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Economic Systems follow simple rules that historically have proven to be true each and every time certain scenarios pop up. The freer the system of exchange, the more prosperous it will become. The more a system of exchange is interfered with by government, the more likely it will struggle, poverty will increase, and the ability to create wealth decreases. Money is simply something that was created to replace the barter system. Rather than giving you a donkey for three sheep, I can purchase the sheep with a monetary amount you believe to be equal or greater than that of the value of the sheep. Historically, money tended to be something like coins made of precious metals, making the exchange something that swaps value for value. In today's era of paper money, and a debt-based economy, the only reason money retains any value is because we have faith that it does.
Money does not exist like people think. It only exists because the bankers let it exist. Money appears, or is extinguished, because a ledger entry somewhere says that it can. Or, perhaps I should adjust that to "keystroke entries."
In an orderly society we agree to use a particular method or item for money, be it precious metals, paper issued by a government, or electronic digits in our accounts. When we do such a thing, the rise and fall of values of products, and ultimately the rise or fall in the cost of living, will follow basic principles understood by economists and financial whizzes from the very beginning.
Supply and Demand is the most commonly known principle of economics. The price or perceived value of an item fluctuates based on the amount of product available, and the amount of consumers demanding the product. If, for example, the demand is high, and the supply is low, the price of a product will increase. If there is a glut of a product in the market, and the demand is relatively low, the price of the product drops drastically in order to entice the consumer to purchase the item.
Supply and demand also applies when it comes to the amount of money in the system versus the value that is in the system. The price of a product may also be heavily influenced by the cost of producing the product.
There's an old saying among business owners. "I don't pay taxes, you do." In other words, taxation against businesses are treated as nothing more than a cost of doing business. So, if a corporate tax, or a manufacturing tax, increases, it really isn't a tax against the business. It is a tax against the people. The business will figure out how much per unit the tax is costing them, and then raise the price accordingly. They do the same thing with the rise in cost of raw materials, and labor costs. If wages go up, especially when mandated by government bureaucrats, to make up for the increase in the cost of doing business, the business owner will raise the price of the product. Sometimes they may not do it in an obvious manner. I remember when a mayonnaise producer was faced with a rise in the cost of producing each unit, so rather than raise the price the producer added a beveled bottom to the jar, which led to less product being in each unit. On the surface it looked like the price never changed. But, the consumer was purchasing less product for the same price without even realizing it.
In a communist system the goal is to eliminate possessions, individuality, and wealth creation. Two classes emerge in these systems. The haves, and the have-nots. Those in power live in luxury while the common folk, while excited they finally have what they consider to be equality, are left to be equal in misery. The market collapses, supply drops, prices rise, and poverty becomes the norm for everyone in the class of folks who had been screaming for "power to the people" before the whole thing began to knock them into place. To achieve such a system, communists create class warfare, first between any group they can get to go at each other's throats, and eventually between the proletariat and the bourgeoise. The latter are those who have possessions, or any level of comfort (a.k.a. the producers), and the former are considered the working class (a.k.a. the laborers). Taxes rise to redistribute wealth, and eventually the middle class and small business sector is destroyed, leaving only the workers, and the government (along with a handful of powerful corporate entities)."From each according to his ability, to each according to his needs."
-- Political Pistachio Conservative News and Commentary