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So that's why we can't ever have some deflation here in the modern US, it would reduce tax revenue! I always wondered about that. In this light it makes perfe

• adamson 7y ago
  I’m not aware of any evidence that that’s actually the motivation behind preventing deflation. Just about every economist will tell you that deflation is undesirable because it incentives hoarding accumulated currency rather than investing it in productive capital because of the decreasing value of production relative to currency.
• JumpCrisscross 7y ago
  > that's why we can't ever have some deflation here in the modern US, it would reduce tax revenue Deflation also increases the buying power of that tax revenue. We avoid deflation because it incentivises hoarding currency over productive activity. We also know how to stop inflation--raise rates. We don't have reliable tools for fighting deflation (see: Japan). (Also, it's not true that we've never seen deflation. Around the financial crisis, we saw negative CPI.)
  • mamon 7y ago
    >> We avoid deflation because it incentivises hoarding currency over productive activity. No, it incentivises reasonable spending on things you need and saving the rest over mindlessly throwing money on useless crap because your money lose value every day.
    • JumpCrisscross 7y ago
      > over mindlessly throwing money on useless crap because your money lose value every day Your have more choices than spending and hoarding. Buying Treasuries, for instance, yield around inflation. (TIPs if you're more worried.) To say nothing of the entire universe of investable assets, from commercial paper to venture capital.