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wittgenstein
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26 Feb 2015, 3:59 pm

Money represents value. It has no intrinsic value. ( as the old Russian proverb said, " if it were not for the poor the rich would have to eat their money") However, increasing money does not increase value. Sure you have more dollar bills but each bill is worth less.
Suppose, I counterfeited $1. Considering how small a percentage of the economy that would be, no inflation would result. However, I would have $1 of value!! !
The paradox is that printing money does not increase goods and services. However, if only a tiny bit were counterfeited it would!! ! *
I wonder how much money one can counterfeit before it triggers inflation.
* It’s like creating a symbol that creates a tangible commodity! And that is obviously absurd!


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ruveyn
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27 Feb 2015, 11:38 am

wittgenstein wrote:
Money represents value. It has no intrinsic value. ( as the old Russian proverb said, " if it were not for the poor the rich would have to eat their money") However, increasing money does not increase value. Sure you have more dollar bills but each bill is worth less.
Suppose, I counterfeited $1. Considering how small a percentage of the economy that would be, no inflation would result. However, I would have $1 of value!! !
The paradox is that printing money does not increase goods and services. However, if only a tiny bit were counterfeited it would!! ! *
I wonder how much money one can counterfeit before it triggers inflation.
* It’s like creating a symbol that creates a tangible commodity! And that is obviously absurd!


We either trade hard definite goods and services or we trade promises for goods or service. The "counterfeit" you speak of are really i.o.u. s which have to be redeemed in actual goods or services.

How in order to expand a market economy a certain amount of "future money" is required. This is usually implemented as credit which is a polite word for an i.o.u. If the i.o.u. s used as investment capital actually lead to the production of additional goods and services you actually get more to buy and sell which means the i.o.u. money has been redeemed. On the other hand if more i.o.u. s are made in relation to the goods and services produced, then the i.o.u. s become worth less which in the extreme case means they become worthless. Think of what happened to Germany during the 1920's and 1930's. The Deutchmark was rendered worthless because too much of it was printed.

BTW we don't print credit money any more. The government gives the Fed an i.o.u. and the Fed opens up a bank account on which checks can be drawn and money transfers made.



wittgenstein
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27 Feb 2015, 3:43 pm

I can take that counterfeit $1 and get $1 worth of goods for it. I get $1 worth of actual value. So by creating an IOU I have created actual value! However, society will not suffer ( there will be no inflation because $1 is too little to impact the economy). That is the paradox!
PS; I am not arguing economics or the benefits of inflationary spending. I am putting forth a mathematical paradox. Perhaps I have discovered a paradox on my own?
I love paradoxes! Here are some of my favorites.
http://en.wikipedia.org/wiki/Raven_paradox
http://en.wikipedia.org/wiki/Unexpected_hanging_paradox
http://en.wikipedia.org/wiki/Russell%27s_paradox
Here is a site with a list of paradoxes!
http://en.wikipedia.org/wiki/List_of_paradoxes


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trollcatman
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02 Mar 2015, 11:43 am

wittgenstein wrote:
I can take that counterfeit $1 and get $1 worth of goods for it. I get $1 worth of actual value. So by creating an IOU I have created actual value! However, society will not suffer ( there will be no inflation because $1 is too little to impact the economy). That is the paradox!
PS; I am not arguing economics or the benefits of inflationary spending. I am putting forth a mathematical paradox. Perhaps I have discovered a paradox on my own?
I love paradoxes! Here are some of my favorites.
http://en.wikipedia.org/wiki/Raven_paradox
http://en.wikipedia.org/wiki/Unexpected_hanging_paradox
http://en.wikipedia.org/wiki/Russell%27s_paradox
Here is a site with a list of paradoxes!
http://en.wikipedia.org/wiki/List_of_paradoxes


But once people find out your $1 is fake, the person owning it at that time will lose $1, essentially he has been robbed of that amount of money.
I think a better example is money laundering: you get real money that cannot be used because of its criminal past, and then you turn it into actual money again!
And the reason you think you are not causing inflation is because $1 is too small an amount to be noticed by anyone, but you still are affecting the money supply (whether that leads to inflation is more complex than just the amount of monies in circulation).



wittgenstein
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02 Mar 2015, 1:25 pm

“But once people find out your $1 is fake, the person owning it at that time will lose $1, essentially he has been robbed of that amount of money.”
trollcatman
But if no one discovers that it is counterfeit, no one will lose and I will have an extra $1 of value. Yes, I did not stipulate that the $1 was a perfect counterfeit. However, if it is, the paradox works.
……………………….
“ but you still are affecting the money supply”
trollcatman

Yes, you are affecting the money supply. However, you are not reducing the value of every dollar. Therefore, the paradox still works. There is no way counterfeiting one dollar can add to inflation.


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naturalplastic
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02 Mar 2015, 1:30 pm

wittgenstein wrote:
I can take that counterfeit $1 and get $1 worth of goods for it. I get $1 worth of actual value. So by creating an IOU I have created actual value! However, society will not suffer ( there will be no inflation because $1 is too little to impact the economy). That is the paradox!
PS; I am not arguing economics or the benefits of inflationary spending. I am putting forth a mathematical paradox. Perhaps I have discovered a paradox on my own?
I love paradoxes! Here are some of my favorites.
http://en.wikipedia.org/wiki/Raven_paradox
http://en.wikipedia.org/wiki/Unexpected_hanging_paradox
http://en.wikipedia.org/wiki/Russell%27s_paradox
Here is a site with a list of paradoxes!
http://en.wikipedia.org/wiki/List_of_paradoxes


Its not a paradox.

If you print a counterfeit dollar bill you can then spend it to get a dollar's worth of goods and or services. So it increases value ..to you. But it doesnt increase value for society. Its just like if you pulled a gun on someone and took the money out of their wallet. Except the victim would be not just one person, but everyone. It would be a form of theft (but theft spread out). You would get value, but would be robbing everyone in society of a tiny bit of value- including yourself. Everyone's dollars would be worth one millionth of a cent less because you Xeroxed the bill, including that one dollar you xeroxed itsself because you xeroxed it! But you would be ahead by 99 point 99999999 cents. So you wouldnt care!

To answer the question "at what point does it cause inflation": (a) its all on a sliding scale, and (b) it depends upon what the economy is doing at the moment.

It there were a recession, or a depression, you could probably counterfeit a lot without causing any inflation. But if there were full employment then even a small counterfeiting operation would microscopically feed inflation. The reason being that if there is high unemployment putting more money into circulation increases demand for goods and services. This causes both the unemployed people, and the unemployed plant and equipment, to be put back to work to meet the demand.

So the ratio between money in circulation, and the amount of goods and services, stays constant (the increase in one is balanced by the increase in the other). So there is no inflation.

But if there is already full employment then putting even more money into circulation would just increase the amount of money relative to the topped out amount of labor, and goods and services. More money chasing a constant amount of stuff. So the price of the stuff gets bidded up. Although it would take billions to actually be noticeable as inflation.



eric76
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02 Mar 2015, 1:50 pm

Only marginally on-topic, if you pay for something with $2 bills, some people will be stupid enough to think that they are counterfeit.

From http://articles.baltimoresun.com/2005-03-08/news/0503080089_1_bolesta-pole-baltimore-county:

Quote:
When I bought the stereo player," Bolesta explains, "the technician said it'd fit perfectly into my son's dashboard. But it didn't. So they called back and said they had another model that would fit perfectly, and it was cheaper. We got a $67 refund, which was fine. As long as it fit, that's all.

"So we go back and pay for it, and they tell us to go around front with our receipt and pick up the difference in the cost. I ask about installation charges. They said, `No installation charge, because of the mix-up. Our mistake, no charge.' Swell.

"But then, the next day, I get a call at home. They're telling me, `If you don't come in and pay the installation fee, we're calling the police.' Jeez, where did we go from them admitting a mistake to suddenly calling the police? So I say, `Fine, I'll be in tomorrow.' But, overnight, I'm starting to steam a little. It's not the money -- it's the threat. So I thought, I'll count out a few $2 bills."

...

"I'm just here to pay the bill," Bolesta says he told a cashier. "She looked at the $2 bills and told me, `I don't have to take these if I don't want to.' I said, `If you don't, I'm leaving. I've tried to pay my bill twice. You don't want these bills, you can sue me.' So she took the money. Like she's doing me a favor."

...

A Best Buy manager refused comment last week. But, according to a Baltimore County police arrest report, suspicions were roused when an employee noticed some smearing of ink. So the cops were called in. One officer noticed the bills ran in sequential order.

"I told them, `I'm a tour operator. I've got thousands of these bills. I get them from my bank. You got a problem, call the bank,'" Bolesta says. "I'm sitting there in a chair. The store's full of people watching this. All of a sudden, he's standing me up and handcuffing me behind my back, telling me, `We have to do this until we get it straightened out.'

"Meanwhile, everybody's looking at me. I've lived here 18 years. I'm hoping my kids don't walk in and see this. And I'm saying, `I can't believe you're doing this. I'm paying with legal American money.'"

Bolesta was then taken to the county police lockup in Cockeysville, where he sat handcuffed to a pole and in leg irons while the Secret Service was called in.

...

Finally, Secret Service agent Leigh Turner arrived, examined the bills and said they were legitimate, adding, according to the police report, "Sometimes ink on money can smear."



wittgenstein
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02 Mar 2015, 2:06 pm

“If you print a counterfeit dollar bill you can then spend it to get a dollar's worth of goods and or services. So it increases value ..to you. But it doesnt increase value for society.”
naturalplastic
True, but my gain ( by creating a mere symbol) in actual value is not compensated for by a loss in any other part of the economy.
“But it doesnt increase value for society. Its just like if you pulled a gun on someone and took the money out of their wallet. Except the victim would be not just one person, but everyone”
naturalplastic

And how will everyone be affected ( there money will not be worth less) ? How will anyone be affected if I counterfeit $1?


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wittgenstein
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02 Mar 2015, 2:15 pm

“Everyone's dollars would be worth one millionth of a cent less because you Xeroxed the bill, including that one dollar you xeroxed itsself because you xeroxed it! But you would be ahead by 99 point 99999999 cents. “
Trollcatman
Does being poorer by 1/1,000,000 of a cent even make sense?


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naturalplastic
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02 Mar 2015, 3:06 pm

wittgenstein wrote:
“If you print a counterfeit dollar bill you can then spend it to get a dollar's worth of goods and or services. So it increases value ..to you. But it doesnt increase value for society.”
naturalplastic
True, but my gain ( by creating a mere symbol) in actual value is not compensated for by a loss in any other part of the economy.
“But it doesnt increase value for society. Its just like if you pulled a gun on someone and took the money out of their wallet. Except the victim would be not just one person, but everyone”
naturalplastic

And how will everyone be affected ( there money will not be worth less) ? How will anyone be affected if I counterfeit $1?


Because of what I said-there will be more money relative to the amount of goods and services so there will be a tiny bit of inflation. Obviously one dollar wouldnt be noticeable. You would be have more buying power-but would not have earned by producing value.



naturalplastic
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02 Mar 2015, 3:09 pm

wittgenstein wrote:
“Everyone's dollars would be worth one millionth of a cent less because you Xeroxed the bill, including that one dollar you xeroxed itsself because you xeroxed it! But you would be ahead by 99 point 99999999 cents. “
Trollcatman
Does being poorer by 1/1,000,000 of a cent even make sense?


It would in Italy.

What is it? A billion lira to the dollar? So in Italy would be poorer by a thousand lira!



eric76
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02 Mar 2015, 3:15 pm

wittgenstein wrote:
“Everyone's dollars would be worth one millionth of a cent less because you Xeroxed the bill, including that one dollar you xeroxed itsself because you xeroxed it! But you would be ahead by 99 point 99999999 cents. “
Trollcatman
Does being poorer by 1/1,000,000 of a cent even make sense?


Are you arguing that if you only steal a small amount, it isn't theft?

And don't forget that whoever has the counterfeit money when it is found to be counterfeit loses the entire amount. In the end, you don't steal a millionth of a penny from everyone, but the entire amount from someone, likely the store in which you used it. Would you say it is perfectly okay to walk into a store and walk out without paying for whatever you want?



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02 Mar 2015, 8:10 pm

It isn't a paradox. If you simply printed off 1 dollar, the inflation obviously would not really exist- but this is no more a paradox than the fact that increasing the temperature by 0.01 degree has no noticeable effect. The fact is that if you increased the temperature by 0.01 degrees several times, you would never notice any difference from the previous temperature increment- but you'd start to notice that the temperature was beginning to feel warmer than the starting point. The realization may come suddenly, after it has been warm enough to notice for some time (you just havent thought about it yet). Same here. If you printed off a dollar and bought soda with it- you'd be increasing the number of sodas sold-but only by one- and if price was determined in a continuous fashion by an algorithm that took into account units sold and at what previous price, rather than corporate managers who just come to the conclusion that the price must be raised because demand has increased a noticeable amount - then the price of soda would increase ever so slightly (assuming money was continuous and not broken into a multiple of cents). This makes a non-zero but small contribution to inflation- so no paradox.



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03 Mar 2015, 11:30 am

eric76 wrote:
wittgenstein wrote:
“Everyone's dollars would be worth one millionth of a cent less because you Xeroxed the bill, including that one dollar you xeroxed itsself because you xeroxed it! But you would be ahead by 99 point 99999999 cents. “
Trollcatman
Does being poorer by 1/1,000,000 of a cent even make sense?


Are you arguing that if you only steal a small amount, it isn't theft?

And don't forget that whoever has the counterfeit money when it is found to be counterfeit loses the entire amount. In the end, you don't steal a millionth of a penny from everyone, but the entire amount from someone, likely the store in which you used it. Would you say it is perfectly okay to walk into a store and walk out without paying for whatever you want?


Riddle me this: If no one notices their loss and they don't complain, has theft occurred?

ruveyn



wittgenstein
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03 Mar 2015, 12:34 pm

?????
That has nothing to do with what we are talking about.
No one loses any money. If they are aware or not that they have not lost any money makes no difference.


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wittgenstein
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03 Mar 2015, 12:39 pm

Basically the paradox is this.
1. I create a symbol of value ( the $1) and I can purchase $1 of goods. I gain $1 in actual value
2. NO ONE loses any money.
Therefore, by creating a mere symbol I have created actual value. That is the paradox.
I really do not understand why that is so hard to understand. The only way that it is not a paradox is if 2 is not true. Show me how ANYONE loses ANY money if I counterfeit a $1. If you cannot then it is a paradox.


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