Whatever gave you the idea that supply and demand necessarily referred to money?

I print money in my garage everyday! It's great!

True.
And the Federal Reserve is neither federal nor a reserve. It is not part of the US government but a private bank own by private stock holders.

I think the stock holders are other banks or something like that.

Still you know that stock has never seen a bad day.

How can you go wrong with a company that has a monopoly on money? :1orglaugh

In a way there is. Prices stay "the same", it's the dollar that's decreasing in value.

What do you mean by "human greed raises prices?" Are you inferring that "greedy" companies raise prices to make more of a profit or inferring that the consumer "greed" for more of a product raises the demand for that product which in turn raises the price?

Prices are determined by supply and demand, and demand is determined by how intensely people want a commodity and what they have to offer in exchange for it.

When people want more of a commodity, their competitive bidding raises its price. This increases the profits of the producers who make that product. This stimulates them to increase their production. It leads others to stop making some of the products they previously made, and turn to making the product that offers them the better return. But this increases the supply of that commodity at the same time that it reduces the supply of some other commodities. The price of that product therefore falls in relation to the price of other products, and the stimulus to the relative increase in its production disappears.

In the same way, if the demand falls off for some product, its price and the profit in making it go lower, and its production declines.

It is only the price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other. These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits and costs.

So if you freeze prices, there will not be any stimulus to produce.

Unless you have a monopoly like De Beers' or a oligopoly like the oil companies.

Then you have more control of the price.

Yours was only the nearest, clearest occasion of the phrase. I know what YOU meant.

It is implicit in Mark's scenario, however -- "...prints and issues..." -- that a finite number of bills has been *dispensed* to the over-18 population. Even if the conveyance of value were via electronic means -- as in: "Load Acct. #XXX@XXX, $1,000,000.00" -- we'd still be working with a finite amount, which could neither be borrowed against nor credit sought (in this hypothetical scheme) using collateral.

We must also assume that, in almost 100% of cases, the money would be spent almost immediately, as people took the money and went straight to *purchase* the life they feel they should have. At this point there are many holes in Mark's sketch (or simply details not provided) that would be necessary to provide a deeply considered response. For example: Are people permitted to work? Are forms of income that you create with your million dollars permitted? May one person who still has money *lend* to another who's run out? What about children, subsequent generations? How do we *vest* for the ones who will be turning 18 in the future? Is there a pre-fund? Is the list of things for which prices have been fixed the only things that may be bought and sold? People create products and services all the time to meet new needs.

But let's assume the simplest case, which is -- THIS IS A "RUN TO FINISH" EXPERIMENT ON CURRENT CONDITIONS.

Like I began, most people would blow through the money pretty quick on rapid-depreciation items. To put the line at 18, you'd have many households (US Census definition) with parents and 2-3 kids getting a mill. each. Upon such liberating windfall, the nests would empty, and -- further -- I think many marriages would end, for the high number of unhappy women in abusive-dependent situations. Basically, I think everybody would *go fer theirz". There would be a spike in demand for real estate (though I think fewer than 25% would buy homes or pay off mortgages), cars, luxury items and electronics. Pre-existing scarcity (finite supply, as in homes) and limits of manufacturing capacity, combined with frozen prices would rapidly create a near-zero supply situation, with long waiting periods. This effect would "trickle down" to even basic items in less than 12 months. Their money bound up in "things", people who no longer have any cash begin to trade "thing" for "thing". NEW items become very hard to come by, and are often "purchased" with several OLD items. Yes, a black market thrives. Prostitution is rampant, especially in exchange for health care services. From there, the entrepreneurial spirit (fired-up by a threat to basic survival) would produce an "alternative economy" with many eager participants. If successful, this alternative economy would overthrow existing power systems, a new currency would be created and we'd be pretty much be right were we started. Just change the names in the history books -- :)
















2hp

Lol.... Some people really don't know shit about economics and sustentability....

In this case the prices would increase!

How? The demand for products would increase with everyone having one million.
The price freeze law only applies for existing products so in order to raise the price manufacturers should simply create new products. Re-label the shit. Give it a new name and double the price!

Inflation there you go! :winkwink:

imagine if everybody has so much money than they need, money will lose it value

You just made my argument. I'm not implying greed in the sense of the evil bad thing but rather a person's desire to have more and when the demand is there for what they have, they can raise the price to do so. But if they were keeping their prices the same even though more people want the item and not accepting a bidding war then the price wouldn't change. It's a human decision, not one made by hard circumstances like the decay of a proton.

Excellent post. I'm pleasently surprised at the amount of discussion a serious topic got here. =]

I dont know where some people here come up with their BS - but the Federal Reserve is definitely a part of the US government - it is an agency of the US government run by a board of governors appointed by the president and confirmed by congress. It reports to Congress on a regular basis for its marching orders, and makes recommendations on controlling the overall interest rates on the US's loans (which of course trickles down to all interest rates) as well as recommending economic policy with overseas trade, currency policies etc.

Second - as to the original hypothesis of giving everyone a certain amount - remember that the money given would have to be declared as income, therefore approx 30% of it would go right back to the IRS into the US tills - of course in this case it would pay off the deficit nicely figuring in the neighborhood of 180 million Americans over 18. Since most Americans are in debt up to their eyeballs, we can assume another 50% of that money would have to be used to pay everyday bills (or in most cases they would get paid off) which would cause a complete collapse of the credit card system, leading to a complete collapse of the banking system, which would then really just negate the need for the Federal Reserve (since thats why it was formed in the first place - due to the runs on banks that were common in the first part of the 20th century)
What was left over would be used up within a few weeks and the country would be in a depression very similar to the one in the 1930s where everyone basically ran out of money.
At that point either Bush would declare himself ultimate dictator and institute martial law, or he would commit suicide as he wouldnt have enough money left to pay for his alcohol and coke habit.

Demand for goods would rise. Supply of labour would decrease and therefore wages would rise. So, the prices would have to rise. As you put a freeze on the prices you would simply create inflation and get a new inofficial currency.

Because of the frozen prices a burger would officially still cost 2$ but you could nowhere buy a burger for that (as the production cost would be higher). Instead you would have to trade 5 eggs for a burger. 20 years later there would be some sort of contracts in order to make the trading easier: an inofficial currency is born.

If you didn't close the border, people would have access to the currency of another country and would use this currency for their trading.

No the FED is a private company regulated by the government

Lol, a "price freeze". I wish they would've done that with gas prices back in the 1970's.

Anyway, you cant print money like that because then as you may already know, money would become worthless. Might as well pay for something with toilet paper or newspaper.