In praise of deficits

It is an incontestable fact that if a factory and its workers were left to idle for a period, that an output which might otherwise have been produced,will have been lost forever.The factory may indeed resume production hence, but the total output of the factory over any given period of time over-spanning that period of idleness, would always be in deficit to the sum of the lost production of that period. However, the converse of this argument, that a dollar not spent to buy the factory¶s output in the present cannot be spent to buy its output in the future, would seem absurd. On a microcosmic level of economic activity, this proposition would indeed be apocryphal. The very basis of money is its ability to function as a medium of exchange and as a referential store of value. Neither of these functions will hold if the unit of money cannot carry its presence into the future. Indeed, the definition of money and of its functions is syllogistically related in a very cohesive manner. The strength of this relationship is clearly illustrated in the treatment of the currencies of nations where there has been an extreme degree of erosion in the confidence of those nations¶ monetary authorities to uphold their currencies as a medium of exchange and as a referential store of value: they are bypassed as much as possible by economic actors. In many cases, the national currency only manages to retaina vestige of function because it is the unit of account in the national economic space.Thus, because they can no longer fulfil the essential function required of money, theses currencies cease to be treated as such, regardless of fiat. The question of whether a dollar not spent today can carry its presence into the future does not pertain on the microeconomic level.The question is thus, how does it behave in the global economic space?

While in the microcosmic economic space, money is used as a medium of exchange for goods and service that already exist or which are contracted to be produced, in the macroeconomic space, a great degree of goods and services are produced on a speculative basis. Factories can be idle not because their goods are not competitive but because of demand weakness. The essence of the question concerning the temporally constrained dollarcan be better illustrated by rephrasing it. If a dollar was created out of thin air and spent to buy an item which would have otherwisenot been produced, what would be the consequences of having created that dollar in the future?

The basis for the concept of a temporal constraint to the validity of a unit of money lies in its relationship to variable economic output. For there to be equilibrium of price spanning two consecutive periods, the ratio of money in circulation to the amount of goods produced must remain constant. A movement in the ratio will result in either inflation or deflation.

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