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Please don't call me son, I'm not your kid nor am I a kid. > With continual slight inflation, in order to keep up, society is pressured to keep expanding expon

Please don't call me son, I'm not your kid nor am I a kid. > With continual slight inflation, in order to keep up, society is pressured to keep expanding exponentially. True, but this assumes no corrections, like the one we're currently in. Ideally there'd be no inflation or deflation, but that's just not practical as wealth is not fixed nor can the money supply be. So the balancing act either tries to stay centered or slightly to one side or the other. > continual slight deflation is the best option. Deflation increases the value of my debt load putting me in deeper and deeper and reduces the value of my assets; how is that good? Deflation increases the value of saved cash. If anything, that sounds way worse for the poor than slight inflation. If I'm rich I just keep all my wealth in cash and steal from the poor via deflation. Under continual inflation, I can't do that, I have to convert my wealth into hopefully appreciating assets-and I could easily bet wrong-and the poor have continually decreasing debt as long salaries keep up with inflation. Sounds like a better deal to me. > Deflation is the natural order of things, That's not an argument, being natural doesn't equal being good. > Anything more inflationary than natural deflation (of course society will go through occasional inflationary bouts) is effectively stealing the fruits of societal progress from the poor, and reappropriating it to the rich or politically connected. You assert that, but I don't see any proof or evidence of it. You've shown me why you think inflation is bad, but now why you think deflation is good; you just assert it is.

dnautics 16y ago
>Deflation increases the value of my debt load putting me in deeper and deeper and reduces the value of my assets; how is that good? Deflation increases the value of saved cash. If anything, that sounds way worse for the poor than slight inflation. If I'm rich I just keep all my wealth in cash and steal from the poor via deflation. The value of your assets is untouched, the value of your assets relative to money goes down. There's nothing wrong with that. Who told you to go into debt in the first place? Islamic Finance, for example, doesn't allow for interest bearing fractional reserve debt, and Indonesia largely rode out the most recent economic crisis? I think with modest deflation, borrowing will not cease, but will largely be confined to collateral-backed loans (like car and home loans) and investment loans (like a loan to start out a second restaurant where the first succeeded). Revolving debt will disappear, and I don't really have much of a problem with that. I'm also unclear as to how deflation steals from the poor. If I am rich, and spending 20% of my income on day to day expenses, and there's 10% deflation, I will be spending 18% of my funds on day to day. That's a 2.5% increase in discretionary spending/investing power (80%-82%). If I'm poor, and spending 90% of my income on day-to-day expenses and there's 10% deflation, I will then be spending 81% of my income on day to day expenses. That is a 90% increase in my discretionary spending/investing power (10%-19%). Sounds to me like a good deal for the poor. > Under continual inflation, I can't do that, I have to convert my wealth into hopefully appreciating assets-and I could easily bet wrong-and the poor have continually decreasing debt as long salaries keep up with inflation. Sounds like a better deal to me. 1) any situation where you feel like "have" to do something is generally a red flag, if you ask me. 2) Who told the poor to go into debt in the first place? Under continual inflation, you encourage financiers to seek out more and more predatory loans (so they can make money off of the delta-interest and exert the strong arm of the law against the poor to wring the last of their money out). In a deflationary environment, instead of having to borrow money, from ever more-centralized banks, and when people get in trouble you will see them seek help from decentralized, local, institutions, like families, churches, charities, and mutual aid societies. This naturally limits the spread of risk. In a debt-based society, a catastrophe (like say, katrina, or say a meteor hits NYC) ripples throughout the debt network, as the victims are unable to repay their immediate lenders, whose power to pay back their lenders also gets hurt, and so on like dominoes. In a savings based society, the damage done by a catastrophe is largely a sunk cost. 3) I went over the mathematics of how the endebted poor are not helped by inflation many, many, posts up. The gist of it is the erosion of amortization power far far outstrips any benefit gained from loss of real debt value... And the reason for it is: >as long salaries keep up with inflation They don't. >You assert that, but I don't see any proof or evidence of it. Well, the two mechanisms of inflation are printing money (which sends money to the politically connected) and debt expansion (by lowering fed rates or by loosening reserve requirements) which sends money to the financiers, or rich people. That's my point. It's not the naturalness of deflation that makes it good, but the fact that inflation is a policy choice with bad results that makes inflation bad. It is possible to have natural, secular inflation, if population expands faster than technology can accomodate feeding mouths and housing the new people - and I'm more neutral on that situation. But a side effect of secular, natural, deflation is that we live in a savings-based society, which is more stable. I consider this to be good. There will also be a natural redistribution of wealth to the poor. I consider this to be fine. Artificial deflation can be catastrophic, and even kleptocratic, as happened just prior to the great depression as well as in argentina during the 70s. If you can't see why deflation is 'natural' consider any technology where government has not instituted price controls. You would be hard pressed to argue that there hasn't been "price deflation" - a phrase I cringe to use because it's a malignment of the concept - in computers, TVs, cars, voluntary medical procedures like lasik or breast implantation...
- gnaritas 16y ago
  > The value of your assets is untouched, the value of your assets relative to money goes down. Which is a depreciating asset. We trade in money, the value in money has gone down, I've lost money. > Who told you to go into debt in the first place? Irrelevant. We're talking about people, and people are not rational actors, they are in debt, so any solution needs to accept that as a fact. I can see now that you're not talking about our economy, but some idealised economy you've envisioned. > In a deflationary environment, instead of having to borrow money, from ever more-centralized banks, and when people get in trouble you will see them seek help from decentralized, local, institutions, like families, churches, charities, and mutual aid societies. This naturally limits the spread of risk. It also limits the availability of help; that approach doesn't scale as well as debt does to all classes of people. > In a debt-based society, a catastrophe (like say, katrina, or say a meteor hits NYC) ripples throughout the debt network, as the victims are unable to repay their immediate lenders, whose power to pay back their lenders also gets hurt. In a savings based society, the damage done by a catastrophe is a sunk cost. We don't have a savings based society, and we're unlikely to, so this is just intellectual masturbation; the world runs on debt and credit now, we're not suddenly going to go back no matter what happens. >> as long salaries keep up with inflation > They don't They do, if you lose the idea of staying in one place too long. Change jobs every few years and you'll have no problem keeping up with inflation. > I went over the mathematics of how the endebted poor are not helped by inflation many, many, posts up. That's not relevant if they are hurt by deflation even more. > I'm also unclear as to how deflation steals from the poor. If I am rich, and spending 20% of my income on day to day expenses, and there's 10% deflation, I will be spending 18% of my funds on day to day. That's a 2.5% increase in discretionary spending/investing power (80%-82%). If I'm poor, and spending 90% of my income on day-to-day expenses and there's 10% deflation, I will then be spending 81% of my income on day to day expenses. That is a 90% increase in my discretionary spending/investing power (10%-19%). Sounds to me like a good deal for the poor. Because you continue to ignore debt. Your arguments assume ideal conditions rather than actual conditions. In this country, in this time, most people are carrying a good amount of debt and deflation hurts them because of that debt. You can't fix that by saying they shouldn't have borrowed in the first place. > If I'm poor, and spending 90% of my income on day-to-day expenses and there's 10% deflation, I will then be spending 81% of my income on day to day expenses. That is a 90% increase in my discretionary spending/investing power (10%-19%). Sounds to me like a good deal for the poor. It's also a good example of how to lie with statistics. For a 50k salary, my expenses dropped 4500 a year, nice, but my 200k house just went 20k in the hole as it's now worth only 180k but I still owe 200k. I can throw the entire 4500 savings at paying down the debt, but the net effect is that I'm still down 15.5k; ouch. Debt and deflation do not mix well. It looks all fine when you're just talking percentages, but plug in actual numbers and the size of the debt load makes a big difference; it's like leverage in reverse, and it's specifically those on lower incomes who will suffer the most as they're the ones who's debt load is going to kill them the most with deflation. If you're just saying we shouldn't be a debt based society, well ok, I agree that'd be nice, but it's also a fairy tale, because we are a debt based society. And in a debt based society-which isn't going to change-continual inflation is the best option.

dnautics 16y ago

>Deflation increases the value of my debt load putting me in deeper and deeper and reduces the value of my assets; how is that good? Deflation increases the value of saved cash. If anything, that sounds way worse for the poor than slight inflation. If I'm rich I just keep all my wealth in cash and steal from the poor via deflation. The value of your assets is untouched, the value of your assets relative to money goes down. There's nothing wrong with that. Who told you to go into debt in the first place? Islamic Finance, for example, doesn't allow for interest bearing fractional reserve debt, and Indonesia largely rode out the most recent economic crisis? I think with modest deflation, borrowing will not cease, but will largely be confined to collateral-backed loans (like car and home loans) and investment loans (like a loan to start out a second restaurant where the first succeeded). Revolving debt will disappear, and I don't really have much of a problem with that. I'm also unclear as to how deflation steals from the poor. If I am rich, and spending 20% of my income on day to day expenses, and there's 10% deflation, I will be spending 18% of my funds on day to day. That's a 2.5% increase in discretionary spending/investing power (80%-82%). If I'm poor, and spending 90% of my income on day-to-day expenses and there's 10% deflation, I will then be spending 81% of my income on day to day expenses. That is a 90% increase in my discretionary spending/investing power (10%-19%). Sounds to me like a good deal for the poor. > Under continual inflation, I can't do that, I have to convert my wealth into hopefully appreciating assets-and I could easily bet wrong-and the poor have continually decreasing debt as long salaries keep up with inflation. Sounds like a better deal to me. 1) any situation where you feel like "have" to do something is generally a red flag, if you ask me. 2) Who told the poor to go into debt in the first place? Under continual inflation, you encourage financiers to seek out more and more predatory loans (so they can make money off of the delta-interest and exert the strong arm of the law against the poor to wring the last of their money out). In a deflationary environment, instead of having to borrow money, from ever more-centralized banks, and when people get in trouble you will see them seek help from decentralized, local, institutions, like families, churches, charities, and mutual aid societies. This naturally limits the spread of risk. In a debt-based society, a catastrophe (like say, katrina, or say a meteor hits NYC) ripples throughout the debt network, as the victims are unable to repay their immediate lenders, whose power to pay back their lenders also gets hurt, and so on like dominoes. In a savings based society, the damage done by a catastrophe is largely a sunk cost. 3) I went over the mathematics of how the endebted poor are not helped by inflation many, many, posts up. The gist of it is the erosion of amortization power far far outstrips any benefit gained from loss of real debt value... And the reason for it is: >as long salaries keep up with inflation They don't. >You assert that, but I don't see any proof or evidence of it. Well, the two mechanisms of inflation are printing money (which sends money to the politically connected) and debt expansion (by lowering fed rates or by loosening reserve requirements) which sends money to the financiers, or rich people. That's my point. It's not the naturalness of deflation that makes it good, but the fact that inflation is a policy choice with bad results that makes inflation bad. It is possible to have natural, secular inflation, if population expands faster than technology can accomodate feeding mouths and housing the new people - and I'm more neutral on that situation. But a side effect of secular, natural, deflation is that we live in a savings-based society, which is more stable. I consider this to be good. There will also be a natural redistribution of wealth to the poor. I consider this to be fine. Artificial deflation can be catastrophic, and even kleptocratic, as happened just prior to the great depression as well as in argentina during the 70s. If you can't see why deflation is 'natural' consider any technology where government has not instituted price controls. You would be hard pressed to argue that there hasn't been "price deflation" - a phrase I cringe to use because it's a malignment of the concept - in computers, TVs, cars, voluntary medical procedures like lasik or breast implantation...

gnaritas 16y ago
> The value of your assets is untouched, the value of your assets relative to money goes down. Which is a depreciating asset. We trade in money, the value in money has gone down, I've lost money. > Who told you to go into debt in the first place? Irrelevant. We're talking about people, and people are not rational actors, they are in debt, so any solution needs to accept that as a fact. I can see now that you're not talking about our economy, but some idealised economy you've envisioned. > In a deflationary environment, instead of having to borrow money, from ever more-centralized banks, and when people get in trouble you will see them seek help from decentralized, local, institutions, like families, churches, charities, and mutual aid societies. This naturally limits the spread of risk. It also limits the availability of help; that approach doesn't scale as well as debt does to all classes of people. > In a debt-based society, a catastrophe (like say, katrina, or say a meteor hits NYC) ripples throughout the debt network, as the victims are unable to repay their immediate lenders, whose power to pay back their lenders also gets hurt. In a savings based society, the damage done by a catastrophe is a sunk cost. We don't have a savings based society, and we're unlikely to, so this is just intellectual masturbation; the world runs on debt and credit now, we're not suddenly going to go back no matter what happens. >> as long salaries keep up with inflation > They don't They do, if you lose the idea of staying in one place too long. Change jobs every few years and you'll have no problem keeping up with inflation. > I went over the mathematics of how the endebted poor are not helped by inflation many, many, posts up. That's not relevant if they are hurt by deflation even more. > I'm also unclear as to how deflation steals from the poor. If I am rich, and spending 20% of my income on day to day expenses, and there's 10% deflation, I will be spending 18% of my funds on day to day. That's a 2.5% increase in discretionary spending/investing power (80%-82%). If I'm poor, and spending 90% of my income on day-to-day expenses and there's 10% deflation, I will then be spending 81% of my income on day to day expenses. That is a 90% increase in my discretionary spending/investing power (10%-19%). Sounds to me like a good deal for the poor. Because you continue to ignore debt. Your arguments assume ideal conditions rather than actual conditions. In this country, in this time, most people are carrying a good amount of debt and deflation hurts them because of that debt. You can't fix that by saying they shouldn't have borrowed in the first place. > If I'm poor, and spending 90% of my income on day-to-day expenses and there's 10% deflation, I will then be spending 81% of my income on day to day expenses. That is a 90% increase in my discretionary spending/investing power (10%-19%). Sounds to me like a good deal for the poor. It's also a good example of how to lie with statistics. For a 50k salary, my expenses dropped 4500 a year, nice, but my 200k house just went 20k in the hole as it's now worth only 180k but I still owe 200k. I can throw the entire 4500 savings at paying down the debt, but the net effect is that I'm still down 15.5k; ouch. Debt and deflation do not mix well. It looks all fine when you're just talking percentages, but plug in actual numbers and the size of the debt load makes a big difference; it's like leverage in reverse, and it's specifically those on lower incomes who will suffer the most as they're the ones who's debt load is going to kill them the most with deflation. If you're just saying we shouldn't be a debt based society, well ok, I agree that'd be nice, but it's also a fairy tale, because we are a debt based society. And in a debt based society-which isn't going to change-continual inflation is the best option.