Star Gazer
SOC-5
Drakon said:
This is actually a myth, and a quite insidious one at that. The reason why it's not true has to do with the nature and origin of currency.
Any government worth its salt is going to be creating it's own currency and making sure that requirements for future payments are always denominated in their own currency. Sure, the Imperium has the Imperial Credit, which is the currency of last resort or reserve currency if you like, but there are several references in the cannon to money-changers for local currencies, which means that it's a common enough thing to do.
So, what does it mean for an economy? Not that much actually, instead of the currency being worth the value of one or a basket of goods, it's tied to the value of the entire economy (mostly through the prices that the government purchases goods and services for), but other than that, it means just one important thing:
When the government purchases a good (like hydrogen for fusion reactors) or a service (like BattleDress maintenance crews), they're not taking from some limited supply of, say, Unobtanium out of the hands of their hard-working populace, it's generating new currency to meet an economic good in a slightly superior way to that of a business: A business needs to generate income first, because it's a currency user, not issuer. The government of Viscountopia simply meets the economic need flat out. It's entirely possible (though not terribly efficient) to have Viscountopia do most of the economic activity.
Does the BattleDress maintenance crew care if they get paid by the Warlord down the road or by the Government of Viscountopia? No, they are getting paid for economically useful work. Does the economy care that they get paid by Viscountopia? Nope, an economic need was met and the price was that which Viscountopia was willing to pay for the service.
Now it becomes apparent where inflation comes from: the price that Viscountopia sets for its purchase of a good or service is the floor: if anyone in the business sector wishes to pay less than this price, the employees simply vote with their feet and fulfill Viscountopia's requests first, and only after all of Viscountopia's requests are met, then, possibly will the underpaying firm find employees.
Well, that's about as clear as mud. But think about this: Viscountopia needs to ensure that it always has availability of hydrogen for its transports, buildings, naval vessels, PGMPs and a million other things that run on fusion cells, and since it wisely leaves 'who wants to get into the hydrogen production business' up to the people, it's always going to be paying (just barely) the highest price for energy goods. And boom, there you go, energy costs are the basis for just about EVERYTHING in a society (and if you notice from RW data, Oil Prices track nearly perfectly with inflation since Nixon dissolved Bretton-Woods: they explain nearly 90% of it, an astounding number), so as energy prices rise slowly, so does the cost of everything else as that price information trickles through the economy.
And, as it turns out, a small, constant and most importantly known rate of inflation is awesome for an economy: Money in mattresses loses value (slowly) so if you want to save that money, you need to put it into economically useful activities: you invest it. If money is based in price on a limited resource, say Unobtanium, then the value of money rises over time and you fall prey to the Spanish Disease: they didn't have enough silver to cope with the economic activity they produced (why invest it if just sitting on it is going to make you richer? Trusting others with your money is risky, keeping it in a vault under your own watch is vastly less so), resulting in a production crash. The sinking of the Spanish Armada off the coast of Britain certainly didn't help, but it was the lack of currency circulating that really ended the Spanish Empire.
So, as long as the country was smart enough to institute its own currency, it is not correct to say that it does not generate wealth, in fact, it is the ultimate source of the ability to generate wealth in a peaceful manner, and that it generates wealth commensurate with the economic activity it purchases that cannot, by the way the currency is generated at need, detract from business at all. (with the proviso that the economy is not running at 100% capacity - an impossibility)
Just thought I'd clear that up, it leads to a lot of 'government is always an economic drain' that simply isn't true, done right (which isn't all that hard, create currency and feed it to the bottom of the economic ladder so that it generates wealth all the way up, creating need for more currency to be created to match the wealth created - remember the Spaniards), it's a hugely successful driver of economies.
