Monetary policy and its effect on distribution of wealth and power.

If you want to understand the policy of inflation, which only can result from someone having a monopoly on production of money, you must understand compound interest, both negative and positive compound interest.

Below I give you an example that makes you realize in no time how pronounced the effect is for the ruling class that understands and enjoys the monopoly vs. the rest of the society, us mere subjects, who are largely ignorant to the effect of the policy, but who pay the price for it.

Here we go:

Imagine that we have a nation called Clownesia, and that Mr. Pennywise has succeeded in becoming the nation's tyrannical ruler.

He has monopolized the production of money and declared the following:

1. Everyone must accept Clown Dollars (CDs) as payment (legal tender)

2. All taxes must be paid with CD

3. The total stock of CD shall increase at an average rate of 7% per year

4. Only Pennywise is allowed to own gold

5. Pennywise has the right to be the first user of the newly issued money

Rule No. 1 and 2 are in effect in almost all nation states today. 

Rule No. 3 is the same as a typical rate of expansion of the stock of money in a western country today, for instance in Norway and USA in the 20 year period 2002-2022.

Rule No. 4 is the same as Executive Order 6102, signed on April 5, 1933, by US President Franklin D. Roosevelt, which forbid private ownership of gold.

Rule No. 5 is different from traditional monetary policy, where our governments in their wisdom have let private banks have the privilege of being the producers and first users of money.

In practical terms the difference is small, because banks and governments have probably been bedmates since long before the governments awarded them this profitable monopoly.

Now let's say that Pennywise  today shares the title "richest man in Clownesia" with one of his subjects, let's call him Blow Jiden.
 
Both of them own a fortune estimated at 1 trillion CD, which coincidentally equals the total money supply today in Clownesia.

Pennywise hates Jiden, especially because the latter earned much of his fortune when he was president of Clownesia (before Pennywise came to power) due to selling top secret information to foreign governments.

Jiden unfortunately for him now suffers from dementia, and has forgotten how inflation works.

As a consequence, he has parked all of his wealth in a checking account that yields zero interest.

Pennywise, who's only shortcoming is being extremely evil and who doesn't at all suffer from cognitive issues, keeps all of his wealth, as well as the proceeds he gets from issuing more CD, in solid gold.

(He has read economic history, and knows that gold for thousands of years has kept a stable value.)

Now, here comes the question I want you to ponder:

How fast will Pennywise's wealth outpace Jiden's wealth?

I gave you a hint when I previously mentioned that you must understand the effect of compound interest if you want to understand the effect of monetary policy.

At the rate of 7% increase of the money supply, Pennywise doubles the money supply in about 10 years.

Thererefore he also doubles his wealth.

(You can google "The Rule of 72" if you want to check my math.
This rule is an easy way to calculate how long it's going to take for your money to double.)

As you understand, Pennywise enjoys the benefit of POSITIVE compound interest.

But what about poor demented Jiden? 

He sees his wealth being cut by 50% in this 10 year timeframe.

The reason is that the doubling of the money supply cuts the value of each CD he owns in half.

(Again, you can use The Rule of 72 if you want to check my calculation.)

This is the same effect that you get when you double the amount of water you mix into your lemonade.

Jiden's wealth loses value due the effect of NEGATIVE compound interest.

However, my precise question was:

"How fast will Pennywise's wealth outpace Jiden's wealth?"

And the answer, since over the course of 10 years the former doubles his wealth while the latter's wealth is cut in half, the pace is 4:1 in 10 years.

After 20 years, Pennywise's wealth is 8 times Jiden's wealth.

And after 30 years, it's 16 times larger, after 40 years the ratio is 32, and so forth.

I have resorted to simplification to drive home my point. 

For instance, few people people have all of their money in zero interest checking accounts.

But I have also left out the effect inflation has on people's tax burdens.

As one example, when people pay capital gains tax, they don't get any deduction of stock price appreciation caused by expansion of the money supply (meaning - we pay tax on inflation) which amplifies the rulers' benefit from the monetary monopoly.

To conclude:

This example demonstrates why  the parasitical class is hellbent on keeping you in the dark about the potency of the monetary policy.

No other ordinary policy instruments come close to ensuring rapid centralization of wealth and power.

Therefore, I think you should support abolishing the current monetary monopoly.

You would also be well advised to learn more about the historical role of gold, as well as familiarizing yourself with #Bitcoin. 

Thank you for reading.

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