4 ms·

Its important to note that not only do they mention the disincentive to work, but the disincentive to save and the disincentive to pay your debts. How is disco

by viggity 17y ago

Its important to note that not only do they mention the disincentive to work, but the disincentive to save and the disincentive to pay your debts. How is discouraging people to save and pay their debts good for anyone or society as a whole?

nazgulnarsil 17y ago
this is veering into monetary policy. the government inflates the dollar to pay for things without raising unpopular taxes (80% of treasury bonds purchased by the fed last year). constant inflation causes several things A) a disincentive to pay debts since they will be cheaper in the future B) a disincentive to save since your money will have less purchasing power in the future
- harshavr 17y ago
  B) should be disincentive to save using money, not a general disincentive to save itself. One could make investments in any other commodity whose value relative to other commodities stays constant or increases. It is a somewhat unusual tax, in that your tax rate is based on what proportion of your assets are in dollars. Does someone know what the rate per year on dollar assets is and how to calculate it? You would need to know how much money the Fed prints in a year. Do they publish it or was that what auditing the fed was about? Also for A), banks probably factor in inflation while setting the interest rate for a loan. So, the relevant variable, i guess, is unexpected inflation rather than the value of inflation itself. The debtor benefits only when the loan market makes low estimates.
nostrademons 17y ago
I dunno, but the credit card companies seem to be doing a pretty good job of it. Same with the Federal Reserve. Would you get rid of them as well? ;-) (It's a semi-serious question. Credit card companies encourage people to buy things they can't afford and then carry the balance - it's how they make money. And the Federal Reserve attempts to cause continual low-level inflation, such that savings are worth less and debts are easier to pay back the longer you carry them. I don't really support either practice, but there are lots of things America is doing to discourage savings and encourage debt.)
- eru 17y ago
  Credit card companies are also making money on fees when you buy stuff.
- zzzmarcus 17y ago
  Yes, I'd get rid of the Federal Reserve.
ZachPruckowski 17y ago
> How is discouraging people to save and pay their debts good for anyone or society as a whole? In a time of economic slowness, it benefits the society as a whole more if you increase your marginal spending (spend more cents of every dollar), because that keeps money flowing through the system. Of course, that means we'd want to create incentives to pay debts off and save when the economy's going well (which also has the benefit of controlling growth). In America, we've become more and more dependent on consumer spending as the engine of our economy, so we keep incentivizing it beyond reason, even in boom times. That's what's causing the personal debt levels we're seeing.

by viggity 17y ago

nazgulnarsil 17y ago

this is veering into monetary policy. the government inflates the dollar to pay for things without raising unpopular taxes (80% of treasury bonds purchased by the fed last year). constant inflation causes several things A) a disincentive to pay debts since they will be cheaper in the future B) a disincentive to save since your money will have less purchasing power in the future

harshavr 17y ago
B) should be disincentive to save using money, not a general disincentive to save itself. One could make investments in any other commodity whose value relative to other commodities stays constant or increases. It is a somewhat unusual tax, in that your tax rate is based on what proportion of your assets are in dollars. Does someone know what the rate per year on dollar assets is and how to calculate it? You would need to know how much money the Fed prints in a year. Do they publish it or was that what auditing the fed was about? Also for A), banks probably factor in inflation while setting the interest rate for a loan. So, the relevant variable, i guess, is unexpected inflation rather than the value of inflation itself. The debtor benefits only when the loan market makes low estimates.

nostrademons 17y ago

I dunno, but the credit card companies seem to be doing a pretty good job of it. Same with the Federal Reserve. Would you get rid of them as well? ;-) (It's a semi-serious question. Credit card companies encourage people to buy things they can't afford and then carry the balance - it's how they make money. And the Federal Reserve attempts to cause continual low-level inflation, such that savings are worth less and debts are easier to pay back the longer you carry them. I don't really support either practice, but there are lots of things America is doing to discourage savings and encourage debt.)

eru 17y ago
Credit card companies are also making money on fees when you buy stuff.
zzzmarcus 17y ago
Yes, I'd get rid of the Federal Reserve.

ZachPruckowski 17y ago

> How is discouraging people to save and pay their debts good for anyone or society as a whole? In a time of economic slowness, it benefits the society as a whole more if you increase your marginal spending (spend more cents of every dollar), because that keeps money flowing through the system. Of course, that means we'd want to create incentives to pay debts off and save when the economy's going well (which also has the benefit of controlling growth). In America, we've become more and more dependent on consumer spending as the engine of our economy, so we keep incentivizing it beyond reason, even in boom times. That's what's causing the personal debt levels we're seeing.