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Inflation isn't a problem, it's a benefit. With inflation it starts making sense to invest into human labor and knowledge instead of tangible physical things.

Inflation isn't a problem, it's a benefit. With inflation it starts making sense to invest into human labor and knowledge instead of tangible physical things. Progress accelerates and income distribution becomes less of a power law. Inflation benefits you unless you're in the top 1 percent.

uxcolumbo 6y ago
Can you provide more details or share a link where this is explained? I don't get this: If purchasing power decreases - how does that benefit us?
- orwin 6y ago
  Let's say the money is deflationary: the more you sit on it, the more you have. Why create a company or invest in one when you're sure that you will still get richer by doing nothing? Just keep cash under your pillow and wait! Now let say your parents died when you were young and all the inheritance was used for your phd in math. Who will pay you when the ROI on math discovery is so low? Every dollar you receive will make your employer poorer. You will have to become a teacher, but then, who will you teach? Other future teacher? Us had deflationary events. From 1930 to 1933 an 2007-2008 more recently.
- imtringued 6y ago
  If you pay less for goods the salary of the producer has to be compensated downwards to match the fall in price. Essentially your salary is going down every year. Your highest salary will be in your 20s and from that point on you will earn less and less. Now imagine that your dad is a wealthy business man in the 20th century. He keeps all his wealth in dollars and never does anything with the wealth. You inherit his dollars and will become more wealthy than your father will ever be just from deflation alone, without having to do anything to earn the additional wealth. Here's the irony. Old people are entirely dependent on the work of young people. Once old people retire and decide to spend their money it will be worthless because there won't be enough young workers to provide for all their spending. It's simply not possible to buy enough apples and water in your 20s to last until your 80s. The ability to save money over long periods of time would imply that such a thing is possible. A dollar is basically the promise that someone, somewhere in the US will work for you and provide you with a service or good. The value of the dollar is entirely dependent on the existence of an economy that lets you exchange the dollar for a service or good. In short, the dollar is backed by the economy of the US. If that economy disappears or shrinks then so does the value of your dollar. By having an inflationary currency you basically promise that future income will be greater than current income. Businesses love growing incomes and grow their business accordingly and employ workers along the way. Thus the existence of an economy that allows you to exchange dollars for goods and services is guaranteed. It's quite easy to see how deflation is bad for business. You put money into resource inputs and transform them into goods. With deflation you want to buy as late as possible and sell as early as possible. The obvious problem with this is that you must produce before you sell. It's not possible to buy inputs after selling the product. Any company that keeps an inventory of goods is discouraged to do so because the value of the goods is constantly going down.
krageon 6y ago
> it starts making sense to invest into human labor and knowledge Because that's definitely what happens when people hold a lot of money. They invest into human labour and knowledge.
- imtringued 6y ago
  >v when people hold a lot of money. The point is that they don't. Money is supposed to be itchy. You're supposed to spend it. When you spend money you are paying someone else's salary and that someone can spend money on things you provide and pay for your salary. With deflation you basically get the minimum possible economy, which means lots of unemployed people. Their work isn't needed and by extension the person itself isn't needed either so we would be better off with the minimum number of people possible. That means heading straight to 0.
  - krageon 6y ago
    This sounds like trickle-down economics, which is a load of nonsense.
jariel 6y ago
"Inflation benefits you unless you're in the top 1 percent." Not really - inflation generally means wages go down relative to wages and those who spend a higher portion of their income on 'stuff' are generally worse off. Inflation is targeted at 2% to keep a tiny bit of wage deflation in the economy, and to stay safely away from deflation which is a little scarier.
- imtringued 6y ago
  There is an obvious problem with the Fed and ECB going overboard with crazy policies. I mean come on, it's pretty laughable that these giant institutions are unable to do their job. They should be a laughing stock and people should stop taking them seriously because they can't even do something as simple as hit 2% inflation.
  - jariel 6y ago
    Yes, all the best bankers in the world are idiots? They are not idiots, the only question is strategy. Inflation is actually in check, which is odd because they are spending a lot. The concern right now is not inflation or deflation, it's the amount they are spending and the huge amounts on their balance sheet. That's the worry.

uxcolumbo 6y ago

Can you provide more details or share a link where this is explained? I don't get this: If purchasing power decreases - how does that benefit us?

orwin 6y ago
Let's say the money is deflationary: the more you sit on it, the more you have. Why create a company or invest in one when you're sure that you will still get richer by doing nothing? Just keep cash under your pillow and wait! Now let say your parents died when you were young and all the inheritance was used for your phd in math. Who will pay you when the ROI on math discovery is so low? Every dollar you receive will make your employer poorer. You will have to become a teacher, but then, who will you teach? Other future teacher? Us had deflationary events. From 1930 to 1933 an 2007-2008 more recently.
imtringued 6y ago
If you pay less for goods the salary of the producer has to be compensated downwards to match the fall in price. Essentially your salary is going down every year. Your highest salary will be in your 20s and from that point on you will earn less and less. Now imagine that your dad is a wealthy business man in the 20th century. He keeps all his wealth in dollars and never does anything with the wealth. You inherit his dollars and will become more wealthy than your father will ever be just from deflation alone, without having to do anything to earn the additional wealth. Here's the irony. Old people are entirely dependent on the work of young people. Once old people retire and decide to spend their money it will be worthless because there won't be enough young workers to provide for all their spending. It's simply not possible to buy enough apples and water in your 20s to last until your 80s. The ability to save money over long periods of time would imply that such a thing is possible. A dollar is basically the promise that someone, somewhere in the US will work for you and provide you with a service or good. The value of the dollar is entirely dependent on the existence of an economy that lets you exchange the dollar for a service or good. In short, the dollar is backed by the economy of the US. If that economy disappears or shrinks then so does the value of your dollar. By having an inflationary currency you basically promise that future income will be greater than current income. Businesses love growing incomes and grow their business accordingly and employ workers along the way. Thus the existence of an economy that allows you to exchange dollars for goods and services is guaranteed. It's quite easy to see how deflation is bad for business. You put money into resource inputs and transform them into goods. With deflation you want to buy as late as possible and sell as early as possible. The obvious problem with this is that you must produce before you sell. It's not possible to buy inputs after selling the product. Any company that keeps an inventory of goods is discouraged to do so because the value of the goods is constantly going down.

krageon 6y ago

> it starts making sense to invest into human labor and knowledge Because that's definitely what happens when people hold a lot of money. They invest into human labour and knowledge.

imtringued 6y ago
>v when people hold a lot of money. The point is that they don't. Money is supposed to be itchy. You're supposed to spend it. When you spend money you are paying someone else's salary and that someone can spend money on things you provide and pay for your salary. With deflation you basically get the minimum possible economy, which means lots of unemployed people. Their work isn't needed and by extension the person itself isn't needed either so we would be better off with the minimum number of people possible. That means heading straight to 0.
- krageon 6y ago
  This sounds like trickle-down economics, which is a load of nonsense.

jariel 6y ago

"Inflation benefits you unless you're in the top 1 percent." Not really - inflation generally means wages go down relative to wages and those who spend a higher portion of their income on 'stuff' are generally worse off. Inflation is targeted at 2% to keep a tiny bit of wage deflation in the economy, and to stay safely away from deflation which is a little scarier.

imtringued 6y ago
There is an obvious problem with the Fed and ECB going overboard with crazy policies. I mean come on, it's pretty laughable that these giant institutions are unable to do their job. They should be a laughing stock and people should stop taking them seriously because they can't even do something as simple as hit 2% inflation.
- jariel 6y ago
  Yes, all the best bankers in the world are idiots? They are not idiots, the only question is strategy. Inflation is actually in check, which is odd because they are spending a lot. The concern right now is not inflation or deflation, it's the amount they are spending and the huge amounts on their balance sheet. That's the worry.