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If we kept inflation close to zero (or negative) wealth would tend to concentrate in fewer and fewer hands, and the bias would be toward idle rentiers. People l
by api 9y ago
If we kept inflation close to zero (or negative) wealth would tend to concentrate in fewer and fewer hands, and the bias would be toward idle rentiers. People like property landlords would get unbelievably rich by collecting mandatory continuous rent payments. Since deflating currency holds or increases in value they'd have zero incentive to do anything with it other than hoard it. Eventually you end up with a landed nobility.
Add to this the fact that deflating currency makes loans hard to service and biases the lending market toward default. This further decreases the incentive for those with a lot of currency to lend it since the probability of losing it to default becomes higher.
The ideal is probably a little bit of inflation. I think it's possible that we have too much, and that we are misinformed about that because we are measuring the wrong things. I'm not positive but I seem to remember that the CPI does not include things like rent and college tuition, which if true is utterly insane and makes it a bogus statistic.
- ryanwaggoner 9y agoBoth rents and tuition are included in the CPI: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.pdf https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... https://www.bls.gov/cpi/factsheets/college-tuition.htm https://www.bls.gov/cpi/factsheets/college-tuition.htm
- YPCrumble 9y agoThis looks suspicious. There is not a single mention of square footage in the rents document. So let's say everyone moves to a smaller house because housing costs are so high, that's not a sign of inflation?!
- nradov 9y agoThe BLS corrects for those factors using hedonic adjustments.
- YPCrumble 9y ago"Hedonic adjustments" sounds like a term for "the number is whatever we want it to be but we want it to sound official so people don't question it." If you mix "hedonic adjustments" into every number then there is zero value in the numbers. There is no meaningful way to quantify a "hedonic adjustment". Is a smartphone a positive or negative "hedonic adjustment" relative to a landline? Lots of people would say it's positive. Lots would say it's negative. Nobody knows the actual answer because smartphones have only existed for a few years.