Inflation question - Input Junkie
|Date:||September 21st, 2009 04:47 am (UTC)|| |
Modern money didn't start until the power of the Catholic church was broken by the Protestant Reformation. Until that time, the church forbid "usury," or loaning money and charging interest. Without the ability to borrow money, people who didn't already have some couldn't get any, and most people returned to barter until the invention of paper money.
Jews were lending money at interest in Europe by the 1300s-- the Protestant Reformation was two centuries later. I don't know how much lending at interest increased once Christians were allowed to do it, though.
Surely people without money could have sold things or worked, and gotten money that way. This is not to deny the importance of borrowing to start or expand enterprises.
Second link: Your theory about the boom and bust cycle involving raw materials is plausible, but there's a piece I've wondered about-- whether there are only so many good ideas for business expansion around at any given time. Rothbard seemed to assume that there were always enough good ideas, and the only problem was having enough money to finance the ones which take longer to pay off. This isn't obviously true.
Third link: Why didn't the increased money for labor in the dot com boom cause lower prices or wages in other parts of the economy? Does increased productivity from the dot coms come into the picture anywhere?
I'm assuming that economies to slow down when there's less money around because of contracts which were made when the price levels were higher, not because lower prices are bad in themselves.
Edited at 2009-09-21 02:30 pm (UTC)