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I think such people just aren't paying attention. Everyone who understands American economic policy knows that the currency is being slowly devalued on purpose

by jblow 10y ago

I think such people just aren't paying attention. Everyone who understands American economic policy knows that the currency is being slowly devalued on purpose. This is not a conspiracy theory, it is common knowledge. The inflation target is always greater than 0. This is in part because of the perceived risks of deflation -- better to be on one side of the line than the other -- but also, generally, the point is to encourage people to spend or invest rather than passively save, because spending and investment grow the economy. To a libertarian this is one of the most oppressive things about the way the government works currently ... it forces everyone to work more than they would ideally have to, in a sense. (But I say "in a sense" because if the economy were at a much less active level as "normal" maybe everyone would have lower quality of life. I don't know.) If you ever wondered why Ron Paul dislikes the Fed so much, well, it's because of reasons like this.

amluto 10y ago
> To a libertarian this is one of the most oppressive things about the way the government works currently ... it forces everyone to work more than they would ideally have to, in a sense. This part I don't get. It is generally straightforward to invest one's fiat currency in a very secure (and privately run in a nicely capitalist way!) instrument that has positive real interest rate.
- logicchains 10y ago
  The worst thing for me is that inflation is an implicit wealth tax, because governments don't account for inflation when charging capital gains tax. So if inflation is 3%, you have $10000 which increases in value to $10300, then you pay capital gains tax on that $300, reducing the real value of your holdings.
  - jdavis703 10y ago
    Why are you investing in things with a 0℅ return then? If you're part of society you're ideally using labor and resources from other specialists such as farmers and miners who need some reason to move dirt around to make your life better. If you have money then you put that to work helping those people be more efficient, and maybe spawn other kinds of specialists like web developers. If however you'd rather not be a part of this society, then you're free to opt out. But then you don't get the benefits of "being on the team" and now either your standard of living goes down (I.e. homelessness) or you have to work super hard (I.e. living off grid in some remote area).
    - grzm 10y ago
      "a 0℅ return" I've seen ℅ used a couple of times recently where I would have used %. Is there a connotation or other difference in meaning implied by ℅ (care of) instead of % (percent)?
      - jdavis703 10y ago
        They're fairly close together and easy to mistake for each other when typing fast on an Android keyboard. I certainly meant to write percent (%), and probably others too. In fact I just learned there was even a "care of" symbol.
        grzm 10y ago
        Ah! Thanks for clarifying!
    - logicchains 10y ago
      It doesn't matter what the return is; if the nominal rate of return is 5% and inflation is 3%, and $10000 increases to $10500, I'm still paying capital gains on $500, when in fact $300 of that is just inflation and the real gains are only $200. The key issue is that capital gains tax applies to nominal rather than real returns.
- alloyed 10y ago
  Wouldn't those instruments (I'm assuming stocks/retirement, I'm not an economic smart guy) be implicitly tied to everyone else doing more work then they "have to"? That's exactly economic growth, just reworded.
  - witty_username 10y ago
    Everyone is doing more than they "have to" (that is not well-defined) because they want to. Let them do that.
- zo1 10y ago
  Another problem we find with it is that it distorts the market. I.e. The example you mentioned about financial instruments. People are "herded" or "coerced" into investing their currency/capital into such things. They simply have no other choice but to try beat the inflation that causes their capital to deflate. And on every corner, people that accumulate wealth are vilified (see talk of inequality, and progressive taxation). If we can't accumulate wealth and pass it off to better the lives of our own offspring, then we're nothing more than insects that live, work, and eventually disappear into nothingness.

by jblow 10y ago

amluto 10y ago

> To a libertarian this is one of the most oppressive things about the way the government works currently ... it forces everyone to work more than they would ideally have to, in a sense. This part I don't get. It is generally straightforward to invest one's fiat currency in a very secure (and privately run in a nicely capitalist way!) instrument that has positive real interest rate.

logicchains 10y ago
The worst thing for me is that inflation is an implicit wealth tax, because governments don't account for inflation when charging capital gains tax. So if inflation is 3%, you have $10000 which increases in value to $10300, then you pay capital gains tax on that $300, reducing the real value of your holdings.
- jdavis703 10y ago
  Why are you investing in things with a 0℅ return then? If you're part of society you're ideally using labor and resources from other specialists such as farmers and miners who need some reason to move dirt around to make your life better. If you have money then you put that to work helping those people be more efficient, and maybe spawn other kinds of specialists like web developers. If however you'd rather not be a part of this society, then you're free to opt out. But then you don't get the benefits of "being on the team" and now either your standard of living goes down (I.e. homelessness) or you have to work super hard (I.e. living off grid in some remote area).
  - grzm 10y ago
    "a 0℅ return" I've seen ℅ used a couple of times recently where I would have used %. Is there a connotation or other difference in meaning implied by ℅ (care of) instead of % (percent)?
    - jdavis703 10y ago
      They're fairly close together and easy to mistake for each other when typing fast on an Android keyboard. I certainly meant to write percent (%), and probably others too. In fact I just learned there was even a "care of" symbol.
      - grzm 10y ago
        Ah! Thanks for clarifying!
  - logicchains 10y ago
    It doesn't matter what the return is; if the nominal rate of return is 5% and inflation is 3%, and $10000 increases to $10500, I'm still paying capital gains on $500, when in fact $300 of that is just inflation and the real gains are only $200. The key issue is that capital gains tax applies to nominal rather than real returns.
alloyed 10y ago
Wouldn't those instruments (I'm assuming stocks/retirement, I'm not an economic smart guy) be implicitly tied to everyone else doing more work then they "have to"? That's exactly economic growth, just reworded.
- witty_username 10y ago
  Everyone is doing more than they "have to" (that is not well-defined) because they want to. Let them do that.
zo1 10y ago
Another problem we find with it is that it distorts the market. I.e. The example you mentioned about financial instruments. People are "herded" or "coerced" into investing their currency/capital into such things. They simply have no other choice but to try beat the inflation that causes their capital to deflate. And on every corner, people that accumulate wealth are vilified (see talk of inequality, and progressive taxation). If we can't accumulate wealth and pass it off to better the lives of our own offspring, then we're nothing more than insects that live, work, and eventually disappear into nothingness.