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I'm not going to pretend I know the right answer here. It's an amazingly complex issue. But I find this to be a poor argument. Absent central bank intervention

I'm not going to pretend I know the right answer here. It's an amazingly complex issue. But I find this to be a poor argument. Absent central bank intervention, a productive economy should naturally undergo significant price deflation year after year as efficiency improves, causing more goods and services to be produced with the same inputs. This is why consumer technology prices trend continually downward. So if the default, absent any intervention, would be for prices to go down every year across the board, pointing to "low inflation" numbers is a red herring. The question shouldn't be how far inflation numbers are above zero, but how far they are above the negative rate of inflation we'd see otherwise. That differential is what tells us how much wealth is really extracted from the economy via what is effectively a highly regressive tax.

wz1000 6y ago
Two things: 1. It isn't clear that the (real) cost of essentials like food, shelter, clothing, healthcare, education is actually going down significantly. 2. Even if what you say is 100% correct, this "extraction of wealth due to inflation" seems to be a somewhat stable scenario, and certainly hasn't lead to the apocalyptic visions of collapse that inflation hawks perennially create a ruckus about. So even if you think we are living through a hyper-inflationary doomsday scenario, certainly this is a very different doomsday than what one is usually led to imagine (Zimbabwe, Wiemar Republic, Venezuela etc.). Maybe inflationary Armageddon isn't so bad after all!
- chiefalchemist 6y ago
  I won't call it cause but there certainly seems to be correlation between lowering food costs and healthcare increasing. Truth is, worldwide there are more deaths from the side effects of too much food, than not enough.
- autokad 6y ago
  I generally dont worry about inflation, I roll my eyes when certain financial people talk about the inflation boogieman that hasnt existed for 40 years. however, we are in a unique situation that has the potential for causing hyper inflation. I say potential because I still think it's not a likely outcome. We are paying people not to work, but eventually someone has to produce something. We ALL can't wfh or be unemployed and collect checks as if we were employed and expect our Amazon deliveries and canned food to arrive; someone has to make and deliver it. Eventually all the extra money laying around today will chase yesterday's production. I think this is why we often see hyper inflation scenarios stem from low inflation environments. it sounds counter intuitive at first. This is why we have to be extremely careful when we try to pick and choose what is essential or not. Now we got situations were food is rotting on the vines and milk being dumped down the drain. I dont think we will enter hyper inflation, but we have to be careful about it.
  - JamesBarney 6y ago
    I only glanced through the wikipedia, and it doesn't seem at all like hyper inflation stems form low inflation environments. https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperinflationary_episodes https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperin...
- tuatoru 6y ago
  > 1. It isn't clear that the (real) cost of essentials like food, shelter, clothing, healthcare, education is actually going down significantly. It is if you think about it. In the 1970s a baby born premature at 28 weeks would have been unlikely to survive. Healthcare quality has increased enormously. If you could get 1980-level healthcare it would cost less of your wage than it did in 1980. Food, clothing, transport, and heating have unambiguously fallen as a proportion of wages. Education is perhaps an outlier here. The spiralling cost is usually explained as a zero-sum social signalling mechanism that is super important for life outcomes, and its rising price as being enabled by the falling cost of everything else.
  - roenxi 6y ago
    The spiralling cost of education is a bit illusory; the actual cost of education is rapidly approaching 0. I can gain free access to a stunning amount of front-line academic research, and anyone can have access to pretty much all of it for prices that are low relative to what it would have cost in the 80s. You can probably listen to free lectures by country-leading authorities on any STEM subject. Well, TEM. I'm not sure about biology and the other sciences. Access to humanities-related texts is also unbelievable vs the 80s. The cost of getting socially certified as having become educated is growing. Not the cost of education.
littlestymaar 6y ago
> Absent central bank intervention, a productive economy should naturally undergo significant price deflation year after year as efficiency improves, causing more goods and services to be produced with the same inputs This comment assumes that central banks create money and that's what drives inflation but this isn't the case: commercial banks are the ones which create money (through credit). Also, you can't sustain an economy under deflation, because deflation would just make the whole economy collapse. In a market driven industrial economy the limiting factor for the economy isn't the output, but the demand, and deflation is the ultimate demand killer (which is why basically nobody buy things in bitcoin: realizing the pizza you bought five years ago is now worth a few thousand dollars doesn't sound cool).
- immawizard 6y ago
  People don’t buy stuff in bitcoin because of the high transaction costs, and low adoption in points of sale. If you believe that bitcoin price will go up in the future, you would buy bitcoin instead of pizza using dollars.
- thorwasdfasdf 6y ago
  I hear this all the time: deflation causes demand destruction for consumers. But, how many consumers check the inflation numbers before buying a pizza? how many consumers even know what inflation is? (many do not). I really think we need to rethink this assumption that deflation is harmful.
  - bob33212 6y ago
    I agree deflation isn't a problem for consumers. How many people buy electronics knowing that they will be worth 30% less within a year? It is a problem for debtors ( home owners, and corporations ) and banks. Who wants to have a mortgage on a house that is going down in value every year? How is a corporation going to get investment in their factory when a competitor could create a similar factory at a cheaper rate in a couple years. Why would a bank lend money to people who may not be able to pay them back when just holding onto the money generates returns?
nerfhammer 6y ago
That's only true if people don't want better stuff over time, only larger quantities of exactly the same stuff

wz1000 6y ago

Two things: 1. It isn't clear that the (real) cost of essentials like food, shelter, clothing, healthcare, education is actually going down significantly. 2. Even if what you say is 100% correct, this "extraction of wealth due to inflation" seems to be a somewhat stable scenario, and certainly hasn't lead to the apocalyptic visions of collapse that inflation hawks perennially create a ruckus about. So even if you think we are living through a hyper-inflationary doomsday scenario, certainly this is a very different doomsday than what one is usually led to imagine (Zimbabwe, Wiemar Republic, Venezuela etc.). Maybe inflationary Armageddon isn't so bad after all!

chiefalchemist 6y ago
I won't call it cause but there certainly seems to be correlation between lowering food costs and healthcare increasing. Truth is, worldwide there are more deaths from the side effects of too much food, than not enough.
autokad 6y ago
I generally dont worry about inflation, I roll my eyes when certain financial people talk about the inflation boogieman that hasnt existed for 40 years. however, we are in a unique situation that has the potential for causing hyper inflation. I say potential because I still think it's not a likely outcome. We are paying people not to work, but eventually someone has to produce something. We ALL can't wfh or be unemployed and collect checks as if we were employed and expect our Amazon deliveries and canned food to arrive; someone has to make and deliver it. Eventually all the extra money laying around today will chase yesterday's production. I think this is why we often see hyper inflation scenarios stem from low inflation environments. it sounds counter intuitive at first. This is why we have to be extremely careful when we try to pick and choose what is essential or not. Now we got situations were food is rotting on the vines and milk being dumped down the drain. I dont think we will enter hyper inflation, but we have to be careful about it.
- JamesBarney 6y ago
  I only glanced through the wikipedia, and it doesn't seem at all like hyper inflation stems form low inflation environments. https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperinflationary_episodes https://en.wikipedia.org/wiki/Hyperinflation#Notable_hyperin...
tuatoru 6y ago
> 1. It isn't clear that the (real) cost of essentials like food, shelter, clothing, healthcare, education is actually going down significantly. It is if you think about it. In the 1970s a baby born premature at 28 weeks would have been unlikely to survive. Healthcare quality has increased enormously. If you could get 1980-level healthcare it would cost less of your wage than it did in 1980. Food, clothing, transport, and heating have unambiguously fallen as a proportion of wages. Education is perhaps an outlier here. The spiralling cost is usually explained as a zero-sum social signalling mechanism that is super important for life outcomes, and its rising price as being enabled by the falling cost of everything else.
- roenxi 6y ago
  The spiralling cost of education is a bit illusory; the actual cost of education is rapidly approaching 0. I can gain free access to a stunning amount of front-line academic research, and anyone can have access to pretty much all of it for prices that are low relative to what it would have cost in the 80s. You can probably listen to free lectures by country-leading authorities on any STEM subject. Well, TEM. I'm not sure about biology and the other sciences. Access to humanities-related texts is also unbelievable vs the 80s. The cost of getting socially certified as having become educated is growing. Not the cost of education.

littlestymaar 6y ago

> Absent central bank intervention, a productive economy should naturally undergo significant price deflation year after year as efficiency improves, causing more goods and services to be produced with the same inputs This comment assumes that central banks create money and that's what drives inflation but this isn't the case: commercial banks are the ones which create money (through credit). Also, you can't sustain an economy under deflation, because deflation would just make the whole economy collapse. In a market driven industrial economy the limiting factor for the economy isn't the output, but the demand, and deflation is the ultimate demand killer (which is why basically nobody buy things in bitcoin: realizing the pizza you bought five years ago is now worth a few thousand dollars doesn't sound cool).

immawizard 6y ago
People don’t buy stuff in bitcoin because of the high transaction costs, and low adoption in points of sale. If you believe that bitcoin price will go up in the future, you would buy bitcoin instead of pizza using dollars.
thorwasdfasdf 6y ago
I hear this all the time: deflation causes demand destruction for consumers. But, how many consumers check the inflation numbers before buying a pizza? how many consumers even know what inflation is? (many do not). I really think we need to rethink this assumption that deflation is harmful.
- bob33212 6y ago
  I agree deflation isn't a problem for consumers. How many people buy electronics knowing that they will be worth 30% less within a year? It is a problem for debtors ( home owners, and corporations ) and banks. Who wants to have a mortgage on a house that is going down in value every year? How is a corporation going to get investment in their factory when a competitor could create a similar factory at a cheaper rate in a couple years. Why would a bank lend money to people who may not be able to pay them back when just holding onto the money generates returns?

nerfhammer 6y ago

That's only true if people don't want better stuff over time, only larger quantities of exactly the same stuff