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you make the argument that inflation is good, but prove it by specifics which only suggest that deflation is bad. Why is inflation better than no-inflation and

you make the argument that inflation is good, but prove it by specifics which only suggest that deflation is bad. Why is inflation better than no-inflation and no-deflation?

AznHisoka 9y ago
I would love to hear a decent answer to this as well. To this day i have never received a satisfying answer to this as most inflation supporters think I am a deflation supporter. While i really support No-deflation and No-inflation.
xapata 9y ago
Hitting an exact zero change is impossible, outside of the beautiful assumptions of a system of a equations. A practical person thus chooses which side of zero is better, for those times (effectively all the time) that we can't guarantee equilibrium.
int_19h 9y ago
It follows directly from his example. Inflation means that you need to invest your money into something (i.e. either use it directly to buy goods and hire people to produce a product or service and sell it, or else lend it with interest to someone else who will do so on your behalf). In essence, an inflation economy is one where the only money that is not in immediate circulation is the one that is currently reserved for anticipated imminent transactions (i.e. the bills in your wallet, or in the cash register before the end of the day) - which is a tiny amount. Everything else is parked in some bank account, investment fund, stock etc, where it generates interest for the holder by being loaned out to someone else who currently needs it to produce. So with some non-zero inflation, you maximize the utility of your monetary tokens as medium of exchange.
mikekchar 9y ago
There is always going to be a sweet spot where you have enough inflation to convince people to invest their money and not so much that they dump the currency altogether. That sweet spot could be zero. It could even be mild deflation. For example, Japan has been mildly deflationary for a decade or more (though it isn't reported that way, and I think it's a problem). It's not necessarily that bad. With a decreasing work force, one could even argue that right now there is no point to having inflation because unemployment is as close to zero as it's going to get. It really depends. My point really was that you would never intentionally build a modern economic system that was deflationary. It doesn't make sense, except in some limited circumstances. You will almost always want it to be very slightly inflationary to encourage people not to sit on cash. Exactly where you want inflation depends a lot on the situation, so it's not a one-size fits all. One thing that's interesting to ponder on is that money is always out of sync with goods and services. So you do some work and get paid. That money should be worth something. But imagine the situation where everybody did a bit of work, got paid enough to retire and then expected to be able to spend their money at the same time -- there is nobody left to work, so they can't spend the money. The system actually requires that people spend pretty much all the money they make because otherwise nobody needs to work for the next round of goods/services. Accumulation of wealth is actually a serious problem for society. It's one of the reasons you have many people encouraging high birth rates and/or immigration so that the population grows -- it keeps your money valuable by having something to spend it on. Now this seems to be clearly insane, but I think human society has a long way to go in terms of giving everyone a comfortable life while still encouraging the work necessary to provide that lifestyle.

you make the argument that inflation is good, but prove it by specifics which only suggest that deflation is bad. Why is inflation better than no-inflation and no-deflation?

AznHisoka 9y ago

I would love to hear a decent answer to this as well. To this day i have never received a satisfying answer to this as most inflation supporters think I am a deflation supporter. While i really support No-deflation and No-inflation.

xapata 9y ago

Hitting an exact zero change is impossible, outside of the beautiful assumptions of a system of a equations. A practical person thus chooses which side of zero is better, for those times (effectively all the time) that we can't guarantee equilibrium.

int_19h 9y ago

It follows directly from his example. Inflation means that you need to invest your money into something (i.e. either use it directly to buy goods and hire people to produce a product or service and sell it, or else lend it with interest to someone else who will do so on your behalf). In essence, an inflation economy is one where the only money that is not in immediate circulation is the one that is currently reserved for anticipated imminent transactions (i.e. the bills in your wallet, or in the cash register before the end of the day) - which is a tiny amount. Everything else is parked in some bank account, investment fund, stock etc, where it generates interest for the holder by being loaned out to someone else who currently needs it to produce. So with some non-zero inflation, you maximize the utility of your monetary tokens as medium of exchange.

mikekchar 9y ago

There is always going to be a sweet spot where you have enough inflation to convince people to invest their money and not so much that they dump the currency altogether. That sweet spot could be zero. It could even be mild deflation. For example, Japan has been mildly deflationary for a decade or more (though it isn't reported that way, and I think it's a problem). It's not necessarily that bad. With a decreasing work force, one could even argue that right now there is no point to having inflation because unemployment is as close to zero as it's going to get. It really depends. My point really was that you would never intentionally build a modern economic system that was deflationary. It doesn't make sense, except in some limited circumstances. You will almost always want it to be very slightly inflationary to encourage people not to sit on cash. Exactly where you want inflation depends a lot on the situation, so it's not a one-size fits all. One thing that's interesting to ponder on is that money is always out of sync with goods and services. So you do some work and get paid. That money should be worth something. But imagine the situation where everybody did a bit of work, got paid enough to retire and then expected to be able to spend their money at the same time -- there is nobody left to work, so they can't spend the money. The system actually requires that people spend pretty much all the money they make because otherwise nobody needs to work for the next round of goods/services. Accumulation of wealth is actually a serious problem for society. It's one of the reasons you have many people encouraging high birth rates and/or immigration so that the population grows -- it keeps your money valuable by having something to spend it on. Now this seems to be clearly insane, but I think human society has a long way to go in terms of giving everyone a comfortable life while still encouraging the work necessary to provide that lifestyle.