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I 100% disagree, the central planning of money is (1) what causes inflation, and (2) greatly exacerbates (and in many cases creates) financial crises. Any supp

I 100% disagree, the central planning of money is (1) what causes inflation, and (2) greatly exacerbates (and in many cases creates) financial crises. Any supply of money will do, the idea that money should increase in supply along with population growth (or some other arbitrary metric) otherwise we’ll permanently live in a deflationary disaster is an imagined monster — we live in the here and now, therefore people have to spend some amount of money to live (food, housing, entertainment, etc) regardless of whether they perceive the purchasing power of money to increase in the future. By centrally planning (and thus inflating) the amount of money in circulation during financial crises the only thing that is accomplished is a re-inflation of the bubble — essentially they’re sowing the seeds of destruction again, causing the next bubble in an attempt to cure the last one. Please read this explanation of the financial crisis, I’d be happy to comment further if you have specific critiques on this article (and no I didn’t write it): https://www.unqualified-reservations.org/2008/10/misesian-explanation-of-bank-crisis/ https://www.unqualified-reservations.org/2008/10/misesian-ex...

ryan_j_naughton 8y ago
A low, but positive, inflation rate is of critical importance. > Any supply of money will do. That is just nonsense. If you have a fixed money supply, given that economic growth is happening, would result in a naturally deflationary currency. That is a terrible place to be for the system as a whole as no one has any incentives to spend or invest in anything as money itself will simply gain value over time just sitting as cash. Thus, that money isn't being used / circulated. Having a ideal velocity of money has significant multiplier effects and deflationary currencies are fundamentally flawed. The problem then is: if you want a low rate of inflation but there is a natural variation in the growth rate due to the cyclic nature of the economy, then how to create a system that could do that without a monetary authority.
- sbenitoj 8y ago
  Prove it, show me the world where we had a stable monetary supply that resulted in people having no incentive to invest in anything — where’s the experiment? Again, you HAVE to spend money to live (otherwise you die). It’s impossible to live without food and water, most people want to live in a house, most people want entertainment, etc. None of those things can be had without spending money. Also, if your argument is correct, why don’t people put 100% of their money into the stock market (which reliably goes up over long periods of time) and instead choose to spend it?
  - Scarblac 8y ago
    Money is fundamentally used for two different things, as currency to help trade and to store value. Once it becomes too useful as a value store, it stops being used for trade, which hurts the economy. So therefore some inflation is a good thing, it means the money keeps moving. If you want to store value you do that with assets other than money.
- Qasaur 8y ago
  >That is a terrible place to be for the system as a whole as no one has any incentives to spend or invest in anything as money itself will simply gain value over time just sitting as cash. Thus, that money isn't being used / circulated. Having a ideal velocity of money has significant multiplier effects and deflationary currencies are fundamentally flawed. In what world is this true? Time preference is a real thing, and it is unrealistic to assume that 100% of the population will put off non-essential consumption and investment because the price of a Ferrari will decrease by 2.353% next year. Time is a very important factor in the consumption/investment decisions that people take, and modern mainstream economics neglect this fact both on the micro-level and on the macro-level, which is why crazy theories about the neccessity of inflation-rate targeting are able to arise. Most people put their savings in a bank account which the bank lends out to businesses to invest in projects - if anything more savings will lead to more investment than otherwise, which is more important to the bedrock of an economy than spending on consumption. Also worth pointing out that the period during which the United States experienced its most significant economic growth (mid to late 1800s) was during a period of severe deflation of the dollar. Keynesian economics (and more generally monetary policy) and inflation-targeting (i.e. the neccessity of having a positive inflation rate) is both theoretically disproven by the existence of time preference (a time preference of zero is literally impossible, it means starving to death) and its heterogenous distribution in a population, as well as empirically by looking at the periods of deflation in the U.S. dollar during the 1800s and the associated economic growth.
  - sbenitoj 8y ago
    Nice to see a handful of people have seen through the Keynesian idiocy they inculcate everyone with in public education!

ryan_j_naughton 8y ago

A low, but positive, inflation rate is of critical importance. > Any supply of money will do. That is just nonsense. If you have a fixed money supply, given that economic growth is happening, would result in a naturally deflationary currency. That is a terrible place to be for the system as a whole as no one has any incentives to spend or invest in anything as money itself will simply gain value over time just sitting as cash. Thus, that money isn't being used / circulated. Having a ideal velocity of money has significant multiplier effects and deflationary currencies are fundamentally flawed. The problem then is: if you want a low rate of inflation but there is a natural variation in the growth rate due to the cyclic nature of the economy, then how to create a system that could do that without a monetary authority.

sbenitoj 8y ago
Prove it, show me the world where we had a stable monetary supply that resulted in people having no incentive to invest in anything — where’s the experiment? Again, you HAVE to spend money to live (otherwise you die). It’s impossible to live without food and water, most people want to live in a house, most people want entertainment, etc. None of those things can be had without spending money. Also, if your argument is correct, why don’t people put 100% of their money into the stock market (which reliably goes up over long periods of time) and instead choose to spend it?
- Scarblac 8y ago
  Money is fundamentally used for two different things, as currency to help trade and to store value. Once it becomes too useful as a value store, it stops being used for trade, which hurts the economy. So therefore some inflation is a good thing, it means the money keeps moving. If you want to store value you do that with assets other than money.
Qasaur 8y ago
>That is a terrible place to be for the system as a whole as no one has any incentives to spend or invest in anything as money itself will simply gain value over time just sitting as cash. Thus, that money isn't being used / circulated. Having a ideal velocity of money has significant multiplier effects and deflationary currencies are fundamentally flawed. In what world is this true? Time preference is a real thing, and it is unrealistic to assume that 100% of the population will put off non-essential consumption and investment because the price of a Ferrari will decrease by 2.353% next year. Time is a very important factor in the consumption/investment decisions that people take, and modern mainstream economics neglect this fact both on the micro-level and on the macro-level, which is why crazy theories about the neccessity of inflation-rate targeting are able to arise. Most people put their savings in a bank account which the bank lends out to businesses to invest in projects - if anything more savings will lead to more investment than otherwise, which is more important to the bedrock of an economy than spending on consumption. Also worth pointing out that the period during which the United States experienced its most significant economic growth (mid to late 1800s) was during a period of severe deflation of the dollar. Keynesian economics (and more generally monetary policy) and inflation-targeting (i.e. the neccessity of having a positive inflation rate) is both theoretically disproven by the existence of time preference (a time preference of zero is literally impossible, it means starving to death) and its heterogenous distribution in a population, as well as empirically by looking at the periods of deflation in the U.S. dollar during the 1800s and the associated economic growth.
- sbenitoj 8y ago
  Nice to see a handful of people have seen through the Keynesian idiocy they inculcate everyone with in public education!