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After all it is the believe in the coin you are using...but the dollar/euro you are useing is only backed by confidence.. the same confidence that can make you buy or save. Worst, what you save now is basically in the bank.. so it really does not exist...You are supposed to be able to recover .. but if every body tries to get at the same time .. well it is like injecting a lot of currency in the economy....inflation?
Basically the economy is a full system of believes as big as religion. It seems like you ahve to balance different believes so that everybosy is roughly happy
When you spend and you are on debt..are you sure you will ever pay.. but then if everybody stops paying nobody pays.. and there is a recession? not really.. you can create a bubble...and even create more money... is inflation going up printing more money...well are you sure? you can put the money you generate in debt.. for future use.
It is all very confusing for a physicist...so Migeru.. is economy hopeless or is there any way to make sense without the impression that we live in a symbolic illusion?
A pleasure I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude
There is a "money fallacy" whereby people think they are progressing if they make more money in nominal terms, not in real terms. If the cost of living dropped by 10% peoplle should be happy to take a 5% pay cut, but they probably prefer to have a 5% raise even though the cost of living goes by 10%. This is because the cost of living is an intangible while the numerical amount of your income is tangible.
One way of getting rid of the money fallacy is to educate everyone about the difference between nominal and real value and how to do financial planning on that basis, taking into account the undertainty of future inflation. The other way to get rid of the money fallacy is to keep inflation constant, since that way the way people actually reason about money will more closely approximate reality, and there will be reduced inflation risk for everyone.
Just a thought. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
