This is an image depicting the concept of "dilution":
This term is used to identify a relative characteristic of the mathematical concept of concentration in the physical science of chemistry. Here is wiki on the topic of concentration:
In chemistry, concentration is the abundance of a constituent divided by the total volume of a mixture. Four types of mathematical description can be distinguished: mass concentration, molar concentration, number concentration, and volume concentration.[1] The term concentration can be applied to any kind of chemical mixture, but most frequently it refers to solutes in solutions.This term "dilution" has no applicability in any analysis of our current monetary system as our current free-floating, non-convertible currency system is based not on nature but on law.
Terms and concepts used in the study of the laws of nature DO NOT apply to our systems based on human law in any real way.
Even metaphorical use of this word in an attempt to describe any aspect of our current U.S. monetary system is false and misleading.
Those seeking to understand the realities of how our current U.S. monetary system functions should keep this in constant view.
16 comments:
I disagree. Dilution is very much applicable wrt to money creation and it is not necessarily bad either. When there is spare capacity in the economy then unearned gains in purchasing power via deflation should be diluted away by new money creation.
And even with private money creation such as with common stock, the existing money (stock) holders might choose to build new assets with new stock issue and thus suffer temporary loss of purchasing power until the new assets come on line.
In scientific terminology a goal is to stick with precise denotation and avoid terms with connotation in order to be technically precise. In rhetoric, the opposite is the objective in order to persuade.
Tom,
Right, I look at the use of this term as rhetorical if it enters discussions wrt our CURRENT monetary system...
f,
REAL: In fall of 2008, measures of the so-called metonym and metaphorical term "money supply" increased by 13,000% and prices COLLAPSED.... for real.
rsp,
Bank credit spends just like real money (due to extensive government privilege) and it has certainly diluted the ability of people to buy a house without borrowing.
Michael Hudson would argue that the problem arises from not taxing economic rent in the form of land rent and financial rent — and perhaps monopoly rent, too, since the big banks control so much of the market.
f,
Here is the definiton: "concentration is the abundance of a constituent divided by the total volume of a mixture. "
We need a constituent AND a total volume
In your paradigm, what is the constituent and how is it measured and what is the total volume and how is it measured ?
Please leave out all metonyms, metaphors and teleological statements in your response please...
rsp,
Matt,
If we think in terms of the conservation of energy or units of energy, and equate the math as analogous to the quantity of NFA in the system, that law holds, ie the math holds.
Net dollars can neither be created nor destroyed except by the fiscal authority, therefore the system is closed.
Of course, as you say the government is the law wrt state money.
Right Paul I look at this from the authoritarian side, I am neither libertarian nor Libertarian.
These are OUR LAWS.
Nature has it's laws that we are subject to, but we humans have our own authority here on earth too, separate from those of nature.
I'm on "team human".
And yes the "math still holds" in either realm of law ;)
rsp,
"And yes the "math still holds" in either realm of law ;)"
Plus in this instance the math is mandated by the Constitution.
I have no problem with submitting to legitimate authority, ie those things in the public interest.
Matt,
The constituent would be an individual's purchasing power in an economy and the total volume would be the total purchasing power in the economy. Increases in the total volume (unless the individual received at least a proportionate share) would "dilute" that individual's purchasing power.
f,
'Power' is energy per unit time.
Here is the wiki: "power is the rate at which energy is transferred, used, or transformed. The unit of power is the joule per second (J/s), known as the watt "
"Purchasing Power" here is metaphorical, suggest try to leave out the metaphor...
In physics, Power (P) cannot be 'diluted'. So if you are going to attempt to use metaphorical analogy it should at least be consistent with the real.
This is why true science doesnt use metaphor to explain/reveal things. Suggest leave it out.
rsp,
f,
"Dilution" is a comparison of stock measures (measured at A point in time)
"Power" is a flow (per unit time).
Suggest ditch the metaphor...
rsp,
If you increase the supply of potatoes that is potato dilution, or potato inflation.
It doesn't matter whether there are more mouths to feed, thus more demand for potatoes.
Increasing the supply of potatoes is, categorically, potato dilution or potato inflation.
Thus we must keep the supply of potatoes fixed, to avoid potato dilution or potato inflation, because potato dilution or potato inflation is THEFT of potato power.
If the quantity of people increases by a billion and demand for potatoes thus increases, the price of potatoes should RISE, so each new person has to pay more to eat potatoes.
This will limit the amount of new people demanding potatoes, by starving off those who can't afford to buy potatoes, thus solving the boom-bust potato cycle.
Each new generation must pay more to eat potatoes.
Anything else would be a theft of potato power from those who already own potatoes.
"If you increase the supply of potatoes that is potato dilution, or potato inflation."
y, now wait a minute is it 'inflation' or is it 'dilution'?
;)
Dilution through inflation, Matt, dilution through inflation.
I see another post coming on...
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