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> the biggest of which is inflation Inflation is a mechanism to prevent the rich from hoarding cash. The flipside is that people who aren't putting their mone

by Mikeb85 10y ago

> the biggest of which is inflation Inflation is a mechanism to prevent the rich from hoarding cash. The flipside is that people who aren't putting their money to use lose value. Without inflation, the rich would hoard with impunity.

dnautics 10y ago
That doesn't make any sense. If the rich hoard money the velocity of money goes down, and that causes the value to go down too. As "mechanism to prevent hoarding" by the rich it's pretty shitty. The rich know how to protect their net worth from devaluating currency (e.g. real estate), and can more easily partake in leveraged investment vehicles which would not be possible with higher interest rates and non-inflationary base currency. You don't see the guy on the tenderloin buying leveraged etfs. For that matter neither does the middle class, who mostly are locked into managed find situations which provide low yield (if you look through to trough, the real value of the stock market has been static for 25 years)
- Mikeb85 10y ago
  Taking money out of circulation (by saving it/not spending it) reduces supply, practically speaking, raising its value, causing deflation (price levels drop, cash becomes more valuable). This isn't controversial, it can be seen in recent history. Expansionary monetary policy (increasing the supply of money) = inflation, deflationary policy (reducing money supply) = deflation. > That doesn't make any sense. If the rich hoard money the velocity of money goes down, and that causes the value to go down too. 'Velocity' of money is a shitty concept, but regardless what it means is that with higher velocity, goods and services are in higher demand relative to cash (more transactions over time). This increases price levels but reduces the value of cash. So velocity going down decreases demand for and the value of goods and services (price levels), increasing the relative value of cash.

by Mikeb85 10y ago

dnautics 10y ago

That doesn't make any sense. If the rich hoard money the velocity of money goes down, and that causes the value to go down too. As "mechanism to prevent hoarding" by the rich it's pretty shitty. The rich know how to protect their net worth from devaluating currency (e.g. real estate), and can more easily partake in leveraged investment vehicles which would not be possible with higher interest rates and non-inflationary base currency. You don't see the guy on the tenderloin buying leveraged etfs. For that matter neither does the middle class, who mostly are locked into managed find situations which provide low yield (if you look through to trough, the real value of the stock market has been static for 25 years)

Mikeb85 10y ago
Taking money out of circulation (by saving it/not spending it) reduces supply, practically speaking, raising its value, causing deflation (price levels drop, cash becomes more valuable). This isn't controversial, it can be seen in recent history. Expansionary monetary policy (increasing the supply of money) = inflation, deflationary policy (reducing money supply) = deflation. > That doesn't make any sense. If the rich hoard money the velocity of money goes down, and that causes the value to go down too. 'Velocity' of money is a shitty concept, but regardless what it means is that with higher velocity, goods and services are in higher demand relative to cash (more transactions over time). This increases price levels but reduces the value of cash. So velocity going down decreases demand for and the value of goods and services (price levels), increasing the relative value of cash.