4 ms·

If I run a bakery and you run, say, the Mint... Ten years ago, I bake a loaf of bread, and sell it for a dollar. Then I invent an amazing machine that can prod

If I run a bakery and you run, say, the Mint... Ten years ago, I bake a loaf of bread, and sell it for a dollar. Then I invent an amazing machine that can produce the same bread more cheaply. I'm about to drop my bread prices, but you mint some new coins and add them into circulation. So I keep the price at a dollar per loaf. I scrutinize my bread supply chain to the last detail. I optimize the flour, I optimize the temperature. I fire all the workers and replace them with machines. I'm saving every penny I can. Loaves get made faster! Loaves get made cheaper! Bread is flying off the conveyor belt! You pull a lever and crank up the printing press. Dollars are being added in the millions, in the billions! The price of bread stays at a dollar; has the currency been debased? I honestly don't know.

jbay808 6y ago
(Addendum: If your salary was a dollar ten years ago, and a dollar today, you can afford just as much bread as you used to, but your chance of buying a majority share in my bakery, or outbidding me on a house in a good school district, has gone way down.)
chii 6y ago
> The price of bread stays at a dollar; has the currency been debased? I honestly don't know. i say no it hasn't. Imagine a third person, who mows lawn for $1 an hour. He has not improved his lawn mowing during this time period which the baker has made improvements to bread making. So the work of mowing the lawn for $1 should stay the same regardless of what the bakers did - and therefore, the lawn mower being able to buy bread for $1 is not unreasonable.
imtringued 6y ago
You are building pressure into the system. It's like letting a dam fill up. That water is not circulating (please bear with tiny mistakes in my analogies). It's staying somewhere and it is ready to be deployed at any given time. If there is a natural disaster or any other kind of pressure to empty the dam then there is a very real risk of a flood. The currency has not been debased. However, the potential for it to debase in the future has grown massively. One day politicians are going to discover sensible policy (maybe Biden will do it, I don't know) and somehow magically increase inflation. That same day will open all floodgates on all dams. The correct strategy would be to increase taxes and interest rates and cut stimulus spending once that has happened and we'll be fine. Crying hyperinflation is not the right strategy.

jbay808 6y ago

(Addendum: If your salary was a dollar ten years ago, and a dollar today, you can afford just as much bread as you used to, but your chance of buying a majority share in my bakery, or outbidding me on a house in a good school district, has gone way down.)

chii 6y ago

> The price of bread stays at a dollar; has the currency been debased? I honestly don't know. i say no it hasn't. Imagine a third person, who mows lawn for $1 an hour. He has not improved his lawn mowing during this time period which the baker has made improvements to bread making. So the work of mowing the lawn for $1 should stay the same regardless of what the bakers did - and therefore, the lawn mower being able to buy bread for $1 is not unreasonable.

imtringued 6y ago

You are building pressure into the system. It's like letting a dam fill up. That water is not circulating (please bear with tiny mistakes in my analogies). It's staying somewhere and it is ready to be deployed at any given time. If there is a natural disaster or any other kind of pressure to empty the dam then there is a very real risk of a flood. The currency has not been debased. However, the potential for it to debase in the future has grown massively. One day politicians are going to discover sensible policy (maybe Biden will do it, I don't know) and somehow magically increase inflation. That same day will open all floodgates on all dams. The correct strategy would be to increase taxes and interest rates and cut stimulus spending once that has happened and we'll be fine. Crying hyperinflation is not the right strategy.