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2:13 PM <jcowan> "Ever since the great Kyros set up the Persian Empire, to wring all gold an silver has been the policy of the Persian kings.
2:14 PM <jcowan> And what became of this wealth? Was it spent on public works to ease the lot of their subjects? Nay; it was piled up in bags of coin and bars of metal in Sousa and Hagmatana and Parsa, or made into statues..
2:15 PM <jcowan> So, as precious metal became scarcer in the empire, business ran slower, for every man clutched what coins he had, not knowing when he would get his fingers on more.
2:16 PM <mangol> is circulation the fundamental problem here?
2:17 PM <jcowan> Now this vast treasure your Alexander seizes, and in an orgy of profusion spends it: leading armies to India, and paying his soldiers lavish bonuses, and ordering vast public works. Like the Tigris in spring, the stream of money in the Empire rises. Now every man spends his money quickly, lest itts value shrink while it lies in his wallet. So business thrives, and prices rise, and traders bless the name of Alexander."
2:17 PM <jcowan> It's forcible deflation, and deflation is no one's friend.
2:19 PM <jcowan> s/silver/silver from their subjects
2:20 PM <jcowan> A more modern example is the Spanish theory of value: "bring lots of gold and silver into Spain from America, and we'll all be rich!"
2:22 PM <jcowan> Of course the new supply of money was chasing thte same amount of goods and services as before, and so prices rose. The result was that imports paid for in gold and silver were cheaper than home production, and so the gold and silver flowed out faster than it flowed in. The savings of all classes were ruined, and Spain went into a depression it didn't escape for half a thousand years.
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