were issuing notes against it to loan to foreign princes and otherwise engaging in economic activity with it, and which they can no longer do, then not.

A certain amount of the population is always in this state of flux, which is why in the U.S., the Fed (may it be cursed forever!) considers 5% unemployment to be full employment.

We'll have to get together some day and discuss the Fed's many failings. Be warned, though, that on balance I think it's done some things well.

With the ham-fisted "throw money at the problem" approach the CoGA used, inflation in the cities where the ships were being built was rampant, as huge amounts of money were injected into the local economy which allowed shopkeepers, food suppliers, etc. to raise their prices and basically gouge the workers of their abnormally high pay.

I object to the use of the word "gouge" in this context, but agree with much that you have to say.

There was also the problem of the church paying in script, which was quickly discounted in value since it soon ran out of the precious metals to back it, which was extremely inflationary.

Issuance of scrip is, per se, inflationary.

While I'll admit I lack the expertise on economics that some posters in this thread clearly possess, I have studied the real-world effects of monetary policy over the past few decades, and I've learned a few things over the years.

I found your post to be well-argued.

Bad money chases away good.

Yeah. Gresham's Law. Another poster mentioned this earlier.

which normally could pose a problem down the road in its balance of payments

I'm a contrarian regarding balance of payments. So long as exchange rates are allowed to float (less of a problem in Charis) and there are few limits on currency movements (somewhat more of a problem as Charis privateers every Tithe shipment) balance of payments is a problem that solves itself.

I'm sure I've overly simplified the forces involved and exaggerated the degree to which the EoC can avoid inflation, but I think it's valid to expect that it will suffer from much less inflation than the CoGA will.

Let me repeat, for what it's worth I think you have an excellent understanding of economic matters, based on what you've written.

~Tonto

SWM wrote:

Ideal comes from the word "Idea". An ideal system (economic or physics or whatever) is a purely intellectual construction; it does not exist in reality. It is something you can model and describe and make predictions from because it is simplified and follows simple equations.

The closer the ideal system is to reality, the closer the predictions will be to what happens in a real system. When using an ideal system, it is important to know the limits of the model. For instance, the Ideal Gas Law does not account for intermolecular interactions. If those interactions are important in a particular real system, the model cannot be expected to make useful predictions. The Ideal Gas Law models most gasses quite well, but there are exceptions.

Perhaps so, but Incognitia doesn't appear to be using the phrase "ideal economy" in that sense. He doesn't propose a model having no inflation, no unemployment, productivity increases, and population increases and then make predictions from that model. He gives every indication, to me, at least, of meaning "optimum economy." I say that, both because he makes no predictions from his model, and because he describes actual unemployment as arising from "a variety of reasons." If you see Incognitia as having proposed a model, would you describe the predictions necessarily arising from it?

~Tonto

Tonto Silerheels wrote:SWM wrote:

Ideal comes from the word "Idea". An ideal system (economic or physics or whatever) is a purely intellectual construction; it does not exist in reality. It is something you can model and describe and make predictions from because it is simplified and follows simple equations.

The closer the ideal system is to reality, the closer the predictions will be to what happens in a real system. When using an ideal system, it is important to know the limits of the model. For instance, the Ideal Gas Law does not account for intermolecular interactions. If those interactions are important in a particular real system, the model cannot be expected to make useful predictions. The Ideal Gas Law models most gasses quite well, but there are exceptions.

Perhaps so, but Incognitia doesn't appear to be using the phrase "ideal economy" in that sense. He doesn't propose a model having no inflation, no unemployment, productivity increases, and population increases and then make predictions from that model. He gives every indication, to me, at least, of meaning "optimum economy." I say that, both because he makes no predictions from his model, and because he describes actual unemployment as arising from "a variety of reasons." If you see Incognitia as having proposed a model, would you describe the predictions necessarily arising from it?

~Tonto

Hi Tonto and SWM,

I agree that the term ideal was not in a technical sense. Since economics has never been my field of endeavor, I was unaware of the definition that SWM offered. My use of the word "ideal" would be in the colloquial sense of the thing referred to having no faults or flaws or to speak positively it would be to reliably produce the desired results. I can see the relationship to the definition that SWM offered in terms of reliable prediction, but I wasn't thinking in terms of a model.

Don

I don't even think that so-called economists understand economics!
That's probably why it's called "the dismal science"
There's a pretty readable book by Galbraith on the subject and history of economics, called "The Age of Uncertainity".
I read it from cover to cover, and I still don't understand it!
My feeling is that feeding the Silverlode gold and silver into the coinage will cause inflation (money chasing goods), but I'm just guessing.
Philip Stanley

Philip Stanley wrote:I don't even think that so-called economists understand economics!
That's probably why it's called "the dismal science"
There's a pretty readable book by Galbraith on the subject and history of economics, called "The Age of Uncertainity".
I read it from cover to cover, and I still don't understand it!
My feeling is that feeding the Silverlode gold and silver into the coinage will cause inflation (money chasing goods), but I'm just guessing.
Philip Stanley

The trick will be to keep the proper amount of money chasing the proper amount of goods. I think there is textev that with the introduction of arabic numbers, they are beginning to assemble the data to help them determine how to do that.

Don

I'm pretty sure that since the war began that Charis has been having deflation problems, after all it wouldn't have been getting enough new gold for needed coinage, so some inflation right about now will probably be good, and might even cause further growth due to increased ability to spend money thanks to increased division.