Reply To: What Makes an Economy Bad?


On an unhampered market economy, the production of every good is regulated by profit. More gold would be mined and minted into coin only if the revenues it generated more than covered its production costs. Gold mining and minting “add more money to the economy” in the same way that all production adds more goods to the economy.

Issuing fiat money and fiduciary media cannot be regulated by profit since doing so always generates more revenue than costs. Producing more fiat money and issuing more fiduciary media cannot add more money to the economy in the way production of others goods do so. Such monetary inflation is categorically different than production of gold coins on the unhampered market.

The reason real wages fall during monetary inflation is that the processes of the boom-bust that it sets in motion consumes part of the capital structure. Labor, therefore, becomes less productive.