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> The thing is, when you hoard wealth as numbers on a balance sheet rather than spending it, you are actually destroying that wealth. Money which is not in moti

> The thing is, when you hoard wealth as numbers on a balance sheet rather than spending it, you are actually destroying that wealth. Money which is not in motion is not money. Completely wrong. It is insane to see this kind of basic communist rhetoric on Hackernews. If I hide a billion dollar under my mattress for decades, it means that there's that much less dollars chasing goods and services. The effect will be as if those dollars had been destroyed : the total wealth will remain constant, but the value of all the other dollars remaining in the circulation will increase. Let me repeat : the wealth remains constant, it is not destroyed. Cars in driveways are not going to explode. Crops will not spontaneously catch in fire. People will not forget the skills they have.

AnthonyMouse 11y ago
> The effect will be as if those dollars had been destroyed : the total wealth will remain constant, but the value of all the other dollars remaining in the circulation will increase. Which causes deflation. Specifically in this case wage deflation. And then because people have less money, they can't use their cars and crops and skills because people don't have as much money to pay for gas or food or the services of others.
- Frozenlock 11y ago
  >Specifically in this case wage deflation. How? How is this specifically wage deflation? That's a hell of a quantum leap. If anything, wages are much more resistant to downward pressure than goods. (People really don't like getting a paycut.) So even if the value of dollars increase, most people keep the same wage. In extreme cases, in can even end up in layoff, because people are now paid too much in comparison of everything else in the market. I would take deflation over inflation any day. Inflation eats away anything you try to keep for a rainy day, while at the same time reducing the value of your paycheck. This means that you must constantly negotiate (or beg, depending on your position) for a raise or you fall behind.
  - AnthonyMouse 11y ago
    > How is this specifically wage deflation? You're asking how hoarding cash instead of paying higher wages causes wage deflation? > If anything, wages are much more resistant to downward pressure than goods. Wage deflation relative to CPI. Wages remain stagnant or increase less than prices. We would have overall deflation if The Fed wasn't printing money to offset the corporate hoarding. Which is almost certainly better than overall deflation but is still quite bad for people who are paying more for things but not getting paid more. > I would take deflation over inflation any day. Deflation was a primary cause of the Great Depression. Deflation is very bad. > Inflation eats away anything you try to keep for a rainy day, while at the same time reducing the value of your paycheck. Inflation doesn't eat the value of stuff. If you own a home or stocks then inflation causes their value to increase proportionally. The problem is when there is price inflation without wage inflation. Which is caused by corporations hoarding cash instead of paying higher wages.
    - Frozenlock 11y ago
      > You're asking how hoarding cash instead of paying higher wages causes wage deflation? No, I'm asking how deflation in general causes wage deflation. Your post was in answer to deflation caused by hiding/destroying cash. > Wage deflation relative to CPI. Wages remain stagnant or increase less than prices. So it's not related to the increase of value in the currency caused by hiding away 1 billion under a mattress. You used the same term but for different context/meaning. The weird thing is how you phrased it as if it was a causal relationship. > Deflation was a primary cause of the Great Depression. Deflation is very bad. There's many factors for the US Great Depression (such as previous inflation). There's also the relative speed at which those things occur. Both can be destabilizing in high enough magnitude. But deflation is the natural result of a growing economy and better efficiency. If it was bad, civilisations would have self-destructed every time they came up with a better way to do things. Imagine a new technique that would reduce food prices by 50%. Would this be a good, or a bad thing? > inflation doesn't eat the value of stuff. If you own a home or stocks then inflation causes their value to increase proportionally. Sure, I never said to the contrary. What's your point? People should stop saving money and buy everything around them instead? There's a huge cost to that, especially in real estate.
- btilly 11y ago
  And in a world with deflation, putting money under the mattress is actually a good investment strategy. The resulting deflationary spiral is self-reinforcing. Fear of this state is why central banks try to create a consistent level of inflation.
  - mindslight 11y ago
    And yet the bona fide purpose of economic competition is to always be lowering prices through optimization, the technology sector being the strongest (most meta) example of this. If the deflation doom sayers were as prescient as they purport, we'd all still be using 386s waiting for Intel to announce they've created the fastest chip they will ever be able to. In fact, the system is bistable. Inflation has the same self-reinforcing spiral, and we're living it! The moneyprinters' metric (CPI) has become the goal unto itself - anything technological keeps getting ever-cheaper, so anything that can be financialized (the quickest feedback path where printed money returns to the CPI) shoots through the roof.
    - btilly 11y ago
      I have no idea where you're getting your opinion about "deflation doom sayers" from. But you're right that the system has some bistability. A deflationary spiral with declining production and lifestyle can sustain itself for a long time. It is also sustainable to maintain a moderate inflationary spiral with ever increasing production and improving lifestyle. Given that choice, isn't it obvious why bankers try to keep the latter option going? But it is not actually bistable. Keeping moderate inflation going requires continual intervention. It is easy to fall off the rails into a hyper-inflationary disaster. It is easy to fall off the rails the other way into a deflationary disaster. And continued success creates the moral hazard of overconfidence in the stability of the system. This overconfidence leads to risky behavior which in the end WILL result in disaster. We came close to that in 2008. It is unclear to me whether it is better to have regular smaller disasters, or occasional large ones. But pushing off the next disaster is always better in the short run.
      - mindslight 11y ago
- unchocked 11y ago
  You seem to misunderstand money. Hoarding causes general deflation; to capital, as well as wages. Its effect is the same as distributing the value of the hoarded money across the money supply. Deflation causes people to feel as if they have more money, not less. Money that is more valuable (deflated), purchases more value. And while deflation has knock-on effects that are problematic, I'll add that the government backing any fiat currency has ample tools to combat it (creating inflation by printing currency).
  - AnthonyMouse 11y ago
    > Hoarding causes general deflation; to capital, as well as wages. Eventually causes general deflation. The whole problem with deflation is that it isn't evenly distributed. If the price of everything whatsoever increased or decreased by the same percentage at the same time then there would be no trouble. The problem is the period of time between when people start being paid less and when things start to cost less. Or between when things start to cost more and when people start to be paid more. And during that period of time, companies hoard yet more cash which perpetuates the cycle.
madaxe_again 11y ago
That is only true if you are not simultaneously creating new money to replace the money that has been effectively been withdrawn from the system - which is precisely what the fed, the Bank of England, etc., do when they churn out new currency. If there were a constant and fixed supply of money, what you say would be true - but there is not, and therefore what you say is false. Cars in driveways will not explode, crops will not catch on fire, but the incremental benefit from increased efficiency will never be realised in any tangible fashion. Also, nice stoop to the ad-hominem - I'm no communist. Are you a primitive randroid?
- Frozenlock 11y ago
  No, you are trying to move the goalpost. You try to move away from "hiding money destroy wealth" and establish the ground to go to something like "printing money steals value". It is absolutely NOT the same thing. I explained your logic was erroneous. Hiding money away does not destroy wealth. By the way, printing money doesn't destroy wealth either, it transfers it. You can argue that it's evil all you want (and I would agree), but that's NOT the same thing as saying that destroying money destroys wealth.
deleted 11y ago
[deleted]
dang 11y ago
> Completely wrong. It is insane to see this kind of basic communist rhetoric on Hackernews. Please re-read the HN guidelines, which ask you not to call names in comments. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- Recurecur 11y ago
  No names were called. An adjective was applied to the rhetorical content. ;-)
  - dang 11y ago
    Pejorative adjectives are a form of calling names. There are no grammatical loopholes here.
msellout 11y ago
s/communist/capitalist/ Capitalist economies must continually grow to be healthy. Savings which is not invested does not create growth. A healthy growth is a stable, slow rate. If growth is too fast, an economy should stop investing to slow things down. If growth is too slow, an economy should invest more. Unfortunately, neither of those are natural actions. People like to invest more during fast growth and invest less during slow growth. Thus boom-and-bust.
grahamburger 11y ago
Not to mention that it's really, really not being stored under a mattress. Even Tim Cook's mattress isn't big enough to store that much cash. As mentioned elsewhere on the thread[0], it's being reinvested. [0] https://news.ycombinator.com/item?id=11382429 https://news.ycombinator.com/item?id=11382429

AnthonyMouse 11y ago

> The effect will be as if those dollars had been destroyed : the total wealth will remain constant, but the value of all the other dollars remaining in the circulation will increase. Which causes deflation. Specifically in this case wage deflation. And then because people have less money, they can't use their cars and crops and skills because people don't have as much money to pay for gas or food or the services of others.

Frozenlock 11y ago
>Specifically in this case wage deflation. How? How is this specifically wage deflation? That's a hell of a quantum leap. If anything, wages are much more resistant to downward pressure than goods. (People really don't like getting a paycut.) So even if the value of dollars increase, most people keep the same wage. In extreme cases, in can even end up in layoff, because people are now paid too much in comparison of everything else in the market. I would take deflation over inflation any day. Inflation eats away anything you try to keep for a rainy day, while at the same time reducing the value of your paycheck. This means that you must constantly negotiate (or beg, depending on your position) for a raise or you fall behind.
- AnthonyMouse 11y ago
  > How is this specifically wage deflation? You're asking how hoarding cash instead of paying higher wages causes wage deflation? > If anything, wages are much more resistant to downward pressure than goods. Wage deflation relative to CPI. Wages remain stagnant or increase less than prices. We would have overall deflation if The Fed wasn't printing money to offset the corporate hoarding. Which is almost certainly better than overall deflation but is still quite bad for people who are paying more for things but not getting paid more. > I would take deflation over inflation any day. Deflation was a primary cause of the Great Depression. Deflation is very bad. > Inflation eats away anything you try to keep for a rainy day, while at the same time reducing the value of your paycheck. Inflation doesn't eat the value of stuff. If you own a home or stocks then inflation causes their value to increase proportionally. The problem is when there is price inflation without wage inflation. Which is caused by corporations hoarding cash instead of paying higher wages.
  - Frozenlock 11y ago
    > You're asking how hoarding cash instead of paying higher wages causes wage deflation? No, I'm asking how deflation in general causes wage deflation. Your post was in answer to deflation caused by hiding/destroying cash. > Wage deflation relative to CPI. Wages remain stagnant or increase less than prices. So it's not related to the increase of value in the currency caused by hiding away 1 billion under a mattress. You used the same term but for different context/meaning. The weird thing is how you phrased it as if it was a causal relationship. > Deflation was a primary cause of the Great Depression. Deflation is very bad. There's many factors for the US Great Depression (such as previous inflation). There's also the relative speed at which those things occur. Both can be destabilizing in high enough magnitude. But deflation is the natural result of a growing economy and better efficiency. If it was bad, civilisations would have self-destructed every time they came up with a better way to do things. Imagine a new technique that would reduce food prices by 50%. Would this be a good, or a bad thing? > inflation doesn't eat the value of stuff. If you own a home or stocks then inflation causes their value to increase proportionally. Sure, I never said to the contrary. What's your point? People should stop saving money and buy everything around them instead? There's a huge cost to that, especially in real estate.
btilly 11y ago
And in a world with deflation, putting money under the mattress is actually a good investment strategy. The resulting deflationary spiral is self-reinforcing. Fear of this state is why central banks try to create a consistent level of inflation.
- mindslight 11y ago
  And yet the bona fide purpose of economic competition is to always be lowering prices through optimization, the technology sector being the strongest (most meta) example of this. If the deflation doom sayers were as prescient as they purport, we'd all still be using 386s waiting for Intel to announce they've created the fastest chip they will ever be able to. In fact, the system is bistable. Inflation has the same self-reinforcing spiral, and we're living it! The moneyprinters' metric (CPI) has become the goal unto itself - anything technological keeps getting ever-cheaper, so anything that can be financialized (the quickest feedback path where printed money returns to the CPI) shoots through the roof.
  - btilly 11y ago
    I have no idea where you're getting your opinion about "deflation doom sayers" from. But you're right that the system has some bistability. A deflationary spiral with declining production and lifestyle can sustain itself for a long time. It is also sustainable to maintain a moderate inflationary spiral with ever increasing production and improving lifestyle. Given that choice, isn't it obvious why bankers try to keep the latter option going? But it is not actually bistable. Keeping moderate inflation going requires continual intervention. It is easy to fall off the rails into a hyper-inflationary disaster. It is easy to fall off the rails the other way into a deflationary disaster. And continued success creates the moral hazard of overconfidence in the stability of the system. This overconfidence leads to risky behavior which in the end WILL result in disaster. We came close to that in 2008. It is unclear to me whether it is better to have regular smaller disasters, or occasional large ones. But pushing off the next disaster is always better in the short run.
    - mindslight 11y ago
unchocked 11y ago
You seem to misunderstand money. Hoarding causes general deflation; to capital, as well as wages. Its effect is the same as distributing the value of the hoarded money across the money supply. Deflation causes people to feel as if they have more money, not less. Money that is more valuable (deflated), purchases more value. And while deflation has knock-on effects that are problematic, I'll add that the government backing any fiat currency has ample tools to combat it (creating inflation by printing currency).
- AnthonyMouse 11y ago
  > Hoarding causes general deflation; to capital, as well as wages. Eventually causes general deflation. The whole problem with deflation is that it isn't evenly distributed. If the price of everything whatsoever increased or decreased by the same percentage at the same time then there would be no trouble. The problem is the period of time between when people start being paid less and when things start to cost less. Or between when things start to cost more and when people start to be paid more. And during that period of time, companies hoard yet more cash which perpetuates the cycle.

madaxe_again 11y ago

That is only true if you are not simultaneously creating new money to replace the money that has been effectively been withdrawn from the system - which is precisely what the fed, the Bank of England, etc., do when they churn out new currency. If there were a constant and fixed supply of money, what you say would be true - but there is not, and therefore what you say is false. Cars in driveways will not explode, crops will not catch on fire, but the incremental benefit from increased efficiency will never be realised in any tangible fashion. Also, nice stoop to the ad-hominem - I'm no communist. Are you a primitive randroid?

Frozenlock 11y ago
No, you are trying to move the goalpost. You try to move away from "hiding money destroy wealth" and establish the ground to go to something like "printing money steals value". It is absolutely NOT the same thing. I explained your logic was erroneous. Hiding money away does not destroy wealth. By the way, printing money doesn't destroy wealth either, it transfers it. You can argue that it's evil all you want (and I would agree), but that's NOT the same thing as saying that destroying money destroys wealth.

deleted 11y ago

[deleted]

dang 11y ago

> Completely wrong. It is insane to see this kind of basic communist rhetoric on Hackernews. Please re-read the HN guidelines, which ask you not to call names in comments. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

Recurecur 11y ago
No names were called. An adjective was applied to the rhetorical content. ;-)
- dang 11y ago
  Pejorative adjectives are a form of calling names. There are no grammatical loopholes here.

msellout 11y ago

s/communist/capitalist/ Capitalist economies must continually grow to be healthy. Savings which is not invested does not create growth. A healthy growth is a stable, slow rate. If growth is too fast, an economy should stop investing to slow things down. If growth is too slow, an economy should invest more. Unfortunately, neither of those are natural actions. People like to invest more during fast growth and invest less during slow growth. Thus boom-and-bust.

grahamburger 11y ago

Not to mention that it's really, really not being stored under a mattress. Even Tim Cook's mattress isn't big enough to store that much cash. As mentioned elsewhere on the thread[0], it's being reinvested. [0] https://news.ycombinator.com/item?id=11382429 https://news.ycombinator.com/item?id=11382429