Comments by "" (@Cloud_Seeker) on "How did Schacht's MEFO Bills work? Were they inflationary or not?" video.

  1. I am no expert but this is what I found. A bond, or Government bond, or Sovereign bond is when a national government goes into debt to anyone willing to support it by giving it money. This means the tax payers and the government is forced to pay back the debt, which means you can take tax money to pay the debt. The MEFO bills were not issued by the government. They were issued by a "private corporation" that was a dummy corporation for the Nazi government. It is simply not a bond because it isn't backed by the Government or a Sovereign nation. It is backed by Metallurgische Forschungsgesellschaft and their honor. If they do not pay their money back, it isn't the governments fault. A corporation can go in debt without the government being involed.
    3
  2.  @MattyRlufc  I believe they are were guaranteed, but not issued. I noticed this myself after I posted the comment. Its 1AM here and I need to hit the sack soon. There is a difference between being issued by the government and being backed by the government.
    2
  3. There is a pretty big issue here in this explenation of inflation. Inflation and deflation is not inherently bad or good things. Inflation can be bad, but also good. Deflation can be good, but also bad. Having a currently in short supply so each dollar is valued highly doesn't make it better then a currently in high supply and every dollar isn't worth all that much. The point of a currency is to be a medium of exchange that is readily available to help people buy and sell things without having a barter system. Lets say we have the following situation. A and B wants bread. You Z are a baker and sells bread. A and B pay 1 dollar for 1 bread, and since you bake 2 breads you make two dollars. But if the economy grow and people increase. We now have A, B, C and D that wants bread. So if they want to go and buy bread, they only have 1/2 of a dollar so they only get half of a bread. You the baker has to sell 2 breads to 4 people. Clearly the curreny is worth more then it is, so people will hold out and demand that bread becomes cheaper since the bread is not worth 1 dollar anymore. So the baker lower the price by 50% and the farmer lower the price by 50%. This is deflation. A big problem here is that if you are smart you just noticed that since the demand for curreny itself has increased with an increasing population, but the supply of currency hasn't increased in turn. Now lets say you are someone that has 5 dollars before the deflation. Now you have 10 dollars of value just because 1 dollar increased in value as people are trying to make do with less. So if you are even smarter, you can start hoarding money. Why spend it when it will be worth more and more money just for existing and doing nothing? So now we have person E that only focus one being Scrooge McDuck and collect as much money as possible. This will in turn lower the supply of money until most of it belong to E, and A, B, C, D, Z and the farmers simply can't do anything anymore because the money they used to use as a medium of exchange just isn't floating around anymore. The puprose of money is to be used as an exchange medium to remove a barter system, but in this situation a barter system is the only way you can conduct business since growth and E have ruined the money supply. This will cause industry to grind to a halt out of inefficiency. Its like a engine that needs oil, but there is no oil for the engine so it just stands there ready and waiting. A way to solve this issue, is just to print more currency and inflate the money supply. Price stability is actually something you want. Yes. More people will come and demand more bread, but lets not forget that they are workers as well and produce things Lets say C and D are farmers, and they allow the cost of producing bread to be cut in half. This means the baker and bake 4 breads for the same price it took to bake 2 breads in the past, so he can sell it for 1 dollars each. Maybe the farmers invent a new machines to cut the price to 75% instead of 50%, which makes the bake go 25% profit so he can expand his business. There is ofc issues here, but nothing is without issues. But the main point is that neither inflation or deflation are inherently bad. Deflation encourage people not engage in the economy and hoard money for hoardings sake, which cause stagnation in the economy. Inflation is a tax on savings which makes working less and less valued, so people can not engage in the economy as their money becomes more and more worthless.
    1
  4. Well no. They were not injected as a payment for any product. They were a IOU or promissory note that the government well pay the holder back. You have 100 bucks and I want that right now. I can give you a IOU where I say I will pay you 110 bucks tomorrow if you give me 100 bucks now. You then hold a piece of paper worth 110 bucks that you can demand from me tomorrow. Absolutely no product need to have been made for me to make you this IOU. Even if the MEFO bills were associated with a product that still doesn't change that they inflated the currency. Is the expansion of the money supply that is the inflation. Until debts have been paid, every single MEFO bill have inflated the money supply since you can trade IOU's if you which to.
    1