Goods and Services Produced in a Given Year In any year, there will be a mixture of people buying goods and services: People who are currently in the work force Retirees People who own assets and want to sell them One thing that may not be obvious without thinking about it, is that all of the people wanting goods and services have to compete for the same set of goods and services that are available at that time. For example, we grow a certain amount of corn and rice, and we extract a certain amount of oil and coal and copper, and we make a certain amount of electricity in electric power plants. Because of inventories, there is a little flexibility in these amounts, but basically, the amount that is available is determined by market prices and availability of supply lines. If the amount of goods and services produced is decreasing, because we are on a down escalator economy, this smaller quantity of goods and services needs to be shared by the entire population. If there is relatively little available in total, and those who produced it don’t want to part with it, a person trying to trade accumulated “assets” for current production will not receive very much scarce production in return for his accumulated wealth, no matter what form it may take. In the case of most assets (stocks, bond, gold, silver, etc,) this means that the value of the asset tends toward $0. If currency is viewed as another asset, its value may go to close to zero as well. In fact, if there has been a government change, its value of the currency may be exactly zero.
Posted on: Thu, 25 Jul 2013 07:07:31 +0000
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