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Old 02-23-2012, 03:54 PM   #1
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Buckaroo's

Interesting "fiat currency experiment" at a US University to determine what really determines value.

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Old 02-23-2012, 08:33 PM   #2
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Interesting, but I think there is a fundamental flaw in making any analogy to the real economy.

The students were required to pay 5 Buckaroos tax to stay in school (obviously more important to them than the value of 5 hours community service - which they will use to round out their resume anyhow). Real world taxes don't work that way in any economy I know. That would be a head tax. In this case, pay $X or you get 'kicked off the island'. Now that would be big incentive to earn $X (or 5 Buckaroos). Pay your fixed tax amount or get deported?

But we tax most things as a %.

Maybe there are other lessons in there, but they kind of lost me at that point.

-ERD50
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Old 02-23-2012, 11:38 PM   #3
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I have to try to think this one through. Sometimes economics just spins off into the ether when I am trying to understand it well enough to explain it to someone else.
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Old 02-24-2012, 10:23 AM   #4
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Quote:
Originally Posted by ERD50 View Post
Interesting, but I think there is a fundamental flaw in making any analogy to the real economy.

The students were required to pay 5 Buckaroos tax to stay in school (obviously more important to them than the value of 5 hours community service - which they will use to round out their resume anyhow). Real world taxes don't work that way in any economy I know. That would be a head tax. In this case, pay $X or you get 'kicked off the island'. Now that would be big incentive to earn $X (or 5 Buckaroos). Pay your fixed tax amount or get deported?

But we tax most things as a %.

Maybe there are other lessons in there, but they kind of lost me at that point.

-ERD50
1. Deportation is not possible, what Country/University would accept them?The reason for the creation of Debtors prison is to allow someone else's work
(family member?) to pay the taxes, enabling the institution to exist.

2. Tax policy (evolves) and while it is crucial to establishing the initial "value" of a fiat currency, Monetary policy and productivity would seem to determine "current value".

3. When a fiat currency is first created (The Dollar initially was not a fiat currency), its value is created by two factors:
a.The fact that it is illegal to refuse to accept "x currency" for payment.
b. "x currency" is the only acceptable form of payment for taxes.

This was a 10 year experiment to understand "what" market forces and monetary policy determined the value of a Buckaroo over time. Of particular interest to me was the quality of service performed (productivity) and it's effects on value.

I think most people here understand that ultimately all fiat currencies will return to "0" (via inflation) and can only be managed by governments through monetary policy.

Currency markets exist to exploithedge the differences in the rates of decline among the various currencies.

Mishandling by governments of monetary policy affects ER, savers LBYM types more than others as it forces you to incur more risk to stay ahead of inflation.
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