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Where is the growth? The Federal Reserve pumping easy money into the economy doesn’t count. The author completely missed the point as to why capital is misalloc

Where is the growth? The Federal Reserve pumping easy money into the economy doesn’t count. The author completely missed the point as to why capital is misallocated. True growth is when productivity increases, prices fall, and capital investment increases. It’s easy to sell 10 dollar bills for 8 dollars a piece. In what world is that considered growth?

rimliu 7y ago
When prices fall it is called deflation. The investment then decreases as well, because who in the sane mind would invest into something that is getting less valuable as time passes?
- roenxi 7y ago
  Someone who wants more stuff or anticipates change in the future. Best time to buy an asset is in the latter stages of a long price decline. Speaking from a mining industry perspective, best time to invest might be after about 3-5 years of price deflation. If you invest in capital when prices rise sharply then you can lose a lot of money; as mining companies generally seem to do discover when there is a bull market :/. I've seen mining companies do a pretty good job of bankrupting themselves by not investing when prices have been dropping for a while then over-'investing' when the price rises. So, in the real economy, sane people would invest when prices drop. On a sane timeframe. None of this millisecond knee jerk day trading business. Basically, the argument is that investment depends on anticipated change over some time horizon. If someone has a long time horizon, best time to set up is in a deflationary period. It isn't a general rule but you'd certainly see some canny people getting their hands dirty if they anticipated a shortage of some good or service.
- StacyRoberts 7y ago
  Far too many people apparently. New phones every year or more often. Apple products built with the intention to prevent their repair. I was reflecting on the increasing gap recently between price and quality. If inflation were the cause of increased prices the expectation is that quality would stay the same. Quality is going down however. Where is that difference going then? Shareholder pockets. What is the value of hoarding all that cash? If the Fed didn't print more there would not be enough currency liquidity in the market. This is what we see today. Deflation is staved off only through QE. It should be through incentives to spend, but there are too many incentives to hoard.
aguyfromnb 7y ago
>It’s easy to sell 10 dollar bills for 8 dollars a piece. In what world is that considered growth? Silicon Valley.
- deleted 7y ago
  [deleted]

rimliu 7y ago

When prices fall it is called deflation. The investment then decreases as well, because who in the sane mind would invest into something that is getting less valuable as time passes?

roenxi 7y ago
Someone who wants more stuff or anticipates change in the future. Best time to buy an asset is in the latter stages of a long price decline. Speaking from a mining industry perspective, best time to invest might be after about 3-5 years of price deflation. If you invest in capital when prices rise sharply then you can lose a lot of money; as mining companies generally seem to do discover when there is a bull market :/. I've seen mining companies do a pretty good job of bankrupting themselves by not investing when prices have been dropping for a while then over-'investing' when the price rises. So, in the real economy, sane people would invest when prices drop. On a sane timeframe. None of this millisecond knee jerk day trading business. Basically, the argument is that investment depends on anticipated change over some time horizon. If someone has a long time horizon, best time to set up is in a deflationary period. It isn't a general rule but you'd certainly see some canny people getting their hands dirty if they anticipated a shortage of some good or service.
StacyRoberts 7y ago
Far too many people apparently. New phones every year or more often. Apple products built with the intention to prevent their repair. I was reflecting on the increasing gap recently between price and quality. If inflation were the cause of increased prices the expectation is that quality would stay the same. Quality is going down however. Where is that difference going then? Shareholder pockets. What is the value of hoarding all that cash? If the Fed didn't print more there would not be enough currency liquidity in the market. This is what we see today. Deflation is staved off only through QE. It should be through incentives to spend, but there are too many incentives to hoard.

aguyfromnb 7y ago

>It’s easy to sell 10 dollar bills for 8 dollars a piece. In what world is that considered growth? Silicon Valley.

deleted 7y ago
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