How is the path of capital "planned" for the public?

A:

The direction of all capital is determined by the rate of return its owner will choose to pursue. Once the choice is made to send property off on any particular path for investment, it is because its owner has judged that the rate of return their property is now in pursuit of will exist in the future (see risk). In short, investors are believers because investment requires faith.

By virtue of the legal definition they have received from the state, it is these lending firms now referred to as "banks" that currently possess the privilege of defining a scientifically untested equilibrium price of capital for an entire economy. In the United States of America, a federally chartered firm called the Federal Reserve defines the economy's scientifically untested equilibrium price of capital. In Great Britain, a collection of nationally chartered firms also define the economy's scientifically untested equilibrium price of capital (LIBOR). Either way, the price of capital being offered on either side of the Pacific are 1) not scientific, and 2) not capable of being easily rejected by members of the public who only wish to store and move their cash in a modern economy.

Hence, most all cash is forcefully converted into capital that chases state-sanctioned, scientifically untested rates of return; this is how the path of capital is planned in the direction of a state-chartered "banking" or borrowing & lending system.

How does giving firms the privilege to define the economy's scientifically untested equilibrium price of capital cause inflation?

See: Inflation.

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