What Makes an Economy Bad?

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    If money, being the most marketable commodity of any society that qualifies as a medium of exchange, can have a greater or lesser quantity without affecting negatively affecting price levels (in that a miser hording gold makes prices lower because less money is used overall, and adding money to an economy gradually inflates prices and consequently increases wages), how exactly does an economy become bad?

    It seems that the standard definition of a bad economy seems to be high prices and low wages. Am I viewing this correctly? If so, how exactly do wages lower while prices rise? This level of inflation seems to me to only occur with artificial influence, perhaps with the printing of money for instance, but take goldmining: they are adding money to the economy, so could this be perceived to be money injected into an economy at a natural rate vs. the inflation caused by printing money?

    In essence, how is goldmining different from printing money in the sense of inflated prices resulting?


    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.

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