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I don’t buy your argument. People will still invest because investment generates a return on their money. Additionally, if the savings rate becomes too high th

I don’t buy your argument. People will still invest because investment generates a return on their money. Additionally, if the savings rate becomes too high the government has the ability to tax and reinvest that revenue as appropriate. Inflation is a hidden tax that impacts the poor and middle classes the most. Worse, wealthy people have the means to escape inflation. Today the worlds weathiest simply buy land and property. Is that the sort of “investment” you’re cheering for as a positive result of inflation?

pimmen 9y ago
The problem is that with a deflationary currency, the only risk you run into is if the amount of stuff drops because that's the only way this global currency would drop in value; the perceived amount of stuff it could buy drops. Every other investment has much greater risks, so why would people chose them? And what's saying the return would be higher for that stuff anyway when everyone's saving rather than spending, why would anyone spend their money on the output of your investment? Not saying you're wrong, I'm saying there's a very high likelihood it won't result in investments, far higher than I would like. And it's good that you brought up land and property because that's exactly what I don't want people to invest in (unless they actually want to use it for production, like renting it out to people or companies) but housing is something a lot of people do invest in for retirement, especially in my country. I would much rather people invested it in their 401k, a mutual fund, their business idea, bonds or whatever would enable production. Inflation is a tax on people who have money in their mattresses, if you invest money rather than save it you will beat inflation over your life. That's what I want people to be incentivized to do, not to pile them up or freeze them in status symbols like homes. And inflation can actually help the poor, it makes it much easier for them to pay off their debts as the principal decreases in value. It's the main reason poor farmers fought for bimetalism in Gilded Age America because rich bankers were making a killing on low inflation.

pimmen 9y ago

The problem is that with a deflationary currency, the only risk you run into is if the amount of stuff drops because that's the only way this global currency would drop in value; the perceived amount of stuff it could buy drops. Every other investment has much greater risks, so why would people chose them? And what's saying the return would be higher for that stuff anyway when everyone's saving rather than spending, why would anyone spend their money on the output of your investment? Not saying you're wrong, I'm saying there's a very high likelihood it won't result in investments, far higher than I would like. And it's good that you brought up land and property because that's exactly what I don't want people to invest in (unless they actually want to use it for production, like renting it out to people or companies) but housing is something a lot of people do invest in for retirement, especially in my country. I would much rather people invested it in their 401k, a mutual fund, their business idea, bonds or whatever would enable production. Inflation is a tax on people who have money in their mattresses, if you invest money rather than save it you will beat inflation over your life. That's what I want people to be incentivized to do, not to pile them up or freeze them in status symbols like homes. And inflation can actually help the poor, it makes it much easier for them to pay off their debts as the principal decreases in value. It's the main reason poor farmers fought for bimetalism in Gilded Age America because rich bankers were making a killing on low inflation.