Tonto Silerheels wrote:SWM wrote:
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Over-simplifying bites me on the bum again. So I'll try to lay out what I'm thinking in more detail.
I agree entirely that what Charis needs is high production. They need continued innovation, high production, added value (from which they gain the funds to keep investing), and spare manpower for the Army and Navy.
Given the bottomless pits into which manpower can be sunk (e.g. there will be sites that could establish another Delthak Works, if the men can be found to commence it. The Army could always use another Brigade, at least until the open fighting is over; etc), the aggregate demand for labour across the Empire should easily be sufficient to use any able-bodied adult in some capacity.
In peacetime we generally figure that an unemployment rate of ~5% is the "natural" rate, due to things like gaps when people move jobs, the fact that some skills are scarce and others are plentiful, AND the fact that we think unemployment at that level is a reasonable price to pay for low inflation. Personally I would disagree, but that's the balance most governments and central banks seem to have struck.
However, Charis is not at peace, and is industrialising like crazy. It isn't like the 80s, with mines closing down and no new industries opening up - every time something like the cotton-silk gin comes along and frees up a load of labour, that's another tranche of people who will - perhaps after a short gap - be getting drawn into working in new industries and projects. Because people are crying out for labour. The Army could always use another brigade, and Delthak is growing like topsy - where are all the workers coming from? Some will be coming off the farms, some will be coming out of the jobs that are being overtaken by new industries.
(As an example from real history, most of the carriage-makers ended up making automobile bodies because they had relevant skills.)
The tightness of the labour supply in Charis is going to lead to wage increases bidding for the skilled labour, along with competition for the unskilled labour. Wage increases will tend to lead to inflation, even if the money supply is static: the velocity of money can increase, and people can also use IOUs and other makeshifts to deal with situations where they don't have the cashflow for all the deals they're doing.
So that's my assumption on how things will be working in Charis based on my recollection of the books. If I'm right, increasing the money supply will initially have an effect of displacing the assorted IOUs that have been used as stopgaps by people who don't have enough cash on hand, so it won't actually increase inflation; however if you keep minting past that point, you'll cause further inflation.
An IOU-based system has more friction than one based on cash, so minting enough coins to keep up with that inflation which is already happening is arguably an outright benefit, and certainly does no real harm.
In a less-Charis centred argument: yes I was arguing that in a simplified economy where we assume zero friction in employment change (i.e. if there is someone unemployed who has the skills you need, you can hire them instantly and at no cost beyond their wage, so no advertising, no recruiters, no interviewing &c), the only thing you would need in order to have zero unemployment is sufficient demand.
The add-on to that argument is that when friction does exist we can nonetheless approximate the zero-friction case by overheating the economy, one part of which is running with inflation of a few % per annum. Why is this the case? Because paying extra can overcome some of the friction; if demand is high, then labour is scarce, so employers are prepared to take less-qualified applicants and train them up, jobseekers find work quickly, people unhappy with their working conditions are prepared to jump ship (plenty of jobs out there) and so on.
All of this is conventional economics, and to the best of my knowledge it should still apply to a gold-backed economy, but I may have made mistakes because I am not actually an economist.